April 24, 2025 • 32 mins
- Ed Yardeni, President at Yardeni Research
- Nicolai Tangen, CEO of Norges Bank Investment Management
- Philip Lane, Chief Economist at ECB
- Jenny Johnson, CEO of Franklin Templeton Investments
Ed Yardeni, President at Yardeni Research, discusses his equity outlook, whether he's revising his S&P 500 target as tariffs continue to be negotiated, and if he believes the US will enter a recession. Nicolai Tangen, CEO of Norges Bank Investment Management, discusses the global economic outlook as globalization and US tariffs reshape global investing. Philip Lane, Chief Economist at ECB, joins to talk about whether investors are turning bullish on Europe despite trade uncertainty with the US. Jenny Johnson, CEO of Franklin Templeton Investments, discusses asset allocation as the investing and business environment remains highly uncertain and volatile.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and Amrie Hordern. Join us each day
for insight from the best in markets, economics, and geopolitics
from our global headquarters in New York City. We are
live on Bloomberg Television weekday mornings from six to nine
am Eastern. Subscribe to the podcast on Apple, Spotify or
anywhere else you listen, and as always on the Bloomberg
(00:34):
Terminal and the Bloomberg Business App. Joining us now, Danny
of Yourdenny Research. He writes Trump and Bess and discards
some of their best cards while preparing to play tariff
poker with China. Financial markets are happy that Team Trump
is blinkingg Edgiandenny joined us now for more. Ed Welcome
to the program. Let's talk about the extent of that blink.
How much of a U turne are you expecting in
the next several weeks.
Speaker 3 (00:55):
Well, it's a very.
Speaker 4 (00:56):
Odd situation where the United States seems to be negotiating
with itself, so very peculiar art of the deal where
you walk in the room and you're you're the only
one in there, and you keep issuing really press release
to saying that great progress is being made.
Speaker 3 (01:12):
So I don't really know what to make of it.
What I do make of.
Speaker 4 (01:15):
It is that curly the financial markets have had a
big impact on the administration. This is the bond vigilantes
and the stock vigilantes ganging up on the administration and saying,
you know, we need some moderation here, we need some
cooling off. And that's exactly what the administration is doing.
Speaker 2 (01:35):
And that is the target Home Depot and Walmart vigilantes
as well. Clearly the most important meeting that took place
in Washington this week where the retailer is sitting down
with the President of the United States and warning Kim
they're within weeks we could have empty shelves. And I
think it makes it difficult at this moment to read
the economic data. What is a genuine rebuilding infantries, what
is a genuine sustainable underlying trend in demand, and what
(01:59):
do you see in the data and the earnings.
Speaker 4 (02:03):
Well, the earnings are actually starting to be cut back.
Of course, analysts have finally gotten their recession tariff memo,
so they've started to incorporate the fact that this isn't
going to be good for the economy. It's going to
weigh on the economy. I think to the extent that
analysts usually talk just to companies, they don't talk to economists,
(02:25):
But they're reading the headlines and they see that economists
are lowering their outlook for economic growth, and they're probably
getting that kind of guidance from some of their companies
that if the tariffs stay on, the longer they stay on,
the weaker the economy is going to be. But I
think at the rate at which the administration is back
and off here, the economic impact of the tariffs could
(02:47):
start to really ease off by the second half of
the year, which is at this point when most economists
expecting a much weaker economy are actually a recession. So
there could be a reversal at least in the soft
data that then it would suddenly lift the pressure off
the hard data.
Speaker 5 (03:04):
And it feels like the genius sort of out of
the bottle, But we can't see and we don't know
how big he is. We don't know whether he can
climb back into the bottle at any given time.
Speaker 6 (03:11):
I just wonder as you look forward why you reject.
Speaker 5 (03:13):
The idea that what we're seeing right now is a
long term structural loss of US exceptionalism that will result
in a weaker dollar and potentially less dynamism in US
equities over time.
Speaker 3 (03:25):
Yeah, that's a great question.
Speaker 4 (03:26):
I mean, it's only a few months ago that the
American exceptionalism made the front cover of The Economist. I
think it was October of last year. There was a
lot of dollars that looked like a rocket ship, and
you know, we couldn't be staffed. Look, I think now
that everybody is having second thoughts about that, or even
concluding in a dire way that the dollars is in
(03:50):
decline here as a reserve currency. Keep in mind that
there's nothing like the US capital markets. Well, you know,
when you make a list of exceptionalism, American capital markets
are exceptional. They are huge, they are liquid. There's nothing
like them. So I don't know how the dollar losers.
That's preserve status, and I think it remains strong even
(04:12):
this recent hysteria about the weaker dollar. It's fell about
ten percent. Using the Dollar index, the DXY that everybody watches,
but a much better index that the FED calculates is
down about half as much, which is no big deal
in my opinion.
Speaker 5 (04:30):
This is the reason why people are looking at announcements
from a number of different ACID allocators and seeing if
they are trying to diversify even a little bit away
from the United States into other countries. I just wonder
how concerned you are about the idea that forty four
percent of S and P five hundred companies that have
reported so far have mentioned the word recession, except from
three percent in the fourth quarter, at a time where
(04:50):
potentially the US's ability to borrow to bolster the economy
and any kind of downturn could really be a lot
more difficult, a lot more pricey, a lot more paniff.
Speaker 3 (05:02):
Yeah.
Speaker 4 (05:03):
Well, I think the stock markets discounted certainly a weakening
in the economy in the second half of the year.
We certainly lowered our numbers from something like two and
a half to three percent growth this year to something
more like.
Speaker 3 (05:18):
Zero point five to one and a half percent.
Speaker 4 (05:21):
The only question is what there should be negative signs
on those numbers, and some people, I guess are in
that camp. We're still looking at the forty five percent
odds of an outright recession.
Speaker 3 (05:32):
We think the.
Speaker 4 (05:33):
President's really the administration is going to back off as
they have been on these tariffs, and to the extent
that they don't, I think they're going to declare victory.
I think they're going to get maybe ninety pieces of
paper from ninety countries, signed by key diplomats, laying out a.
Speaker 3 (05:49):
Groundwork of framework.
Speaker 4 (05:51):
You can't negotiate a treaty in ninety days, you can't
implement the treaty in ninety days. But I think they're
going to declare victory, move on to the extension of
the tax cuts, and life will go on.
Speaker 1 (06:03):
And when it comes to the tariffs, though, the Wall
Street General appoint of the administration might back down on
China to say sixty percent, but that is what Trump
has been saying for months. On the campaign trail, he
promised ten percent across the board, of sixty percent on China.
So if that's the base case, how does this economy look?
Speaker 4 (06:20):
Well, as you know, it's hard to define what the
base case is. It changes almost daily from the press
conferences that the President has in the Oval Office. Is
associates keep talking about how much progress they're making. So
(06:41):
I think, you know, sixty percent is just as prohibitive
as one hundred and forty five percent. I think they're
going to have to again negotiate against themselves and maybe
postpone that increase so to leave it at sixty percent,
but they're going to postpone it for ninety days, turn
down the rhetoric, and find somebody to negotiate with the
(07:03):
Chinese on a better deal.
Speaker 2 (07:06):
Just a final question from us. You've been super constructive
on this cycle for quite a while. Coming into the
twenty twenties, you talked about the Roaring twenties. Yep, we're
at the halfway point working through that now. If he's
fronting the town on that view or you're sticking with.
Speaker 4 (07:18):
It, well, John, it was a great first half of
the decade. I hope it's the Roaring twenty twenties as over.
Yet there's sort of deja avous with the nineteen the
nineteen twenties we got a whole decade out of that
before the Congress that hoerendously imposed tariffs, So there's a
(07:38):
certain similarity here. But I think this too shall pass,
and I'm still looking for the Roaring twenty twenties to
be a description of the entire decade called me an optimist,
but I think I guess my mantra has been Look
how well the US economy has done over the years
despite Washington.
Speaker 3 (07:55):
That's still my bet.
Speaker 2 (07:58):
And we hope you're right. It's going to catch up
with you. As always, Danny, there have your Danny research
to discuss and place to say. The North Bank Investment
Management CEO Nikolay Tangan joins US now for more. Nicolay,
welcome back to the program. So a lot has changed
(08:20):
since we last spoke. Attitudes towards US as sets are
starting to shift. I just wonder how you and the
team have started to think about that, how you're debating
that issue internally over in Norway.
Speaker 7 (08:31):
Well, we have a very long term view on what
we do, so you know, we are invested with roughue
half for the fund in the US and we are
here for the very long term. So we have not
made any major adjustments lately.
Speaker 2 (08:45):
So Nikolai, can I rid into that that you view
this as just a shock to the cycle and maybe
not a long term shock to the system.
Speaker 7 (08:52):
Well, I think it's very very difficult to say it,
because when we make scenario analysis here, one of the
negative things that that we see is that if you
get a decentanglement between the two major trading blocks, that's
really really negative because it slow down it slows down growth,
increases inflation and zone. So it is potentially one of
the really negative things that can happen here. So I
(09:13):
think the out look for markets are very, very uncertain, given.
Speaker 5 (09:17):
That there has been a shift, Nikolai, to move at
least a little bit of assets about large acid allocators
out of the United States, diversified to places like China,
to India, to Europe. Why aren't you doing the same
and shifting to benchmarks that have a little bit more
exposure elsewhere.
Speaker 7 (09:36):
Well, we actually are extremely well diversified already. You know,
we own one and a half percent of all the
listed equities in the world. In Europe we have more,
we have closed to three percent, and so in the
US we have one than a half percent, and we
also have the same in the rest of the world.
So I would say we are we are well diversified,
(09:57):
seventy percent equities, thirty percent bonds. We also have a
very very good way to say, portfolio, which is coming
in really handy here.
Speaker 5 (10:05):
Well, nikola you said previously this morning when you were
speaking to media and OSLO that you will correct the
underweight to US stocks. So you are planning to reinvest
in US stocks even though you are surprised that we haven't.
Speaker 6 (10:18):
Seen even more weakness.
Speaker 5 (10:19):
Why are you redeploying all of the money that maybe
has lost in terms of benchmark allocation to US equity
has given some of these larger uncertainties.
Speaker 7 (10:30):
Well, the kind of the increased medication to the US
is part of a program that we've been doing for
quite some time. We still have some work to do
here and that we will continue to do. And you know,
we think the large American companies are just great long
term investments, and so we are very happy to be
invested in there.
Speaker 1 (10:51):
What sectors can you give us a little bit of
a hint of specifically the sectors or the companies are
interested in the United States?
Speaker 7 (10:58):
Well, are quite in near in how we are invested
in the US. So we typically have large holdings in
the you know, in the big tech companies, in all
your large companies.
Speaker 6 (11:08):
Really and we made you know a lot of money.
Speaker 8 (11:12):
There over the last few years.
Speaker 7 (11:13):
Of course, so far this year it's been it's been negative.
But when you look in comparison to the games we've
had the last year and the year before, we're given
back in a way surprisingly little.
Speaker 1 (11:24):
I would say, what about defensive companies like Lockheed Martin,
is that going to be open for business? When it
comes to the cumber.
Speaker 7 (11:31):
Well fund, Well, we invest in a lot of different industries.
We have less exposure to the defense industry, but we
are in a lot of the defensing names as well.
Speaker 2 (11:46):
Nikolai, one word you often use with us is we
are diversified. I just wonder if the meaning of that
word has shifted over time, particularly this year, the treasury
market is behaving in unpredictable ways. When the equity market
is falling, treasury markets have fell as well. In fact,
those two asset classes are training and lockstep. At the moment,
it's as if investors are treating all dollarg and ONMITD
as assets as one bucket. And I just wondered, Nicolay,
(12:08):
what that means for how you think about diversification this
year and beyond.
Speaker 7 (12:13):
Yeah, there was sometimes when when this type of diversification
worked less well.
Speaker 8 (12:18):
We had the same type of situation.
Speaker 7 (12:20):
You know, two three years ago, and so some years
it works, some years it doesn't.
Speaker 8 (12:26):
I think over time, if you have.
Speaker 7 (12:27):
A really long term time horizon, I think it's the
right positioning to have.
Speaker 2 (12:33):
We've seen over the last month or so that some
investors were trying to understand whether what was happening in
the treasury market was just trades unwinding, some hedgephones, hedge
funds blowing up, or nicolay, whether it was a reassessment
of the safe haven status of the United States. Nicola
I was on your dashboard to have distinguished between one
and the other.
Speaker 8 (12:51):
What do you think it was? What do you think
it is?
Speaker 7 (12:54):
Well, I think it's a very very complicated question. I
don't think it's only one thing. I think it's a
cocktail of all kind of things you mentioned. Now, so
far this year, we've we have been neutral to the
US treasure market. We have not reduced or increased positions,
so we have we have certainly not to cause that move.
Speaker 5 (13:16):
Do you have a sense, Nikolai, going forward of whether
we are entering a more inflationary period given some of
the deglobalization that we're seeing, some of the fissures and
some of the kinks that are emerging in the supply
chain system.
Speaker 7 (13:30):
Yeah, I think we are potentially going into a more
inflationary situation. It is kind of a pretty obvious consequence
of higher tariffs, and of course inflation is really negative
of market so I think that's potentially one of the
big risks that we are.
Speaker 8 (13:49):
Seeing just now.
Speaker 7 (13:50):
Interestingly, we just yesterday released a podcast with Ken Rogoff,
kind of the world leading specialist, I guess on inflation,
and he's also very word about this particular fact.
Speaker 5 (14:02):
Well, I guess, just to build in what John was
asking about the idea of diversification, and you have been
about neutral on US bonds, there has been a feeling
that maybe diversification, especially in an inflationary environment, requires some gold,
requires some alternative assets that might be act based funding
that have different streams of diversified revenues. Is that your
(14:24):
take on it that you just on the margins want
to pick up a little bit more gold or diversify
a little bit more in some of these other asset classes.
Speaker 3 (14:32):
Yeah.
Speaker 7 (14:32):
So we have a very strict mannight here from the ministry,
so we cannot buy gold, and I do think gold
sometimes has a bit difficult to understand what the intrinsic
value is of gold.
Speaker 8 (14:44):
We also don't do cryptocurrencies, for instance.
Speaker 7 (14:47):
But when we look at alternative assets, I would say
in a market like this to have real estates, that's
very good. We have just under a thousand properties around
the world, you know, large holdings in Manhattan, Boston, Washington
one and so I think that's going to be a
pretty good place to be going forward.
Speaker 2 (15:04):
Nikolay, I appreciate your take at a difficult time. Thanks
for your time this morning. Nicolai Tangan there the Norway
Well fun CEO. On a difficult moment, the UCB warning
tarras may be more disinflationary than inflationary for Europe. This
(15:26):
after President Trump said he's confident of reaching a trade
deal with the EU. Joining us around the table here
in our studio in Washington, d C. The chief economist
of the European Central Bank, Philip Blank.
Speaker 8 (15:36):
Philip's good to see you, sir, Good morning. Thanks for
being able to hear in Washington.
Speaker 2 (15:39):
So the Governing Council meeting, I imagine was very different
this time around than a number of months ago when
you walked into that room and presented changes to the economy.
Speaker 8 (15:47):
What did you tell a team?
Speaker 9 (15:48):
Sure, I mean, I think it was a gear change
for several reasons, So of course our core business has
been to try and get inflation back down from a
high number to our targets. I think there was a
milestone in this meeting in the sense of the most
recent data had come in quite low. What we've been
waiting for services inflation to kind of drop, and it
(16:11):
has been dropping. And then we had surveys showing that
basically the weight dynamic this year and in twenty six
is lower than we expected. So basically, if you like,
if you clear the table about the historic issue, are
we safely bringing inflation back to target? I think a
lot it's not entirely settled, but a lot of it
(16:31):
is settled. So the gear change was of course, now
we have new things to talk about, and really since
all the way back to last summer, trade policy uncertainty
has been part of what we've had to talk about.
But we still have trade policy uncertainty, but we also
have trade policy news. You know, lots has happened that
(16:54):
the and then the other element of what we've seen
is of course, and that happened, by the way, like
a day or two before our March meeting, was a
German break through and fiscal policy. So we already had that,
if you like, in the early incarnation at the March meeting.
We know more now, but it's still, you know, in
(17:15):
terms of what the other European countries are going to do,
it's something that's still in discussion. So what I would
say if you put all of that together, and I
think you're probably hearing this from various colleagues and other
people this week, is if I take a longer term perspective,
and the IMF in their publications this week, a lot
of the data go out of twenty thirty. If I
(17:37):
take a twenty thirty perspective, you know, I think there's
a lot of grants to have a renewed optimism that essentially,
with more fiscal support, the credibility of delivering our two
percent target on a kind of long term basis is stronger.
The case for the European economy to be more resilient,
(17:57):
to grow from a domestic source, not just from running
a big export machine is more credible. But of course
we have to navigate from where we are now. Where
As you said in your intro, immediately in the short term,
the way it's playing out with euro appreciation with.
Speaker 8 (18:18):
A big job and energy prices.
Speaker 9 (18:20):
The disinflatory forces are there, but I would say maybe
the question you know, I wouldn't load it all on
the trade policy is what we also see now as
a portfolio shift. So there's a clear portfolio shift going on,
which is I think the way you can reconcile euro
appreciation in the middle of this trade discussion.
Speaker 2 (18:41):
As you know, Philip, that sort of begs the question
why you don't act more aggressively. Does that give you
the space to act more preemptively?
Speaker 9 (18:47):
Well, I think a very important narrative we had last week,
and it was repeated threat to Manto policy statement was resilience.
What we're seeing is the europan economy growing. Two years
of it was kind of more stagnating. So we said
the European economy is going to recover. We saw modest
(19:07):
but still market recovery last year is around zero nine.
We have zero nine written down in March for this year.
And that's basically because with incomes going up, consumption through
recover with our Munti policy, and the general improvement of
the economy, investments should recover with more government support. So
(19:28):
all the domestic engines are there. So what you have
to think about. Is all of that, if you like,
is saying that the economies should be growing, even marking
down some trait negative And this is why we're not
in a situation where we see some dramatic change in
(19:48):
the external environment or in friest pressures and so on.
Speaker 8 (19:52):
So steady is okay?
Speaker 5 (19:53):
Hold on a second, Are you saying that what we've
seen with respect to US policy and the uncertainty isn't
increasing the chance of session materially for the euroregion?
Speaker 9 (20:02):
Well, I mean, I think our overriding seam, of course
is uncertainty, and let's not get ahead of ourselves in
terms of being too sure about any any path for
the economy. But I think the message is but it's
not me dreaming it up. If you look at the
external watchers, if you look at the IMF, it's fairly
modest mark dance on the growth trade for the European economy.
(20:25):
The US, of course has a major trade policy issue
all with the world. We have a trade policy issue
with the US. The US is an important trading partner,
but it's not our only trading partner, so directionally it
is a markdown. There is a markdown, but it's important
to say. It's a markdown from a growth trade around
(20:47):
zero nine to a little bit less. Let's see in
the coming weeks how much less. And I think if
you look at the surveys this week, the surveys have
elements of people being concerned, but they also have elements.
Right now, we're busy. Manufacturing is a bit busier than
it was. That could be a little bit of front
running of taris, for sure, but it's also remember the
(21:09):
recovery narrative Europe what has been stagnating. The American economy
has grown quickly, So if you like, in terms of
if there was room for the American economy to decelerate,
and then trade policy is adding to that. What I'm
saying to you is essentially the baseline for Europe was
to grow a bit more quickly, and so the resilience
(21:29):
is there. You can take a trade hit without going
to using that word which I of that you mentioned.
Speaker 1 (21:38):
You mentioned, of course, that Europe has more trading partners.
Speaker 6 (21:41):
Than the United States.
Speaker 1 (21:42):
How concerned are you that if the walls keep going
up in the United States, China will have to just
jump somewhere.
Speaker 6 (21:47):
It's going to be on the continent.
Speaker 9 (21:49):
So I think directly an element with that must be
you know, must be expected. But I think you know,
China fully understands that if you listen to their policy
announcements they're going to do. Their focus is on improving
domestic demand. So in terms of the reorientation from the US,
(22:11):
I would allocator at fairmount to domestic demand, some amount
to around the world. But I think also China understands
it's a large economy and a bit of restraint in
exporting may make sense.
Speaker 2 (22:26):
For the twenty seconds left, I just wanted to jump in.
Olie Rain was busy this morning, your governing council partner,
and he made the point that we should be open
to larger interest rate cuts. Is that a position that
you and the team agree with?
Speaker 9 (22:37):
Philosophically, we don't pre commit to any rate path, of course,
and so this is why again it's important, and I
think the Government Council, I think tries hard to maintain
this is. You can express that in different ways, and
in particular, there's no reason to say we're always going
to do the default twenty five. Philosophically I agree with that. Okay,
(23:00):
what I said to you earlier on.
Speaker 8 (23:01):
Is right now.
Speaker 9 (23:02):
The growth performance. I'm sure to be marked down. It's
still a growing economy. We've replaced from I think to
the downside. But we don't need to be too from.
Speaker 8 (23:12):
Out about equity futures.
Speaker 2 (23:23):
Right now in the SMP, just the touch soft that
we're down by two tenths of one percent. Coming up
this hour Franklin Templeton CEO Jenny Johnson. Following back to
back games for equities, we'll catch up with Carlos Querpo,
the Trade and Economy Minister of Spain, on a US
EU trade deal and the standard chart of Chair Jose
Vines on the potential for lower levees on China. We
(23:43):
begin this now with stocks lower as investors away clarity
on trade talks. Jenny Johnson, the CEO of Franklin Templeton,
one of the world's largest investment managers, joined us now
for more.
Speaker 8 (23:52):
Jenny, it's good to see you.
Speaker 6 (23:53):
It's great to be here. Thanks for having me.
Speaker 2 (23:55):
Things have changed a lot since we caught up with
you in Davos, Switzerland. So a lot of optimism, you
remember it everyone with us, exceptionalism well strength, lots of
hiring markets are great.
Speaker 8 (24:04):
There's a change the law. Have they change for you.
Speaker 10 (24:07):
Well, you know, I actually we talked about it at
the time. You know, I think that you have to
think through kind of where the president is.
Speaker 6 (24:16):
Right, He's come in with a plan. He's been very clear.
Speaker 10 (24:18):
Right, it's taxes, immigration, tariffs, government efficiency and deregulation, right
and so, and he has about a year and a
half to get those things done before the midterms come in.
And so you know, from the tariff standpoint, again, he's
a deal maker. So when you are trying to make
a deal, you need to show that you are in
the position of strength, right, So a lot of this
(24:40):
blistering is around I'm in a position of strength and
you're going to have to bow to my will. I
think the challenge has been there are some unintended consequences
of that. I was talking to somebody yesterday about Canadians.
Speaker 6 (24:51):
They're so they're not.
Speaker 10 (24:52):
Upset about the terroiff, they're upset about the fifty first
state comment and that Airbnbs in Rhode Island are down
because the Canadians say, I'm not going to come visit
the US. So those are the under tenant consequences. The
other piece of this is he needs the tax revenues
identified in tariffs to help fund his tax cuts, which,
by the way, are not tax cuts really, they're extensions.
(25:15):
And if we don't get that extension, there is a
massive tax increase that happens, which really becomes an issue
around the economy.
Speaker 2 (25:22):
Can you describe how you and the same thing the
endgame looks like? What do you think it looks like?
Because some people have described the last few weeks as madness.
Speaker 8 (25:28):
Is there a method to it?
Speaker 6 (25:29):
Yeah?
Speaker 10 (25:29):
So I think what we hope to see, you'd like
to see a couple of deals done right, to show
that he's willing to come to the table and make
a deal.
Speaker 4 (25:37):
Right.
Speaker 6 (25:37):
So if we can see a deal with.
Speaker 10 (25:38):
Japan or Vietnam or you know, somewhere, to show no, no, no,
he's playing his deals.
Speaker 6 (25:42):
You'd like to know who is responsible.
Speaker 10 (25:45):
Remember it was Paul Ryan who ushered the first tax
cuts through, Like who's responsible for ushering that legislation through
and champion that?
Speaker 6 (25:52):
That will be very.
Speaker 10 (25:53):
Important because he's got to get those done and the
question is how quickly can he get it done to
calm the markets because what we've seen is, you know,
look at you when you suddenly have CEOs who say
I can't give guidance because there's so much uncertainty. That
uncertainty makes them fear, and then they stop making investments.
If you stop making investments, it slows down the economy. Right,
So I think what we need to see in the
(26:15):
next ninety days is some clarity in the meantime uncertainty.
Speaker 5 (26:19):
It leads to a lot of conspiracy theories and lots
of other types of speculation. As someone who oversees one
and a half trillion dollars of assets, how much of
a material shift have you seen with customers, consumers shifting
just slightly away from US assets to insulate from some
of the whip siwing and the uncertainty.
Speaker 10 (26:38):
You definitely see, you know, non Americans reducing on the
institutional side some of their exposure to US equities.
Speaker 6 (26:45):
Okay, so we've seen that a bit.
Speaker 10 (26:48):
But on your hand, you know, you sort of you
if you are in the market now, this is not
the time we get out of the market, right, you
need to play this out. And if you hadn't made
the trade to being in more defensive stock, then there's
no point in doing that now, right, because you've already
sort of missed it. So you know, the reality is AI.
I actually played around this weekend with an app called
(27:10):
replet where you can just use natural language processing to
have it code and generate an app for you. Like
the efficiencies are come from AI, we haven't seen those
kind of productivity gains yet. The productivity gains that we're
seeing are coming from technologies that came out twenty years ago,
and so as those things play into companies, I think
you'll see real opportunity.
Speaker 5 (27:30):
You know, one thing that I hear from you, and
I heard from Mike Wilson of Morgan Stanley earlier this morning,
was that corporate America has a lot of good about
it in terms of strength, in terms of resilience, in
terms of technological progress. It's the question about other dollar
denominated assets, and I'm talking about treasuries. I'm talking about
government debt, especially given some of what you were talking
about with respect to who is driving some of these
budget proposals through Congress.
Speaker 6 (27:52):
That really is the issue.
Speaker 5 (27:54):
How much have you seen that bid get called into
question as institutions, particularly foreign ones, move away.
Speaker 10 (28:00):
I think there's a question of you know, how much
are you know, foreign governments pulling away from treasuries and
you know, is that is that what we're seeing the
treasury market or are we seeing the unwinding of the
basis point?
Speaker 6 (28:10):
They are the basis.
Speaker 10 (28:11):
Trade and so you know, look, then the question falls
into well is the reserve US as the reserve currency?
Speaker 6 (28:19):
At question? Look, is not where else you going to go?
Speaker 3 (28:21):
Right?
Speaker 10 (28:21):
The US is going to be the reserve currency. People
will say, well, China trade has gone up to two percent. Yeah,
it's gone from four to six percent of trade, right,
you know, it'll chip away at it, but we are
still going to continue to be the reserve currency.
Speaker 1 (28:33):
You mentioned a lot of non US investors pulling back
from the United States. Morning Star had research out this
week that said some of that is actually patriotic rebalancing
from capital from America to Europe. Do you think it's
that emotional for some.
Speaker 10 (28:45):
Of these people, Well, you know, just again talking to
folks from Canada who are so fundamentally offended by the
comment of you know, the fifty first state. Yeah, it's emotional, right,
they kind of get it on the trade and tariffs
and we can deal and you want help on immigration.
But a comment like that has obviously had that kind
(29:06):
of nationalists response.
Speaker 1 (29:07):
One are the long term impacts of feelings like that.
Speaker 10 (29:11):
You know, who's at a dinner last night, we're you know, debating.
Does that push Europe to China?
Speaker 6 (29:17):
I don't think it, you know, obviously.
Speaker 10 (29:19):
I think what it does is there's the joke of
you know, it's not Mega, it's Mega make Europe great again, right.
Speaker 6 (29:24):
It forces Europe.
Speaker 10 (29:25):
To do things like more defense independence, more energy independence. Look,
there's been a lot of brilliant talent in Europe. Why
are we not seeing these unicorn companies from a technological
and a lot of people say it's the regulation and
it's some of the policies that they have in Europe.
And so if this forces Europe to be more resilient
(29:46):
on its own, that's actually a good thing for Europe.
I don't think it necessarily. They don't suddenly trust China
much more. They're already trading with China. But it forces
them to say, you know what, we have to we
have to stand on our own a little bit more.
Speaker 2 (29:58):
It's why we're seeing some invest this rebalance towards Europe
since the start of the year. I wanted to build
on some of Lisa's questions, and I think this is
an important line of questioning at the moment, some investors
aren't drawing a distinction between risk assets in America and
the safe have an asset in America, it's training as
one bucket.
Speaker 8 (30:14):
Dollar denominated assets.
Speaker 2 (30:15):
And I wonder from your perspective, when that Ian dynamic
starts to take hold of the country, whether that's a
risk you need to actively manage or a dislocation you
take advantage of.
Speaker 8 (30:24):
Which one is it at the moment?
Speaker 10 (30:25):
Well, I think anytime that it becomes a risk on
risk off in a big block, and yet you know,
the underlying fundamentals are different in kind of an investment,
that actually becomes a great investment opportunity.
Speaker 6 (30:37):
So I think you have to look at it and
unpack those Do.
Speaker 2 (30:39):
You think that's what this is right now and it's
the opportunity in stocks or bonds?
Speaker 8 (30:43):
With that in.
Speaker 10 (30:43):
Mind, I think you know, right now it's almost a
market reacting to just a headline statement, right, and so
it's really sort of on and off. It's a risk
on risk off. I think that from a you know,
the dollar was someon would say over valued, who knows, right,
and it's come down a fair bit. I think there
are a lot of people that were the US the
(31:05):
debt and the deficit. You know, thought that it was overvalued,
and so probably in this there's a little bit of
that coming, you know, some of that frightingness coming off.
Speaker 2 (31:13):
What's your advice to people right now who were part
of that dollar bit. They've built up that massive dollar
long over the period of a decade across asset classes,
in both equities and fixed income, and they're nervous about
the policy in Washington and looking to reallocate.
Speaker 8 (31:25):
What do you suggesting they do?
Speaker 10 (31:26):
I think it depends on where If you're a dollar
based economy, I think that's okay, you don't have to
worry about that. If you're not a dollar based economy,
you have to understand how that's going to impact your investments.
Speaker 2 (31:37):
Certainly been something that the Europeans about to think about
over the last few months, that's for sure. Jenny, it's
good to see you lost to talk about. I can't
imagine how much has changed the next time we spoke.
I speak Jenny Johnson. There the Franklin Templeton CEO on
the latest in this market. This is the Bloomberg Sevenants podcast,
bringing you the best in markets, economics, angiot, politics, You
can watch the show live on Bloomberg TV weekday mornings
(31:58):
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
Speaker 5 (32:12):
MHM
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and Amrie Hordern. Join us each day
for insight from the best in markets, economics, and geopolitics
from our global headquarters in New York City. We are
live on Bloomberg Television weekday mornings from six to nine
am Eastern. Subscribe to the podcast on Apple, Spotify or
anywhere else you listen, and as always on the Bloomberg
(00:34):
Terminal and the Bloomberg Business App. Joining us now, Danny
of Yourdenny Research. He writes Trump and Bess and discards
some of their best cards while preparing to play tariff
poker with China. Financial markets are happy that Team Trump
is blinkingg Edgiandenny joined us now for more. Ed Welcome
to the program. Let's talk about the extent of that blink.
How much of a U turne are you expecting in
the next several weeks.
Speaker 3 (00:55):
Well, it's a very.
Speaker 4 (00:56):
Odd situation where the United States seems to be negotiating
with itself, so very peculiar art of the deal where
you walk in the room and you're you're the only
one in there, and you keep issuing really press release
to saying that great progress is being made.
Speaker 3 (01:12):
So I don't really know what to make of it.
What I do make of.
Speaker 4 (01:15):
It is that curly the financial markets have had a
big impact on the administration. This is the bond vigilantes
and the stock vigilantes ganging up on the administration and saying,
you know, we need some moderation here, we need some
cooling off. And that's exactly what the administration is doing.
Speaker 2 (01:35):
And that is the target Home Depot and Walmart vigilantes
as well. Clearly the most important meeting that took place
in Washington this week where the retailer is sitting down
with the President of the United States and warning Kim
they're within weeks we could have empty shelves. And I
think it makes it difficult at this moment to read
the economic data. What is a genuine rebuilding infantries, what
is a genuine sustainable underlying trend in demand, and what
(01:59):
do you see in the data and the earnings.
Speaker 4 (02:03):
Well, the earnings are actually starting to be cut back.
Of course, analysts have finally gotten their recession tariff memo,
so they've started to incorporate the fact that this isn't
going to be good for the economy. It's going to
weigh on the economy. I think to the extent that
analysts usually talk just to companies, they don't talk to economists,
(02:25):
But they're reading the headlines and they see that economists
are lowering their outlook for economic growth, and they're probably
getting that kind of guidance from some of their companies
that if the tariffs stay on, the longer they stay on,
the weaker the economy is going to be. But I
think at the rate at which the administration is back
and off here, the economic impact of the tariffs could
(02:47):
start to really ease off by the second half of
the year, which is at this point when most economists
expecting a much weaker economy are actually a recession. So
there could be a reversal at least in the soft
data that then it would suddenly lift the pressure off
the hard data.
Speaker 5 (03:04):
And it feels like the genius sort of out of
the bottle, But we can't see and we don't know
how big he is. We don't know whether he can
climb back into the bottle at any given time.
Speaker 6 (03:11):
I just wonder as you look forward why you reject.
Speaker 5 (03:13):
The idea that what we're seeing right now is a
long term structural loss of US exceptionalism that will result
in a weaker dollar and potentially less dynamism in US
equities over time.
Speaker 3 (03:25):
Yeah, that's a great question.
Speaker 4 (03:26):
I mean, it's only a few months ago that the
American exceptionalism made the front cover of The Economist. I
think it was October of last year. There was a
lot of dollars that looked like a rocket ship, and
you know, we couldn't be staffed. Look, I think now
that everybody is having second thoughts about that, or even
concluding in a dire way that the dollars is in
(03:50):
decline here as a reserve currency. Keep in mind that
there's nothing like the US capital markets. Well, you know,
when you make a list of exceptionalism, American capital markets
are exceptional. They are huge, they are liquid. There's nothing
like them. So I don't know how the dollar losers.
That's preserve status, and I think it remains strong even
(04:12):
this recent hysteria about the weaker dollar. It's fell about
ten percent. Using the Dollar index, the DXY that everybody watches,
but a much better index that the FED calculates is
down about half as much, which is no big deal
in my opinion.
Speaker 5 (04:30):
This is the reason why people are looking at announcements
from a number of different ACID allocators and seeing if
they are trying to diversify even a little bit away
from the United States into other countries. I just wonder
how concerned you are about the idea that forty four
percent of S and P five hundred companies that have
reported so far have mentioned the word recession, except from
three percent in the fourth quarter, at a time where
(04:50):
potentially the US's ability to borrow to bolster the economy
and any kind of downturn could really be a lot
more difficult, a lot more pricey, a lot more paniff.
Speaker 3 (05:02):
Yeah.
Speaker 4 (05:03):
Well, I think the stock markets discounted certainly a weakening
in the economy in the second half of the year.
We certainly lowered our numbers from something like two and
a half to three percent growth this year to something
more like.
Speaker 3 (05:18):
Zero point five to one and a half percent.
Speaker 4 (05:21):
The only question is what there should be negative signs
on those numbers, and some people, I guess are in
that camp. We're still looking at the forty five percent
odds of an outright recession.
Speaker 3 (05:32):
We think the.
Speaker 4 (05:33):
President's really the administration is going to back off as
they have been on these tariffs, and to the extent
that they don't, I think they're going to declare victory.
I think they're going to get maybe ninety pieces of
paper from ninety countries, signed by key diplomats, laying out a.
Speaker 3 (05:49):
Groundwork of framework.
Speaker 4 (05:51):
You can't negotiate a treaty in ninety days, you can't
implement the treaty in ninety days. But I think they're
going to declare victory, move on to the extension of
the tax cuts, and life will go on.
Speaker 1 (06:03):
And when it comes to the tariffs, though, the Wall
Street General appoint of the administration might back down on
China to say sixty percent, but that is what Trump
has been saying for months. On the campaign trail, he
promised ten percent across the board, of sixty percent on China.
So if that's the base case, how does this economy look?
Speaker 4 (06:20):
Well, as you know, it's hard to define what the
base case is. It changes almost daily from the press
conferences that the President has in the Oval Office. Is
associates keep talking about how much progress they're making. So
(06:41):
I think, you know, sixty percent is just as prohibitive
as one hundred and forty five percent. I think they're
going to have to again negotiate against themselves and maybe
postpone that increase so to leave it at sixty percent,
but they're going to postpone it for ninety days, turn
down the rhetoric, and find somebody to negotiate with the
(07:03):
Chinese on a better deal.
Speaker 2 (07:06):
Just a final question from us. You've been super constructive
on this cycle for quite a while. Coming into the
twenty twenties, you talked about the Roaring twenties. Yep, we're
at the halfway point working through that now. If he's
fronting the town on that view or you're sticking with.
Speaker 4 (07:18):
It, well, John, it was a great first half of
the decade. I hope it's the Roaring twenty twenties as over.
Yet there's sort of deja avous with the nineteen the
nineteen twenties we got a whole decade out of that
before the Congress that hoerendously imposed tariffs, So there's a
(07:38):
certain similarity here. But I think this too shall pass,
and I'm still looking for the Roaring twenty twenties to
be a description of the entire decade called me an optimist,
but I think I guess my mantra has been Look
how well the US economy has done over the years
despite Washington.
Speaker 3 (07:55):
That's still my bet.
Speaker 2 (07:58):
And we hope you're right. It's going to catch up
with you. As always, Danny, there have your Danny research
to discuss and place to say. The North Bank Investment
Management CEO Nikolay Tangan joins US now for more. Nicolay,
welcome back to the program. So a lot has changed
(08:20):
since we last spoke. Attitudes towards US as sets are
starting to shift. I just wonder how you and the
team have started to think about that, how you're debating
that issue internally over in Norway.
Speaker 7 (08:31):
Well, we have a very long term view on what
we do, so you know, we are invested with roughue
half for the fund in the US and we are
here for the very long term. So we have not
made any major adjustments lately.
Speaker 2 (08:45):
So Nikolai, can I rid into that that you view
this as just a shock to the cycle and maybe
not a long term shock to the system.
Speaker 7 (08:52):
Well, I think it's very very difficult to say it,
because when we make scenario analysis here, one of the
negative things that that we see is that if you
get a decentanglement between the two major trading blocks, that's
really really negative because it slow down it slows down growth,
increases inflation and zone. So it is potentially one of
the really negative things that can happen here. So I
(09:13):
think the out look for markets are very, very uncertain, given.
Speaker 5 (09:17):
That there has been a shift, Nikolai, to move at
least a little bit of assets about large acid allocators
out of the United States, diversified to places like China,
to India, to Europe. Why aren't you doing the same
and shifting to benchmarks that have a little bit more
exposure elsewhere.
Speaker 7 (09:36):
Well, we actually are extremely well diversified already. You know,
we own one and a half percent of all the
listed equities in the world. In Europe we have more,
we have closed to three percent, and so in the
US we have one than a half percent, and we
also have the same in the rest of the world.
So I would say we are we are well diversified,
(09:57):
seventy percent equities, thirty percent bonds. We also have a
very very good way to say, portfolio, which is coming
in really handy here.
Speaker 5 (10:05):
Well, nikola you said previously this morning when you were
speaking to media and OSLO that you will correct the
underweight to US stocks. So you are planning to reinvest
in US stocks even though you are surprised that we haven't.
Speaker 6 (10:18):
Seen even more weakness.
Speaker 5 (10:19):
Why are you redeploying all of the money that maybe
has lost in terms of benchmark allocation to US equity
has given some of these larger uncertainties.
Speaker 7 (10:30):
Well, the kind of the increased medication to the US
is part of a program that we've been doing for
quite some time. We still have some work to do
here and that we will continue to do. And you know,
we think the large American companies are just great long
term investments, and so we are very happy to be
invested in there.
Speaker 1 (10:51):
What sectors can you give us a little bit of
a hint of specifically the sectors or the companies are
interested in the United States?
Speaker 7 (10:58):
Well, are quite in near in how we are invested
in the US. So we typically have large holdings in
the you know, in the big tech companies, in all
your large companies.
Speaker 6 (11:08):
Really and we made you know a lot of money.
Speaker 8 (11:12):
There over the last few years.
Speaker 7 (11:13):
Of course, so far this year it's been it's been negative.
But when you look in comparison to the games we've
had the last year and the year before, we're given
back in a way surprisingly little.
Speaker 1 (11:24):
I would say, what about defensive companies like Lockheed Martin,
is that going to be open for business? When it
comes to the cumber.
Speaker 7 (11:31):
Well fund, Well, we invest in a lot of different industries.
We have less exposure to the defense industry, but we
are in a lot of the defensing names as well.
Speaker 2 (11:46):
Nikolai, one word you often use with us is we
are diversified. I just wonder if the meaning of that
word has shifted over time, particularly this year, the treasury
market is behaving in unpredictable ways. When the equity market
is falling, treasury markets have fell as well. In fact,
those two asset classes are training and lockstep. At the moment,
it's as if investors are treating all dollarg and ONMITD
as assets as one bucket. And I just wondered, Nicolay,
(12:08):
what that means for how you think about diversification this
year and beyond.
Speaker 7 (12:13):
Yeah, there was sometimes when when this type of diversification
worked less well.
Speaker 8 (12:18):
We had the same type of situation.
Speaker 7 (12:20):
You know, two three years ago, and so some years
it works, some years it doesn't.
Speaker 8 (12:26):
I think over time, if you have.
Speaker 7 (12:27):
A really long term time horizon, I think it's the
right positioning to have.
Speaker 2 (12:33):
We've seen over the last month or so that some
investors were trying to understand whether what was happening in
the treasury market was just trades unwinding, some hedgephones, hedge
funds blowing up, or nicolay, whether it was a reassessment
of the safe haven status of the United States. Nicola
I was on your dashboard to have distinguished between one
and the other.
Speaker 8 (12:51):
What do you think it was? What do you think
it is?
Speaker 7 (12:54):
Well, I think it's a very very complicated question. I
don't think it's only one thing. I think it's a
cocktail of all kind of things you mentioned. Now, so
far this year, we've we have been neutral to the
US treasure market. We have not reduced or increased positions,
so we have we have certainly not to cause that move.
Speaker 5 (13:16):
Do you have a sense, Nikolai, going forward of whether
we are entering a more inflationary period given some of
the deglobalization that we're seeing, some of the fissures and
some of the kinks that are emerging in the supply
chain system.
Speaker 7 (13:30):
Yeah, I think we are potentially going into a more
inflationary situation. It is kind of a pretty obvious consequence
of higher tariffs, and of course inflation is really negative
of market so I think that's potentially one of the
big risks that we are.
Speaker 8 (13:49):
Seeing just now.
Speaker 7 (13:50):
Interestingly, we just yesterday released a podcast with Ken Rogoff,
kind of the world leading specialist, I guess on inflation,
and he's also very word about this particular fact.
Speaker 5 (14:02):
Well, I guess, just to build in what John was
asking about the idea of diversification, and you have been
about neutral on US bonds, there has been a feeling
that maybe diversification, especially in an inflationary environment, requires some gold,
requires some alternative assets that might be act based funding
that have different streams of diversified revenues. Is that your
(14:24):
take on it that you just on the margins want
to pick up a little bit more gold or diversify
a little bit more in some of these other asset classes.
Speaker 3 (14:32):
Yeah.
Speaker 7 (14:32):
So we have a very strict mannight here from the ministry,
so we cannot buy gold, and I do think gold
sometimes has a bit difficult to understand what the intrinsic
value is of gold.
Speaker 8 (14:44):
We also don't do cryptocurrencies, for instance.
Speaker 7 (14:47):
But when we look at alternative assets, I would say
in a market like this to have real estates, that's
very good. We have just under a thousand properties around
the world, you know, large holdings in Manhattan, Boston, Washington
one and so I think that's going to be a
pretty good place to be going forward.
Speaker 2 (15:04):
Nikolay, I appreciate your take at a difficult time. Thanks
for your time this morning. Nicolai Tangan there the Norway
Well fun CEO. On a difficult moment, the UCB warning
tarras may be more disinflationary than inflationary for Europe. This
(15:26):
after President Trump said he's confident of reaching a trade
deal with the EU. Joining us around the table here
in our studio in Washington, d C. The chief economist
of the European Central Bank, Philip Blank.
Speaker 8 (15:36):
Philip's good to see you, sir, Good morning. Thanks for
being able to hear in Washington.
Speaker 2 (15:39):
So the Governing Council meeting, I imagine was very different
this time around than a number of months ago when
you walked into that room and presented changes to the economy.
Speaker 8 (15:47):
What did you tell a team?
Speaker 9 (15:48):
Sure, I mean, I think it was a gear change
for several reasons, So of course our core business has
been to try and get inflation back down from a
high number to our targets. I think there was a
milestone in this meeting in the sense of the most
recent data had come in quite low. What we've been
waiting for services inflation to kind of drop, and it
(16:11):
has been dropping. And then we had surveys showing that
basically the weight dynamic this year and in twenty six
is lower than we expected. So basically, if you like,
if you clear the table about the historic issue, are
we safely bringing inflation back to target? I think a
lot it's not entirely settled, but a lot of it
(16:31):
is settled. So the gear change was of course, now
we have new things to talk about, and really since
all the way back to last summer, trade policy uncertainty
has been part of what we've had to talk about.
But we still have trade policy uncertainty, but we also
have trade policy news. You know, lots has happened that
(16:54):
the and then the other element of what we've seen
is of course, and that happened, by the way, like
a day or two before our March meeting, was a
German break through and fiscal policy. So we already had that,
if you like, in the early incarnation at the March meeting.
We know more now, but it's still, you know, in
(17:15):
terms of what the other European countries are going to do,
it's something that's still in discussion. So what I would
say if you put all of that together, and I
think you're probably hearing this from various colleagues and other
people this week, is if I take a longer term perspective,
and the IMF in their publications this week, a lot
of the data go out of twenty thirty. If I
(17:37):
take a twenty thirty perspective, you know, I think there's
a lot of grants to have a renewed optimism that essentially,
with more fiscal support, the credibility of delivering our two
percent target on a kind of long term basis is stronger.
The case for the European economy to be more resilient,
(17:57):
to grow from a domestic source, not just from running
a big export machine is more credible. But of course
we have to navigate from where we are now. Where
As you said in your intro, immediately in the short term,
the way it's playing out with euro appreciation with.
Speaker 8 (18:18):
A big job and energy prices.
Speaker 9 (18:20):
The disinflatory forces are there, but I would say maybe
the question you know, I wouldn't load it all on
the trade policy is what we also see now as
a portfolio shift. So there's a clear portfolio shift going on,
which is I think the way you can reconcile euro
appreciation in the middle of this trade discussion.
Speaker 2 (18:41):
As you know, Philip, that sort of begs the question
why you don't act more aggressively. Does that give you
the space to act more preemptively?
Speaker 9 (18:47):
Well, I think a very important narrative we had last week,
and it was repeated threat to Manto policy statement was resilience.
What we're seeing is the europan economy growing. Two years
of it was kind of more stagnating. So we said
the European economy is going to recover. We saw modest
(19:07):
but still market recovery last year is around zero nine.
We have zero nine written down in March for this year.
And that's basically because with incomes going up, consumption through
recover with our Munti policy, and the general improvement of
the economy, investments should recover with more government support. So
(19:28):
all the domestic engines are there. So what you have
to think about. Is all of that, if you like,
is saying that the economies should be growing, even marking
down some trait negative And this is why we're not
in a situation where we see some dramatic change in
(19:48):
the external environment or in friest pressures and so on.
Speaker 8 (19:52):
So steady is okay?
Speaker 5 (19:53):
Hold on a second, Are you saying that what we've
seen with respect to US policy and the uncertainty isn't
increasing the chance of session materially for the euroregion?
Speaker 9 (20:02):
Well, I mean, I think our overriding seam, of course
is uncertainty, and let's not get ahead of ourselves in
terms of being too sure about any any path for
the economy. But I think the message is but it's
not me dreaming it up. If you look at the
external watchers, if you look at the IMF, it's fairly
modest mark dance on the growth trade for the European economy.
(20:25):
The US, of course has a major trade policy issue
all with the world. We have a trade policy issue
with the US. The US is an important trading partner,
but it's not our only trading partner, so directionally it
is a markdown. There is a markdown, but it's important
to say. It's a markdown from a growth trade around
(20:47):
zero nine to a little bit less. Let's see in
the coming weeks how much less. And I think if
you look at the surveys this week, the surveys have
elements of people being concerned, but they also have elements.
Right now, we're busy. Manufacturing is a bit busier than
it was. That could be a little bit of front
running of taris, for sure, but it's also remember the
(21:09):
recovery narrative Europe what has been stagnating. The American economy
has grown quickly, So if you like, in terms of
if there was room for the American economy to decelerate,
and then trade policy is adding to that. What I'm
saying to you is essentially the baseline for Europe was
to grow a bit more quickly, and so the resilience
(21:29):
is there. You can take a trade hit without going
to using that word which I of that you mentioned.
Speaker 1 (21:38):
You mentioned, of course, that Europe has more trading partners.
Speaker 6 (21:41):
Than the United States.
Speaker 1 (21:42):
How concerned are you that if the walls keep going
up in the United States, China will have to just
jump somewhere.
Speaker 6 (21:47):
It's going to be on the continent.
Speaker 9 (21:49):
So I think directly an element with that must be
you know, must be expected. But I think you know,
China fully understands that if you listen to their policy
announcements they're going to do. Their focus is on improving
domestic demand. So in terms of the reorientation from the US,
(22:11):
I would allocator at fairmount to domestic demand, some amount
to around the world. But I think also China understands
it's a large economy and a bit of restraint in
exporting may make sense.
Speaker 2 (22:26):
For the twenty seconds left, I just wanted to jump in.
Olie Rain was busy this morning, your governing council partner,
and he made the point that we should be open
to larger interest rate cuts. Is that a position that
you and the team agree with?
Speaker 9 (22:37):
Philosophically, we don't pre commit to any rate path, of course,
and so this is why again it's important, and I
think the Government Council, I think tries hard to maintain
this is. You can express that in different ways, and
in particular, there's no reason to say we're always going
to do the default twenty five. Philosophically I agree with that. Okay,
(23:00):
what I said to you earlier on.
Speaker 8 (23:01):
Is right now.
Speaker 9 (23:02):
The growth performance. I'm sure to be marked down. It's
still a growing economy. We've replaced from I think to
the downside. But we don't need to be too from.
Speaker 8 (23:12):
Out about equity futures.
Speaker 2 (23:23):
Right now in the SMP, just the touch soft that
we're down by two tenths of one percent. Coming up
this hour Franklin Templeton CEO Jenny Johnson. Following back to
back games for equities, we'll catch up with Carlos Querpo,
the Trade and Economy Minister of Spain, on a US
EU trade deal and the standard chart of Chair Jose
Vines on the potential for lower levees on China. We
(23:43):
begin this now with stocks lower as investors away clarity
on trade talks. Jenny Johnson, the CEO of Franklin Templeton,
one of the world's largest investment managers, joined us now
for more.
Speaker 8 (23:52):
Jenny, it's good to see you.
Speaker 6 (23:53):
It's great to be here. Thanks for having me.
Speaker 2 (23:55):
Things have changed a lot since we caught up with
you in Davos, Switzerland. So a lot of optimism, you
remember it everyone with us, exceptionalism well strength, lots of
hiring markets are great.
Speaker 8 (24:04):
There's a change the law. Have they change for you.
Speaker 10 (24:07):
Well, you know, I actually we talked about it at
the time. You know, I think that you have to
think through kind of where the president is.
Speaker 6 (24:16):
Right, He's come in with a plan. He's been very clear.
Speaker 10 (24:18):
Right, it's taxes, immigration, tariffs, government efficiency and deregulation, right
and so, and he has about a year and a
half to get those things done before the midterms come in.
And so you know, from the tariff standpoint, again, he's
a deal maker. So when you are trying to make
a deal, you need to show that you are in
the position of strength, right, So a lot of this
(24:40):
blistering is around I'm in a position of strength and
you're going to have to bow to my will. I
think the challenge has been there are some unintended consequences
of that. I was talking to somebody yesterday about Canadians.
Speaker 6 (24:51):
They're so they're not.
Speaker 10 (24:52):
Upset about the terroiff, they're upset about the fifty first
state comment and that Airbnbs in Rhode Island are down
because the Canadians say, I'm not going to come visit
the US. So those are the under tenant consequences. The
other piece of this is he needs the tax revenues
identified in tariffs to help fund his tax cuts, which,
by the way, are not tax cuts really, they're extensions.
(25:15):
And if we don't get that extension, there is a
massive tax increase that happens, which really becomes an issue
around the economy.
Speaker 2 (25:22):
Can you describe how you and the same thing the
endgame looks like? What do you think it looks like?
Because some people have described the last few weeks as madness.
Speaker 8 (25:28):
Is there a method to it?
Speaker 6 (25:29):
Yeah?
Speaker 10 (25:29):
So I think what we hope to see, you'd like
to see a couple of deals done right, to show
that he's willing to come to the table and make
a deal.
Speaker 4 (25:37):
Right.
Speaker 6 (25:37):
So if we can see a deal with.
Speaker 10 (25:38):
Japan or Vietnam or you know, somewhere, to show no, no, no,
he's playing his deals.
Speaker 6 (25:42):
You'd like to know who is responsible.
Speaker 10 (25:45):
Remember it was Paul Ryan who ushered the first tax
cuts through, Like who's responsible for ushering that legislation through
and champion that?
Speaker 6 (25:52):
That will be very.
Speaker 10 (25:53):
Important because he's got to get those done and the
question is how quickly can he get it done to
calm the markets because what we've seen is, you know,
look at you when you suddenly have CEOs who say
I can't give guidance because there's so much uncertainty. That
uncertainty makes them fear, and then they stop making investments.
If you stop making investments, it slows down the economy. Right,
So I think what we need to see in the
(26:15):
next ninety days is some clarity in the meantime uncertainty.
Speaker 5 (26:19):
It leads to a lot of conspiracy theories and lots
of other types of speculation. As someone who oversees one
and a half trillion dollars of assets, how much of
a material shift have you seen with customers, consumers shifting
just slightly away from US assets to insulate from some
of the whip siwing and the uncertainty.
Speaker 10 (26:38):
You definitely see, you know, non Americans reducing on the
institutional side some of their exposure to US equities.
Speaker 6 (26:45):
Okay, so we've seen that a bit.
Speaker 10 (26:48):
But on your hand, you know, you sort of you
if you are in the market now, this is not
the time we get out of the market, right, you
need to play this out. And if you hadn't made
the trade to being in more defensive stock, then there's
no point in doing that now, right, because you've already
sort of missed it. So you know, the reality is AI.
I actually played around this weekend with an app called
(27:10):
replet where you can just use natural language processing to
have it code and generate an app for you. Like
the efficiencies are come from AI, we haven't seen those
kind of productivity gains yet. The productivity gains that we're
seeing are coming from technologies that came out twenty years ago,
and so as those things play into companies, I think
you'll see real opportunity.
Speaker 5 (27:30):
You know, one thing that I hear from you, and
I heard from Mike Wilson of Morgan Stanley earlier this morning,
was that corporate America has a lot of good about
it in terms of strength, in terms of resilience, in
terms of technological progress. It's the question about other dollar
denominated assets, and I'm talking about treasuries. I'm talking about
government debt, especially given some of what you were talking
about with respect to who is driving some of these
budget proposals through Congress.
Speaker 6 (27:52):
That really is the issue.
Speaker 5 (27:54):
How much have you seen that bid get called into
question as institutions, particularly foreign ones, move away.
Speaker 10 (28:00):
I think there's a question of you know, how much
are you know, foreign governments pulling away from treasuries and
you know, is that is that what we're seeing the
treasury market or are we seeing the unwinding of the
basis point?
Speaker 6 (28:10):
They are the basis.
Speaker 10 (28:11):
Trade and so you know, look, then the question falls
into well is the reserve US as the reserve currency?
Speaker 6 (28:19):
At question? Look, is not where else you going to go?
Speaker 3 (28:21):
Right?
Speaker 10 (28:21):
The US is going to be the reserve currency. People
will say, well, China trade has gone up to two percent. Yeah,
it's gone from four to six percent of trade, right,
you know, it'll chip away at it, but we are
still going to continue to be the reserve currency.
Speaker 1 (28:33):
You mentioned a lot of non US investors pulling back
from the United States. Morning Star had research out this
week that said some of that is actually patriotic rebalancing
from capital from America to Europe. Do you think it's
that emotional for some.
Speaker 10 (28:45):
Of these people, Well, you know, just again talking to
folks from Canada who are so fundamentally offended by the
comment of you know, the fifty first state. Yeah, it's emotional, right,
they kind of get it on the trade and tariffs
and we can deal and you want help on immigration.
But a comment like that has obviously had that kind
(29:06):
of nationalists response.
Speaker 1 (29:07):
One are the long term impacts of feelings like that.
Speaker 10 (29:11):
You know, who's at a dinner last night, we're you know, debating.
Does that push Europe to China?
Speaker 6 (29:17):
I don't think it, you know, obviously.
Speaker 10 (29:19):
I think what it does is there's the joke of
you know, it's not Mega, it's Mega make Europe great again, right.
Speaker 6 (29:24):
It forces Europe.
Speaker 10 (29:25):
To do things like more defense independence, more energy independence. Look,
there's been a lot of brilliant talent in Europe. Why
are we not seeing these unicorn companies from a technological
and a lot of people say it's the regulation and
it's some of the policies that they have in Europe.
And so if this forces Europe to be more resilient
(29:46):
on its own, that's actually a good thing for Europe.
I don't think it necessarily. They don't suddenly trust China
much more. They're already trading with China. But it forces
them to say, you know what, we have to we
have to stand on our own a little bit more.
Speaker 2 (29:58):
It's why we're seeing some invest this rebalance towards Europe
since the start of the year. I wanted to build
on some of Lisa's questions, and I think this is
an important line of questioning at the moment, some investors
aren't drawing a distinction between risk assets in America and
the safe have an asset in America, it's training as
one bucket.
Speaker 8 (30:14):
Dollar denominated assets.
Speaker 2 (30:15):
And I wonder from your perspective, when that Ian dynamic
starts to take hold of the country, whether that's a
risk you need to actively manage or a dislocation you
take advantage of.
Speaker 8 (30:24):
Which one is it at the moment?
Speaker 10 (30:25):
Well, I think anytime that it becomes a risk on
risk off in a big block, and yet you know,
the underlying fundamentals are different in kind of an investment,
that actually becomes a great investment opportunity.
Speaker 6 (30:37):
So I think you have to look at it and
unpack those Do.
Speaker 2 (30:39):
You think that's what this is right now and it's
the opportunity in stocks or bonds?
Speaker 8 (30:43):
With that in.
Speaker 10 (30:43):
Mind, I think you know, right now it's almost a
market reacting to just a headline statement, right, and so
it's really sort of on and off. It's a risk
on risk off. I think that from a you know,
the dollar was someon would say over valued, who knows, right,
and it's come down a fair bit. I think there
are a lot of people that were the US the
(31:05):
debt and the deficit. You know, thought that it was overvalued,
and so probably in this there's a little bit of
that coming, you know, some of that frightingness coming off.
Speaker 2 (31:13):
What's your advice to people right now who were part
of that dollar bit. They've built up that massive dollar
long over the period of a decade across asset classes,
in both equities and fixed income, and they're nervous about
the policy in Washington and looking to reallocate.
Speaker 8 (31:25):
What do you suggesting they do?
Speaker 10 (31:26):
I think it depends on where If you're a dollar
based economy, I think that's okay, you don't have to
worry about that. If you're not a dollar based economy,
you have to understand how that's going to impact your investments.
Speaker 2 (31:37):
Certainly been something that the Europeans about to think about
over the last few months, that's for sure. Jenny, it's
good to see you lost to talk about. I can't
imagine how much has changed the next time we spoke.
I speak Jenny Johnson. There the Franklin Templeton CEO on
the latest in this market. This is the Bloomberg Sevenants podcast,
bringing you the best in markets, economics, angiot, politics, You
can watch the show live on Bloomberg TV weekday mornings
(31:58):
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
Speaker 5 (32:12):
MHM
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