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This is the Bloomberg Surveillance Podcast. I'm Jonathan Farrow, along with Lisa Abramowitz and Anne-Marie 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 6 to 9 a.m. 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.
Stephanie Roth of Wolf has one of the lowest estimates on the street, writing, we're looking for 90,000 non-farm payrolls, weather, seasonal factors, and the calendar alone suggests a substantial headwind. Stephanie joins us now for more. Stephanie, good morning. Good morning. Is it too early to expect to see a hit from the policy volatility down in Washington?
No, I think we should start to see that companies probably pause on their hiring. If we don't know what the outlook is, a lot of companies are quite uncertain about where things are going. It makes sense that they're going to pause on hiring. And then from the comments that you just read, there's seasonal factors weighing on the print, calendar factors weighing on the print. It makes sense for it to be below 100. It has been described as a random number generator at times. In the survey week, claims were okay. Does that make a difference to you? No.
No, because the seasonal stuff is not really an effect of firing. It's more just timing around the survey week compared to last month. There was bad weather. That doesn't mean that there was actual firing, so that shouldn't correlate with the claims data. This is more a function of this particular non-farm payrolls print. Does it matter which jobs...
end up getting removed or maybe seeing a weak performance in this report given the fact that there has been this ballast of healthcare as well as a couple of other sectors including the government that have really driven things over the past couple of years. Yeah, and I think
that we're going to see over the next couple months is the parts of the labor market that were really strong should start to slow down, government in particular, healthcare as well, especially since grants are likely to be slowing down healthcare hiring. And then on top of that, you should start to see the cyclical parts of the economy slow down. That one I don't expect for this print necessarily. I think we should see a sort of more gradual slowdown from that perspective. But we should start to see construction, should see a headwind from some of the weather stuff.
healthcare, government should be a little bit softer in this print. And then in the next print, things like rail employment, stuff that's actually tied to the goods economy. That's probably less of a story for this print. It's probably more about the May payroll print. You know, this has been a really confusing moment. On one hand, a lot of people are predicting a lot of pain and potentially a real headwind to growth. On the other hand, you do have companies withdrawing guidance. You have others like some of the travel companies, cruise liners and hotels increasing
their adjusted full year forecast because they see people still traveling, people still want to go around, the consumer is still strong. How do you pair these two ideas and put them together in some sort of outlook? - I think it makes sense. Today the economy is fine.
There will be some significant headwinds in the next couple of months unless Trump pulls back the tariffs on China in particular in a big way. So if he doesn't do that in the next couple of weeks, we might be on a sort of unsustainable path towards recession. Based cases, he probably pulls down the tariffs on China in particular fairly quickly.
fairly notably in the next couple of weeks. Otherwise, we might be looking at bare shelves and COVID-like environment, but it was a self-inflicted one. Stephanie, what's fairly notable in terms of pulling the tariffs down? 60%? That still feels like to many people a trade embargo.
You need tariff rates to be below 55% roughly, all in. That includes the fentanyl tariffs, that includes the reciprocal tariffs. And then, by the way, you have to be cognizant that there are 301 tariffs from the last trade war as well, some of them up to 25%. Right. So it's a massive cumulative rate. You said something earlier. You said you don't expect companies to be hiring. They're on pause. Do you expect them to be firing at this moment?
Probably not. There's just so much uncertainty. There was so much difficulty hiring in the past couple of years. It probably makes sense for them to just pause for a little while. Of course, there's going to be still some hiring to some extent. There's just a business needs the economy still growing. But to the extent that at the margin, if you're not sure you need the position, you might just kind of wait for the next couple of months, see how things play out, and then make a decision about whether you actually want to hire that position. Later on this morning, we get consumer confidence numbers. And within that, you're offered a read of
on attitudes to the labour market, how difficult or hard it might be to get a job. And I think this is really important on taking the temperature not only for that, but also the potential for second round effects when it comes to inflation and price hikes. Now, if I'm worried about getting a job, how likely is it that I'm going to get a pay rise anytime soon, or at least ask for one?
Probably less so. So you're probably going to start to see a little bit of a deceleration from a wage perspective. The one thing is the immigration stuff actually has a different implication for the blue-collar worker at the lower end. So there is a bit of stuff happening kind of under the surface that is quite nuanced. So we might start to see an unusual tightening for the blue-collar worker, even though the white-collar worker might actually be having a little bit more difficulty finding a job. So just for the record, ask for a pay raise, right? Okay.
Really? Always. Always. Okay, so that's basically so in some. Please, Rachel? This can become self-fulfilling, don't you think? The people start to worry about these things, so they back off, they stop spending, and it takes on a life of its own. Which is the reason why I think it's really salient that you mention these surveys and how people feel about their jobs, people staying longer. The quits rate later this morning when we get that JOLTS data is going to be key in terms of people's confidence, not just to ask for a raise, but to leave their jobs...
And as we're talking about this, UPS announces plans to cut 20,000 jobs this year as a result of the Amazon tie-up. You're seeing this on the margins, cost-cutting coming more into the fore. Where is consumer price tolerance right now going into potentially higher prices? Not very high. So the biggest driver of consumer inflation expectations is past inflation.
So to the extent that consumers are worried about the inflation that we saw this time, they're quite worried about inflation that we're going to see in the future, in which case they're probably going to be pulling back on spending. They're going to be very attuned to the prices that they're seeing on the shelves. So this is very different than the last trade war for a number of reasons of magnitude, of course, but also where we are coming from. And in 2018, we didn't have it
have a period of inflation. People weren't really expecting inflation. They didn't really know what it felt like. This time consumers feel are very, very different versus where we were. Amazon has a different idea of how this might play out, right? Amazon, I think, is going to get very political. The Trump administration is not going to like this. Punchbowl says that they're going to add what the tariff rate is on top of the cumulative price. So if you're a consumer and you see something's $5 and now it's $10, $7, whatever, you see the additional tariff input.
That is going to, I think, really irk the administration. Yeah, the politics of that is going to be interesting over the next few months or so, if that's how it plays out. Stephanie, it's good to see you, as always. Thanks for dropping by. Stephanie Roth there of Wolf Research.
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Let's turn to a busy week of data ahead and a busy week for Washington as well. The Fed's next rate decision just a week away. Colin Martin of Charles Schwab writing, while soft data has been concerning, the hard data has held up well. If this week's data disappoints, the Fed won't necessarily react. Colin, join us now for more. Colin, good morning.
Good morning.
It'd be pretty disappointing. I mean, when we look at the labor market outlook, there's all these thoughts and concerns about what could happen as the tariffs are put in place over the next few months. And there isn't too much concern in the here and now, opposite, you know, aside from what Slok just put out. I mean, I think the consensus estimate is $165,000, something like that.
If we were to see a slowdown here in April, I don't think that would change the Fed's calculus for next week. We kind of heard that from a lot of Fed officials in terms of no move in May. Maybe maybe it gets pulled up to June. I think it'd be bad for the markets, though.
If we got that negative reading this early, this quickly, I think that'd be a pretty bad outcome. When you say the markets, you're talking risk assets in particular. And what we have seen so far is a real divergence between the front end of the yield curve, which has really signaled a great more pain than certainly risk assets, whether it's credit instruments or whether it's equity ones.
Do you think that that divergence needs to close to more weakness on the risk side of things? Or do you think that people are pricing in an overly large response by the Federal Reserve?
I don't think they are. If you look at the 10-year Treasury, for example, that's been hovering in that 4.2 to 4.5 range. I think a lot of that comes down to potential confidence, dollar concerns, things like that. If you look at the Fed Funds futures market, they have been pricing in relatively aggressive cuts. We somewhat disagree with that. We don't think we're going to see that slowdown as quickly as a 3 or 4 rate cut outcome suggests.
but it does come down to the labor market. If we see that weakening, we think the Fed over time will react. We're seeing Powell kind of pivotal away a little bit, I think a week and a half ago. He mentioned maybe we'll focus on the inflation mandate more than the labor market mandate.
That seems to be the minority right now based on concerns and comments we've heard from other Fed officials. This is a fascinating moment. Or Latfi Karoui of Goldman Sachs yesterday came on the show and said that he actually prefers credit risk to sovereign risk right now. And it's talking about removing from some of the volatility that you're seeing in Treasury markets to really go with corporations that are telling you we have no clue, that are one after another saying we can't give you any forward guidance. Can you reconcile that? Do you agree with that?
You know, somewhat, but I guess it depends how much credit risk we're talking about. We're still a little bit cautious on, you know, the very low-rated parts of the market. I mean, junk in general, we're worried that spreads can blow out if we get this prolonged trade war. Investment grade, we're still pretty comfortable taking that risk. So whether it's credit on the corporate side, whether it's municipal credit risk,
We're okay there because the hard data leading up to now was generally okay. Corporations are in pretty solid footing, especially IG rated. We're looking at really strong balance sheets, plenty of liquid assets. If profits slow down, I think that might be more of a stock market issue. That's an earnings issue, not a balance sheet issue. We think they have really strong balance sheets right now. Again, IG issuers, they've pushed back that maturity wall a little bit. So IG we're okay with.
But we're not really taking low credit risk right now. This is a really tough time to be an investor, I have to say. I can just begin to imagine. There's so many different themes that are kind of overlaid. You've got this question of credit versus sovereign risk, and then you've got a question of just international appetite for U.S. dollar-denominated assets.
And that has been one of the biggest shifts over the past few weeks, is that that's really been called into question. How much have you changed your allocation to shift away from US dollar-denominated assets, just to touch on the margins, to immunize yourself from that type of narrative that does seem to be coming entrenched in certain pockets? - I can say we're talking about it a lot more.
uh... with our clients than we were a few months ago over the past years when we look at international markets at schwab it's not really a a big aspect of what we look at i think most u_s_ investors from a bond standpoint are probably under allocated to international debt with the dollar being it's as strong as it's been over the past few years there hasn't been as much of a case because you have that uh... yield disadvantage when you consider other global developed markets
if the outlook is for the dollar to weaken a little bit from here, then the case can be made to shift a little bit to international assets. We're not saying go nuts, we're not saying go overweight, but it probably makes sense, especially when you talk about the idea of a loss of confidence or sovereign risk. You don't hear about those concerns with some of the higher-rated issuers in, say, Europe, for example. So I think it's a decent option, but really just for investors who are probably under-allocated right now versus...
hey, take all your money out of the U.S. and go into Europe, for example. You said you're talking to your clients about this. Are they nervous about U.S. losing something like reserve status? Yes, full stop. I mean, it's over the past few weeks we've done... Have you ever heard this before?
We get it a lot. It's a question that always lingers, especially when you have the idea of rising debts, rising deficits. There's no shortage of concerns about the outlook for the dollar and how investors should be positioned. But over the past few weeks, especially since so-called Liberation Day, the client events and requests for communications have been through the roof, no surprise.
And that's a major concern. The question is what's going on with foreigners potentially selling our debt? What's the outlook for the dollar? We try not to be too alarmist about it. We don't think the dollar is going to lose its reserve currency status overnight. I think there could be a risk over the long run if the goal here by the Trump administration is to reduce those trade deficits.
then maybe that means we have less of a capital account surplus and it means foreigners over time don't need to hold as many dollars. It's a very long-term view, though. So we're trying not to be alarmist. Obviously, there's concerns out there, but we're not saying you need to get out of the dollar or dollar-denominated assets right now.
It's not something that happens overnight. It's something that happens gradually. And we have started to see this take place. The dollar started to weaken. Gold started to appreciate. That's been a story for the last couple of years now. And some of the people would also point to the steeper curves we've seen as well. Less of a willingness to hold the long bond, particularly in moments of stress in equity markets. You're not even seeing subtle signs of this starting to accumulate.
What do you mean by starting to accumulate with foreign investors and nervousness about long-term debt? Nervousness about holding US assets, particularly at times of stress. You know, I don't know if it's so much a nervousness. I think it's just a gradual shift away. Hey, there's a lot going on right now. And if you're a foreign investor, and it seems like it might be private investors as opposed to central banks, obviously these are negative headlines if you're a foreigner. Just the idea of maybe I don't want to hold that asset right now. But John, you hit the nail on the head. It's a long-term potential shift.
This takes years for something like this to happen. And it's not our outlook right now, mainly because where else can you go? I mean, the dollar is still the most held asset, the most traded asset. So it's not something that we're worried about right now. And if you've been away for a while and came back and saw DXY at 99, you probably wouldn't freak out. That's for sure. Good to see you, Colin. Appreciate it, as always. Colin Martin there of Charles Schwab on the latest.
Savita Subramani, Bank of America, writing, the only thing to fear is fear itself. Folks are worried about a recession, so they are acting recessionary. Speed in achieving policy clarity is of the essence. Savita joins us now for more. Savita, good morning. It's good to see you. Good morning. Great to see you. A lot of cuts to outlooks. We're seeing suspensions of guidance repeatedly across the board from corporate America this morning. What does that mean for you and the team? Yeah, well, I mean, it's not great. It's not great.
It's definitely not good. We're seeing the revision ratio, just the number of cuts to number of raises to earnings, approaching all-time lows. Guidance is being suspended.
That's a hit. I mean, we saw the same thing during COVID, probably more so during COVID because there was a much higher level of uncertainty. And what we found was the companies that continued to guide actually traded at the widest premium to the non-guiders or the suspenders that we've seen. So I think right now people want transparency, investors want to know. So that's one thing we're watching. I think what's interesting is that in the last week, we've heard more companies say,
talk about mitigation tactics for tariffs than we did in prior weeks. So I think that what we're in right now is the environment where corporates are doing what they always do, which is adapt, figure out where they can kind of change things around the edges. And on top of that, we're seeing kind of a deferral of big decisions. So it almost feels like we're in this phase where there's no hiring.
but no firing. There's no new capital committed to projects, but projects aren't necessarily being canceled. And I think that's both good and bad. I mean, this pause, the longer it lasts, you
you know the worst it gets for the economy but at least we're not seeing just this sort of reactive firing canceling you know kinda a a downdraft inactive this is important for the data that comes on Friday exactly when you say adapt then if they're not firing how are they adapting what are they doing
So, what they're doing is they're sort of shifting supply chain. They're thinking about more manufacturing in the U.S. I think that the idea that we've seen this movie before back in 2018, especially with respect to China, gives companies a little bit more confidence that they know how to negotiate this. So, I think that's a positive. What's interesting though is that you're hearing more weakness around consumer.
and even in consumer staples. So if you think you can hide in the food stocks and the defense, not necessarily working this time, and I think that's also noteworthy. I will tell you, I mean, everything we're looking at really points us in one direction, which is large cap value. And I feel like it's almost this
kind of unassailable theme in an environment where the risks are, you know, potentially higher yields, and we can talk about that, potentially higher inflation because what we're seeing right now on the table from a policy standpoint is mostly inflationary.
And in that environment, you really don't want to be in bonds, you want to be in dividends. Russell 1000 value companies have a much higher tether to non-discretionary spend, either services or goods. Think about it. I mean, if we're in an environment where we're cutting back, we're still going to pay insurance, we're still going to pay utilities, heating, etc. So I think those types of areas of the market should hold up quite well. And
the value index, the large cap value index has kind of consistently outperformed the growth index this year. So I think that's where you really want to be to sort of cover yourself as opposed to just going pure defensive, you know, kind of the old school defense playbook. Yeah. To your point, some of the consumer staples, Kraft Heinz came out and cited worsening consumer sentiment and cut their forecast. Evidently, Oscar Mayer sausages, as well as
your Heinz ketchup, but not necessarily moving off the shelves as quickly as in the past. You said you've learned to talk about hot dogs. Yeah, well, I mean, maybe that's something else. Maybe that's John's hack in terms of health care. Check your blood and then you check that Oscar. Anyway, let's move on. You talk about yields. Let's go there. You have a very non-consensus call on what U.S. equity markets are implying about where Treasury yields could go. Yeah.
7%? Really? 7%. So this is the analysis. We said, okay, equities and the corporate sector is actually quite unlevered and unusually healthy when it comes to leverage because all that leverage sits on government balance sheets. So if you look at the leverage ratio between corporates and the government, complete opposites. And if you apply the math, so what we found is that
investors will pay a higher multiple if leverage risk is lower. If you apply that math to where bond yields are, where the US government is,
it spits out yields of around 7%. It's a much higher level of return that investors need to see in an environment where leverage is so high. This is following the logic that the math is the same for U.S. sovereign risk as in corporations. It's back of the envelope, but this raises this real question, which is if there is a credit risk component to U.S. sovereign debt,
How much does that impede the equity story in the United States, given that a lot of guests who come on this show say, once 10-year treasury yields hit 5%, forget about it. You're going to see some losses in equities. Yeah, I don't necessarily think so. I mean, let's say we're kind of becoming more like an emerging market. Sometimes emerging market equities do really well, especially when they're unlevered and there's potential for growth. And I think that's where we are today. So if you look past tariffs and you think about
what the administration is trying to do. We're trying to get American manufacturing again. We're already seeing the seeds sown for that story over the last four to eight years. So I think that the idea that stocks have to implode if yields hit 5% is completely false. In fact,
We've looked at this a lot of different ways. I mean, think about it. Yields right now are not unusually high. 7% sounds really high, but we've been there. We've been higher in the past, and stocks have done okay, especially dividend-yielding stocks. So I think this is an environment where we have to kind of recalibrate to what's actually going on.
The U.S. government debt levels are at, you know, off the grid. We've never seen this before. We're seeing a closed economy. We're seeing signs of a closed economy. We're seeing signs of inflation. We want to see growth in the U.S. That's what the policymakers are trying to get. And all of that is likely to push up bond yields on the long end. Yeah, go ahead. Right. The administration, though, is targeting lower yields. If it hits 7%, does that mean they failed?
I don't know if it's failing. I mean, I think it's just sort of we're all anchoring to super low rates over the last 20, 30 years and they've been falling the entire time. But think about where we are now. I mean, rate cycles last for decades. We were in a multi-decade period where interest rates were falling. So I just think we should sort of gear ourselves for the idea that interest rates rising even from here is not necessarily anathema for stocks.
From a policy perspective, I mean, nobody's calling me about, you know, if rates move higher, have we failed? But I think that the idea is if rates move higher but growth is accompanying that rate move, that's not a failure. It's actually kind of a more normal boom time economy. And I just think we're so not used to that because we haven't...
seen that in such a long time. Why they're high, though, is important. Is it going to be the boom time economy that takes rates higher? Or is it going to be something else? I think it's a whole bunch of things. The good case is positive growth. The bad case is sovereign risk. It's also a lack of demand for US treasuries because the buyers, you know, foreign buyers have left the building. The Fed used to buy treasuries. I mean, one could argue that if we get to 5% on rates, the Fed will step back in and start buying.
But I think even there, we've got an environment where, again, going back over time, we're just all looking at the last 10 to 20 years and we're thinking that 5% seems unsustainable, companies aren't geared for it. Companies are actually very geared for a higher rate environment.
They've paid down debt. They've locked in very low fixed rate obligations. Consumer balance sheets are pristine. I mean, for the most part, you're seeing, you know, you're seeing some fraying around the edges. But when you think about what just happened, the government gave the private sector a whole bunch of money. Right? So,
So what do you want to buy, the government or the private sector? But when I hear you, Savita, I hear you talking about the potential for earnings. I don't hear you talking about the potential for what people will pay for those earnings. And when you talk about higher sovereign risk, when I start to think about that, when I start to think about what could happen to the sovereign,
That makes me think that people won't be willing to pay for earnings in the same way they were, particularly foreign investors who have built up an incredible long on dollar assets over the last decade. What kind of multiple are you putting on that very optimistic outlook? It's tricky because I think the S&P today is a very different animal than it's been historically. So saying...
a 15 multiple which is the long-term average you just slap that on and that's what you get what you get i don't think that's fair i think that's overly punitive because when you look at the market today it's you know higher margin industries with a lot of potential to become even even higher when you think about old economy sectors that can use a lot of this automation and tools and you know little ai sprinkled in to get more asset light and
you know, kind of improve margins and improve earnings variability. So I think a multiple of 20 seems completely reasonable. In fact, we ran this analysis where we looked at the S&P 500 versus other global benchmarks. Granted, the S&P is trading in the stratosphere, everything else is super cheap.
Now, if you adjust for sector mix, if you adjust for earnings volatility, leverage, consumer aspects, you actually come to a conclusion that the S&P isn't that expensive relative to these other benchmarks. So I think
by just sort of painting this historical average, everything has to trade at the same level, I think we're sort of oversimplifying really important details about U.S. corporates. A big dose of optimism this morning from Savita Subramani, McBank for America. Savita, thank you.
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You'll love the presentations you can easily design with Canva. Your clients and coworkers will too. Love your work with Canva presentations at canva.com. Kathy Bosjancic of Nationwide writing, we think the economy added just 120,000 jobs in April. Kathy joins us now to discuss. Kathy, welcome to the program. 120, are we at risk of something much, much lower? Well, good morning, John.
Well, yeah, I do think the risks are on the downside, but it's a bit early to look for the real negative numbers in payroll or the hit from the government layoffs and the hit to health care and even the cyclical sectors. I think that's going to be a few months from now, but...
We certainly see businesses just pull in their hiring range. And given that we do see churn in the labor market every month, the fact that you're just seeing companies paralyzed and not hiring, that does impart a downward bias to the number. Kathy, are there specifics that you're looking for under the hood of the headline number that's going to be important to see?
Yeah, no, absolutely. You know, one of the main engines of growth in payrolls has really been the health care and social assistance sector. Those sectors are very much related and dependent on federal government activity and
and support. So we think those are areas that will start to see some softening. And then that means overall non-farm payrolls start to weaken. Really, if you looked at what we would call the core cyclical sector, we had already seen the labor market losing some steam. But overall health care, education, and even the government sector was boosting the overall headline number. Kathy, we're going to get a host of other data before that, including the JOLTS
information, which includes the quits rate will get some more consumer confidence, as John was just mentioning. I'm just wondering from your vantage point, as you look forward, how you reconcile the gap that we have seen between the soft data and the hard data. Do you agree with some of the earlier people, earlier guests on the show who said it's probably a four to six month lag before you see a similar type of deterioration in the hard data?
Yeah, I would agree with that. I mean, maybe I'd say a little shorter, you know, three to six months, but by and large, you know, the movement in the soft data has been so pronounced. You really have to be careful shrugging that off. Sometimes it can be a little bit misleading, especially the confidence numbers. But when you spoke about
the Conference Board of Consumer Confidence data, what I'm going to zero in on is all the labor market readings. And particularly, I want to see the expectations for more jobs or jobs that are fewer out there and looking at the labor differential. That, I think, is meaningful. And also, consumers' expectations about income going forward. Usually, that survey shows this very, like, American attitude. Oh, future incomes will be up.
What we have seen is some breakdown in that and people becoming a little more pessimistic about future income. That can obviously influence current consumer spending. But at the moment, we do see consumers also front-loading, wanting to get ahead of the tariffs. What does this mean for spending at the second half of the year, Kathy?
So the data are very skewed by the tariffs. You know, you were talking about, Mike was talking about the import data. You know, yes, import is going to drag on GDP, but consumption is going to keep it elevated more than it otherwise would be. So it's very skewed. But that
pulling forward means there's just a lot less consumption in the second half of the year, regardless of what happens on the tariff front. Like even if they're resolved, if you bought an auto or a big ticket item, you're not going to be buying one in the second half of the year. So that's certainly going to be a negative for consumer spending and GDP growth in the second half of the year. John has brought up this point a lot. If you're going out and you're spending on big ticket items, say a car or some sort of SUV, are you actually nervous about losing your job?
Well, that's a great question. I would say no. I think that, you know, by and large, those are people who are just trying to get ahead of the price increase. I think if you're worried about losing your job, you probably hold on to your current car and just run it as long as you can or look to the used car market, which that's also going to feel upward pressure, right? And prices, we saw that during COVID. So I think that's a really good point. And even in, you know, our out
And I would say the vast majority of others I've seen, you know, it's going to either be a borderline recession or if we get a recession at this point, most of us thinking mild. That means the unemployment rate goes up to 5 percent. That's still overall historically pretty good labor market. But it's this uncertainty that is really, I think, killing the economy right now.
Cathy, as we've seen, the chairman of the Federal Reserve has chosen to prioritise anchoring inflation expectations. I just wonder, from your perspective, how you imagine that might shape his approach to next week's meeting.
Yeah, he's going to have to walk a tightrope as many times he does, especially during the press conference. But I don't think he'll back away from that. I know some others have been a little more dovish, right, some Fed officials. But I think he'll maintain this idea that, you know, inflation expectations are high. The worst outcome for them is it becomes embedded and becomes more persistent. One of the things I worry about is the rollout of the tariffs. We're still waiting to see if there's going to be additional sector tariffs.
The longer that process gets elongated, the more inflation shock can be persistent. Right. I almost rather have all the tariffs at once. I mean, it's not good for the economy. But in terms of inflation, it is really hard to gauge then what's, you know, transitory versus persistent. Cathy, what's your take on some of the pressure that's come from the president on the chairman of the Federal Reserve? How does that reshape the optics of them trying to ease sometime soon?
You know, I think Chairman Powell would say he ignores that and they're apolitical and they're only looking at the data. And I think by and large, that is the case. I just worry a little bit about the optics for market and investors, how they interpret that. And it could be that
you know, they ease for the right reasons, but the market second guesses that. And that would be bad, right? And then you could have long-term interest rates rising while short-term interest rates are lower because of inflation expectations rising or an extra term premium embedded on the long end. Cathy, got to leave it there. Cathy Porchanczyk there of Nationwide.
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