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Sarah Hunt of Alpine Saxon Woods writing, it may take a couple of months to see the real world effect of the trading slowdown caused by the tariff situation. It's hard to believe this all started only four weeks ago. Sarah, good morning. Good morning. I said the same thing yesterday. Where's a month gone? This has been brutal, hasn't it?
It has been quite a lot to happen in a short period of time. And I think, you know, I've talked about this before, I think market participants are so used to immediate effects and immediate information flow that we don't all remember that this all takes time to play out through the economy. So this only started four weeks ago. The actual effects of that are not even close to being seen. And all you're seeing right now is the ancillary effects that people are worried about. Equity markets have recovered at the index level on the S&P 500. Policies haven't changed too much.
What kind of changes are people expecting and how quickly? Well, I think this is the big question, right? So you had a really decent earnings season for the most part. You had a number of companies call out the problems. You had a number of issues. But the capex was strong. The AI story stays intact. That was very helpful, I think, for markets. And that was very important. But now we get back to, OK, now what's going to happen in trade? And we still don't know. And I think that is the sooner we can get any kind of clarity on that, the better. But right now, I think that that just leaves us in a tough position risk reward wise.
If someone were on the US central bank, they might be really happy that we have so rarely mentioned the Fed on a day when the two-day meeting is starting and they do have to come out with some prognostications tomorrow. I am wondering how much of a possible put this is later in the year if the Fed were to cut rates more significantly. That's what John and Anne-Marie were hearing yesterday from Chris Harvey of Wells Fargo reaffirming the 7,000 level. Do you buy that?
Well, I think that the Fed's in a tough place for all the reasons that have been discussed, right? We have still some inflationary pressures. The labor market's holding up. The earnings are holding up. The economy is holding up pretty well. The question is going to be if you start to see deterioration in that labor market. And we certainly have heard anecdotally layoffs from different companies. Some of it is specific to them. Some of it is just general industry and a lack of hiring. And I think if that starts to catch up, you could see those cuts. But because of the other
issues in the prices paid index and where you're seeing inflation, I think it's very difficult to bake in as much as we're baking in right now, to be fair. I'm trying to figure out if we've learned anything. That basically companies have been coming in with momentum. They have done pretty well. If you take a look at the earnings as a whole, Mohamed El-Erian was saying that the raw data is showing that momentum is sort of pretty robust heading into this. And then you have a Fed that has quite a lot
to potentially cut if there is some sort of deterioration of the data. Is that enough for you to see this as more than just a bear market rally?
Well, I think it really is going to depend on a number of things. One of them is getting some certainty because we're still seeing a lot of pull forward because people don't know. So people are still buying ahead, not just companies pulling in inventory, but individuals making choices. That makes the data look very good in the near term. And the question is, is it going to soften at the end of the year, the hard data, not the survey data? So if that starts to be a problem and the Fed can cut, I think that's going to be helpful. But
where markets are right now on the equity side, I think it's a little difficult to see how you can really get that next leg up unless you think that there is a path forward that doesn't have so much uncertainty and chaos. And I don't think we know that yet. Well, the whole point of the Trump administration they've talked about is game theory, strategic uncertainty. But what if we end where Trump started? 10% around the world, 60% on China. How would the market digest that? I
I think there would be probably some relief in that, to be fair, because the numbers were so much higher. And I think that that's part of that game theory. I'm going to throw out a bunch of numbers and we're going to end up somewhere lower. But in the interim, you are seeing some people getting stuck trying to figure out, do I pay for things at that level? Do I cancel this? You've seen a lot of cancellations. And you've got a big freight market and an ocean freight market that's in a chaotic state right now. So sorting that out is going to take some time. And unless there's a path on the other side of that where people feel comfortable, I think it's going to be difficult.
I'm pleased you brought up the Federal Reserve. The Fed last met on March 19th. March 19th is a lifetime ago. And think about the response to that meeting. I remember the dovish interpretation, just the very idea they saw any kind of inflation bump as a one-off. Then the out years of 26, 27, inflation comes back down. Super dovish. Markets absolutely ripped.
And you and I remember having a conversation about a more hawkish interpretation, this idea that they saw a deceleration in growth, and yet they didn't increase their outlook for interest rate cuts. And I wonder if the more hawkish interpretation becomes that much more relevant in the months to come. Not at this meeting, but the next one, when they have to put out fresh forecasts all over again. Stagflation is a central bank's nightmare. Stagflation is what a lot of people are talking about, are stagflationary-like trends.
At a point when that's what we're seeing on the margins communicated in the data, like yesterday's ISM services, how do they respond to that in a way that somehow is constructive for this market, given the fact that stagflation really is one of the difficult things that a central bank has to deal with. They don't have perfect tools to counter that. I think what the equity market would like to hear is Governor Waller, his words from Chairman Powell. How likely is that? I think that's a bit difficult at this juncture. So I think that it would be
You'd need to see some real data changes before you could get that shift in tone from one to the other. And I'm not sure that that is anything we're going to see in, certainly not this week, I don't think, and into the next month, we'll see. How concerned are you that there appears to be, not necessarily a shadow fed, but some sort of countervailing force on the FOMC that's creating uncertainty
a question around political, I don't want to say interference, but political clouds hovering around the Federal Reserve. I think that we've seen it very often that you got this argument between politics and the Fed. And I don't know that this is any worse except that it has been, you now have a president who's actually willing to say something out loud in that way. I don't think that the Fed
in a political way. I think that they are going to continue to do what they think they need to do for the economy, but it makes it far more difficult and it makes the bar a little bit higher if someone's pushing on you to do something that you don't necessarily want to do and you don't want to look like you're capitulating. So I think that there is an issue there. Are you even watching the press conference tomorrow? Always. Okay, so what are you hoping to hear?
I'm expecting to hear not a whole lot and a dance again between that, but a dance between inflation and the labor market, right? Because that's the tension that they're going to keep calling out. The labor market still looks pretty good. Until you start to see that soften, I think it's hard to say anything that is specific about what I'm going to do. I'm going to do X if Y happens. So I think I'm looking to hear more of that dance and to see if there's any changes on the margin. Can you just pretend it's going to be really exciting for us?
Super exciting. Absolutely. I can't wait. Live coverage, 1.30 tomorrow afternoon on Bloomberg TV and on Bloomberg Radio. It's going to be stunning. There's the promo. Sarah, let's build on some of this. We've been trading on rhetoric, the prospect of deals, negotiations. When does the substance start to matter? What does a deal actually look like?
I think the problem is that because we don't have substance, we can't make those plans out, right? I don't know what the substance looks like. And I think that's the biggest problem is that there isn't a specific absolute, I know we're looking for this ask. I know we're looking for that. And once we get that, we'll have a deal. It still continues to be amorphous. And that's why people are struggling both on the corporate side and on the investment side. Given how integrated the US and Canada are,
the economies, if this meeting actually does go south, how negative could that be for the equity market?
I think it could be pretty negative just because it is one of the, like, this is somebody that we shouldn't necessarily be fighting with, right? This is a country that we've had a long series of negotiations and agreements with. So to put this on footing that becomes very negative, I think would be more of an outlook for how that's going to go elsewhere than it would be as much about the U.S.-Canada relationship. But I also think that that is an important relationship, and you don't want to see that go south. And I think that that's
That would be very, I think that would be very negative. Do you know, to Jonathan's point, to Tyler earlier, do you know what a win would be for the United States when it comes to Canada in trade? Well, I think this has been the problem throughout this last couple of weeks where we hear about a memorandum of understanding or we hear about a trade framework of a framework is that there isn't a clear picture for what winning really looks like. So not knowing what those parameters are, it's hard to game out what the odds are that those parameters are acceptable.
And of course, it's also a dynamic type of picture, as many of the executives have talked about. With the market playing a leading role, Julian Emanuel of Evercore ISI came out and said that because the market had performed so much better over the past nine trading days, it
President Trump the room to actually talk more tough talk with respect to tariffs and that would lead to a pullback and it sort of is this range that he's playing with to try to use the market to understand what his potential guidelines are.
How much do you think about that from an investing standpoint? I think that that is exactly the problem that the investment world tries to react so quickly and the real world cannot. That we're already over something that hasn't happened yet on equity markets. And I think that that's one of those reasons that I don't disagree with him. I think that there is an absolute case to be made for the fact that a recovery in financial markets means that you take that as, "See, we can get through this." And part of that recovery was backing off to begin with and moving at 90 days.
And the other part of that recovery was earnings. But how much are those earnings going to flow through continuously through the next several months? Because we don't know where they're going. And to Cameron's point earlier, margins are really going to be in question because the cost picture is unclear because the supply chain is unclear. So we're already discounting something that hasn't even happened and we've already decided it's okay.
Over the past couple of decades, there's been this focus on Wall Street about getting faster and getting a time edge on other people, getting closer to electricity sources so that you can respond to information more quickly to everybody else.
Has this been the death of that, that getting information first is not any kind of advantage whatsoever and that everybody has to shift to another frame of reference when it comes to investing that is longer term, more patient, more, I don't know, private, something else that is not sort of high frequency trading?
I think you're dead on right now because I think that the absolute chaos and uncertainty that we're living through, rightly or wrongly for the end outcome, makes that information not as important because you don't know which way it should really direct things. I mean, even at Fed meetings, even before this, you could watch the reaction to what the Fed said and that markets would be up and down and up and down in the same hour.
because people couldn't figure out which way we were actually going. And now I think you've just put that on steroids and you've added other types of information to that, not just what the Fed thinks but what's happening both in the economy and what the administration wants to do. So getting a piece of information first is not necessarily directionally easily interpreted.
Let's just say that. Friday is a great example of that. We had the port director from Los Angeles, Gene Soroka, and Gene told us what was happening with trade volumes as of this week, that we had a 30% roll-off in bookings of arrivals. And we all sit around the table and we're like, okay, what happens next?
And there's a big debate about what happens next and over what timeline and what it should mean for markets, because markets might not even respond to it. They might just shake it all off on the prospect of deals and horizon, which gives you a forward look of better economic data around the corner. How are we going to trade bad data in the next couple of months if the president is still going around saying deals,
deals, we're going to close lots of deals. I think that there is a point at which that rhetoric no longer is as effective. And because this is all so recent, again, we're talking about a four or five week period now since we even started, the rhetoric has been very effective. But the longer you go without having something done, the less you can goose things with saying it's going to be done, it's going to be done. And the more problematic it becomes when those
when those goods are not coming over or going back and you've got not the right, things are not situated in the right way to get those trade flows started again. - This is the window everyone's talking about, the window. No one really knows how big it is, but this is ultimately it. Ultimately, you have to show something, otherwise eventually you get that bad data and this market will have to trade on it.
Eventually, those ships will not have gotten here with those goods. And eventually, retailers will have to adjust. And the pricing ramifications will happen and potentially layoffs will happen. And this is the reason why Jane Frazier of Citigroup yesterday at the Milken conference was talking about this gap
between hard data and soft data and how it has to close. Even though people say that it could persist and which way it's going to close is not clear. And I really mean that because it could close to the upside or it could close to the downside. The president likes to anchor negotiations to the extreme, which is why he goes out there with some pretty flamboyant statements at times. The Europeans have been quite reserved.
through all of this over the last several weeks. This just drops, this report that the EU is targeting 100 billion euros of US goods with tariffs if talks fail. Just setting up the talks in a different way from the European side over the coming weeks. A fantastic scoop from our colleagues over in Europe. What you see here playing out is a carrot and stick approach now from Brussels. Last week it was in the Financial Times, they were looking at 50 billion euros worth of purchases
of U.S. goods like soybeans, like LNG. And now what they're saying, if we don't get a deal, we are going to go after 100 billion euros worth of U.S. goods. What I find so interesting right now about the Europeans is they don't come up a lot in conversations I have with administration officials. It's all about Japan or India or South Korea. What's going on with Canada? We're going to meet with China at some point. Europe?
it seems to be silent. At the same time, the trade chief in Europe came out this morning and talked about how if you tally up all the goods that could potentially have some reciprocal tariffs on them from under President Trump, it would equal $622 billion worth. So they're
writing down on pieces of paper, calculating, like something's not adding up. So we're going to have to come out here with a threat. And maybe that's what predicated this discussion this morning. Stocks responded to that headline. We're down by about three quarters of one percent, just an extra inch lower on the screen on the S&P 500. Stocks a little softer. Sarah, thank you. Good to see you as always. Sarah Hunt there of Ampire Saxon Woods.
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Turn back to policy. Taxes and tariffs in focus with Treasury Secretary Scott Besson testifying before Congress today and tomorrow. Joining us now, Congressman French Hill, head of the House Financial Services Committee. Congressman, our good friend, welcome back to the program, sir. Talk us through and just frame, if you can, your approach to these hearings over the next few days. What do you want to hear?
You bet. Well, Jonathan, great to be with you this morning. Secretary Besant comes to both the House Appropriations Committee and House Financial Services today for the first time as Treasury Secretary. And I think you'll see questions about the president's economic policy. He's put his policy as the centerpiece of deregulation, right-sizing regulation, making sure that the American businesses and families don't have a big tax increase at the end of the year.
And using a trade strategy that encourages investment in the United States, foreign direct investment in the U.S., and more fairness for American products and services abroad, I think all those things will be subjects of questions in both committees. You, of course, French, represent the home state of Walmart. Congressman, what do they want to hear over the next 24 hours? And ultimately, what is the company saying to you?
Well, all my constituents, including Walmart, have made it very clear to President Trump and to their trade associations, who in turn have made it very clear to the White House,
They want resolution and certainty as about to what the tariff strategy is. And as it relates to imported goods that would be found in Walmart or a department store, those decisions have to be made pretty promptly or you're going to see, in my judgment, impact on what's on store shelves this fall and even this summer. And you're going to see price increases this summer potentially as well. I think that message was delivered quite clearly.
by American retail businesses principally. Well, the message was delivered, but is there understanding you got from Walmart and some of your other constituents that they received an optimistic tone from this White House about where the future of trade is actually going to end up?
Well, this is something that we've continued to talk about on this show and in Congress, which is what is the strategy? You have a China strategy. You have a trade fairness and reciprocity strategy. You have a bring business back to the U.S. strategy. Sometimes those things are in conflict.
And they're tough to do all at once. That's why I think that the idea of let's square things away at USMCA with Canada and Mexico. Let's make sure we're on the same page with Japan, Korea, and the European Union. Those are first and foremost. I think that will help us then get the best kind of leverage we can as we work on the toughest issues.
nut in the group, which is how do we have trade fairness and end China's mercantilistic trade policy around the world. Congressman, though, did Walmart, though, leave that meeting in the Oval Office feeling like the president heard them and that they're listening to their concerns?
Well, from the reports I've got, the answer was yes. I mean, President Trump worked very hard in his first term to make sure that consumers were not immediately impacted by his tariff negotiations as he attempted to design a tariff strategy that would bring jobs back to the U.S. and foreign direct investment back to the U.S.,
but not hit consumer pocket boats directly. And so I think that was the message that was delivered. And from what I've heard, I think he got that and heard that message quite clearly. Do you have a sense, and maybe you're going to get this from the Treasury Secretary this week, of a timeline on when all these negotiations would actually come to fruition?
Well, as I've said, based on talking to my constituents, whether they're big European, Mexican, or Canadian relationships that we have in Arkansas, or a big global company like Walmart, the sooner that we have clarity and certainty here, the better for business planning. I think that's good for business outlook, and I think that's good for the American economy is to have certainty. Nobody questions the desire to have better trade fairness.
improve USMCA, stop dump goods from coming into Canada and Mexico and into the North American market. Those are all worthy goals, but the question is we need realistic strategies to achieve them, and we've got to make sure that we can clearly communicate that to the American people. Congressman, there also is this question of how feasible it is to get some sort of tax deal. One of the other prongs of Secretary Bessence
goal through Congress at a time where there are a number of red lines that need to be crossed. That's expanding the deficit, potentially cutting Medicare and Medicaid in order to get no tax on tips and some of the other sweeteners. How feasible do you think that it is to get some sort of consensus among your colleagues on that?
Well, we've had seven of our committees now report their reconciliation plans. Next week, you'll see Agriculture, Energy and Commerce, Ways and Means conduct their work. These are important committees. They have the bulk of the savings in those committees to be debated among members. And then what is that tax plan? And President Trump has absolutely been leading in private meetings with Secretary Johnson, with Speaker Thune, with Ways and Means Chair Smith.
and Chairman Guthrie at Energy and Commerce. And so I think we're going to find that right spot where we can hold Republicans together and meet the president's objectives for reconciliation. But the next two weeks are very, very important. That's what I was going to ask, Congressman. How quickly does something need to get passed for there to be a positive spin at a time where there's a three-legged stool and one of the legs is really remaining in question, or actually two of them are, the trade policy as well as what gets actually passed? How quickly does it...
have to get passed for there to be a change in tone, certainly among polls? Well, I think it's important. We've put a premium on the House under Mike Johnson's leadership of getting the tax and spending reform plan through the House as soon as possible. And you've seen, as I said, seven of our committees have already done our reconciliation work. In the next two weeks, we hope to complete it.
I think that sends the message to the Senate that the House is serious, the House has the votes. We want to get President Trump's spending and tax priorities through the Congress. And that, I believe, will send the right signal both to the economy, to planning, and be a key plank, as you noted, in the president's economic policy. Congressman, but you know, of course, we're going to need payfers. And our audience is keen to know where you stand on this issue. Do you think stock buyback tax could be on the table when it comes to this reconciliation package?
I think the stock buyback tax is a dumb idea. It was a dumb idea when Chuck Schumer offered it. You're hurting individual shareholders. You're hurting pension plans. So I don't think that's something that should be used. I think it hurts economic growth, and I think it hurts individual family investments in their pension funds and in their individual accounts. At your blunt best. Congressman, thank you, sir, as always. I appreciate it. Congressman French Hill, great to hear from you, sir. Thank you very much.
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Media stocks falling after President Trump threatened 100% tariff on movies produced overseas. Jason Bazaner of City writing, investors have viewed Netflix as immune to tariff risks. That may no longer be true. Jason joins us now for more. Jason, welcome to the program, sir. Good to get your thoughts. Another shocker, another shock to ultimately deal with and process without much detail or clarity about what happens next. Just how exposed do you think Netflix actually is?
Well, I think if the 100 percent tariff went through, I think they would be very exposed. I suspect that what Trump is really trying to do is just nudge more production into the U.S. And there we estimate that U.S. production costs are maybe 35 percent higher than overseas.
And so that will limit the damage, I think, to Netflix. So, Jason, you think that this is a maximalist approach and that Trump is not actually going to implement 100 percent tariff? Well, look, there's a lot of questions on the street about whether he even has the legal authority to impose 100 percent tariff. There's a law in the books called the Berman Act, which says you can't impose tariffs on intellectual property.
In Trump's tweet, he cited national security concerns related to the production of movies. So he's going to try and get around it. That sort of raises all sorts of legal questions. So I think like Trump always does, he's just trying to get maximum leverage early on in the negotiation. But I think the ultimate goal is to nudge more production on U.S. soil. And he has Governor Newsom coming out and talking about it. He has industry leaders coming out and talking about it. He said yesterday he's going to have a meeting with all of them. What would a federal tax credit for the industry mean?
Well, it would, I mean, it would, it depends how large the tax credit is, but ultimately, you know, the tax credit would have to be large enough to more than offset the production savings that the media companies enjoy.
by producing overseas. So if you had, let's assume my 35% number is right, if you had a tax incentive that was larger than the 35%, you could see production move to the United States and it would actually be an earnings positive for these media companies. If it's smaller than that, it would be a negative to earnings
but would boost employment and sort of help the overall U.S. economy. Jason, not to get philosophical, but what does it mean to be produced in the United States? Is that a clear concept to you?
No, it's not a clear concept. I mean, a lot of these movies and TV shows, you know, have a hybrid approach. And so every production is different. It's not black and white like something that's manufactured. And so it's a gray area. Very, very tough in my seat to analyze with precision.
But I think the broad goal is just get a larger percentage, let's call it that, produced in the United States. Jason, a tax break sufficient to achieve that. What makes it so much more expensive to produce content in this country?
Well, mostly it's labor costs. I mean, that's the main thing. And then a lot of the overseas markets are providing tax incentives as well. So you've got a twin benefit if you produce overseas tax credits and lower labor costs. And that should help them with the pricing of the overall product as well, Jason. I think we wanted to finish on that with you. Just how immune and insulated is a company like Netflix going up against the prospect of an economic downturn? I know we haven't seen it in the hard data just yet, but how worried should we be?
Yeah, I don't think particularly worried. You know, Netflix's advertising revenues are, you know, call it one or two percent of the overall revenues. I think they'll be able to grow ad revenues even if we see an ad recession just because they're in such a nascent, you know, part of their arc in terms of moving into the ad market. In terms of subscriptions, you
When we run the math, Netflix is still the cheapest app service out there for video on a dollar per minute consumed. So it's probably half the cost of a company like Disney on a per minute consumed. It's probably one-fifth the cost of...
of streaming services like Paramount or Max or Peacock on a per minute consume. So I think reasonably insulated from recession risk. Interesting. I appreciate the framing. Jason, thanks for your time this morning. It's Jason Bassano there of Citi.
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Jonathan Pingel of UBS writing, we see a worsening growth and inflation trade-off facing the FOMC. We expect no changes to the policy stance. Jonathan joins us now for more. Jonathan, welcome to the program, sir. You're certainly not alone expecting no change tomorrow. Most people expect no changes. What happens after that? This came from Jan Hatsius of Goldman. He said, we expect enough evidence to accumulate for a cut by July. Jonathan, do you think we'll have enough evidence by July to make that kind of call?
No, I mean, so first of all, I actually have a lot of sympathy for Jan's forecast at the moment, where ours isn't that much different from his based on what I've seen. But I'm expecting that the May data looks okay. And it's really going to be sort of June, July, August data that's released July, August, September that makes the case for rate cuts at the September meeting.
But, you know, it's one of those things where, you know, your previous speakers were talking about it. We think you're going to start to see some of the inflation impacts in next week's CPI report.
I just think the labor market is going to lag a little bit. I think that's really what's going to drive the Fed's calculus over rate policy eventually, if it's weak enough anyway. That goes to the heart of the question, Jonathan. Has the damage already been done? Is there already enough moving down the pipeline to cause some sort of near-term inflationary surge at the same time as a downward kind of pressure on the overall economic growth trajectory?
I mean, I think that's right. At least I don't think it's like a discrete jump at the moment. But, you know, if all tariffs went away, I would not snap back my GDP forecast to where we were and we would not snap back our inflation forecast where we were. But I think you're at a crucial sort of four or five months juncture here where every month it lasts longer, the more the economic damage is going to be done. And, you know, as I've sort of been trying to tell people, you know, if
If the bulk of these tariffs stay in place for the bulk of the year, I mean, the bulk of the economic damage is going to be done.
There's a larger question here about if there is some sort of trade resolution and there is some sort of better tone in markets, could there be an inflationary shock in addition to pretty solid growth? I mean, we've been talking about stagflationary types of wins, but a lot of the companies in their earnings reports portrayed a pretty positive backdrop in terms of economic growth. Is there an upside risk for a Federal Reserve that has to be cautious about how quickly they cut rates?
Well, I think that's exactly the kind of trade-off they're facing is that they don't know. I mean, equities have rallied back pretty impressively actually following the drawdown after the April 2nd announcements. So that's exactly the challenge for the Fed and Chair Powell
we expect on Wednesday is going to say how the dual legs of the mandate might be in tension. If growth holds up, fine. This is a Fed that could be on hold for a long time. Or if the inflation tradeoff is bad enough and growth is fine, maybe even put hikes back on the table.
I think, though, one of the questions I think they're going to face, though, is if the labor market weakens sufficiently, I think they're going to end up asking themselves, what are the point of the tools? Because at some point, there might not be anything to restrain, right? If the labor market's weak enough,
What are you trying to restrain, right? I mean, if it's slackening the economy for you due to the negative growth impacts, it sort of calls into the question the role of restrictive monetary policy in the first place. So, you know, it is a really tough spot for the Fed, and the potential outcomes depend a lot on restrictions.
really uncertain data forecasts. Just want to carry that through. Are you saying that at a certain point, if there's an inflationary impulse at the same time as weakening growth, there's not really much that this Fed can do, that it's kind of out of tools?
Yeah, in a way. I mean, you know, they'll have other questions to ask, like, is there credibility being called into question or longer run inflation expectations becoming unanchored higher? But, you know, when we were roaring out of the pandemic, you know, there was a role for higher rates to play in restraining the supply demand mismatch. I mean, aggregate demand and the labor market were just surging. I mean, there was a role for rates to play in restraining that growth.
If growth is contracting or the labor market is contracting or the unemployment rate is rising rapidly, monetary policy doesn't really need to be there to make it rise faster. You know, if non-farm payroll employment tips negative, they don't need to make it more negative. You know, so there might be a point at which the usefulness of the tools become an important question. Jonathan, can we do psychology? Does legacy have a role to play?
Does the legacy of Chairman Powell have a role to play over the next 12 months when he knows after this he's out, he's done? I think the legacy struck me in March because it became clear in March
when you looked at the SEP, that this was a chair who no longer expected to get inflation back to 2% on a sustainable basis during his current term. Now, I think history could be written a number of different ways, because if I look at the incoming data on the ECI, the recent inflation data, average hourly earnings,
I think it looks like they were on track to nail the soft landing. So whether this next surge is a fault of, you know, if history writes this as a fault of the chair or the tariffs or the next Fed chair, I mean, that remains to be seen. And I think we'll have to see how it plays out. But
I have been struck. I do think the FOMC was getting close to nailing the soft landing, but at this point I think it's probably going to escape Chair Powell's term. The situation certainly gets harder, that's for sure. Jonathan Pingler, UBS. Jonathan, thank you.
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