Stocks Rebound Post-Tariff Tantrum as Investors Weigh CPI
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Bloomberg Audio Studios. Podcasts. Radio. News. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Joining us now as we slide into this CPI report, this important report,

Constance Hunter, Senior Advisor, Macro Policy Perspectives, and of course, always with the Economist Intelligence Unit, joins us today. I guess it's sort of like a mysterious report to say the least, but is disinflation in place if I see U.S. and global yields moving higher?

Well, the yields are probably moving higher for a number of reasons. But I think what we've seen is the disinflation and deflation in goods that's about to end. And I agree with Anna Wong. We're seeing softness in transportation services. That's about 6% of the weighting of CPI. And so the question is, are the increases in goods and the fall in transportation going to offset each other? When we look at core services, though, we're still running a little bit above 4% year over year. So-

Did you see what vets charge? Not yet. Not yet. I will soon know. They're way above 4%. Way above 4%. All right. So CPI, X food, X energy, year on year, consensus is 2.8%. Isn't that okay? Well, so...

I can live with that. So if we go back to the, so I was listening earlier this morning and I forget the name of the guest you had on who was talking about the post 90s, the late 90s equity market, right? And in the 90s, we had potential GDP was a bit higher. We had inflation between two and a half and 3%. And because growth was humming along, actually 2.8%,

was okay. The big question mark here is we are coming into potentially softer growth and even higher inflation going forward as a result of the tariffs. How could you forget Julian Emanuel of Evercore? I'm so sorry, Julian. Unforgettable. My bad. You're right, Tom. So what do we do here? If you're the Federal Reserve, you see a print like 2.8%. Let's say it comes in there today.

Do you feel like you've got more work to do? Do you feel like you can sit on your hands? Do you need to cut rates? So what everybody is going to be looking for, and it's going to be challenging, right, because these are lagging indicators, but what everybody's going to be looking for, what are the clues not just about what it says, where we would be going if we weren't having tariffs, but we're looking for clues about what is going to be inflation in May, June, July as a result of the tariffs. And so the details of this goods policy

pricing is going to be really critical. And we have the amazing work by Cavallo and his colleagues on the real prices index, right? And if you look since March, we've seen import prices go up. But of course, this allows domestic producers to say, well, I can also afford to raise my prices because my competition is raising their prices, right?

You import overall inflation. I got 42 seconds. Just as simple as I can. And this goes to Economics Intelligence Unit, all the wonderful work of Anna Wong. Here, your work with Macro Policy Perspectives and Julia Coronado.

In your head, where is CPI 12 months out? Not year-end, but just, is it, to Paul's point, is it three-ish? Is it 2.X-ish? Is, you're going to make some news here, four-ish? No, I think the news here is that the growth shock is going to overtake the inflation shock. So you've asked the critical question, and I think 12 months out, we

we could be looking at a two and a half percent inflation provided that all of those core services that have been sticky continue to inch a little bit downward constant hunter chief economist at the economist intelligence units still with us in our bloomberg interactive broker studio constance we've had so much discussion about tariffs this year

Has it impacted your GDP outlook at all? Because I'm not sure, actually, I'm not even sure where we are with tariffs right now, but it seems like it's not as bad as it was maybe a couple of days ago. Has it impacted your GDP outlook? So what's impacted our GDP outlook is the uncertainty that the back and forth on tariff policy has caused. And of course, this is intertwined with a bunch of dispersion regarding economists' forecasts and

So it is that uncertainty that we think is going to drive the pullback in growth. And that's going to come from firms reducing capex because they're not quite sure where it makes sense to spend. We have a corporate network that are around the world. We have it in different cities and cities.

We've surveyed them and we asked them about in this tariff war, who are you going to choose to align with? Are you going to choose to align with the US? Are you going to choose to align with China? Are you going to try to stay neutral? And, you know, Japan executives, Japanese executives, yes, they want to align with the US. You look at executives at companies based in other countries and they're reconsidering whether they want to align with the United States. That's going to impact CapEx here.

To your global view, and Constance Hunter is known for always taking things globally, my first chart of the day was generic 40-year Japan. Yields are slipping away here, there, and everywhere. To me, that's lower fixed income prices. Do we underestimate the drift of the U.S. 10-year yield, the drift of Japan and other nations' debt?

No, I think we shouldn't underestimate it, right? We are seeing term premia come back.

And if we go back to this 90s world we were talking about earlier, that is fine if you have stronger growth, stronger productivity. It has a dampening effect on growth if you don't have those things, if it's because of increased debt levels. And when we think about what's happening, we're looking at China really doing a huge stimulus to try to make up for this, increasing its debt levels. We're looking at Germany ending its debt break, increasing its debt levels. So

There is a good reason that we are seeing term premium go higher here and around the world. Terrific work again, always by the Top Live blog. It's one of the great premium products of the Bloomberg Terminal, Top Live and Chris Ancy driving forward all of that coverage. Some of these, we got to kind of say, you got to react to some of these headlines. The annual gain in a headline CPI, what our audience cares about.

At 2.3% is the smallest since February of 2021. In other words, before the big inflation surge of spring of 2021. But the trade more may reverse that because of goods inflation? We're not seeing that yet. I was just glancing at the goods inflation from the release and from what they've, these sort of,

top line numbers and we're really not seeing any goods. We saw apparel continue to decline. We saw used cars continue to decline. It's not there yet. And the question is sort of when does that come? Does it come in May? And all indications are that it will be coming in

And so we really go back to what's happening with CORE, which was 2.8. Well, thank you. You drove the VIX under 18. You're killing it. Constance Hunter with us with the Economic Intelligence Unit today. And Julia Coronado.

over at Macro Policy Perspective. 17.90 on the VIX. That's a wow statistic. Futures up nine. Dow futures off of UNC, UnitedHealth, showing a negative statistic. NASDAQ up a solid four-tenths of a percent. Paul had a tantrum. He said, Tom, I'm sick and tired of John Lipsky and Constance Hunter and all these people at 60,000 feet.

Let's get the landing gear out with Matt Miskin, Manulife Johnny Hancock Investments, their co-chief investment strategy. Matt, tough question. What is your strategy this second, third week of May?

well we've gone from risk off to risk on in a matter of weeks and it's been incredibly volatile uh for us it's about just being patient here we leaned a little bit into markets on the equity side amidst that drawdown because we didn't think it was that fundamental but now frankly we're back to the bond market and looking at disinflationary forces uh that cpi report did miss again uh we actually had egg deflation uh which was nice to see

And so we actually think you got to be patient here. Now things are back to being expensive on the risk side. Look to get some high quality income. He's too modest. Emily Rowland has nailed it with buy American, buy large cap, stay the course, don't go to cash, Paul. Matt, what are we doing in the fixed income space here? The two-year treasury is yielding darn near 4% these days. Do you just hide out there or do you try to take some credit risk here?

The short end, we don't mind. I mean, that is attractive yield. You know, you can't dismiss that. But also in the intermediate part of the curve, we just think it's completely hypnotized right now by political developments. It's so odd to us that the tariff risk has come down and inflation is coming down. And yet the 10-year Treasury yield is accelerating higher.

So it really has not been pricing in any disinflation in our view, and you're getting this really nice income stream again, available to you in the bond market. And it's not, it's blowing through all the risk issues that could be playing out. I mean, if you look at the risk assets right now, we're back to 21 times on the PE ratio of the S&P, high yield spreads are back to 3%. Industrials are the best performing sector now year to date and financials are close behind.

Risk assets are priced for perfection. High quality income has a lot of ability to run here if this other side of the market gets a bit of a rotation or a bid again. What did you make of earnings there, Matt? Did it give you any confidence? Is it reflecting, I guess, the uncertainty of the tariff situation we're in? What did you take away from earnings?

You know, the U.S. earnings season has been great. It's just amazing how little that has been of attention from investors. So the U.S. earnings season is going at about 14% year-over-year growth clip, which is one of the best we've seen in years. And U.S. equities are significantly underperforming their foreign counterparts. On the MSCI IFA, earnings are down 6% year-over-year, and that's the best performing part of the global equity market.

So stocks are not following profits. They're following politics. And it's a lot of sentiment. And to us, we're not going to be whipsawed by sentiment. We're going to follow the earnings. And even though the earnings have been good, the negative side of the story is that the earnings revisions have been coming down. So we started the year with nearly a 14% earnings growth estimate for 2025. This is the streets view. Now it's nine.

So our view is that's going to keep getting trimmed. S&P multiples just got expensive again. We want to look for high quality income and be patient here. John Hancock was involved in all sorts of deals and negotiations at the founding fathers and, you know, getting things done in the 18th century. He would have loved a big, beautiful tax bill. How does the tax bill coming? This is really the first time, Paul.

I brought this up on the show. All of a sudden, folks, it's a summer legislative season. Matt Mishkin, what's that going to do to the bond market? What's it going to do to Emily Rowland's call on the equity market?

Coming from Boston, we dislike taxes just like almost all Americans. I mean, we're still getting over T-tax over here, Tom. Legacy of Boston and ancestors here. But in terms of policy, it's been a give and take. And tariffs were going to be a negative on margins. They were going to crimp margins. That's diminishing. Now we've got a potential tax bill.

At the end of the day, what we are seeing is that growth in profit margins are probably gonna be limited. We just don't see much of a tax cut. We just see an extension of the current tax regime more likely. And it's just gonna be one that, you know, I think it's, if you did a pie chart, it's 90% of investor intention. 10% is everything else. But in our view, investors should be more attentive to global growth and fundamentals. And to us, it's okay.

but it is a decelerating growth environment we're likely to see over the course of the year where are we in 60 40 somebody i'm sorry i can't cite it folks somebody had a great article this weekend on the death of 60 40 60 equities 40 bonds go play golf outside babson at the wellesley country club matt miss can help me here is 60 40 still germane

It's a great foundation still in our view. It's just that the equity side of the portfolio we think is going to have as a long term investor, less return potential. We're coming off of amazing 10 year, 15 year type returns out of the equity side.

And the bond side has been brutal for like the last five years. And we just think that the bond side is going to take on more of a return driver over the next decade. The yields are a lot higher than they were five, 10 years ago. And then on the equity side, look, if you want to like look at credit or private debt or other things, income as a return driver is our big theme over the next several years. Are share buybacks an income driver?

It's okay. We'll take it as a capital return. It does help, obviously, reduce shares, increase earnings power. But at the end of the day, we've already done a lot of that. That has been a significant return driver for capital appreciation. But good old dividends and income and that's the us get on the health course. Thank you.

Matt, got to go there. Thank you so much. Matt Miskin with us with Man Your Life at John Hancock. Running joke here, folks. Paul Sweeney says, where's the beef? Where's the dividend? Yep, exactly right. I've been asking Tim Cook that for a long time at Apple. Let's talk about the fixed income market, Tom. I'm looking at the 10-year Treasury.

uh we're in about three basis points four point four three percent but still people are talking about people are talking about i mean you can actually talk to somebody in fixed income this days and have a reasonably interesting conversation years ago you just get like zero percent return on the bond market who wants to talk to these people kathy jones for example she fixed income strategist that charles schwab nobody wanted to talk to her for like a decade now

real yield in the fixed income space. Cathy, how are you guys at Charles Schwab thinking about the bond market these days?

You know, Paul, I think the key is that at the long end, you still have some risk to the upside. We didn't see a tariff effect in this CPI report, which is great, but we do expect to see some impact. Tariffs even at a lower level are still four or five times as high as they were before. So we'll probably see some tariff effect coming through towards the end of the year. And then we have all the

budget talks to go through. So I think that the long end, the intermediate to long end stays elevated, doesn't necessarily have to go a lot higher here, but stays elevated because the term premium is going to stay up until we see some of those policy issues resolved. The Cathy Jones review for our listeners and our viewers here, this is an important question, folks.

Out the yield curve, where does Jerome Powell and company have impact? Don't give me it's just in the short term baloney. Can they affect the belly of the curve? Can Jerome Powell affect the price of the 10-year note?

Yeah, certainly, because they focus a lot on inflation expectations. And that's where you get the Fed policy focus that moves out the yield curve. So the Fed affects the yield curve certainly very strongly out to two years, maybe three to five years. But when it comes to 10 year, then you have to incorporate the inflation outlook and a bunch of other stuff. But keeping inflation expectations anchored

which I would say right now, I'm not sure they are fully anchored, but keeping those anchored is a big focus for the Fed because that's what keeps the long end down relative to the short end. Tom, here's some inflation news that you can use. Eggs were down.

12.7% on the month, the biggest tumble since 1984. That's after the surge in egg prices due to the avian flu. Of course, that's according to Chris Anthony, our senior editor for Bloomberg News. That's news you can use. I'll defer to Ken Fennelly, of course, but...

But are they back to where they used to be? No. No. I took a photo of Kirkland eggs here. I'll get it out on social for Lisa Mateos. I know she's hanging on every word this morning. Yep. But the bottom line is if you're paying $7.49 a dozen for fancy eggs that were handpicked, you know, in a field in Connecticut...

And you get your, what is it, 12 point? 7% decline. Then there's $6.59. This is not happening. I can assure you. I'm reporting, folks. That's not happening. Kathy Jones, how's credit quality out there? I mean, with all this tariff talk and I'm concerned and some economic uncertainty that's bringing into the marketplace, are fixed income investors starting to worry about credit quality?

we saw a little bit of widening of spreads a fairly substantial widening of spreads as the tariff talk ratcheted up they've come back a bit from there we haven't seen them skyrocket yet because the economic data keep keep holding in pretty pretty well so i think credit quality is peaked for the cycle but it

definitely an investment grade it's still pretty strong i think in high yield it's kind of a mixed bag from here but we haven't seen that downturn in the economy that would cause credit spreads to really widen significantly for me out of youtube live chat i mean you know they don't care about you they don't care about me one guy goes i really don't care about john tucker but 24 eggs at shoprite

$9.99. Okay. Two dozen. Yeah. That's like five bucks a dozen. I'm shopping at the wrong store. Exactly right. Kathy, are there some sectors here that kind of screen well for you guys here when you think about credit risk here?

- You know, we tend to look at it in aggregate, but I would say the areas that have held up well are still financials. Financials continue to be in very good shape. And those are issuers of not only investment grade bonds, but also issuers of say preferreds. So you get to play either the higher risk, longer duration version of that in financials or the kind of intermediate term,

basic bond aspect of that, the financials. But they're holding up pretty well. In this cacophony of news, of international relations, of Riyadh and the rest, Kathy Jones, what are CFOs going to do on issuance? Do they say, let's go, let's go, let's go?

- You know, issuance is still holding up, but the opportunity set isn't that great, right? Because the curve sort of flattens out. You don't get a lot of advantage right now in issuing beyond maybe

a little bit in the belly of the curve. So issuance is going to keep pace, but I don't think that these yields are so attractive that any CFO who hadn't already extended duration or hadn't already taken advantage of financing would jump at these yields. Kathy, thank you so much. Greatly, greatly appreciate it. Kathy Jones with Charles Schwab.

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Joining us in the studio now, Brian Belsky. He's here for two reasons. One is after the shock of yesterday, and also finally the Minnesota Twins won eight games in a row. In a row? It's like they're on a roll. It's amazing. I was there for one of them. It was a beautiful night in Minneapolis. Was it? Beautiful night in Minneapolis. Are there black flies at the Twins Stadium in May? There are. Is it like...

Cleveland where there's gnats. We call them gnatts. Yeah. Yeah. I went to several spring training games down at Fort Myers and then was up in Minnie for business last week. So I was able to catch a ball. Red Holtz has a book out, How Not to Invest. And how not to invest is to panic. And this is the modern disease that Brian and I are so against, which is go to cash. How do you get back in the market if you're part of the go to cash crew? Yeah.

You buy. And I think you try not to outsmart yourself. You know, we've been talking about this for years, Tom, and everyone tries to time the market and try to be smarter than the market. The market is what the market is. And, and thanks for sticking with us in terms of our view, because many people did not. And we took a lot of heat in the media and a lot of heat internally and a lot of heat from our clients for all built. Ian Lincoln was mad at you. Ian is such a lovely guy. I just did the re conference. Um,

keynote and he followed me. So I love that guy plus Minnesota guy. So, you know, of course, but you know, listen, we, we do what we do for a reason. We're investors. We're not going to react, fear sells. People were making binary decisions based on emotion without having analysis. And the analysis said that, you know, the markets were not going to be as broken as everybody thought. And I think everyone was kind of, once again, jumping to conclusions. I really think guys that,

what's happening is we've kind of shocked ourselves into a period of normalization, believe it or not. And so the periods that we've seen really for all intents and purposes, Tom and Paul, since 2007 have not been normal. Not been normal. So we've been saying for the last couple of years that we're entering normalization. So normalization, is that a high single-digit return expectation for equity markets? Yeah, I mean...

If you go back historically, it's 9.6% or 9.8%. They're all dividend on there. So I think high single digit, low double digits for both the S&P 500 and earnings growth. We said this in our year ahead piece for 2023 that we published in November of 2022. At that report, guys, we said the new cyclical bull market has begun. Part of our 25-year secular bull market theme, which remains intact. We are now in year three of that cyclical bull cycle.

And so at the end of the day, we think that you answer Tom's questions. Don't try to outsmart yourself. Be an investor. Stocks are higher 12 months from now. Stocks are higher six months from now. And this too shall pass. And oh, by the way, it looks like it's passed. Are financials a comfort stock for people scared stiff?

I think they are, Tom, because a lot of people talk about deregulation going forward. But we think about how, from a portfolio perspective, small, mid, and large, we think there's massive under-owning, under-ownership of financials. And we think our major theme in large-cap money would be scale. And small-cap monies, by those small-cap banks that have existing fantastic relationships and clean balance sheets,

But we think it's the regional banks that are going to be interesting because they absolutely positively have to either get smaller or get bigger. And we think there's going to be a lot of consolidation 26, 27. Hey, Brian, what did you make of earnings this cycle? Because we had a lot of companies kind of pulling guidance. It's kind of, I guess, at the height of this tariff uncertainty here. What did you make of earnings? What did you make of the guidance? How much can we hang our hat on that?

Well, the only difference now versus COVID where everybody pulled their guidance, they pulled actually their forecast too. They haven't pulled their forecast. They just came out with great earnings, the majority above the long-term trend in terms of the first quarter. What we looked at is 2026 numbers relative to 2021.

five numbers and we saw what we like to call this earnings revision low, meaning everyone dropped their numbers at once. So I think that at the end of the day, earnings are kind of tracking high single digit, low double digit increases for the S&P 500. We think small cap and mid cap can actually potentially do a little bit better, Paul. But I think

This uncertainty with respect to what has occurred the first six months of the year, five months of the year, I'm sorry, with respect to the tariffs is starting to unwind. And you'll start to see more kind of consistent earnings. But again, I think earnings are set up to be under promise and over deliver, which is that's the kind of period that you want to be in. So, I mean, I'm trying to figure out, I'm reading all the Bloomberg stuff I can, where we are on tariffs. I know we're higher. I don't know how much higher, but I know we're higher.

so that's got to impact earnings margins that kind of stuff is that reflected in the stocks do you think i well i think the one thing that people don't know is who's going to take on the the cost is it going to is it going to come out of margins it's going to be the consumer or the producer i think so many people rush to judgments paul that it was going to be the consumer uh but what we're seeing is we're we're seeing that

The consumer discretionary sector, I think from a bottoming perspective, looks very well in terms of earnings. That's exactly when you want to buy them. Quickly here, the revenue persistency of MAG7. I mean, even if it's high single digit, which is pretty gloomy, but if they sum up to a high single digit revenue persistency, that's constructive.

Right? Yeah, two things. Actually, three. Following me is one of the greatest stock pickers I've ever met, Nancy Tangler. I'm a great friend of mine, and I think we're entering into this period of stock picking, and it means matter, and you need to have a lot of experience doing that, number one. Number two, I've said this for a long time now, for at least 10-plus years, that the MAG7 or the big cap tech stocks are the new consumer staples.

If you go back to the 90s, we went to liquidity and where there was consistency and maybe their business models are changing a little bit. We're going to see that in Google clearly. But I think the consistency of the revenue growth going forward and the liquidity that it offers investors, that's why you have to own some of these names.

Brian, thank you so much. Brian Belsky with Espimo Capital Markets. I got a tape saved somewhere of you when it was terrible. I was just saying, just stay the course. Just be in there. We'll play that, you know. End of the year. The Vikings will be 6-0 before they break the Northwest hearts one more time. They've been doing that a lot. And then finish 7-10.

Seven and ten. Brian Belsky, thank you so much. As he mentioned, Nancy Tengler coming up. This is what we like to do, folks, just back-to-back excellence. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay and Android.com.

with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say, Alexa, play Bloomberg 1130. Nancy Tangler, like Brian Belsky, what's the market going to do? Boring. Okay, if you roll like Nancy Tangler, and 11 years ago, you write the introduction to your classic book.

i'm looking at three beds four baths seven thousand square feet paradise valley 85253 arizona

Three beds, four baths for $25 million. Nice. Okay. Paradise Valley. And there you were, Nancy. And the name says it all. We got to interrupt. The Women's Guide to Successful Investing was important with Paul Grave MacMillan, and then it became even more important. What was it like fighting to get that book published? Did you have to yell and scream? Did Laffler have to call up and beat on someone? No.

Thank you for that, Tom. No, no, not at all. It was, I think we were early on the whole issue of women, transfer of wealth to women. That's a huge deal. And then the second edition, you know, happily they came to me. And just, I mean, you've written a ton. You know it's harder to write a second edition than the first edition because you have to edit and then you have to add in topical stuff. But it's been fun.

It's been fun and important. Nobody cares. We want a third edition right now. I want you to talk to women after three once-in-a-lifetime events and all the stereotypes out there that still exist. How do women get started to understand equities? Yeah, well, I think...

The research shows women make better investors than men. Let's just say we're as good of investors because I just followed one of the greats, Brian Belsky. But they need to give themselves permission because women have excused themselves from the conversation. Average age of a widow is 59 in the U.S. I was 59.

Happily, I'd been managing all the family wealth, but that's a bad time to start learning. So they need to read my book, and then they need to listen to your show, and they need to read Barron's. The stereotype of this is like an auto ad or something. I can't remember. And the guy's worried about like three tuitions, mortgages, and that. And the woman wants to figure out where to get a Diet Coke. It's not funny, Paul. This is like the most important conversation we can have. I know.

Nancy, what were you telling your clients when we actually had a market a couple of weeks ago down 20% from its recent highs? That's a bear market for a lot of people. A lot of folks aren't that experienced with that. What kind of conversations were you having with them then and now? Well, again, like Brian, we're long-term investors, so we were buying. And we were able to pick off a number of names like Microsoft, Palantir, 20% ago, just a few weeks ago. So...

I think I've been hearing that the tech trade is over for the last three years. I was going to say three decades. Or maybe three decades, but certainly the last three. Every summer we get a bear market in technology. Everybody goes, that's it, we're done. That's it, we're done. And we've just been in buying it, and it's been great for our clients. And we also have a lot of history of outperformance, so that gives them confidence in a period like that.

So what do we do now? I mean, I think tariffs are going to be lower than maybe we initially feared, but they're still higher than they were before. I guess that's a drag on economic growth. I'm not sure how much. I think everybody's trying to do the math right now. What do you do in this kind of environment? Yeah, so I mean...

I long for the days when we had a Fed that used price-level targeting like Wayne Angel. Remember him? The late-weight Angel who just died. We just lost Wayne Angel. Explain his contribution off of Milton Friedman to our economic thought. Yeah, well, he was forward-looking, as you know. I mean, he was looking at the currency markets.

exchange rates, commodity prices to really guide Fed policy instead of looking at last month's data, which is what we have right now. And so I think when you have a Fed that says tariffs

I can't do anything until I know what they are. That's not how this works. And so I think you have to be looking at things that are relevant. As we have, and Paul mentioned it eloquently, if we have this walk back on the trade war, we had John Lipsky on earlier, who's much more apolitical than the Laffler-Tangler Republican heritage. Where is your tribe in Pleasant, what's it called, Pleasant Valley area? Paradise. Paradise. It's not Pleasant, it's Paradise, Tom.

Where is your tribe post-Trump? Is it like we revert back to what we knew, or do we go on to something different within a conservative economic ethos? Yeah. Well, I mean, I personally think tariffs are bad. They're an indirect tax on the consumer. They're a tax. So I do think it would be much more constructive to focus on growth and focus on reasonable tax levels. So, you know, if we get the extension of the TCJA extension,

And additional tax cuts, which are in there, the SALT deduction goes up, you get no tax on tips and Social Security potentially in overtime. That will be, I think, helpful to growth. But we as a nation need to focus on spending discipline. We have none. This bill looks like it's going to be additive to the deficit. And we have to focus on growth and incent people. I love this idea of opening an account for people

uh every newborn in america where they learn to invest at a very young age and they see the power of compounding well my daughter's gotten her three brothers to focus on this stuff she's the only one that's got her head on straight women exactly she's the one she does the taxes for them as well uh she taught some turbo tax

What do you think about the consumer? We're going to hear about the consumer on Thursday. Yeah, they're still spending, Paul. They are. I mean, I think, you know, we saw some pull forward. Custom duties in April were over $16 billion versus $8 billion the month before. So we didn't see it in first quarter earnings, but we are going to see it, I think, in second quarter. But that said, I think the consumer continues to spend. It's the great Ed Yardeni's comment that they spend when they're happy. And he lifted his call yesterday. When?

He lifted, I think, off the top of my head 6,500. Yeah, he did. And Goldman just raised theirs to 61. I don't live in that world. I have to produce performance, and so I can't change and wiggle. But yeah, and he said they spend when they're depressed because it produces dopamine. So I think we'll continue to see the

consumers spend as long as they're working. I need your opinion on this. I think it's really important. I put out a lovely, lovely small village in Massachusetts. Somebody has a Barbie garden. They have like hundreds of Barbies. We've actually donated to it. I think we donated Barbie Ferrari with Ken and the whole thing. But it's like hundreds of Barbies in their yard. People come by and stare at it.

How many, your thoughts on 30 Barbies or three Barbies? Is this what we've come to in American consumption? I'll bet you, where you were at Point Loman before that, you had what, 40 or 50 Barbies?

I wasn't really a Barbie gal. You weren't a Barbie gal? No, I wanted to be a pilot in the Navy. Well, they had Barbie Top Gun. That's right. I think sometimes our administration, I'm going to say it this way, has an unfortunate way with words. And that was just, that was a dumb statement, I think, to make. And I think we don't want that kind of, we want growth. We don't want that kind of,

well, we'll have to pull back on our own personal consumption, but the government doesn't have to. So I think we have to get some of this stuff right-sized. I think once you get to Washington, you just lose touch. I interviewed for a position at the Fed, and the guy said to me, look what we've done for America. He was ex-Goldman Sachs.

we've lowered rates. And I said, well, that's great if you are invested in risk assets, but not if you retired with a certain assumption of interest rate, you know, income on your investments, and now you're a greeter at Walmart. So they need perspective. Like, I think they need to do time in mid-America. Can you come back again? We need a third edition of Successful Investing. Then you come back. Nancy Tengler with us.

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This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal. This is a joy. What we do on surveillance around the busy schedule of our guests is wait till we can talk to them for an extended moment. And we have that with John Lipsky.

out of Iowa years ago in Wesleyan in Connecticut, and of course, forever identified with Stanford. He attended the recent John Taylor conference with Michael McKee. John Lipsky's contribution to our public policy, scheduled and less than scheduled, has been profound at the International Monetary Fund, and of course, forever identified with J.P. Morgan Economics. John Lipsky, thrilled to have you with us today.

You're too kind, but it's a pleasure to be here. I got to start with the great loss of Joseph Nye. I want you to explain in the trenches of the IMF, you're speaking in Hanoi, you're working with Lagarde to right the ship, what Joseph Nye contributed to international relations.

Well, I've ran across him in a couple of ways. One, of course, the renown for his conceptualization of the idea of soft power in international relations as opposed to simply hard power. And of course, in the context of the IMF, which was a foundational institution creating the post-World War II order,

that restored the global economy and produced in the 60 years after World War II, the fastest sustained global economic growth probably ever. That the United States leadership in creating the institutional grid that

that was the foundation of the so-called rules-based international order was a reflection and a powerful reflection of the U.S. soft power. Joe was for many years also as a professor at the Kennedy School at Harvard and an essayist, also was the U.S. head of the Trilateral Commission.

And so took an active, but behind the scenes in a way, role of keeping certainly an international foreign policy elite together. John Lipsky, let me ask you the money question that all listening to us across this nation want to know. After Trump, do we revert back to a Lipsky international relations and structure, or do we go on to something new?

Well, I don't know what a Lipsky structure would be, but the really, Tom, you know, at the in the in the first Trump administration, when there was already a degree of, let's let's say, shock and uncertainty created about where U.S. policy was going. It was commonplace for Americans to tell foreigners, well, it's it's it's

It's going to be, even if Trump is gone, it's not going to be back to being the same again. And people would say, well, what do you mean exactly? And the answer would be, I'm not sure either. Now we would be doubling down on that. Let's look at the many ways that we would take a look, try to figure out what comes next.

Right now, the president is enunciating and acting energetically to pursue what he would call America first. But Secretary of the Treasury Scott Besson describes as America first doesn't mean America alone.

Well, that's good, but what exactly does it mean? And it's obvious that we don't know the answer. So we don't yet know what Trump 2.0 is actually going to be. For example, let's take this in relation to the kind of question you were asking, Tom. The U.S. and the World Trade Organization, where are we on that?

Reciprocal tariffs appear to be a policy that's not compliant with one of the fundamental aspects of the World Trade Organization agreements, which is the principle of most favored nation. In other words, you don't go around discriminating country by country with differential tariff rates on the same product.

that inhibits international trade creates a mess. Well, we seem to be pursuing that. So what does that mean with regard to such fundamental things as our support for the WTO? Well,

well forgive me yeah go ahead john lipsky uh with us here folks who welcome all of you across the nation on youtube around the world good morning as well and one of the great charms here is ages ago in the salomon brothers building yeah building seven yep paul sweeney got to walk the halls of john lipsky yeah i was a lowly investor banking grunt john lipsky was a giant there so uh hey john what does it mean i'm looking at the us dollar here i i

Stocks have bounced back, bonds have bounced, yields have come back, but the dollar is still kind of under pressure here. What do you make of the U.S. dollar here in the global economy?

Well, it seems to me, obviously, markets are trying to find their way here. But I would say that there's little doubt that there has been a substantial reassessment of the outlook for the U.S. economy that involves not just foreign investors, but domestic investors, but it has had an impact on the dollar.

And I would say roll the tape back to last fall or even at Davos in January when the dominant theme was U.S. exceptionalism. How is it that the U.S. has faster productivity, growth, more new business formation, stronger growth in business investment, et cetera, an entirely positive thing?

not entirely, but substantially in positive view of the U.S. economy, especially in differentiated formats that the U.S. is doing. It's not perfect by a long way, but doing better than everybody else. That has been fundamentally reassessed by policy developments that have caused investors everywhere to, number one,

look at the, to reassess us growth downwards, reassess inflation outlook upwards and create more institutional uncertainty. Tom had mentioned earlier that I was last weekend attending last week, attending two conferences at Stanford university. And we heard presentation from,

from Stanford professors who were measuring what they call the convenience premium for U.S. Treasury securities that was formed one of the

evidence of the investors viewing not just the U.S. economy, but U.S. markets as exceptional. And that seemingly has disappeared. So in other words, you could say a loss of safe haven or a diminishment of the safe haven aspects of the U.S. market. But I would say what you've seen in the dollar is

again, a fundamental reassessment of the differential view of the U.S. economy and not in a favorable way, to say the least. Added on to that last word here, the degree of uncertainty about where policy is going, since this has essentially been a policy-driven upset, remains pretty substantial. Hey, John, I think

You and I, and most of our listeners, most of our viewers, we grew up in a world where globalization was the story. You had to do your time in Tokyo. You had to do your time in London. This is a global economy, global market. Is that over? Oh, no, not at all.

As you see, the rest of the world is still obviously has to take important account of what the world's largest economy is doing, especially since it seems intent on privatization.

altering at the very least, if not disrupting the institutional frameworks that were created largely with the support of the United States. The rest of the world is continuing to trade. In other words,

For example, within Asia, the growth of interregional trade continues to outstrip that of trade between regions, especially in the US. Also, trade and services has continued to grow rapidly.

And our trade policies that have caused so much upset have exclusively looked at trade in goods, but it's trades in services that forms part of the most interesting opportunity for the global economy. John, I want to get this in. I think it's just too important. Your heart and soul is of Iowa. Your mother served public office in Iowa ages and ages ago. I have family on the Mississippi River in western Illinois, etc.,

And the basic idea, and I go back to Smuckler's classic essay in the 50s, of isolationism in America. And it comes from Iowa. It comes from the Midwest. When you and I were kids, it was led by the Chicago Tribune. I want you to speak to the new breed of American isolationism now. How does that amend now?

Yeah, Tom, it's an excellent question and it's a puzzlement to me. Let's keep it with Iowa. Iowa remains an agricultural state in the sense of its products, even though actually direct farming now is a very, very small part of the labor force. But still, Iowa

U.S. agricultural exports are an absolutely vital part of the Midwest farming and for Iowa. And for example, the last time there was in Trump number one, when there was a big upset with agricultural trade with China, the administration ended up having to spend tens of billions of dollars in compensation

to, among others, to Iowa farmers for their lost income. And at the same time,

There has been, when I was growing up, Tom, let's just say what you would call there weren't very many folks of color around. But today at my old high school, I think it's considered exceptional if the valedictorian is one of those very talented Asian kids who

who have settled in the wake of, especially in the wake of the Vietnam War. And you can find in the construction industry, let's see what's happening now. And in the packing industry in Iowa, a huge influx of Latin workers who are viewed as very much sold to the work, hardworking folks. And yet Iowa's voted overwhelmingly for Trump.

So it's, as you would say, call it isolationist, seems jarring. But still, it's certainly more nationalist and buying into the idea that the U.S. has been taken advantage of by foreigners and by the elites.

Thank you so much. And just as one example there of the change of the Middle West is, of course, the wonderful Jim Young Kim, who was at Dartmouth College and then the World Bank serving right when John Lipsky was serving as well. John Lipsky, thank you for extended comments today and remembering Paul Sweeney a few years ago. Exactly. Exactly. As well. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple

CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg 1130. Brian, user principal at Madison Wall. Brian, you're based in Portland, Oregon. I have no idea why you were there. I love the town.

but you're in new york i am uh laura martin our good friend from needham she's in new york why are all you media moguls in new york this week we all like to hang out together and it's up front

Oh, that. That, yeah. Tell us what upfront is and why do we even have an upfront season anymore? Tell us what upfront is. Right. Well, the upfront is this period of time where the world's largest advertisers and the largest sellers of advertising in the United States and TV in particular come together. The TV network owners and YouTube and Amazon all do big song and dances. I think Lady Gaga is going to be at YouTube's broadcast tomorrow. And yeah, basically they show what they're

They've got planned for the next year. And then it's the time, once they've done that, then everyone can forecast what they think audiences are going to be. And then budgets basically start getting negotiated. That's what the whole upfront period is about. Bring us up to date with your historic call that TV will not go away. Well, we're brilliant on that. But what's a new view from Brian Weiser?

Well, it's a gradual erosion. I mean, I still think that the overall industry can grow the top line by, let's say, 1%. If you included streaming growth of, call it, 10%, and you assume that subscription fees from pay TV declines by, call it, 6% or 7%, and ad revenue declines by, call it, 3%. This is joyous. The overall medium...

grows by about a percent so it doesn't die it just evolves and the profit margins might shrink but it doesn't go away if i'm cbs and tom some of these after parties for these up fronts legendary stories i cannot tell but that's what the new york post is for exactly talk to us about i mean what are the networks where are they allocated are they spending money on their cbs television network

Or are they putting everything on streaming these days? Well, I think that when you look at some of the networks like NBCU, it's kind of surprising, if not shocking, just the share of the content budget going to Peacock versus going to the broadcast networks. The creative budget. Yeah, exactly. We're paying for content other than sports. Now, sports rights continues to be heavily skewed towards broadcast networks, cable networks.

And that's primarily because you can get people to pay for the services, right, to access it. And the leagues want the breadth and the reach of broadcast still. So if I go over to Michael's today for lunch, have the kale salad and all that, they put me in the way back. And I'm back with the D-class celebrities. Up front are the fancy people you talk to leading the up front charge.

What are they talking about? Is it like 100% they're talking about YouTube? What's the theme in the hallways? Here's the fun thing. Even though YouTube may very well have the biggest single event this week,

it's really not part of the upfront conversation, which is kind of weird, right? They want to be part of those conversations. They might be bigger than NBCU and Disney and Paramount combined, but they're not really part of the overall TV budget process because most marketers don't think of them as TV yet. See, that is so odd because that's where the, I used to just say to people, wherever the eyeballs go,

that's where the ad dollars will go. And it's slow, right? - It's because it's different though. In the eyes of the typical marketer, Mr. Beast might be comparable, but Mr. Beast by himself is one thing. - You're calling me Mr. Beast? - No, I'm calling Paul Mr. Beast. By himself, Mr. Beast is relatively small. And so because you're buying audiences, not programs when it comes to YouTube, it's hard to wrap your head around what you're getting.

That's part of the issue. We're living this every day, folks. And we really treasure that you're on YouTube with us around the world, particularly in the Pacific Rim evening. Good morning to you, New York time on YouTube. Subscribe to Bloomberg Podcast. If Brian Weiser saw our numbers, he'd be calling us the Beast Brothers. So, Brian, how are advertisers thinking about advertising?

broadcast television, cable television today? Yeah, right now, well, today as in, what, May something, right? I think they're still freaking out, notwithstanding yesterday's press conference. I think that there's still a lot of concerns and uncertainty about what their budgets are going to be. And so I think there's going to be a lot of reluctance to put down money. That's the first thing, right? Is that because just general political...

- Political, economic issues? - Uncertainty is a real issue because it's already a challenge when you're making these commitments for a period from say October to September of the following year when you don't even know what economic policy is going to be in about 30 days, let alone 69, 120. So I think that that uncertainty is the first top of mind thing. And that's gonna be a huge feature of this upfront in terms of reluctance to commit

without a lot of flexibility. So that's the first thing on top of their mind. But digital platforms are even more important, right? So the TV budgets have a negative trajectory. Digital budgets continue to have a growing trajectory for large brands.

like single digit growing? I think this year, single digit. And I think that the double digits is a thing of the past. Paul mentioned you're in Portland. From Portland up to Vancouver is the new Hollywood. Maybe throw Toronto in the rest. President Trump, Mr. President, went after it. Good morning, Marilyn Monroe. Thanks for listening. But the bottom line is the future of Hollywood is

if they're exporting every labor transaction outside California. - Yeah, well, the smart thing if you're in the production business outside of the United States is to make sure you're doubling down your production for outside of the United States. The United States is, as you guys follow as well as anyone or more, pushing towards autarky.

I mean, the reality is that if you want to produce content or any business or product for the United States, you kind of are going to need to have a US-based operation. I think that Vancouver in particular, where I'm from, and Toronto are heavily dependent on American productions. But if they focus on the rest of the world, huge opportunity.

So what are we doing today on the upfront? What's the party today? Today, Disney is later today. So I'll be there. So where are we getting this ESPN app that's going to have everything we all want?

Yeah, well, I don't know. I don't know the specific schedule, but I think that the sports specific apps really have a limited audience because the number of people who are willing to pay only for that product are going to be limited. That's why the whole concept of having like a bundle of services is a better business. Like a Comcast or a Charter. Oh, no one would ever pay for that. When you were Sterling Draper, did you ever meet Jonah Holloway?

Oh, no. Was that? No. Yeah, certainly. Big fan. I've met some people from that era. Was that when they sit? Well, he was a group M. The biggest. But remember, I replaced the guy who started in 1948. Yes. And who was that guy? Bob Cohen. Bob Cohen. That's right. Bob Cohen was the definitive vocalist

voice on Madison Avenue on where global ad spend was going to be. What happens to, not West Point, Pepperell, WPP? I think that agencies generally are more likely, 20 years from now, you'll be able to recognize today's agencies in some form with a higher probability than Meta will be around.

Okay. Mark my words. And that is just extreme. Hard probability. You nailed this. Yep. Don't be a stranger. We should get live reporting from the upfronts. Joining us now are upfront correspondent Brian. Exactly right. They're good fun. Brian, thank you. This is the Bloomberg Surveillance Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts.

Listen live each weekday, 7 to 10 a.m. Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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