Trump Tax Bill Passes Senate as Republicans Notch Major Win
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This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast with Carol Masser and Tim Stenevek on Bloomberg Radio.

Carol Massera, along with Matthew Miller here in our Bloomberg Interactive Broker Studio. You know, another busy day out of D.C. President Donald Trump's $3.3 trillion tax and spending cut bill passing the Senate earlier today after a furious push by Republican leaders to persuade holdouts.

Thank you.

And we did see the president personally lobbying lawmakers to quickly move the legislation through Congress. It's a great bill. There's something for everyone, is what President Trump told reporters earlier. So is it? Let's ask someone who provides U.S. and international macro policy and political forecasting for financial markets and prominent investors and is definitely a well-known voice to our Bloomberg audience. With us from Washington, Terry Haynes, founder of Pangea.

policy. Terry, good to have you here. So is it a great bill? Is there something for everyone in your view?

Well, thanks for having me, Carol. I appreciate it. And yeah, there's so many so many things for so many people. But I would take issue. I know this is you're you're quoting other people here. But I would argue even with the White House that this is the entirety of the president's agenda, because what they're going to want, you know, this is a.

This makes a lot of important changes. It makes permanent the 2017 tax cuts, which is a big deal. It creates new incentives for manufacturing and onshoring, very big deal, including for defense. I think it all and it.

It deals with the debt ceiling debt limit problem, which is a very big deal. So markets have anticipated this and largely priced it in. But nonetheless, you know, for markets, it's a very big deal because it provides a great deal more economic certainty. That said, what you're going to see is kind of the rest of the story in the fall when you're going to get inflation.

spending bills, fights and a bunch of other things that are going to try to rationalize debt and deficit a little bit more and and right size that which Secretary Besson says is going to be a three or four year project. By the way, speaking of Secretary Besson, we had him on yesterday and I was so hoping to ask him, like, what happened to three, three, three? You think that was just sort of campaign promises or does it's

The Treasury Secretary really believe that, you know, in his lifetime, we're going to get back to three percent deficits. Does he believe that in this term we're going to get to three percent growth or that we're going to produce three million barrels more of oil a day?

I think Besant, I think, would tell you all those things are aspirational. But yes, he's very serious about it. And they're very serious about the manufacturing as well. I mean, one of the Terry, this bill includes four and a half trillion dollars of tax cuts and only one point two trillion dollars of spending cuts. I mean, you don't need to have an MIT Ph.D. to get that. This is likely to add to the deficit. Right.

Well, I think it probably does add to the deficit, but I would take issue and a lot of people I think would take issue, but not me.

incidentally, Barack Obama, with the idea that taking CBO scoring wholesale is the only way to judge the yardstick here. Besant would tell you, we're on right now, that CBO scoring, the static model, doesn't take into account growth, it doesn't take into account revenue from tariffs, it doesn't take into account an awful lot of things.

Wall Street Journal lead editorial today points out that using CBO analysis of this legislation, the $40,000 self-cap is actually a deficit reducer.

which is about as ridiculous as you can get, but it tells you kind of the perverse incentives that are built into the model. So, you know, I tend to be, and not for any partisan reason, but I tend to be somebody who thinks, well, you know, CPO's not got all the answers and there's an awful lot that's relevant and it's relevant to markets that they're leaving out. That's fair. By the way, since you brought it up...

Yeah. You have a lot of experience in Washington, appointed by the president to run things. And I think a couple of congressional committees you ran as well. Yes. Yes. In terms of the SALT deduction, that's that was part of U.S. policy for like over a century because the

This country, there's a balance, right? We don't want undue federal overreach into a state's autonomy to tax. And does anyone care at all about states' rights anymore? Or are we all OK with this centrally powered federal swamp anymore?

Well, you know, there's a there's a lot of different ways that flash through my mind to answer that question. One of them is if you're feeling like you want to read a court case to look at a look at a nearly century old Supreme Court case called Wickard versus Filburn, in which the Supreme Court essentially said that, yes, federal government can use the Commerce Clause to bigfoot anybody on anything at any time, pretty much. It is interesting.

States' rights have gotten a lot less important over the years, and you see that in this bill in a lot of different ways. You see the – and you point out, I think, properly so, about the balance, the old balance on salt. It doesn't really matter so much anymore, not only because it's a blue versus red issue, but because it was a revenue-raising issue.

But you also see things like the AI moratorium on state regulation that happens. And so there's a, for a long time now, and there's a lot of streams into this, civil rights being one of them, frankly, the federalization of rights. And as a result of what state policies are, aren't yet a lot less important.

Terry, is this are these policies ultimately that will make America great again?

You know, the let me answer this way, and I'm not going to duck the question at all. But I let's say let's put it this way. What what they hope, what they intend is to have is to have an economic policy that frankly serves the United States geopolitical policy and maximizes U.S.

economic strength as part of US geopolitics. So what they want in the short term here, this is why the July 4th bogey, July 4, July 9 bogey is so important. What they want is they really want a triple boost to the American economy through the tax legislation, through bilateral trade deals, through

showing that they're not going to go crazy on reciprocal tariffs, for example, and then they'll start dealing with the spending issue. What they hope to do through all this, including the manufacturing reshoring for what Secretary Besson calls critical industries,

including defense, is that they think they are reindustrializing and reorienting the American economy to make it much stronger for the long geopolitical conflict that's following. So, you know,

they think this is a way to make America greater. Certainly. Yes. Do you think it is? And what about your clients and those folks that you advise? Let me, let me just put it this way. Sitting, sitting on a, sitting on the status quo, uh, sitting, sitting in the status quo, uh, uh, before 2025, I think was very bad for the country for a lot of different reasons and, uh, and didn't serve us well and put us on the back foot on a lot of things. So, you know, what they're trying to do is put,

put things on the front foot. And, you know, as a citizen, I support some of it. I'm not crazy about some of it. But you didn't have me on to talk about that. Fundamentally, you know,

they actually do have a plan. They're actually trying to execute it. They've actually been reasonably successful in executing it so far. And the markets seem to be going along with it, judging by what's happened in the second quarter of this year. It is impressive that they're able to push this through. No, I mean, considering the opposing forces. Yeah. Is there something though, you know, only 48% of Americans have heard anything about the so-called big, beautiful bill. I mean, where do they live under a rock? Well,

I don't know, Terry. What does that also tell us about Americans? I'm like, what? I don't know. Like, these are programs that well, you know, they get well, they you know, they get you and I, particularly me, judging by hair color, the you know, think about the legacy media more than we should.

No offense. But we do. We do. And people get their information from lots of different ways and they get it. They get it in different piece parts and kind of different shards. I think of it as shards. I've never heard that anywhere else, but different shards than than you and I might, you know, almost meme like, you know, they get it from Chinese social media sites.

Yeah, yeah. My daughter will tell you all about some movie and she's now, you know, but she's never seen the movie. She's seen, you know, parts of the movie through memes or whatever. But like, oh, yeah, that's you know, that, you know, that's from this or that or the other movies. Like, have you seen that movie? No, it's not a picture. You know, I think the quickly I think the important question here and just in 30, 40 seconds.

Is this going to come back to bite the Republicans in the midterms when those people who don't watch the news realize they no longer have Medicare coverage? Are they going to vote against Republicans? Well, yeah. And you saw March on me a little bit. The answer I when I went to law school, I learned there's only three things you learn in law school. One of them is to say it depends as much as possible.

But thank you for laughing at my little joke. But it actually does depend. I mean, if they put their reputation on the line on among other things, making sure that the making sure that the health care programs still work properly. So if they don't, that's going to redound negatively to on them, just like it did after the Affordable Care Act with Obama when they couldn't even get a website out.

Listen, Terry, so good that we could spend some time with you. Terry Haynes, founder of Pangea Policy.

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Hey, listen, our heads are spinning a bit today when it comes to Tesla news. We've got a long time. Musk lieutenant leaving in a high profile departure. Tesla's latest quarterly sales update that's coming this week, too. And then there's this great ongoing spat between the leader of the free world and the world's wealthiest individual. Although I need to check on that. We are talking about Trump versus Musk. Yeah. Earlier today, President Trump did say he would look into deporting the billionaire in response to a question about the ally turned critic of

of the president's signature tax and spending legislation. I checked for you, by the way. You might have to put Doge on Elon. You know Doge? Doge is the monster that might have to go back and eat Elon. Wouldn't that be terrible? I think what's going to happen is Doge is going to look at Musk. And if Doge looks at Musk, we're going to save a fortune. Thank you very much, everybody. I don't think you should be playing that game with me.

All right. That, of course, is President Trump earlier today and then about a week or so ago talking about Elon Musk. What did you say about Elon Musk? I checked for you. I typed Rich Go on the Bloomberg terminal, and he is still the richest man in the world by over $100 billion. So he's not worried. $362.7 billion for Musk. Coming in at second, Mark Zuckerberg with $260 billion. Not too shabby. Not too shabby. By the way, that was President Trump all from earlier today commenting on Elon Musk. All right. There's a lot of...

we could go here. What we wanted to really tackle, though, is what the political fallout of the apparent relationship fallout between President Trump and Elon Musk. So let's get into it. With us is Ed Ludlow. He's co-host of Bloomberg Technology on Bloomberg TV. Catch him at 11 a.m. Wall Street time, Monday through Friday. He's at our San Francisco bureau. And then in our Washington, D.C. bureau is Mike Dorney. He's Bloomberg News team leader for the Capital Influence team. I want to get to you, Mike, in just a moment. Ed, first up, though, we do want...

We want to talk political influence, but I got to ask you, Tesla shares are down. What news is it on? Because there is a lot going on with Tesla right now. So just lay it out quickly for us. Yeah, it's a version of the Trump trade, right? That prior to November's election, the Trump trade, is it related to Tesla at least, like the

the public proxy was that close proximity to the administration would yield policy and regulation results that would be to Elon Inc., but particularly Tesla's benefit. But trades can go both ways. And I think that the market's super fixated on the idea that a deteriorating relationship between

the president of the United States and Musk is not a good thing for that company necessarily. The president also had specific commentary around electric vehicles as it relates to the big, beautiful bill, the tax bill. And we can get into like, they're shouting like two different things at each other. Something really amazing, like if you'll allow me to just real quick, like I'm not a credit guy. I don't really know the credit markets, but we have this headline as well that even XAI's bonds moving in the session today, like a few cents, right?

But clearly, you know, if you're an investor of some kind in an Elon Inc. company, you're looking at this and thinking, is this a good thing or not? It's interesting to me that this kind of moves the needle to some extent because, you know, Joe Weisenthal had Jim Chanos on his Oddlots podcast yesterday and he asked about, you know, the underlying fundamentals of the company. Listen to what Chanos had to say.

Do you have a Tesla thought of the day? Nobody cares. That's my thought. Nobody cares. Yeah. You could, you know, you could see Elon, you know, robbing a Brinks truck with a mask on or whatever. Oh, that's Elon. It's a unique animal where people say, oh, well, of course, yes. But, you know, Rosie the robot is going to serve me my breakfast and it's got a Tesla trademark on it. So, you know, it's worth a trillion dollars.

I mean, nothing matters. It's all a dream. And tomorrow Tesla comes out with sales figures. But it's not a trillion dollar company on selling two million units a year, right?

I go back to Carol's original question as well. Like there's key man risk. The key man risk is codified in Tesla's annual regulatory filings, where they basically say Elon Musk has a special value to this company. And if anything were to happen to him, that would be bad for Tesla. What we reported, Carol, to your question this morning is that after the aftermath of recent departures from Tesla, Elon Musk now oversees sales in both the United States and Europe. And that's really important because as it

the data is expected to show, sales are under pressure right now. And we can get into the political background of why in Europe in particular that's because of Musk's relationship with Trump. Well, I want to get into the political fallout of this apparent relationship fallout between President Trump and Elon Musk. Mike, come on in on this because what, you know, Matt brought up a good point too, like how significant could this be for the GOP if indeed

Elon backs off of his financial support. We saw it big time in this last presidential election. So it could be significant, particularly if he were to go and back other candidates with a lot of money. Remember, Elon Musk was the largest donor ever in U.S. history in the last election.

You can see today with this Trump tax bill in Congress, it passed with no problem. Even though Musk was intensely criticizing it, they were still able to get reluctant Republicans who had reservations about the bill to side with President Trump. So that just shows that for actual Republican lawmakers who are up for reelection, they'd much rather be with Trump than with Elon.

You know, I was reading Eric Wasson's story today about the holdouts. Okay, Joni Ernst eventually went for the bill, but she was concerned about a reduction in solar and wind credits that would hurt Iowa, and I thought...

She doesn't necessarily have to kowtow to Donald Trump just to get his support. Like there's there's someone else in town who could bankroll her reelection campaign. I'm not sure if she actually needs one, but you understand my point, right, Mike? Elon Musk being anti-Trump does give Republicans who no longer want to be like sycophantic yes men for the rest of their careers an alternative option.

An alternative option, but one that's maybe not so attractive if you've got to win a primary, because the Republican Party, particularly the people who are active enough to vote in primaries, are increasingly just a Trump party. It's less more to traditional Republican philosophy and more the Trump worldview.

So Trump has a lot of influence, especially with primary voters. Now, whether that'll be the case in three years, we don't know. But right now, it sure feels like that to the actual elected officials who may have to run for reelection soon. Ed, what have you heard about how much Elon liked being in the Oval Office and having such close proximity to Donald Trump?

Yeah, I mean, what we consistently kept hearing, right, and Musk said as much himself on the Tesla earnings call prior to the start of Doge, that the whole point was to kind of get some kind of benefit, right? Robo-taxi is probably the easiest example where Musk was trying to, and we reported, was literally himself lobbying on the passage of legislation that would govern, give a federal framework for robo-taxis. And he kind of went into the White House for that and has come out without it.

What I find so astonishing about all of this is you have to give credit where credit's due. And actually, Elon Musk has been very consistent about all of this. He's very worried about the national debt pile leading up to November. That was kind of what he was on the road campaigning with Trump about to a certain extent.

But the president's commentary and posts is like Elon's upset about EV subsidies. Well, again, to his credit, Elon Musk has been relatively consistent, saying, actually, if you did away with particularly consumer facing credits or incentives, we'd be fine with that because we feel Tesla is better placed than other automakers in America if that environment didn't exist anymore.

So, you know, again, it's not clear, like they're not speaking the same language here necessarily, but what the specific point of grievance is with one another. Mike, I'm also curious how much President Trump likes having the world's richest man and his millions and billions nearby. And also when it comes to the GOP, when it comes to influence, what areas or sectors of our economy, what in the GOP world really has the most influence? Yeah.

Well, first off, President Trump loves having rich people around him adoring him because he sees that as a marker of success, of how smart someone is. Really, he keeps score by how much money someone makes. And for the richest man in the world to be kind of

like a dog coming around and being very happy to be around Trump all the time is tremendously flattering to him. Now, there are lots of wealthy people who do back the Republican Party, and a lot of them are going to be even happier now that they have this tax bill today.

that is well on its way toward getting past. There's a lot of sectors of the economy, particularly wealthy investors, who are going to benefit from this. One industry that you can see has a huge influence with the Republican Party is the oil and gas industry. And you can see that in the tax legislation

which essentially has really rolled back clean energy subsidies while doing things like making coal a clean energy benefit. So that's one place where you can see a strong influence in the Republican Party. Mike, President Trump talked about turning Doge, which he termed a monster, against Elon Musk. It didn't seem...

very useful when it was used against the federal government. How much did Doge actually save? And Mike, forgive us, we just have about 30 seconds. Okay, well, it didn't save a lot of money, but it sure crippled some regulatory agencies that Elon Musk and others might not like. For instance, the Consumer Financial Protection Board, which could have regulated some of these tech finance companies. And also it did pull back

government from some areas like foreign aid. So it wasn't a huge savings in terms of money, but it did pull back the government in some areas. Ed Ludlow, 10 seconds. When do we get those sales numbers from Tesla? Be quick. Well, I expect pre-market tomorrow and it'll be

relative to the same period last year. This is the Bloomberg Businessweek Daily Podcast. Listen live each weekday starting at 2 p.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. ♪

Carol Masser, Matt Miller here at Bloomberg headquarters in New York City. As you know, the Senate passing that $3.3 trillion tax and spending cut bill, a 51 to 50 vote. VP J.D. Vance casting that tie-breaking vote. The bill includes provisions to also raise the debt limit, cut Medicaid and other social safety net programs, provides also tax breaks. We talked about this earlier for some groups, but has been criticized for its potential to increase the deficit and harm low-income Americans.

We wanted to dig into maybe how companies are seeing it and maybe some of the things that they might have to do as a result. We welcome into our studio Olalu Agonga. She is U.S. Chief Investment Officer for Mercer. If you're not familiar with the firm, it is, in terms of its U.S. client base, ranges from defined benefit and defined contribution retirement plans to

healthcare asset owners, endowments, foundations, wealth managers, and insurance companies. So that's the perspective. She joins us right now in our studio. Welcome, welcome. Nice to have you here with us. Thank you so much. And thank you for giving the introduction on Mercer, really. Well, I think it's important to kind of understand where you are coming from as we have this discussion. So talk to us, first of all, about the Massive Tax and Spending Bill.

How is that impacting maybe the conversations you guys are having with your clients and the strategy that you are giving to Mercer clients? Thanks. I'll put one more vantage point there. Mercer is a part of Marsh McLennan, and Marsh McLennan has risk and insurance services, and then, of course, now the investments part. So if we were to combine both of them and go back to the spending bill right now, our client base ranges, all that you listed, and now it's Foundation Healthcare, and I'll just

Stop on for a little bit, especially with regards to Medicaid, Medicaid reimbursements, what that means for hospitals or hospital balance sheets. Yeah, that has been a very, very big focus across the board because the investment portfolios and the ability to either allocate to illiquid assets and tie up capital. Now there's a bunch you have to rethink.

So the aspect of taxes, not just from the bill, but the uncertainty around taxes has created a situation whereby very many of these clients, especially if you're an operating entity, so you need the assets to be able to run your organization. They've had to rethink private markets and the composition and diversification around that. So what exactly how exactly do you think?

go about investments as the chief investment officer, right? You're not as worried about the extemporaneous things, but really about making money, I guess, return on your investments. And the return, regardless of the uncertainty and the chaos...

is there. I mean, we're at all new record highs on the S&P. If you own fixed income, you've been crushing it in the first half. If you own Bitcoin, I mean, MicroStrategy made $14 billion. So like...

assets, risk assets have been on fire. Risk assets have been on fire. If you think of institutional portfolios and we manage money for long-term investments and longer time horizons, and it's all objective based. So what are your objectives for your investment pool? Is it income? Are you trying to build a building, right? So you can't take that type of Bitcoin volatility on a pool of assets. I was just throwing that in there to illustrate. So as we think of client objectives, the focus is

Let's pin down the objectives so you eliminate a lot of the noise. So depending on your category, is your endowment pool, are you a university endowment? If you're a university endowment, do you have potential for looming taxes and those things affecting what you're going to be paying out? Are you an endowment that maybe has inflows so that can offset maybe those types of increases?

Then we very much believe in broad diversified portfolios. If you were holding U.S. equities, for example, relative to international equity markets this year, you wouldn't have done as well. Last year, you did incredibly well. So broader diversification across public and private is very important. But the time horizon and the returns that you need from your pool allows us to stay steady and stay the course. Are your university endowment clients feeling stressed?

More so than usually. More so than usual just because a number of what's being discussed from a macro policy standpoint and federal policy standpoint could affect their how they think through portfolio construction. But

help us understand and I don't know how much you can share about who those clients are but you know some of these universities especially within the Ivy League I mean billion dollar endowments massive endowments and not all liquid not all but I understand that but there I

could see someone looking in and saying why are we giving them assist why are they why are they you know considered you know they get tax benefits or so and so considered non-profits who knew harvard got nine billion dollars very very very many of them um well actually not not too many are in that really big bucket but research scholarships innovation those types of things like where is it coming from for some of these institutions they are known as research organizations

And then, of course, the student body, master's degree, Ph.D. So the budget is a very complicated thing with regards to university endowments.

Will companies have to step in and make up some differences for some of their employees because of maybe some of what's going on in the government? Depending on the companies and the type of insurance plans that they're issuing, perhaps. And that's what we're going through right now. So the bill passed in the Senate. What exactly is the composition? Who does it affect? What do those reimbursements look like? So companies are doing a whole re-evaluation. Institutional asset owners are doing a re-evaluation. It's pretty much...

Is it a bigger eval than we've seen under other administrations? Or is it the same old if you had, I don't know, pick your administration. I mean, this is the stuff we get changes. It's probably bigger. It's probably fair to say that this is potentially wider ranging because, uh,

Very many areas that had not been in question before are in question. Who had really looked at tax or those types of implications on not-for-profit institutions and foundations and endowments? Yes, in 2017 there was a little bit of a tax, but now it's pretty wide-ranging. And then if you were to look at this big, beautiful bill,

it encompassed a wide range of things, hence the debates and the negotiations and all that. I want to ask quickly about defense, non-U.S. defense companies, because you highlight them specifically, and it does look like if...

If he's doing anything, President Trump is rearranging the global defense order. Yeah. So is that a good investment for you? Does it have to be a long-term investment? So in this particular environment whereby there's news that comes out and then something else changes the next day or the next week, you run a really big risk of being whiplashed back and forth. We can see a pullback, but now equity markets are back to the highs.

we tend to think about things in terms of not just the strategic asset allocation, but longer-term themes that can withstand a lot of this back and forth. And one of the themes that plays into defense, we call it the security of everything. And security of everything, it means really securing assets

uh logistics and transportation it means really securing uh cyber security uh defense companies there are a number of different sectors that fall into that broader theme which is broadly applicable in this uh environment between geopolitics and what we're seeing across the board so yes defense is one of the areas and defense companies exist here in the u.s and also globally yeah by the way do you guys you're both seven sisters i

Did you know that? I did not know that. I did not know that. You went to Smith, right? I did. And she went to Barnard. Oh, look at that. And you know what? The Seven Sisters schools produce fantastic members of society. Thank you so much. And I don't know if you also know that I'm filling in here for Tim Stenevek. So normally I anchor a TV show called Bloomberg Open Interest every day from 9 to 11. He's trying to steal your guest. I'd love to have you on my show. I would love to.

on your show, America, you heard him. I'm there. That would be great. We got to run. This was so good. Olalu Agunga. She is U.S. Chief Investment Officer for Mercer. Great guest. Seven sisters. Every business has an ambition. PayPal Open is the platform designed to help you grow into yours.

with business loans so you can expand and access to hundreds of millions of PayPal customers worldwide. And your customers can pay all the ways they want with PayPal, Venmo, Pay Later, and all major cards so you can focus on scaling up. When it's time to get growing, there's one platform for all business. PayPal Open. Grow today at paypalopen.com. Loans subject to approval in available locations. For enterprise organizations, managing all your food needs is a tall order.

But with Easy Cater, you get a single workplace food vendor with the tools and resources to make it easy, giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform. All while consolidating your corporate food spend so you can control costs, streamlining billing and payment and simplifying reporting.

Easy Cater, your business tool for food. To learn more, visit easycater.com slash podcast. This July 4th, celebrate freedom from spills, stains, and overpriced furniture with Anabay, the only machine washable sofa inside and out where designer quality meets perfection.

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You're listening to the Bloomberg Businessweek Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube.

Carol Master along with Tim Stenevek live here in our... No, I'm not Tim Stenevek. Oh, shoot. Sorry, Matt Miller. See, it's just... I'm so sorry. When I go on remote, I am like... Here's the thing. Tim Stenevek just joined this company like a couple of years ago. I have been here for 25 years. You and I anchor television shows together in the aughts. I know. I'm so sorry. I am so sorry. I'm Carol Master along with Matthew Miller. He's a...

here at Bloomberg headquarters in New York City. Let's drive to the close. You've got Paisley Nardini, Managing Director, Head of Multi-Asset Solutions at Simplify Asset Management. They've got about $7 billion in assets under management. She joins us from Newport Beach, California. Paisley, you're going to have to save me. Good to have you here with us. I got you. Good, good, good.

Let's start broad macro. We're watching the stuff out of D.C. Any of the news, including on this big tax and spending measure, does it kind of change any of your thinking about the investment environment, the financial market environment?

Yeah, great question. Thanks first and foremost for having me guys. It's a short week, 4th of July holiday, so hopefully everybody gets some time with family and friends. But to answer your question more specifically, it does not change kind of how we're thinking about opportunities and risks this year. I love a good alliteration. And so as I think about what we've encountered, it's been tariffs, now it's taxes. We've also dealt with some geopolitical tensions. And

And so as we take a step back, a lot of noise, a lot of things that can really knock us off of our path, which is kind of those long-term objectives as it relates to investing. And coming into this year, we kind of had a feeling it was going to be a bumpy ride. And I think what I am most surprised by is just the resiliency of markets and investors. And I think it's going to take a lot

for investors to be kind of knocked off track. And as we've seen, we've had a pretty meaningful rebound in equity prices. And today's news, I think, is just more clarity around some of this uncertainty that's been hanging over us. Yeah, I mean, a lot of people basically have described what we've seen since the lows of April as a melt-up. And I think Citi was out with a report showing that there were just a massive amount of bullish, of call buys in the last week.

A lot of this has been retail and it looks like institution that's had to catch up, um, the last couple of days, which is why we hit brand new records, but everyone's ignoring the big fat left tail. Um,

You know, that triple trap, that triple threat that you mentioned, how do you protect against that? Do you hedge or do you try and diversify more than anyone has needed to in the last 15 years? Do you go overseas? What do you do?

Yeah, great question. I would say we're always focused on diversification. If you think about what Simplify Asset Management is doing is we're bringing innovative solutions to the market so investors have access to these diversified tools within their portfolio. With that being said, we're very constructive, we're bullish, we're optimistic on kind of continued momentum and what we've seen in equity prices.

But for the reasons you mentioned, some of those left tails, how do we think about diversifying away from that? And as we take a look back over the last few years, we've had some really significant, strong historical returns within the equity portion of our portfolios. How do we lock that in and feel comfortable about staying in the market? So we're not suggesting investors should kind of exit positions and run for cash.

But how can you trim some of those gains? How can you think about diversifying risk? That could be overseas. That can be long, short type strategies, really looking at ways to think about diversifying away from economic risk, meaning traditional stocks and bonds. And long, short strategies allow you to do that, as well as some kind of the more trend following type strategies, things that are dislocated from just the continued move in some of this equity growth risk that we've seen. Paisley, one thing I like to ask, especially when you got you

in terms of some of the funds that you guys have, the ETFs.

You've got the Simplify High Yield ETF, which I'm looking at performance, and it looks like it is up about 10% year to date. I'm looking at some of your other funds. The Simplify Barrier Fund, Barrier Income ETF, interest income, so it's bills, notes, bonds. You've got also the Simplify, forgive me as I kind of go through the Bloomberg, Currency Strategy ETF. You've also got the Simplify Managed Futures Strategy ETF.

Where's the investment money flowing into? Where is it flowing out of? I'm always curious with investment flows.

Yeah, what we've seen over the last few months is really a lot of investors not throwing in the towel completely, but really looking at ways to diversify from their bond risk. As we think about what the role of bonds is in a portfolio, it's that ballast. And as we've seen, bonds have not provided that ballast. There's been a lot of volatility within interest rates. And so those various strategies that you mentioned allow investors to kind of replace some of their bond exposure. But I would say the other outlier

outcome oriented nature of those strategies that you highlight is a little bit more definity. It's more clarity around these specific outcomes. And so for example, the high yield bond strategy that we manage that you mentioned has downside risk, it has an embedded credit hedge component, which has provided a lot of those performance tailwinds that we've seen year to date.

The barrier strategies that you mentioned is one of our more recent strategies that we've launched, which provides investors high levels of income. And so as they're replacing some of their bond allocations, there's a need to still produce income, especially for kind of more the retiree part of the market. And so these are just unique, differentiated ways that allow our investors to stay in the market and still achieve those desired outcomes. So I'm sorry, forgive me. So money flowing where or money flowing out of like, just give me an idea.

Yeah, money flowing out of bonds and into some of these more income producing barrier oriented, more credit hedge component of the high yield market. I think a lot of investors are maintaining their equity allocations, maybe diversifying within them. But we are seeing a lot of flows into the more alternative sources of income away from traditional bonds. I wonder what you think about

the outperformance that we've seen overseas. It's been pretty remarkable, even in, you know, euros, for example, how well those indexes have done. But if you're a dollar investor, you've just absolutely crushed it, right? If you're a euro investor, the DAX is up 19%, the IBEX 35 is up 21%. But if you're a dollar investor, those gains become 35 and 37%. Is that, can that continue? Does that still have legs? Yeah.

I think it could. I would say I'm a bigger picture investor. So if we zoom out and you look at some of the continued underperformance of international assets, I don't get too excited by the kind of year to date rally that we've seen. A lot of it makes sense when we start to think some of the depreciation in the dollar and really coming into this year.

the concentration that we had in U.S. equities, so investors looking for differentiated sources of equity growth risk overseas. I do think that some of that can continue just given some of the deficit concerns here in the U.S., some of the continued weakness that we've seen in the dollar. But I'm still pretty optimistic on the role of U.S. equities within a long-term investor portfolio, just given the innovation, technology, and growth that we've seen from the corporate earnings here. What about

You know, going back for a moment to the fixed income conversation, when I type INGO on my Bloomberg terminal, I just see what has been an amazing year for fixed income indexes and especially for things like U.S. high yield. Right. Does that look like it has legs? We've seen such an incredible move in the in the 10 year Treasury from getting near 5 percent back down to like four and a quarter.

Well, there's really two components that we like to remind investors that drive any kind of corporate, whether it's investment grade or high yield bond returns. And that's the interest rate risk and that's your credit risk. And we saw some pretty meaningful spread widening. I think high yield spreads went from about 300 over treasuries out to 450. And some of that dislocation really hurt some of the passive high yield bond investors. Going back to that strategy I mentioned earlier, having an embedded credit hedge, having downside protection,

has allowed our investors to really navigate that volatility. And then that first component I mentioned, which is the interest rate risk, I think investors have continued to be whipsawed by rates. We saw rates be a tailwind at the beginning of the first quarter and have been a headwind, I would say, through much of the second quarter. So I think there's just continued uneasiness in whether that interest rate component of bonds

is going to show up for investors and provide that ballast. But at the end of the day, their equities have re-delivered for them after the bounce that we saw in kind of late April and May. And so I think investors are less concerned about some of that interest rate fall as their equities have shown up for their portfolio again. Paisley, you sound pretty confident and comfortable about kind of the environment where we're going. Just got about 30, 40 seconds. What's the major risk out there for investors?

Well, next week, we, of course, have hopefully some updated news or certainty around tariffs. I think we're likely to see that can kick down the road again. I think the administration's seeing kind of markets ease and relax a bit with some of the pause. I think they'll want to continue that growth trajectory within markets.

Ultimately, the risks I think that lie ahead are as it relates to kind of the Fed's dual mandate around the employment data and the inflation data. And so I think inflation continues to ease. I don't see any imminent concerns there, but I think all eyes in my perspective are on the employment data and any weakening there that would drive Fed decision. Yep, we get that on Thursday. So we'll be breaking that down here at Bloomberg. Hey, Paisley, thank you so much. Really appreciate it. Paisley Nardini, Managing Director, Head of Multi-Asset Solutions at Simplify Asset Management.com.

They've got about $7 billion in assets under management. Joining us from Newport Beach, California. She would be a great guest on my television show, Bloomberg Open Interest, weekdays from 9 a.m. to 11 a.m. Paisley, don't do it. Don't do it. Don't do it. I'm just going to say you can't steal all of our guests. You can come and guest host. You get some pretty good guests on this show, actually. We turn out to be actually pretty good here. I'm just telling you.

Don't steal them all. He's like, can I have the email? Can I have this? This is the Bloomberg Business Week Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.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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