Daybreak Holiday: Markets, Nvidia, Bitcoin
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Thank you so much for joining us on this special edition of Bloomberg Daybreak. U.S. markets are closed for the Memorial Day holiday. I'm Nathan Hager, and coming up this hour, we'll look ahead to earnings from one of the so-called Magnificent Seven. NVIDIA is out with its quarterly report on Wednesday. We get a preview with Mandeep Singh, Global Head of Tech Research at Bloomberg Intelligence.

Plus, Bitcoin's back at record levels. We'll ask Bloomberg Intelligence Senior Commodity Strategist Mike McGlone where he thinks the cryptocurrency's headed. And PGM, fixed income. Chief U.S. Economist Tom Porcelli will join us with his thoughts on how long the Fed...

can stay on hold. But we want to begin with a look at the stock market after a turbulent few months. Stocks have basically recovered their losses since President Trump's Liberation Day tariff announcement in early April. So we thought now would be a good time to bring you a special roundtable on equities. And for that, we're pleased to welcome Invesco global market strategist Brian Levitt.

and Barry Ritholtz, the founder of Ritholtz Wealth Management and host of Bloomberg's Masters in Business podcast. It is great to have the both of you with us. Barry, I'll start with you. Is this just a Washington-dependent equity market at this point? Well, no doubt Washington policy decisions are having a big impact on

on the market's expectations for the economy and corporate revenue and profit. Look, the president calls himself tariff man, says tariffs are the most beautiful word in the dictionary. We know what he did in the first term. And so the consensus seemed to have been pre-April, hey, we'll get some 10% tariffs here and there. And that's already built into our models. But when you

suddenly and unexpectedly drop 100 percent tariffs on 182 countries plus penguins in the Antarctica. The market has to stop and say, oh, we failed. You know, this is a failure of our imagination. We did not anticipate tariffs this large.

This is going to take 10, 20% off of corporate revenues and profits always fall faster than revenues. Maybe this is 20, 30% off of corporate profits four quarters from now. We have to adjust our prices down. And what were you off like 14%, 12% when the 90 day pause came in?

That was on the way to going much lower as a discounting mechanism. The pause gave everybody some help that, all right, maybe our original assessment was correct, but it's still very much up in the air. Brian, I'll turn it over to you. Has the market sort of shaken out where the policy direction is going now? Have we adjusted to the second term of President Trump?

Not entirely. Barry makes a great point about it. I mean, we remember we had a tariff rate that was quite low a year ago. And now we're talking about 15, 18 percent average effective rate. So, yes, we've had a pause. Yes, we've seen tariff rates come down on countries such as China.

But it's still not entirely clear where this is ultimately heading. Now, what's good for the market or what the market is at least expecting is that things are going to get incrementally better from here on the policy front. There's no guarantee, but that seems to be the market's expectation and does seem to be the modus operandi of President Biden.

Trump. I look back to the 2018 environment. If you remember the fourth quarter of 2018, stocks fell 20% during the US-China trade war. You got a 90-day pause. You did not get a phase one China trade deal for really another year, but the markets continued to perform well amid expectations that policy was going to get better.

We are under a 90-day pause, as you mentioned. We're heading toward what I think a lot of lawmakers in Washington are hoping to be a big tax and spending cut bill around 90 days or so from now. Is July turning into a pivot point for the equity market, Barry?

Maybe, you know, I love to do the compare and contrast with how the Fed communicates changes in policy with how this White House does. You know, before the Fed says we're going to shift our regime and now we're either raising rates or cutting rates, you get a notice coming.

six meetings in advance, three meetings in advance. Hey, we're tracking PCE and CPI. The month before the meeting, all the Fed governors and presidents fan out and they speak at the Petroleum Club of Houston and the Economic Club of New York and everywhere else. And so when the change happens, it's not a shock. You don't surprise the markets. I think part of the problem here is not just

the policy itself, but how completely shocking and surprising it was to markets. As it turns out, Mr. Market doesn't care for surprises. And that's something that I wish the White House would take a page from the Federal Reserve's communication strategy.

you know look the the s p 500 as everyone knows is overvalued compared to its long-term average driven primarily by a handful of names other markets are not as overvalued particularly non-us markets obviously value indices mid-cap stocks so it's one of these times where um it may make sense it probably does make sense to

lower the valuation of the portfolio as we navigate this period of policy uncertainty and as we grapple with higher interest rates. We're speaking with Brian Levitt. He is the global market strategist at Invesco. And Barry Ritholtz is with us as well, founder of Ritholtz Wealth Management, host of Bloomberg's Masters in Business podcast.

Barry, we have had a lot of attention on the bond market, particularly with the yields going up in response to what's happening out of Washington, D.C. Where do you see the bond market going and could it potentially pose a headwind for equities going forward?

Sure. Always the bond markets are the adults in the room. But let me throw a little bit of a curveball at you. I think Carville was right in the 1980s and the 1990s. Once the new millennium started, it seemed like leadership in terms of influencing D.C. policy was

moved to the equity markets. So let me give you just three quick examples. I have a vivid recollection of Fed Chairman Ben Bernanke testifying in October 08 to Congress. And after a few fiery speeches, they voted down money and authority to the Fed. Markets sold off really hard.

By that Friday, everybody reconvened and they gave the Fed everything they wanted. So 10, 12, 13 percent gets D.C.'s attention. I love what happened in March 2020 during the pandemic. Republicans and Democrats couldn't agree on renaming a library in Washington, D.C. Talk about something with so minor.

Then the NBA canceled the schedule after a Thunder Jazz game where the center tested positive for COVID. Once the NBA canceled their season, the dominoes all began to fall. And it was a week or two later, we passed the single biggest fiscal stimulus as a percentage of GDP since World War II, the CARES Act.

And now we see the same thing that took place in April 2020. The bond market has certainly been driving the debate about the dollar and what

fiscal policy and deficits, but it was the stock market sell-off, hey, down 5%, down 5%, down 5% three days in a row that got the White House's attention. And that's when the president called uncle, not rising yields, but falling equity prices. I want to be reincarnated as the stock market, not the bond market.

Yeah, I mean, that raises the question, the whole idea that the president uses the stock market as a scorecard for how his policies are going. So, Brian, as we head into the second half, where do you see things going for the stock market? Could it sway what happens in Washington, D.C.?

Yeah, our leading indicators of the economy are still pointing to below trend and lower growth and the inflation momentum is picking up. So that's a little bit of a more challenged environment. You're not there that often. Most of the time, you're more in a recovery, expansion or slowdown feel in which stocks can do quite well. So in an environment where leading indicators are pointing lower, you tend to want to be

a little bit more defensive, expect more volatility in the markets. I think you're right and I think Barry's right that ultimately we will get a better policy response. Ultimately, as the economy weakens, Federal Reserve will be able to lower interest rates. When that happens is probably not as soon as people think, and the administration will likely continue to move away from its worst impulses on trade.

You could be in a challenging short-term period here.

Because typically when you're leading indicators are rolling over, you need a policy response. And for the first time in a very long time, it's going to be a challenge in the United States to get that policy response. On the other side, in Europe, China, the UK, you will be getting that policy response, which is why you're starting to see or you have been seeing momentum pick up in non-US assets.

And Barry, are you looking for a challenging environment as well? I mean, we've heard from the likes of Jamie Dimon and JPMorgan Chase saying he can't take stagflation off his table into the second half.

Well, well, Jamie reversed his views not too long ago. He had said, you know, tariffs will be fine. We'll work our way through it before we had that big surprise. My expectations really are dependent on who is the POTUS whisperer, who is the last person that the president hears before he goes into making a key decision.

If it turns out that the majority of the times the last person to influence President Trump is Treasury Secretary Scott Besson, well, we'll be fine. He's a Wall Street guy. He understands how markets, dollars, bonds work.

I'm comfortable with him as the POTUS whisperer. If on the other hand, it's Peter Navarro, who is, you know, one and only one economist who seems to think

that tariffs are a fantastic idea. Hey, that little Smoot-Hawley thing, all right, that was a one-off that didn't work, but we should try it now. If he's the most influential advisor that the president listens to, well, then the worst case scenario is, yeah, we're going to get rate cuts, but it's going to be in response to a stagflationary, maybe even a recessionary environment.

To be a fly on the wall in Washington, D.C. Thank you for this to the both of you. Barry Ritholtz of Ritholtz Wealth Management and Bloomberg's Masters in Business podcast. And thanks as well to Invesco global market strategist Brian Leavitt. Up next, we're going to preview earnings this week from NVIDIA. Bloomberg Intelligence Global Head of Tech Research Mandeep Singh will join us as this special Memorial Day edition of Bloomberg Daybreak continues. It's 20 minutes past the hour. I'm Nathan Hager. This is Bloomberg. ♪

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Welcome back to this special edition of Bloomberg Daybreak. U.S. markets are closed for the Memorial Day holiday. I'm Nathan Hager. Wall Street gets back to work this week with a key earnings report on the docket. On Wednesday, after the close of trading, we get the latest quarterly numbers from NVIDIA. So what should we expect from the AI chip giant? Let's bring in Mandeep Singh for some answers in that regard. Mandeep, of course, is the global head of tech research at Bloomberg Intelligence.

Mandeep, it's great to have you on with us. NVIDIA investors have gotten used to blowout results quarter after quarter. Is that the expectation this time around?

I think there are a few variables to keep in mind. So the first one is on the demand side, everything really looks strong when it comes to the commentary from hyperscalers that we have heard around CapEx. I mean, pretty much everyone raised their CapEx slightly. They had positive outlook on

even the early 2026 view. So the US hyperscaler spin really strong. The one area that obviously will be a slight headwind is the China exposure. And we know NVIDIA wrote down about $15 billion of their inventory of H20s because of the restrictions. So

The most likely scenario right now is they may not be able to sell to China anytime soon, even if they come up with a different variant. I think chances are they'll find it hard to overcome the restrictions. So that's a negative. At the same time, they had new sovereign deals in the Middle East a couple of weeks back, UAE and China.

I think Qatar and just overall, the sentiment seems to be improving when it comes to sovereign demand outside of China. So there are different sort of variables driving the demand side. But overall, look, the market is still

And NVIDIA chips are still the most performant when it comes to accelerators that you need for AI. So from that perspective, I mean, NVIDIA still has that moat when it comes to the AI accelerator market.

To your point, it really has been a busy quarter leading up to these results from NVIDIA. A lot of headlines coming out for the AI chip company, including some headlines from the CEO himself, Jensen Wong. He was at the Computex AI event in Taipei last week, unveiling his latest raft of technologies aimed at keeping the AI demand boom going. Here he is talking about the latest NVIDIA accelerator chips. Let's listen in.

This year, in Q3, we'll upgrade to Grace Blackwell GB300. The GB300 will increase the same architecture, same physical footprint, same electrical and mechanicals, but the chips inside have been upgraded.

So what kind of further commentary could we get from Jensen Wang on the GB300 when we get these earnings this week? Yeah, the big thing that the street is focused on is what does the GB300 do in terms of the gross margins? Because remember, Nvidia's gross margins have come down slightly with this Blackwell launch compared to the Hopper architecture, which was the prior architecture.

And the expectation is that gross margins go back to mid 70%. This quarter, they'll be more like 71, 72%. But in the second half, everyone is expecting those gross margins to go up, primarily driven by GB300, as your clip just noted. So clearly, you know, they are talking about bigger scale markets.

of these compute architectures that all the hyperscalers are looking to use. And the reasoning models, which really, I think, took off post-DeepSeek earlier in the year, do require much

more compute than the previous sort of way of using AI when it comes to just giving in your prompt in chatbot and getting a response. So the reasoning models have driven up the consumption of compute and that will be a key driver of

the outlook that Nvidia is going to give in their earnings report. We're speaking with Mandeep Singh. He's the global head of tech research at Bloomberg Intelligence as we look ahead to Nvidia's latest earnings report coming up later this week.

You mentioned the importance of NVIDIA broadening its market beyond the hyperscalers, these deals that we saw in the Gulf in recent weeks, Saudi Arabia, the United Arab Emirates. How important is it?

for NVIDIA to capture that market, those sovereign investors into the AI boom. Yeah, I mean, I look at it this way. When you look at the five hyperscalers here in the U.S.,

They're growing their capex by about 40 to 45 percent this year and Nvidia's data center revenue is expected to grow about 55 percent this year so you can see how Nvidia is still So much exposed to the hyperscale capex growth now, you know, there are obviously buyers of Nvidia chips outside of hyperscale the US hyperscalers and

But, you know, you need bigger entities. We are talking about a company that is almost going to do $200 billion in revenue this year. And for that number to keep growing even at a 25 to 30 percent clip,

you need to find those large incremental buyers. You can't just have enterprises with $5 to $10 million of IT budget spending on GPU compute. You need much bigger because we are talking much bigger numbers now. And so sovereigns do

kind of come across as entities that can spend big on CapEx and they can spend for a few years. It won't be just a one and done sort of thing. And so from that perspective, it's huge that, you know, NVIDIA is exposed to these sovereign buyers. I'm more curious to see what sort of LLMs or products

come out of the spend from the likes of Saudi Arabia or UAE who plan to spend big on NVIDIA accelerators because at the end of the day, you have to have something unique than what OpenAI or Gemini is offering in terms of chatbot functionality.

Yeah. And I guess you have to wonder as well whether those sovereigns can come through on some of the pledges they've made around the deals that were announced in recent days. I mean, we've been talking about multi hundreds of billions, if not multiple trillions of dollars in announcements coming out of that event.

Yeah, absolutely. I mean, the numbers are big and these are multi-year commitments, as has been the case even in the U.S. We know about the Project Stargate. You know, even Apple has talked about investing up to $500 billion here in the U.S. I'll be curious to kind of learn more about what Apple plans to invest on because so far Apple has been the one large tech company that has not

invested big when it comes to the GPU and the accelerated compute infrastructure. So that could be a positive for NVIDIA if Apple comes in as another hyperscaler who wants to stand this big GPU infrastructure. But

Clearly, that hasn't happened. And that's why you need the bigger entities like the four or five existing hyperscalers to come in to sustain this revenue growth that we have seen out of NVIDIA. Do you see NVIDIA sustaining the growth of its valuation?

Given the news that's come out in recent months, we've been talking about the deep-seek breakthrough in China. So much competition in the space now. Can investors continue to drive up the value of this company into the next few quarters?

I mean, the good thing for NVIDIA is it's been growing nicely into its multiples. So it's never really traded at a crazy multiple. And that's still the case because, you know, when a company is growing over 50%, I mean, you know, it's almost doubling its revenue in less than two years. So clearly, you know, it's growing nicely into the valuation. And

And look, when it comes to NVIDIA, like they have a very successful mode in terms of having the most performance chip. They have the scale. They have the high margins. I mean, gross margins in excess of 70% is something desirable for any company. And they are doing it as a semiconductor company. So there are a lot of things that are working well for them.

And if AI is this secular trend, and I think everyone sort of agrees on that, this is a 15 to 20 year trend, NVIDIA is still most exposed to kind of growth in that AI infrastructure. It's just a question of can it happen in a sustainable 25 to 30% every year growth type of scenario from here on? Or will there be, you know,

peaks and troughs in terms of a capex digestion period and then things picking back. So that's the sort of question that everyone is trying to grapple with. But there is no doubt that NVIDIA

has almost got a monopoly when it comes to training workloads. And even on the inferencing side, they continue to have a dominant share right now. Yeah, and I wanted to ask you if you think NVIDIA maintains that monopolistic position, that moat, when it's facing competition from the likes of advanced micro devices and so many other competitors that want to chip away at this chip giant.

Yeah, look, there is competition from AMD or Google's TPUs, or even now we've started hearing Huawei being a potential competitor. But when it comes to price, you know, performance, as well as, you know, the power aspect of their chips,

they are still way above everyone else. And that's why these AI workloads are pretty demanding when it comes to the floating point operations that are required and the power efficiency that's required. And NVIDIA has so far managed to stay at least a year or two ahead of everyone else in terms of what they are able to offer versus the competition. And then they also have the software mode that

others are still developing when it comes to their chips. So I do think their mode, at least for now, seems sustainable. But, you know, we're talking big numbers. And when everyone is fixated on this multi-year opportunity, there will be workarounds and their customers are

also potential competitors when you think about the likes of Google and Amazon. I mean, these are the biggest customers of NVIDIA chips, but they're also developing their own chips. So clearly there is that threat that over time they'll try to reduce their dependency on NVIDIA. And I think it will happen. It's just a question of how long will it take them to develop their own chips so that they can completely move out of that NVIDIA dependency. Yeah.

Well, we don't have too long to wait for those latest numbers on NVIDIA's latest quarter. We get the results Wednesday after the close. Thanks for this preview ahead of it. Mandeep Singh, the global head of tech research at Bloomberg Intelligence. Up next, the big move to the upside for Bitcoin. We look ahead at what's ahead for crypto with Bloomberg Intelligence senior commodity strategist Mike McGlone. It's 37 minutes past the hour. I'm Nathan Hager, and this is Bloomberg. ♪

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Welcome back to this special edition of Bloomberg Daybreak. I'm Nathan Hager. The U.S. stock market, of course, is closed for the Memorial Day holiday. And much like the stock market, the trajectory of Bitcoin has reversed over the past couple of months and taken off. It was just over a month ago the cryptocurrency was trading under $77,000. Last week, it surged to a record well into six figures.

Thank you.

Where do you see Bitcoin going? - I guess that's part of the problem, Nathan. It's had a very good run, but now it seems like the consensus for bullishness to be complete certainty is what really scares me. So Bitcoin's a new record, that's a wonderful thing, it's very impressive, but it has basically pile on effect kicking in now. And I'm concerned that one thing it did prove in Q1, certainly to that bottom in April,

When the stock market went down, it went down with it. What it not only does, it went down a lot harder. Now we're at the situation, a lot of people say it's not as highly correlated to the stock market. It's an alternative, but it's proving it actually is more correlated to the stock market than things like gold. So for on the year, gold is still way outperforming Bitcoin. The question is, can Bitcoin catch up? And I think a key prerequisite for Bitcoin to go,

Outperform gold this year, the old rock, is the US stock market probably has to go higher. So at this point, from the last 16 quarters, the correlation with Bitcoin, the S&P 500, I use 16 quarters because Bitcoin works on a four-year cycle, is about 0.7. That's almost the highest ever. Yet the correlation of Bitcoin to gold is about zero. So I like to say at some points,

Bitcoin is digital gold, and sometimes it's leveraged beta. And so far, this year, it's proving it's leveraged beta. But the good news is, so far, it's way outperforming the stock market. I have a sense that there's just so much...

just complete certainty it's going to go higher. This one I have to pull back and be a bit of a contrarian. So are you thinking then that Bitcoin isn't quite the mature asset that some might think it's at least trying to be now with so much more institutional interest in cryptocurrency? Well, it's actually...

More the latter. It's gained so much maturity. Last year was a benchmark year for Bitcoin. The ETFs, those of us who were in this space for a long time, waited for 10 years, finally were launched. So that brought in a lot of those type of investors. We had the halving. And the major, most significant pivot was the Trump administration and President candidate Trump at the time switching over his narrative to being profitable.

I really liked writing bullish things about it when most of the masses hated it, like his first Trump administration. They were not noticing what was happening in crypto dollars and the base layer being the dollar and a lot of crypto stable coins investing in U.S. treasuries. Now they do.

And here's one big problem, Nathan, is the animal spirits are in the space. In the past, there was maybe a couple thousand, up to a million cryptocurrencies. Now on coinmarketcap.com, there's 16 million cryptocurrencies available.

listed and that can be traded. So to me, it's the example of the broomsticks that Scott Preston uses from Fantasia where Mickey Mouse creates the spell and then he can't stop it. You know, the Sorcerer's Apprentice. This is the situation now I see in cryptos. We have an unlimited supply of dependence on Bitcoin going higher.

So Bitcoin, yes, it has that limited supply factor. But now we have so much leverage in this space. There was a story on the Bloomberg Terminal this week that said and pointed out that we have people leveraging 40 to 1 to get long and they put in stops. And the unique thing about this space is those of us who've traded in the past is a lot of times you can run through stops on gaps, meaning when markets are closed, when they're open. But Bitcoin never closes.

So I think what that does is incentivizes many people to use a lot more risk than they should be. So I'm very concerned at these levels. I'm concerned that the US stock markets are going to roll over for that recession we didn't have in 2023. That's somewhat the views of Ana Wong, our chief economist, and Gina Martin-Adams, our senior equity strategist. And the key thing I've been pointing out for a while is that Bitcoin to gold ratio, the amount of gold

equal to one Bitcoin right now is about 33. Now that was first traded in 2021. So I'm really concerned that, you know, this space has become very mature. It's got the masses in it. And now we have a lot of lambs. Look at me, I can make money too, who are doing things that I've,

heard about in 1929 in the stock market. And I remember in 1989 in Japan, in 1999 in the US. And I'll just mention that unlimited supply. And then a lot of these things like the eighth largest cryptocurrency is Dogecoin. It's worth only $36 billion. And it's basically a joke. It tracks nothing. Some of that stuff I'm just waiting to get purged out. And then I can get really bullish again.

So are you concerned or does your concern build when we're seeing some of these regulations looking like they're going to be loose and particularly around the stable coin legislation that was just moved forward in Washington, D.C., sort of feeding into some of those animal spirits? Well, there you go. Exactly. That's the key phrase, I think, the key nomenclature. Animal spirits have been released. The key thing I find about stable coins is, number one, the technology is awesome.

Awesome. The ability, that's the most enduring bull market I like pointing out in 2018 when it was quite the bear market was increasing market capitalization of stable coins. At that time, it was only Tether. It was only about 2 billion. Now Tether is about 150 billion and there's about 250 billion tracking stable coins. And they're all invested in treasuries. This is good for the US. The thing about that, I think that's disconcerting to me is it's that tokenization process. Once we begin to

or expand this tokenization, we can tokenize and trade assets on chain like trademarks

treasuries and stocks, I think that's going to put things like Dogecoin that are just silly, expensive, speculative excesses as short bait. So right now, overall, the government's going to finally figure this out. But just that we realize the technology that uses the US dollar as a base layer and tracks things like stable coins is awesome.

It's quite the market to watch and really good to get your insights on it, Mike. Thank you for this. That's Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence. We now turn our attention to the economy. We're just over three weeks away from the next Fed decision. What will J. Powell and company do in June in light of uncertainty over tariffs? Let's ask PGM Fixed Income Chief U.S. Economist Tom Porcelli. Tom, what will the Fed do? They haven't done much this year.

I think they're going to do much of what they've done, which is to say not much. Yeah, I just, you know, I see very limited scope for the Fed to really do much at this juncture. I mean, I think that there are a couple of challenges sort of lingering in the air for them. So one is that inflation is still above target. Two is that inflation expectations are starting the process of becoming unanchored.

And three, we're waiting for the inflation related to tariffs to kick in. So all of that means that the Fed is on the sidelines. Now, we don't think that they will be on the sidelines the entire year. We do think that they will cut rates. But I think for at least the next, call it two or three meetings, I think it's going to be incredibly challenging for them to do much.

Where do you see inflation expectations going? As you mentioned, they do look like they're starting to become unanchored. Do they become fully unanchored?

So here's the thing that we all need to keep in mind. It's not that what the consumer says is going to happen to inflation ever really materializes. I think that's an important idea. But I think the rhythm of what's happening matters. They're braced for higher prices. So I don't think that them looking for 4% or 5% inflation, which depending which measure of inflation expectations you're looking at,

um you know that's what some consumers are thinking we don't think it gets even remotely close to that high i mean we think you could drift you know sort of closer to three percent which in fairness is not far from where we are now um but having said that the the reality for the consumer is if the consumer is already being pinched right by already higher prices and you're going to layer on higher prices on top of these already higher prices and

you have real incomes that are starting the process of slowing down especially relative to real consumption you know that for us really suggests that um you know economic activity is going to continue the process of slowing as as the year progresses i mean i think that to me is is the right sort of channel through which you need to think about higher prices we've

We've heard the Fed thinking about waiting for clarity around where trade policy is going to go before they act. But can we paint out a scenario where the Fed could at least game out something of an impact from tariffs based on the idea that they're not going to be at the same levels that they have been in the past?

Yeah, Nathan, I think we have to consider that we may never have a period of total certainty as it relates to trade. I mean, we keep on moving the goalposts, we keep on kicking the can down the road. And I think even when we finally do get to the goalpost, I can see the threat of tariffs remaining in place. And if that is true, then the uncertainty, right? I mean, how many times have we all used the word uncertainty? Then I think the uncertainty sort of dynamic...

will also remain in place. So let me paint a very quick scenario. Let's say that we settle on 10% across the board baseline tariffs. Let's just say we settle on that. But if the threat of tariffs remains over the next three and a half years, then I think what that does is it pushes corporations to the sidelines as it relates to CapEx, and it pushes the consumers to the sidelines as it relates to going out and spending.

And I think that's the real risk. And I would add this very quick idea for anyone thinking, oh, well, that's a theoretical idea. It's actually not. It's entirely practical. Just look back at what happened during Trump 1.0 when we had tariffs put on. Even in the face of corporate tax cuts that were also put on right around the same time, CapEx slowed down. I mean, companies like certainty.

and uncertainty is sort of, you know, gonna thrust them to the sidelines. - And as far as the tariff impact, do you see tariffs as sort of a one-off in terms of what they do for inflation, or could they have a more of a longer term inflationary impact? - It does tend to represent a one-time shift higher in the price level. That's an important idea. Now, again, for, you know, in economist lingo, you know, that one-time shift higher means

that you'll get the acceleration in the inflation rate will linger for about a year. Once you get beyond that year point, then the inflation rate will fall back to where it was. But in Main Street parlance, it doesn't matter. Prices will be higher. You'll have that permanent shift higher in the price level. And that's what matters to most of Main Street, most of everyone.

So as we get to this next Fed meeting, what would you say, just to button this up, are your expectations for June? I think very similar to what you heard from him, what you heard from Powell and company at the May meeting. I think it's, you know, they're in this wait and see mode. They want to see how things are going to unfold and that they're not going to be in a rush to engage in any policy action until it's necessary.

Always good to get your thoughts, Tom. Again, thanks for being with us on this holiday. That's Tom Porcelli, Chief U.S. Economist at PGM Fixed Income. Thanks as well to Mike McGlone and Mandeep Singh of Bloomberg Intelligence, Brian Leavitt and Invesco, Barry Ritholtz of Ritholtz Wealth Management and Bloomberg's Masters in Business. And thanks to you as well for taking time out to join us on this Memorial Day. I'm Nathan Hager. Stay with us. Today's top stories and global business headlines are coming up right now.

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