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US Tariffs on Mexico Delayed · Bloomberg Intelligence

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  Speaker 2: Sorry, let's get back to the policy that's coming out
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  Speaker 2: and d see fast and Furious. Nathan Dean, Bloomberg Intelligence
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  Speaker 2: Senior Policy Analyst. Okay, so if we get this news
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  Speaker 2: out of Mexico that Trump and Shamebaum spoke and they're
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  Speaker 2: going to delay tariffs by a month while they work
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  Speaker 2: out other stuff, does this mean that we know why
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  Speaker 2: tariffs are being put. They're being put as a negotiating tactic,
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  Speaker 2: full stop. Is that now correct?
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  Speaker 3: So?
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  Speaker 4: I certainly think you can think about it from President
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  Speaker 4: Trump's point of view in terms of his goals. You know, obviously,
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  Speaker 4: when he's talking about, you know, our trade and balance
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  Speaker 4: or our trade relationship with Canada Mexico, He's mentioned three
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  Speaker 4: things in his truth Social posts, all.
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  Speaker 5: Border security and the economy.
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  Speaker 4: But from the Canadian and Mexican perspective, it's much easier
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  Speaker 4: for them to go to President Trump and say, look,
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  Speaker 4: we'll do something on fentanyl and border security today. We
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  Speaker 4: could take a longer term approach to the economic imbalance.
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  Speaker 4: That's certainly something that President Trump still wants, but from
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  Speaker 4: a negotiation perspective, I wouldn't be.
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  Speaker 3: So I'm all.
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  Speaker 4: Surprised by this because it was what they could give
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  Speaker 4: President Trump in the short term. And we'll see what
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  Speaker 4: this meaning with Justin Trudeau today at three pm. Maybe
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  Speaker 4: Canada has a very similar proposition for the president.
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  Speaker 6: So, I mean, I'm not even sure where to go here,
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  Speaker 6: but I guess as you kind of phrase it there, Nathan,
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  Speaker 6: this is a president that likes to negotiate, likes to
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  Speaker 6: He's transactional, and it seems like if the counterparts are
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  Speaker 6: equally transactional, then maybe you could avoid a wider trade war.
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  Speaker 6: Is that kind of expectation for the folks down in DC.
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  Speaker 4: Yeah, So if you're part of the bull case, I
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  Speaker 4: think in terms of that, you know, President Trump is
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  Speaker 4: the negotiator and so forth.
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  Speaker 5: This is fitting into that narrative.
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  Speaker 4: I mean, obviously you do have to prepare for tariffs,
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  Speaker 4: because we do think tariffs are coming, but it just
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  Speaker 4: really depends on the sectors and also the broad impact
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  Speaker 4: of those tariffs. So let's just say that if Justin Trudeau,
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  Speaker 4: the Prime Minister of Canada, and President Trump make a
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  Speaker 4: deal today at three o'clock and it follows the same
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  Speaker 4: timeline as Mexico, you get one month. President Trump is
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  Speaker 4: eventually going to come back and say, okay, well, let's
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  Speaker 4: talk about those trade and balances. Let's talk about in
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  Speaker 4: his truth selles through posts but making Canada the fifty
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  Speaker 4: first state. But you know, again, it's about extracting concessions.
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  Speaker 4: So what do we have to do for us in
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  Speaker 4: the market sides? You certainly have to prepare for it,
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  Speaker 4: but also at the end of the game, you know,
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  Speaker 4: it's very difficult to call because it's just one man's decision,
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  Speaker 4: and so we're just gonna have to stay tuned and
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  Speaker 4: see what happens.
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  Speaker 2: All right, So that's a great point, stay tuned. What
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  Speaker 2: are you standing us staying tuned for? Like, what are
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  Speaker 2: going to be the key phrases, the key words, the
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  Speaker 2: key pressors that you're gonna be watching out for to
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  Speaker 2: tell you what the reality is going to be.
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  Speaker 4: So I'm actually looking for whether or not Canada and
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  Speaker 4: Mexico fall through or at least threaten to fall through
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  Speaker 4: in terms of their exports. For example, potash not something
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  Speaker 4: many people talk about, but ninety percent of potash in
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  Speaker 4: the United States, which is very important for our fertilizer industry,
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  Speaker 4: comes from Canada. So if Canada wanted to imfact, you know,
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  Speaker 4: put on ecademic pain on a certain aspect of the
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  Speaker 4: American system, and especially a system that has voted for
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  Speaker 4: President Trump, I certainly want to look for something like
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  Speaker 4: that because for me to see the changing of the guard,
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  Speaker 4: or at least a pressure on the president, I have
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  Speaker 4: to see it coming from the trade associations here in Washington,
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  Speaker 4: not the big ones like the US Chamber, but smaller
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  Speaker 4: ones like the National Association and manufacturers are the fertilizer
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  Speaker 4: or the farmers, they're the ones that can put pressure
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  Speaker 4: on their allies on Capitol Hill to go to the
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  Speaker 4: White House and say, President Trump, you need to step back.
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  Speaker 5: So retaliatory tariffs is not something we talk about.
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  Speaker 4: Here a much in the United States in this context,
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  Speaker 4: but that's really what I want to see if President
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  Speaker 4: Trump eventually would move away from these threats.
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  Speaker 6: How about China, Nathan, I mean, we have, you know,
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  Speaker 6: obviously generally very good relationships with Canada and Mexico, and
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  Speaker 6: presumably that that helps in some negotiations like we saw
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  Speaker 6: with Mexico this morning. How about China. What's the feeling
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  Speaker 6: within the Beltway about how the US may approach China.
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  Speaker 4: Yeah, that's a great question, because a lot of the
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  Speaker 4: airtime right now, and certainly a lot of time in
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  Speaker 4: Washington is spent on this Canada and Mexico relationship. But
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  Speaker 4: it should also be said that China received a ten
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  Speaker 4: percent increase in tariffs as well. Now we saw the
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  Speaker 4: response from the Chinese government that was more mooted. In particular,
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  Speaker 4: there wasn't any retaliatory tariffs at this point at least,
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  Speaker 4: but I think that's certainly going to be part of
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  Speaker 4: a broader discussion. I think the folks here in Washington
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  Speaker 4: feel that when it comes to the US China relationship
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  Speaker 4: they can at.
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  Speaker 5: Least take a breath.
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  Speaker 4: Things aren't going to be moving at lightning speed they
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  Speaker 4: are in North America. There can be a little bit
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  Speaker 4: slower aspect towards those negotiations. But again, this is certainly
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  Speaker 4: coming and don't be for you know, European Union, they're
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  Speaker 4: most likely next as well. I mean, President Trump has
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  Speaker 4: a lot of areas around the world that he wants
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  Speaker 4: to move into in terms of tariffs. You know, Canada
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  Speaker 4: and Mexico and China just happened to be the first
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  Speaker 4: one on his list.
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  Speaker 2: But if we're learning anything from the market action in
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  Speaker 2: relation to these headlines, it's that don't trust your first reaction.
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  Speaker 2: I mean, you're just looking at it. And if you
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  Speaker 2: look at the S and P mini futures market that
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  Speaker 2: takes into account yesterday, this morning, and then now today trading,
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  Speaker 2: it's a whole different world. So how should a market
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  Speaker 2: participant think about this?
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  Speaker 4: Yeah, so there's a lot of sentiment right now, and
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  Speaker 4: I agree with this sentiment that you know, in terms
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  Speaker 4: of these threats, we're beginning to see that it's just
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  Speaker 4: the same playbook of that transactional president that he's willing
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  Speaker 4: to negotiate. You know, it's obviously difficult for those of
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  Speaker 4: us in the markets to try and figure out what
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  Speaker 4: President Trump wants from those negotiations. But I think anytime
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  Speaker 4: you see one of these tariff threat slash opportunities that
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  Speaker 4: come up, always just keep in mind that there is
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  Speaker 4: going to be a negotiation that takes place. Whether President
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  Speaker 4: Trump is talking about fetnol border security. Those are things
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  Speaker 4: that the Canadian and Mexican governments can easily control, like
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  Speaker 4: Mexico's example of sending ten thousand troops to the border.
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  Speaker 4: If President Trump's number one demand is an economic imbalance,
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  Speaker 4: like with the European Union in terms of increased share
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  Speaker 4: of GDP spending for its defense, that's a longer term
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  Speaker 4: thing that the European governments would have to put in place.
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  Speaker 4: So I would just say, what is President Trump's number
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  Speaker 4: one goal here? What can the other countries give in exchange?
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  Speaker 4: And can there be a negotiation timeframe that's long enough
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  Speaker 4: to not spook the markets?
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  Speaker 6: Well, tariff certainly has the market's attention today, but tomorrow
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  Speaker 6: is another day. What from a policy perspective, are you
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  Speaker 6: and folks in DC kind of looking towards this Congress,
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  Speaker 6: this administration to move forward on what are the important
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  Speaker 6: ones coming up?
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  Speaker 5: Yeah? So this week obviously we have confirmation hearings.
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  Speaker 4: I mean, I think most people think are going to
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  Speaker 4: get through Telca Gabbert I think is the one that
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  Speaker 4: if she were not to get through, I wouldn't be
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  Speaker 4: surprised by that. You know, Jamison Greer, who is the
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  Speaker 4: US Trade representative of his confirmation hearing is on Thursday,
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  Speaker 4: certainly important because he's going to be one of the
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  Speaker 4: most important voices in this administration towards tariffs. So a
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  Speaker 4: lot of questions may be asked, Hey, why would you
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  Speaker 4: know we do this if potash and those farmers are
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  Speaker 4: going to be harmed? But I would also point out
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  Speaker 4: that the House Budget Committee is trying to come up
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  Speaker 4: with their reconciliation blueprint about trying this is the instructions
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  Speaker 4: for this major multi trillion dollar techs extension bill, and
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  Speaker 4: if they can't get it done, that serves our narrative
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  Speaker 4: that this is going to take a lot of time
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  Speaker 4: to work out and if you lose any votes. And
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  Speaker 4: for example, the Republican Study Committee has already said they're
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  Speaker 4: not going to support anything that doesn't decrease the deficit. Well,
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  Speaker 4: how do you include things like no taxes on tips
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  Speaker 4: without decreasing the deficit. It's an extremely difficult question, and
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  Speaker 4: so I think we're going to be looking to see
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  Speaker 4: what those negotiations take place as well.
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  Speaker 2: Can we just switch gears for a second and talk
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  Speaker 2: about the Elon Musk and the government and what we've
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  Speaker 2: seen from him and Doge in the last twenty four hours.
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  Speaker 4: Yeah, so obviously, you know, we've seen reports over the
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  Speaker 4: weekend that the Doge Committee is in Treasury accessing Treasury
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  Speaker 4: payment systems. This is with the idea that eventually they
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  Speaker 4: could cut off payments in wake of the federal freeze
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  Speaker 4: executive order that was then rescinded. And this is an
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  Speaker 4: idea about empoundment. And I think this is something that's
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  Speaker 4: coming to the courts. And even if you listen to
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  Speaker 4: the Elon Musk last night on his Twitter spaces or
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  Speaker 4: his x spaces, he even said that he may need
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  Speaker 4: the courts support in this this idea of impoundment. Let's
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  Speaker 4: just say the Congress decides that if they're going to
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  Speaker 4: give one hundred million dollars to the Department of Education,
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  Speaker 4: President Trump could just come back and say, now, I'm
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  Speaker 4: not going to pay for it, but somebody is eventually
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  Speaker 4: going to sue over that that will eventually get to
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  Speaker 4: the Supreme Court. And there are already laws that put
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  Speaker 4: in place about empowerment. So it's sort of unclear does
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  Speaker 4: the president have the ability to say we're.
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  Speaker 5: Not going to spend this money.
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  Speaker 4: But look, if from Elon Musk's perspective, there's a lot
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  Speaker 4: of regulatory red tape, there's a lot of bloat in
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  Speaker 4: the US government. We should certainly try, and it looks
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  Speaker 4: like they're starting with the USAID first.
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  Speaker 6: What's the feeling in DC about doze here? Is this
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  Speaker 6: a credible I don't know. Effort, if you will, organization,
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  Speaker 6: if you will, will actual change happen.
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  Speaker 4: So I think if you talk about like the internal
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  Speaker 4: structures of the US government, and specifically within the executive branch,
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  Speaker 4: so agencies like the USAID, President Trump and the DOGE
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  Speaker 4: Committee can do a lot of work in terms of
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  Speaker 4: restructuring it and also, going back to that impoundment fight
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  Speaker 4: that I just mentioned, shrinking it. I think you have
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  Speaker 4: some Republicans who are completely on board with that idea.
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  Speaker 4: You have also some Republicans who are sort of uneasy
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  Speaker 4: about the idea that the White House would then have
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  Speaker 4: the power to just take back this spending, because look,
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  Speaker 4: eventually we will get a democratic president back, and when
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  Speaker 4: a Democratic president comes back, he or she be able
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  Speaker 4: to say, well, you know what, I'm not going to
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  Speaker 4: spend these policy goals that Congress has implemented as well.
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  Speaker 4: So I think there's some unease amongst the Republican Party
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  Speaker 4: that he's doing this, but also supporting the narrative that
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  Speaker 4: there is a lot of blow in the federal government
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  Speaker 4: and so I think it's just one of those. Again,
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  Speaker 4: stay tuned and see what happens over the next few months.
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  Speaker 6: All right, Nathan Deane, thank you so much. We appreciate
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  Speaker 6: that stay tuned. Every day is a new day in
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  Speaker 6: this news flow.
• 9:37
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  Speaker 2: All right, let's take a look at what you do
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  Speaker 2: in this market.
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  Speaker 3: Now.
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  Speaker 2: I'm taking only the S ANDP mini futures contracts. We
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  Speaker 2: are all the lows of the session that we hit
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  Speaker 2: earlier in the morning before the cash show, and so
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  Speaker 2: keeping that a little bit in mind, Carol Pepper, founder
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  Speaker 2: and CEO of Pepper International, joins us. So Carol makes
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  Speaker 2: a question, do you buy this dip? Yes?
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  Speaker 7: Well, as you guys know, I manage money for families
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  Speaker 7: with over one hundred million dollars who are typically family
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  Speaker 7: offices and I would say wait a little bit longer
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  Speaker 7: to see how much the dip is going to dip.
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  Speaker 8: This is a dip. It's a two four percent dip.
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  Speaker 2: Not bad.
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  Speaker 7: You can buy this dip if you want to, but
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  Speaker 7: we may if it looks like these tariffs really will
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  Speaker 7: be implemented.
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  Speaker 8: This is just the beginning of a dip, right.
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  Speaker 6: Well, just a red headline crossing the Bloomberg trumbinal right now.
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  Speaker 6: Mexico's shinebaumb says tariffs delayed for a month, so we'll
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  Speaker 6: have more reporting on that. Apparently the Mexican president had
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  Speaker 6: a conference call early today with President Trump, so perhaps
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  Speaker 6: some relief there. Carol, As we just kind of step
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  Speaker 6: back here and think about some of the volatility or
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  Speaker 6: the news flow that tends to come out of a
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  Speaker 6: President Trump administration, how do you tell your clients to
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  Speaker 6: kind of deal with that?
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  Speaker 7: Well, I think you have to again keep your eyes
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  Speaker 7: on a longer term prize. What sectors over the long
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  Speaker 7: term are going to do well, not within the first
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  Speaker 7: thirty days of a brand new administration, but what trends
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  Speaker 7: that have been true for years are continuing to accelerate,
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  Speaker 7: And I think those trends will work no matter what
• 11:27
  Speaker 7: comes out of the new administration's strategic statements in the
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  Speaker 7: first month as they're trying to put their stamp on
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  Speaker 7: the government.
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  Speaker 8: So if you look at things like defense.
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  Speaker 7: Technology, the entire world has burned through a lot of
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  Speaker 7: weapons that is going to continue to be upgraded with AI.
• 11:46
  Speaker 7: There's going to be more robotics, there's going to be
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  Speaker 7: more drones, there's going to be.
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  Speaker 8: More data centers. AI is not going to go away.
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  Speaker 7: Consumers are going to continue to switch and shop on
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  Speaker 7: Amazon rather than.
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  Speaker 8: In bricks and mortar stores.
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  Speaker 7: All the things that we've been talking about still apply
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  Speaker 7: today with the threat of tariffs if they're now or
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  Speaker 7: in a month or two, So you still have to
• 12:08
  Speaker 7: keep your eye and then think about entry.
• 12:10
  Speaker 8: Point when should you enter these stocks. And so that's
• 12:14
  Speaker 8: really what we're doing.
• 12:15
  Speaker 7: We're not changing our basic thesis because we do believe
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  Speaker 7: it is going to continue as we suspect it.
• 12:22
  Speaker 8: There is more risk off in the market.
• 12:24
  Speaker 7: That means that's going to depress the growth stock priceis,
• 12:27
  Speaker 7: which is good.
• 12:28
  Speaker 8: News for you if you're long term ball. Your long
• 12:30
  Speaker 8: term ball, you kind of like this time to have
• 12:32
  Speaker 8: an entry point. It even a little bit more slippage.
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  Speaker 7: Maybe we'll get a five or six percent down on
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  Speaker 7: some of these big names.
• 12:38
  Speaker 8: Wouldn't it be nice to enter five or six percent lower.
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  Speaker 2: You know, a week ago we also speaking of AI,
• 12:44
  Speaker 2: we would have been talking about how the AI hyperscaler
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  Speaker 2: spending theme is pretty intact no matter what happens with
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  Speaker 2: tariffs and that got disrupted. Is that still sort of
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  Speaker 2: a major core theme for you?
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  Speaker 3: Yes?
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  Speaker 8: Absolutely.
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  Speaker 7: I mean I talk to a lot of folks who
• 12:58
  Speaker 7: are busy building data centers. There are energy, energy and
• 13:02
  Speaker 7: data centers are getting very intertwined. So people are off
• 13:05
  Speaker 7: taking energy that before they might have made carbon credits
• 13:09
  Speaker 7: out of it and capturing it and making data centers
• 13:12
  Speaker 7: in places like middle of the country, in Oklahoma, in
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  Speaker 7: places like this, So those themes are going to continue.
• 13:19
  Speaker 7: Wealthy families are piling into the construction of data centers,
• 13:23
  Speaker 7: whether the chips are in Nvidia or someone else. The
• 13:26
  Speaker 7: data center construction isn't something that takes a few days.
• 13:28
  Speaker 7: That will continue to create jobs. So data centers are
• 13:32
  Speaker 7: still a good play. They're already started, they're already under contract,
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  Speaker 7: and they're not going to stop just because a teriff
• 13:38
  Speaker 7: is implosed.
• 13:39
  Speaker 6: Carol about on the fixed income side, how are your
• 13:42
  Speaker 6: clients playing fixed the come these days? They can actually
• 13:45
  Speaker 6: clip some pretty competitive coupons these days, that's right.
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  Speaker 7: I think it's so hard to tell in fixed income
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  Speaker 7: because we really don't know yet what are going to
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  Speaker 7: be effect of the tariffs on potential inflation and what
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  Speaker 7: Powell can or can not do. Obviously, real estate to
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  Speaker 7: me is still a sector at risk. It's been holding
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  Speaker 7: on by its fingernails now for a few years. You know,
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  Speaker 7: extend and.
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  Speaker 8: Pretend that might have to go on a bit longer.
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  Speaker 7: Now if we have a situation where inflation ticks up,
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  Speaker 7: if they're R and D tariffs and posed, that's going
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  Speaker 7: to make it very hard for Powell to lower the
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  Speaker 7: rates and therefore give some relief to real estate.
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  Speaker 8: So that's a sector I think people need to kind
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  Speaker 8: of watch out for.
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  Speaker 7: It's I don't think we're out of the woods yet
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  Speaker 7: on real estate, but you're right, and the short term
• 14:31
  Speaker 7: as well, not a bad time to have a little
• 14:34
  Speaker 7: bit of fixed income, but more on the shorter side
• 14:36
  Speaker 7: because the swings on the long end are not worth
• 14:38
  Speaker 7: it for most individuals. That's much more an institutional play.
• 14:43
  Speaker 2: What about safety plays? Like, what do you recommend to
• 14:46
  Speaker 2: your clients that just need a portion of their investment
• 14:48
  Speaker 2: portfolio that's saved. It's liquid, like, it's cash still the place.
• 14:53
  Speaker 7: Money markets and cash some people like gold. Bitcoin was
• 14:56
  Speaker 7: looking exciting, but look at what happened with ethereum.
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  Speaker 8: It just collapse now that.
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  Speaker 7: The environment looks a little bit more risky. So yes,
• 15:05
  Speaker 7: I think cash is still king. It's always been king,
• 15:08
  Speaker 7: it will continue to be king. And US dollar cash
• 15:11
  Speaker 7: is still the king because it is still the.
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  Speaker 8: World's reserve currency.
• 15:15
  Speaker 7: Other countries might try to take that position, but I
• 15:18
  Speaker 7: don't think it's going to happen anytime soon. So sitting
• 15:20
  Speaker 7: in cash is no shame, and making some decent returns
• 15:23
  Speaker 7: into your money market fund while the dust settles absolutely straightforward.
• 15:28
  Speaker 6: Play Carol, thank you so much for joining us. Krol
• 15:31
  Speaker 6: Pepper found and CEO of Pepper International, joining us again.
• 15:36
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 15:40
  Speaker 1: weekdays at ten am Eastern on Apple, Colocklay, and Android
• 15:43
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• 15:46
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• 15:51
  Speaker 6: The story today for global markets, Global Wall Street are
• 15:54
  Speaker 6: these tariffs and the economic impacts that they may or
• 15:57
  Speaker 6: may not have. Brian Whalen joins US. He's a chief
• 15:59
  Speaker 6: investment in the generalist portfolio manager at tc W in
• 16:04
  Speaker 6: Los Angeles. Hey, Brian, I know you and your team
• 16:07
  Speaker 6: you think kind of about global markets here, How do
• 16:10
  Speaker 6: you guys think about kind of just tariffs in general.
• 16:14
  Speaker 6: We're not really sure what degree they'll be imposed for
• 16:16
  Speaker 6: how long? How do you guys factor that into your calculus?
• 16:20
  Speaker 3: It's hard? What a morning? Huh? Yeah? Can you can
• 16:23
  Speaker 3: you believe deep steak was just a week ago? Right?
• 16:25
  Speaker 5: Monthly?
• 16:28
  Speaker 9: Look, I think you know the term we've been using
• 16:30
  Speaker 9: around here. We're using the term fat tails, which is
• 16:34
  Speaker 9: just kind of a reflection of like in a traditional
• 16:36
  Speaker 9: investing environment, you've got your base case scenario, maybe you've
• 16:39
  Speaker 9: got a seventy percent probability assigned to it, and then
• 16:41
  Speaker 9: you got your two other options. You know, you got
• 16:44
  Speaker 9: fifteen percent of the downside fifteen percent the other way.
• 16:47
  Speaker 9: I mean, you know, with regards to you know, this
• 16:49
  Speaker 9: new administration and the volatility, fat tails for US means
• 16:53
  Speaker 9: we still have our base case, but you know there's
• 16:55
  Speaker 9: a lower probability on that and then we've got, you know,
• 16:58
  Speaker 9: maybe something like a fifty in the middle, and then
• 17:00
  Speaker 9: twenty five we have this US exceptionalism, high growth, low inflation.
• 17:04
  Speaker 9: On the other side, maybe a lot of this towerst
• 17:07
  Speaker 9: for instance, cause I'll pull down on both domestic and
• 17:10
  Speaker 9: international growth and it up ends the job market and
• 17:14
  Speaker 9: maybe we have a recession.
• 17:15
  Speaker 3: And so for us as portfolio managers, what we.
• 17:18
  Speaker 9: Think about at TCW is like, you still got.
• 17:20
  Speaker 3: To instruct around your base case.
• 17:22
  Speaker 9: But in an environment, particularly one where it's not that
• 17:26
  Speaker 9: expensive to buy optionality, volatility is still low, at least
• 17:29
  Speaker 9: the priced one. You try to do things that you
• 17:32
  Speaker 9: know help your portfolio not lose so much and if
• 17:35
  Speaker 9: it goes one way, or maybe even gain if it
• 17:37
  Speaker 9: goes another. And that's kind of the things we've been
• 17:39
  Speaker 9: doing the last couple of months, have to do about
• 17:41
  Speaker 9: putting things in place in the portfolio that actually help
• 17:44
  Speaker 9: even if our base case isn't realize.
• 17:46
  Speaker 2: So, Brian, why is volatility And I'm just looking at
• 17:49
  Speaker 2: the move in next with the JP Morgan volatility and next,
• 17:51
  Speaker 2: why is it low?
• 17:54
  Speaker 9: Well, a lot of that, I think you know what's transpired,
• 17:57
  Speaker 9: you know, from the FED, particularly once we got into
• 17:59
  Speaker 9: the late months of twenty twenty four, and even what
• 18:03
  Speaker 9: you just heard them say, you know, powisay last week,
• 18:05
  Speaker 9: which is basically, you know, we're good, which is, you know,
• 18:09
  Speaker 9: we kind of like where you know, the FED funds
• 18:11
  Speaker 9: is right now.
• 18:12
  Speaker 3: We still think it's restrictive.
• 18:14
  Speaker 9: But given all the other volatility going on prickly tariffs
• 18:16
  Speaker 9: for instance, we're going to kind of.
• 18:18
  Speaker 3: Sit here and kind of watch things. So what that's
• 18:20
  Speaker 3: done is it's anchored.
• 18:22
  Speaker 9: It's provided stability to the front end of the yield
• 18:25
  Speaker 9: curve and particularly somewhere between like two years and five years.
• 18:28
  Speaker 9: It's anchored there, and it's left the rest of the curve,
• 18:31
  Speaker 9: the ten year and the thirty to kind of move
• 18:32
  Speaker 9: up and down. And so you know, with the fact
• 18:35
  Speaker 9: that the Fed has moved into this kind of pause
• 18:37
  Speaker 9: slash easing mode, it's led to the implied volatiler in
• 18:41
  Speaker 9: the rates market to be relatively low. However, what I
• 18:43
  Speaker 9: would say is, and we can get back to tariffs
• 18:46
  Speaker 9: and other things going on the market, It's like that's
• 18:49
  Speaker 9: conditional upon risk assets performing well. And if we get
• 18:53
  Speaker 9: moves and risk assets, particularly to the downside, you could
• 18:57
  Speaker 9: see that implied ball in the rates market could go
• 19:00
  Speaker 9: away and rates.
• 19:01
  Speaker 3: Move abruptly if we get down.
• 19:03
  Speaker 9: Drafts and equity markets are widening and credit spreads.
• 19:07
  Speaker 6: So talk about credit here, Obrian. How much credit risk
• 19:10
  Speaker 6: are you guys taking these days? When you look at it,
• 19:13
  Speaker 6: you know, to your treasure you're still getting four and
• 19:15
  Speaker 6: a quarter percent. How much above and beyond that do
• 19:17
  Speaker 6: you want to take in terms of credit risk?
• 19:21
  Speaker 9: You know, one of our favorite trades right now is
• 19:23
  Speaker 9: not to have that on.
• 19:24
  Speaker 3: It's not to take credit risk.
• 19:25
  Speaker 9: You know, I think, I think you know you're being
• 19:28
  Speaker 9: you know, fairly well compensated to take no credit risk,
• 19:31
  Speaker 9: which is which is effectively you know, treasuries, and you
• 19:34
  Speaker 9: know you've never been paid less, and that's hard to
• 19:36
  Speaker 9: believe given you know, deep seak a week ago and
• 19:39
  Speaker 9: terror volatility of the last twenty four hours, and you know,
• 19:42
  Speaker 9: Trump's being Trump, and all of a sudden, you know,
• 19:44
  Speaker 9: we spent twenty four hours cranking through the models to
• 19:47
  Speaker 9: determine how these tarifs are going to impact inflation and growth,
• 19:49
  Speaker 9: and all of a sudden we get a big you know,
• 19:51
  Speaker 9: just kidding, you know, and that creates of all So
• 19:54
  Speaker 9: you've never actually gotten paid less to take credit risk
• 19:56
  Speaker 9: right now, you know, to get paid, you know, to
• 19:58
  Speaker 9: take it, to take exposure to kind of average, high
• 20:00
  Speaker 9: quality companies. Right now, it's about extra zero point seventy
• 20:03
  Speaker 9: five of a percent of yield over treasuries and that's
• 20:07
  Speaker 9: never been that low. So look, you win by buying
• 20:11
  Speaker 9: that right now if there is no VALL. You know,
• 20:15
  Speaker 9: if the next six to twelve months it's very low
• 20:17
  Speaker 9: ball and you don't get uncertainty and markets don't move around,
• 20:19
  Speaker 9: and that's that's the carry trade.
• 20:21
  Speaker 3: You win. You lose if.
• 20:24
  Speaker 9: We do get bouts of VALL and things bounce up
• 20:25
  Speaker 9: and down. Are particularly wider because when you buy, we
• 20:28
  Speaker 9: get in such a little premium of compensation for risk.
• 20:31
  Speaker 9: When spreads go from seventy five to maybe just one
• 20:34
  Speaker 9: hundred basis points one percent over treasuries, that's going to
• 20:37
  Speaker 9: impact the value of your holdings.
• 20:39
  Speaker 3: And you'll be wishing you saved your dry powder. You'll
• 20:41
  Speaker 3: be wishing you.
• 20:42
  Speaker 9: Bought treasuries instead of corporate bonds because you'd wish you
• 20:45
  Speaker 9: could buy them at cheaper levels.
• 20:47
  Speaker 2: All right, we really appreciate it. You're awesome. Brian Whale
• 20:49
  Speaker 2: and CIO and generalist portfolio manager at TCW's Fixed Income Group.
• 20:53
  Speaker 2: Great perspective on the fixed income market.
• 20:56
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