Latest / Trend Watch / Episode 60: Democrats Splinter, Trump Wavers

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Episode 60: Democrats Splinter, Trump Wavers · Trend Watch

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  Ready to take a deeper look at where history,
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  politics,
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  and economics all intersect?
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  SPEAKER_00: Well, then you've come to the right place.
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  SPEAKER_00: Each week,
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  SPEAKER_00: here's where we pull back the headlines and focus on the big trends,
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  SPEAKER_00: the stuff that actually shapes our future.
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  SPEAKER_00: Through the noise, we focus on the signal.
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  SPEAKER_00: I'm your host, Neil Howe, and this is Trend Watch.
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  SPEAKER_00: Today is May 1st, 2025, and this is Trend Watch.
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  SPEAKER_00: Welcome back, everybody.
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  SPEAKER_00: As usual, I have on my fellow analyst, Christian Ford.
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  SPEAKER_00: So, Christian, how was your week?
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  SPEAKER_00: It was pretty good,
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  SPEAKER_00: Neil,
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  SPEAKER_01: but I have to say I don't have much to report,
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  SPEAKER_01: you know,
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  SPEAKER_01: just working away on this May Day.
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  SPEAKER_00: This May Day,
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  SPEAKER_00: you can,
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  SPEAKER_00: you know,
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  SPEAKER_00: an ancient pagan festival,
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  SPEAKER_00: or alternatively,
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  SPEAKER_00: the Day of International Labor.
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  SPEAKER_00: That's right.
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  SPEAKER_00: Usually in the late 19th century, we had...
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  We had the Haymarket Riot and all kinds of anarchist bombings
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  and various things occurring,
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  SPEAKER_00: right?
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  SPEAKER_00: Yeah.
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  SPEAKER_00: I must say,
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  SPEAKER_00: up here at the orchard,
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  SPEAKER_00: all the flowers are coming out and nature finally looks abundant.
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  SPEAKER_00: You know, this is when spring kind of goes into high gear.
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  SPEAKER_00: And the problem is not getting things to grow, but cutting things off.
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  SPEAKER_00: You know what I mean?
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  SPEAKER_00: Oh, yeah.
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  SPEAKER_00: Yeah.
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  SPEAKER_00: I mean, that's the problem.
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  SPEAKER_00: Sort of like Adam and Eve in paradise.
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  SPEAKER_00: Just got to hack things down.
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  SPEAKER_00: That's the only problem.
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  It's not worrying about the weather so much and not worrying
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  where the food's going
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  SPEAKER_00: to come from.
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  SPEAKER_00: Well, let's get right into this.
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  SPEAKER_00: We have plenty that's happened.
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  And as we're going to get to,
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  I think we're going to take some reflections on the 100 days.
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  SPEAKER_00: We're going to get to that in one second.
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  SPEAKER_00: Summary of the stories to come on Tuesday.
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  SPEAKER_00: Trump signed two executive orders targeting sanctuary cities and boosting
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  SPEAKER_00: cooperation with ICE,
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  just as a Milwaukee judge was arrested for allegedly aiding an
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  undocumented immigrant.
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  SPEAKER_00: We'll get to that story.
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  SPEAKER_00: The action just never ends, right, under this new administration.
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  SPEAKER_00: It's certainly great for reporting on events.
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  SPEAKER_00: Wednesday, yesterday, marked President Trump's 100th day back in office.
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  But his approval is now underwater,
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  a stark reversal from his post-inauguration high.
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  So we'll take a few minutes to just do a 100 days retrospective
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  on what we've seen
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  SPEAKER_00: coming out of the Trump administration.
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  SPEAKER_00: And another domestic story here,
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  as long as we're in a kind of a contemplative or general
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  perspective mood,
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  SPEAKER_00: we're going to look at the Democrats.
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  struggling to unite over a strategy as some reach out to the
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  manosphere while young
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  SPEAKER_00: progressives ramp up primary threats against party elders.
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  So just taking a bigger look at where the two parties and where
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  the red and blue
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  SPEAKER_00: tribes are today in America.
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  SPEAKER_00: Meanwhile abroad,
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  SPEAKER_00: on Monday,
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  SPEAKER_00: Canada's Liberals won re-election under Mark Carney,
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  who responded to Trump's tough talk on trade by leading a tidal
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  wave of passionate
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  SPEAKER_00: Canadian nationalism.
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  SPEAKER_00: And, uh...
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  SPEAKER_00: He led it and ran that wave all the way to victory on Monday.
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  SPEAKER_00: On Wednesday, the U.S.
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  SPEAKER_00: and Ukraine signed a minerals for aid deal,
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  giving American firms first access to critical natural
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  resources in exchange for
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  SPEAKER_00: reconstruction investment.
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  SPEAKER_00: Also...
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  SPEAKER_00: Yeah.
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  SPEAKER_00: So let's go back up to the top.
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  SPEAKER_00: We're diving in quickly on this one, right?
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  SPEAKER_00: And let me ask you first for news on the economy.
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  SPEAKER_00: I know you're going to recap the markets,
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  SPEAKER_00: but the other big news is this morning we had the Q1 GDP numbers in.
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  SPEAKER_00: So we certainly want to look at those.
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  SPEAKER_00: So I don't know.
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  SPEAKER_00: Bring us up to date.
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  SPEAKER_01: We'll start with the markets, Neil.
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  SPEAKER_01: The S&P 500 closed up today 0.63%.
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  SPEAKER_01: And over the last five days is up 2.71%.
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  SPEAKER_01: I will say this marks eight consecutive sessions of gain.
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  SPEAKER_01: As for the global Dow, not looking as good.
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  SPEAKER_01: Closed down today 0.39% and over the last five days is up 1.09%.
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  SPEAKER_01: The VIX is at 24.6%.
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  You know,
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  it's kind of been hovering around there in 23 for the last week
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  or so.
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  SPEAKER_01: And as for the 10-year treasury, that is at 4.216%.
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  SPEAKER_01: And over the last five days is down 10.8 basis points.
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  SPEAKER_00: Yeah, not down a lot, but down a little bit.
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  It'll certainly take a while for all the adrenaline to get out
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  of the VIX,
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  right?
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  SPEAKER_00: Right.
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  SPEAKER_00: God knows how long it'll take before,
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  SPEAKER_00: even if the markets continue to kind of,
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  SPEAKER_00: you know,
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  SPEAKER_00: well up slowly,
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  SPEAKER_00: things calm down.
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  SPEAKER_00: When do you expect it to get below 20 if nothing else intervenes?
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  SPEAKER_00: Of course, that's a tall order.
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  SPEAKER_00: Nothing else intervening, right?
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  SPEAKER_01: Should I do the US indicators?
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  SPEAKER_01: Yeah.
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  SPEAKER_01: What did we have?
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  SPEAKER_01: In Q1 2025, U.S.
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  SPEAKER_01: GDP fell at a 0.3% annual rate.
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  SPEAKER_01: That is the first contraction we have seen since 2022.
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  We also got the final Michigan consumer sentiment for April,
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  which fell from 57.0 to 52.2%.
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  SPEAKER_01: I will say,
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  SPEAKER_01: Neil,
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  SPEAKER_01: that's a few points above the preliminary reading,
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  SPEAKER_01: but it still marks the lowest point we have seen since July 2022.
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  SPEAKER_00: It's also a big decline, right?
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  57 to 52,
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  which almost makes that 57 reading,
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  I don't know,
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  a little suspect.
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  SPEAKER_00: Right.
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  SPEAKER_00: Yeah, what else?
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  One last thing,
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  we did get the ISM manufacturing PMI from April,
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  which fell from 49 to 48.7.
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  That was slightly above expectations,
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  but still marks two consecutive months of contractions.
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  We won't get services until a few days,
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  so we'll update listeners next week.
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  SPEAKER_00: Right.
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  SPEAKER_00: So what's it with the GDP numbers?
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  SPEAKER_00: Obviously, that came in beneath expectations, needless to say.
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  SPEAKER_00: The Atlanta...
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  SPEAKER_00: The Atlanta Fed GDP now was one of the few that had a negative.
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  At least the last time it was online,
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  I believe they were actually more negative than minus 0.3.
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  SPEAKER_00: I don't know.
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  SPEAKER_00: What's your take on it?
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  SPEAKER_00: I can kind of go down some of the numbers that interested me.
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  SPEAKER_00: Yeah, well, go down the numbers.
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  SPEAKER_00: I'm sure you will be more insightful than I am.
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  SPEAKER_00: Well, I have no idea.
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  SPEAKER_00: I just know what I've
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  SPEAKER_00: I just know what I read in the Commerce Department NIPA reports.
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  SPEAKER_00: And one thing that was obviously very peculiar, right?
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  SPEAKER_00: And everyone knew this would be peculiar about this GDP release.
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  And that is everyone knew that there was a huge surge in
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  imports in anticipation of the tariffs.
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  SPEAKER_00: And that would be negative, you know, that kind of negative GDP.
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  But of course,
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  it would be largely counterbalanced by huge rise in inventories,
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  right?
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  SPEAKER_00: Which is considered investment.
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  You know,
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  it's kind of like,
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  you know,
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  we import all this stuff,
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  so we aren't producing it.
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  SPEAKER_00: But then again, we're just putting in inventory.
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  SPEAKER_00: So, you know, temporarily, we treat that like an investment.
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  SPEAKER_00: But the total negative net exports was minus 4.8% of GDP,
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  SPEAKER_00: you know,
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  SPEAKER_00: relative to the previous quarter,
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  SPEAKER_00: right?
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  SPEAKER_00: That's on an annualized basis.
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  SPEAKER_00: But the increase in inventory is only 2.25.
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  So we don't know whether,
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  you know,
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  that's still a huge reduction from domestic production.
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  SPEAKER_00: So we don't know quite what's going on.
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  SPEAKER_00: If you look at PCE, personal consumption expenditure, that was at an
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  SPEAKER_00: contribution to total GDP growth.
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  SPEAKER_00: Obviously,
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  SPEAKER_00: the total GDP growth was minus 0.3% of the previous quarter's GDP,
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  SPEAKER_00: almost by definition,
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  SPEAKER_00: right?
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  SPEAKER_00: It was down 0.3%.
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  SPEAKER_00: But the PCE contributed a plus 1.2%
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  SPEAKER_00: And a non-residential fixed investment contributed 1.3% positive.
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  So looking at trend,
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  the PCE at 1.2% was about 0.2%,
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  excuse me,
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  0.7% down from recent quarters.
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  SPEAKER_00: So personal consumption is definitely way below trend, right?
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  SPEAKER_00: We've generally been running around
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  SPEAKER_00: 1.9 or something like that over the last couple of years.
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  SPEAKER_00: And now we're at 1.2.
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  SPEAKER_00: So consumption is definitely slowing down is kind of what I mean to say.
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  SPEAKER_00: Residential fixed investment was virtually zero,
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  SPEAKER_00: apparently no impact from the California fires,
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  SPEAKER_00: at least not yet.
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  SPEAKER_00: And government
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  SPEAKER_00: was down about 0.2 or 0.3, which is more than usual.
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  SPEAKER_00: And the question to ask, is that due to Elon Musk going around cutting?
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  Well,
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  it turns out that this decline was almost entirely a national defense,
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  right?
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  SPEAKER_00: Which is not in general where they were focusing their cutting.
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  SPEAKER_00: So nothing really showing up from Elon Musk and domestic spending either.
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  SPEAKER_00: Not that anyone really expected anything to show up, right?
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  SPEAKER_00: So that's kind of where we are.
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  SPEAKER_00: I will say...
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  SPEAKER_00: that what no one really pointed out
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  is that on the other side of this 0.7% reduction in personal
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  consumption spending
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  SPEAKER_00: is this 0.8% surge in business investment,
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  SPEAKER_00: most of it was software and IP.
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  SPEAKER_00: And apparently this is Microsoft,
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  SPEAKER_00: IBM,
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  and Amazon building all these AI data centers and investing in
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  various kinds of AI software.
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  SPEAKER_00: And that's where that big surge comes.
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  SPEAKER_00: We have not seen anything that big
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  in non-residential equipment in any quarter over the last
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  couple of years.
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  SPEAKER_00: So that was kind of interesting to me.
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  SPEAKER_00: This is going to be heavily litigated, as you might say.
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  SPEAKER_00: It's very clear that we're going to get a revision to this.
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  SPEAKER_00: It may well push this GDP number minus 0.3 back positive again.
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  SPEAKER_00: It may even push a negative.
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  SPEAKER_00: Maybe we underestimated
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  SPEAKER_00: the impact of net exports.
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  Who knows whether we got inventories wrong or we got net
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  exports wrong,
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  right?
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  So I suspect there's going to be a very unclear quarter in
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  terms of trend,
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  SPEAKER_00: much like you remember what we saw in 2022,
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  where we did have two consecutive quarters of negative GDP that
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  did not constitute
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  SPEAKER_00: a recession,
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  SPEAKER_00: partly because of the nature of that negative GDP.
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  SPEAKER_00: And indeed, if you want to look at what's often considered to be
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  SPEAKER_00: The least noisy part of GDP,
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  SPEAKER_00: economists will often tell you,
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  SPEAKER_00: just as you look at core CPI or core PCE,
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  SPEAKER_00: if you want to look at core GDP,
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  SPEAKER_00: you can look at a line.
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  SPEAKER_00: which the commerce department will give you,
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  SPEAKER_00: which is final sales to private domestic purchasers,
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  SPEAKER_00: right?
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  SPEAKER_00: That's it, just nothing else.
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  SPEAKER_00: Just final sales to private entities which are purchasing, right?
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  And that was going up at a 3.0% annual growth rate,
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  virtually unchanged from earlier quarters.
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  SPEAKER_00: So my conclusion is, yes, PCE is definitely down.
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  SPEAKER_00: That may be worrisome.
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  SPEAKER_00: But if you just look at the private sector economy,
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  SPEAKER_00: it really doesn't look like it's all that impacted yet.
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  A lot of the motion we're going to see is probably in the last
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  few weeks of the quarter.
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  SPEAKER_00: And any real change, we're going to have to see in Q2.
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  SPEAKER_00: That's kind of my opinion.
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  SPEAKER_00: I don't know.
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  SPEAKER_00: Any other thoughts or do you want to move on to our first story?
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  I would just give you one international indicator that was interesting,
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  Neil.
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  SPEAKER_01: China, we got the NBS PMIs.
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  SPEAKER_01: That's the larger state-owned businesses.
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  SPEAKER_01: And manufacturing for April fell from 50.5 to 49.0.
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  That's the first contraction since January and largest drop
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  since December 2023.
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  SPEAKER_01: both outputs and new orders declined.
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  So people are saying you're starting to see the effects of
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  these tariffs on China's economy.
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  SPEAKER_00: Well, indeed.
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  SPEAKER_00: And,
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  SPEAKER_00: you know,
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  SPEAKER_00: all those,
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  SPEAKER_00: you know,
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  huge negative night exports are clearly going to disappear as
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  that inventory is
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  SPEAKER_00: going to shrink right next quarter.
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  SPEAKER_00: That's going to use all that stuff up.
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  SPEAKER_00: So,
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  SPEAKER_00: you know,
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  SPEAKER_00: all of those games and ping pong tables and flat screen TVs,
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  SPEAKER_00: you'll be buying them out of inventory,
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  SPEAKER_00: right?
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  SPEAKER_00: Right.
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  SPEAKER_00: At least the way you can get them.
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  SPEAKER_00: Although,
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  SPEAKER_00: if you do go on Amazon or any of these places,
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  SPEAKER_00: they've already been priced to scarcity,
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  SPEAKER_00: as you will notice,
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  SPEAKER_00: Christian,
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  SPEAKER_00: if you go out and try to get a flat screen TV today.
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  SPEAKER_00: All right.
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  SPEAKER_00: Okay.
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  SPEAKER_00: Well, let's get into our first story.
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  I think this involves one more step in sort of the immigration
• 13:31
  enforcement saga.
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  SPEAKER_01: That's right.
• 13:33
  SPEAKER_01: This week,
• 13:34
  President Trump signed two executive orders that escalate his
• 13:38
  immigration crackdown
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  SPEAKER_01: and