Stocks Bounce on Trump’s Iran Peace Push

Get the news you need in just 15 minutes. Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager. And I'm Karen Moscow. Join us each morning for curated stories on current events, politics, business, and foreign relations. Plus one conversation on the day's biggest developments, all in just 15 minutes. Subscribe to Bloomberg Daybreak for a precise, thoughtful take on the stories that matter. Listen to Bloomberg Daybreak each morning on Apple, Spotify, or anywhere you listen. Bloomberg Audio Studios. Podcasts Radio News. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Okay, folks, what we're going to talk about you. We're not going to talk DSGE. We're not going to talk integrals within articles or derivatives, the mathiness that Richard Clared is acclaimed for, the former vice chairman of the Fed. I don't want to know when the Fed's going to cut rates or all that. We're going to talk about what you did at Columbia. Okay. Richard Clareda, folks, went into Colombia with some massive hires. in retention of one of the best faculties in the planet. It goes back to Leuven and Belgium. It goes back to some of the way back work in Germany and, of course, the Combine out of England as well. You retained allureate Stiglitz. Yeah. You dealt with Jeff Sachs with all of his ability in that. You have Ned Phelps with this massive eclectic view over time. Columbia owns the social analysis. Good morning, Chicago, and Mr. Becker. You own the social analysis of this case-shaped economy. Jeff Sachs wrote a book 20 years ago, I'm going to say, that was way out front on this. How case-shaped are we when you talk to your friends and Romans and countrymen in Columbia? How case-shaped are we now, Dr. Clarendon? Well, and also you left out Bob Mundell, truly a giant and international monetary economics. So it certainly has been a treat to be at Columbia all these years. We're definitely in a K-shaped economy. I think we've been moving in that direction for 30 years, not in a straight line, but the trend has definitely been in that direction. I think the events with the pandemic, the policy response, and the like amplified some of those trends. You know, in America, if you own your home, as 60% of people do. And if you own stock, you've had a very good run. That means there's a substantial fraction of the country that has not been participating. Maybe if I can just parachute a bit in on this.

You know, the Fed, when the economy slows, you cut rates, and I certainly did that at my time at the Fed. And the Fed understands that when it lowers rates, it's going to support the labor market, which is good. And for a lot of people, that is their stake in the economy as their job. But low rates also lead to higher acid valuations and also leads to some of the trends that you've mentioned in the case-shaped economy. And so I think... Central bankers understand that, but their toolkit is really pretty limited. So I think that's how we end up with this dynamic. How does the Federal Reserve, any central bank, deal with a black swan like, oh, I don't know, a war in Iran that came out of nowhere? I mean, how does a Fed typically look at those types of events? It's difficult to predict black swans almost by definition. So what you try to do is you try to do analysis. You try to look back at history. You know, history doesn't repeat, but it rhymes as the saying goes. And so I'm sure at the Fed, they're looking at past oil shocks, past Middle East. conflicts, but they'll also have to factor in, Paul, that it's a different U.S. economy than, you know, back in my college years in the 1970s, in particular, the U.S. is a net energy exporter. Important, however, is in the Fed's models, it's still the case that when energy prices go up, the economy slows. And I think the main reason for that is that erodes real incomes for a lot of workers. Also, the fact that the U.S. imports a lot of goods that have a high energy content. And so, yes, you better be an exporter than an importer, but the U.S. is not insulated from this shock. My Karl Marx comes from the giant Thomas Sol out at Hoover. And also from my great mentor in London, Megden Desai, who he lost last year. Karl Marx said in the British Museum reading room and wrote a treatise on the end of capitalism. And the bottom line is, by definition, we become ever more K-shaped, ever more divided, and there's corrective solutions. Do you worry that within all of the institutions, as you've represented, that we're getting to stress points where it falls apart? Well, I'm not sure of that, but certainly the trends, as I mentioned, since 2020, have definitely moved more in that direction. I would point out, though, that we have had periods not all that long ago, you know, certainly in the last part of Obama and during the first Trump term before the pandemic. You actually had some of those K-shaped trends reversing and improving. And I can certainly tell you that during my time at the Fed, it was one of my focuses. That's one reason why the Fed got a lot of criticism for cutting rates in 2019 because the unemployment rate was below 4%. And some models were saying, oh, you can't operate the economy below 4% unemployment. And in our attitude, well, let's see how the economy operates. And I think that was a positive.

We do think eventually Kevin Warsh becomes chair. The timing of that is uncertain. Whether or not it happens in time for the June meeting is too soon to tell. But we do think eventually that it will get resolved. The first thing I did with AI, Tom Secunda, one of our founders grabbed me by the cheeses rack in the food court, said, we need a briefing. And Mr. Secunda's leadership folks on AI is noted across a 10-state area. Richard Clarity, he said, here's AI. Get up to speed on it. Richard Clared is up to speed on AI right now. Is it a job creator or is it a job loser? Well, right now it doesn't appear to be either in the data. And I think there are as many opinions on this as there are people that you talk to. Myself, I am skeptical that in the next year or so, we're going to see a dramatic change in the labor market because of AI. The models are impressive, but the analogy I like to use is even their developers admit that they hallucinate. Hallucination is a feature, not a bug. And I don't know about you at Bloomberg, but I can tell you, at Pimco, we don't hire a lot of employees who say, part of my job description is I'm going to hallucinate. And so I think until they figure that out, it may not have as much an effect on the labor market as people think. You and I used a QFEL and S slide rule. Okay, the only way you can learn logs is a slide rule. Remember when the Hewlett Packer comes? Only the rich kids? had the Hewlett-Packard calculator. What was it called? Reverse Polish notation. Reverse Polish notation. I got one on my phone here. But to me, it's the same shift where the professors are going mental in class. You can't use your calculator and all that. And we're just going to get, we're going to deal with it. I think we're going to deal with it. Yeah. And remember that near term, in order to get the nirvana of AI benefits, there has to be a lot of capital spending. data centers, power generation. And so the interesting thing about AI right now is that it's really a driver of a lot of the old traditional bricks and mortar economy. One final question. Yes, sir. Jerome Powell. Yeah. You've been a staunch defender of him. He's had a pretty good 10 days a week here. Yeah. And the governor is well under duress. What's his value add to the American people? to serve out all of his different tenures? Well, I think it's important. I think Jerome Powell recognizes that, you know, the first sentence and eventually whenever his New York Times obituary is written is he wants to make sure that it says something along the lines as Chair Jerome Powell report. restored price stability and maintain the fed's independence. And I think that he is going to achieve that. Thank you so much. Richard Clareter coming. Was this okay that we didn't do monetary part of the game? But can I also say it must be opening day because Mr. Keene's wearing a tomorrow probably. For the Red Sorens. And Mr. Sweeney, of course, my God, where's the Duke guy? Oh, I know for Duke. Are you going to the game? Not going to the game, but it'll be a great game against St. John. I'm afraid to ask, how's your bracket? Yes.

Well, I'm a loyal alum of the University of Illinois, and I picked them, at least on that part of the bracket, I'm doing pretty well. Although, I've got to tell you, what is this playing a tournament game on a home court for the number two seed? Do they have a bracket pool at the Fed? Oh, yeah. All the PhDs, all the staff and all that? I think so. A lot of analysis. There's some rigor there that, you know, like Vince Reinhardt years ago was winning three years in a row. Anyway, go old I. Okay. Richard Clareter. Thank you so much. Greatly, greatly appreciated. Stay with us. More from Bloomberg's surveillance coming up after this. Hi, I'm Barry Ritholtz, inviting you to join me for the Masters in Business podcast. Every week, we bring you conversations with the people who shape markets, investing, and business. I speak with CEOs, Nobel laureates, market innovators, and legendary investors. Whether you own stocks, bonds, real estate commodities, even crypto, these are discussions you ask. Absolutely need to hear. Subscribe to the Masters in Business podcast on Apple, Spotify, or anywhere you listen.

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg business app or watch us live on YouTube. Tina Fordham is a foresight on LinkedIn. A research effort at Fordham Global Foresight is world class. We're thrilled we could get a briefing this morning. Tina, in all the years I've done this, I have never, ever seen a morning like this, a cacophony of news sources. headlines, different cross currents, this way that I'm completely relying on the acclaimed T-Live of Bloomberg with its translation abilities. Give us your update on the veracity of the 15-point peace plan. No one knows, Tom. The idea of coordinating with Pakistan on this is interesting. It is something that we heard through our sources over the last couple of days. What I think is really fascinating and so important for kind of gaming out the power balance here is that Iran, having been presumed to be a weak military force, actually finds itself with more leverage than anybody thought right now and is issuing some pretty robust statements about its commitment to defending its land. Even as the 82nd Airborne is on the way. Does President Trump and whomever of America have an identified Iranian leadership they can speak to? Well, there's some suggestion about who they might be speaking to, but one of our problems, and you know, and I put our, both of us in the same boat here, is the presence of so many unreliable narrators, including the president of the United States. Now, he is clearly looking for an interlocutor. As he said himself, so many of them have been. killed, they've been assassinated by Israel, who have eliminated that whole kind of middle cadre of possible successors. We know that the Iranian succession is four leaders deep, but you've got to have somebody to talk to to make a deal, and you have to have a counterparty that wants to accept that. Right now, Iran is signaling strength. So, Tina, I have to ask, where's the U.S. State Department in all of this? Don't we have like a whole section of government that does this kind of stuff, negotiates with other countries, really thinks about how to craft these agreements? Is that, is there any sense that there's involvement here? Well, we haven't seen much from the Secretary of State. And not only that, at the kind of, you know, the line levels, so many of the embassies, U.S. embassies in the Middle East are without a U.S. ambassador. So everything is concentrated in the president who values surprise. It confuses the bejesus out of market participants, among others. I've been talking to corporates.

including in the Middle East, who are bewildered about all of this. The geopolitical butterfly effect, as I call it, the kind of knock-on effects are manifold. But one of the ones that's caught my attention is a reminder that after the 1973 oil price shock... No incumbents in major countries were re-elected. So this is going to be sending a cool, you know, chill wind, not just the inflation shock, but the political outlook from all of this is not going to endear the United States to anybody. Across the United States around the world this morning, Tina Fordham with us, Fordham Global Forsy. Paul Sweeney and Tom Keen with the news flow this morning. Extraordinary. There's an up field to it with a 15-point peace plan. Futures up 60, Dow futures up 446. The Vixen well over a stick, but oil now under 98, 97.71 on Brent Crude. Tina, your acclaim is a cultural synthesis. of your study of foreign policy of international relations. Now, we have a presence. I was talking to Tim O'Brien. of Bloomberg opinion yesterday. You go up to the food court. I'm having a bag of apricots. And Tim O'Brien's having a full English up there, you know, the whole thing. And Tina, I'm talking to Tim O'Brien, who owns the understanding of Trump. We've got a guy who's deal transaction based and that culturally, how is that Trumpian deal transaction process greeted by the Arab and separately by the Persian world? How is it created by? Well, I mean, he is somebody who values making a deal above all, but also winning above all. And what I think is very concerning is that it's hard to imagine an easy win here. As we get further in, you start to, you know, hear references to that cue word from the Vietnam era Quagmire. Now, the president probably won't want to allow that to happen, but... you know, thinking about your previous guest and what others like Muhammad L. Aryan are saying the impact of this oil price shock, even if it's stopped tomorrow, it will, you know, continue for some months. We're already in this shock. So calling that a win, I mean, most market participants I speak to say, well, the president can kind of, you know, he can quit any time. He can quit this war and call it a victory any time. Maybe, but.

we still come back to first principles, which is who's going to lead the country? And this notion of the world's most unusual joint venture proposition with the Ayatollah, as President Trump put it, and himself, you know, kind of co-owning the Strait of Hormuz. It's hard to think about how you execute that kind of arrangement, isn't it? It is. It's odd. And I think what it comes down to for a lot of us that are just ramping up our knowledge of this part of the world once again is it all comes down to the Strait of Hormuz. I just declaring victory and walking away, that does nothing to really secure that part of the world. What is a reasonable solution? It doesn't take it away from Iran. It doesn't take, Iran controls a major economic chokehold. If, you know, among the many pretexts given for this war, one that has appeared is kind of eliminating Iran's leverage there. You know, there's some reason to, to imagine that President Trump. thinks about the Strait of Hormuz, which he's been talking about for 40 years, by the way, and Kark Island, in the same way that he thinks about the Panama Canal, something that it is like a toll road for global trade, that it is unacceptable for anyone to have control of without United States as a kind of majority shareholder. in that arrangement. Tina, thank you so much. I can't say now, folks, about the LinkedIn effort of Fordham Global Foresight as we had Wayley of BlackRock on yesterday. It's just a font of brilliance from Tina Fordham and her team out at LinkedIn. Tina Fordham, thank you. Stay with us. More from Bloomberg surveillance coming up after this.

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg business app or watch us live on YouTube. Brian Belski with us with Humiless Investment Strategies and the wonderment of his eight-page note densely written like. Damn, I've got to read every word, is this is the courage, this is the thinking to stay in the market. Is the mood out there a panic? Are people quote unquote going to cash? I think a lot of institutional accounts are kind of waiting to see to happen. You know, the majority of who we've talked to recently, obviously, are a great wealth management clients, and they've been waiting for an opportunity. In Canada, they're still a little bit worried with respect to what's happening in the U.S. and they kind of see this as a replay of last year, so they're a little more emotional. But in the U.S., we're ready to put money to work. I think a lot of people... kind of redid their portfolios and reconfigured at the end of the year, Tom. And there's been a lot of talk with respect to some tax gains taken at the end of the year. So I think there's some cash on the sidelines that are ready to go. Is Microsoft at a PE at 22 forward like a new Microsoft? You know, what's interesting thing about Microsoft is that last year it was kind of the darling in terms of the war chest of cash. And in terms of how we look at Microsoft and kind of core and large-cap portfolios, it was tough to continue to be overweight that stock. So we're more neutral. in that stock where I think that the apples and the Amazon's would actually underperform the Meg 7 last year are better. But I think Microsoft Oracle Palantir from a software perspective, we're going to kind of get through this malaise, let's say. The thing that you have to understand is you don't have to own everything, guys. You don't have to own everything. And I think sometimes the market has been trying to outsmart themselves by trying to pick the bottom in some of these SaaS names. It's a really important insight there. It goes back to Munger where you don't have to look at it. Oh, can you hear me buttoning and unbuttoning? Red Sox jacket. Absolutely. The only one that fit me was Don Zimmer's jacket. Exactly. Way back. For those you on the radio, I'm in Wisconsin Red Soxed today. And drawing it down for Giants Yankees, Paul Sweeney in his Yankees jacket with Brian Belsky. Absolutely. Hey, Brian, what we saw a little bit before Iran started was a little bit of rotation in this market. Out of some of the higher multiple tech names, maybe into some more cyclical names, maybe in small and midcap. Is that a short-term trade? Is that something that plays out in 26 as well? I think it's the real trade. When we wrote our year-ahead piece in the first week in January for both the United States and Canada, especially in the U.S., we talked about a broadening out of the market finally, we also talked about and defined what an earnings-driven market looks like. Typically and historically, the beginning stages of cyclical bulls, which we saw in 23, 24, 25.

was this momentum, multiple-driven market. We've transitioned to more an earnings-driven market. Think about the earnings growth is really good. So when that happens is you see dispersion increasing, meaning stocks trade at different levels and different technical-type performance. But more importantly, the earnings side really tried to drive things. So I think investors have a hard time dealing with that, and traditionally that's a more volatile market. So if you look at an earnings-driven market relative to a multiple-driven market, the upside is roughly half. Let's just keep the math simple. But it benefits names that have been underperforming. Like small cap, like financials, like some industrials. And I think that's where we want to be longer term. Again, I've said this for a while now, and we've been a little early, but I think we're right. Ten years from now, we're going to be kicking ourselves if we don't own more small cap. Okay. How about the... AI trade. Again, I'm trying to think about what's been going on the market outside of Iran. And, of course, AI trade has evolved. It used to be just buy everything, you know, and who's ever spending more money, that's where you want to be. Now the market's trying to be a little bit discerning winners and losers. And you mentioned the SaaS stocks took it on the chin there earlier this year. I think about that. I think discerning is the great way to think about it. So let's use a couple terms, demand supply, expenses, and revenue. I think what's happening is we're trying to. match what's happened in expenses and revenues or spending spending spending spending so how much revenue can we derive from that and then in terms of the supply demand who are going to be the winner so there's been so much rhetoric in terms of what platform is going to be the best i still think that you just got to kind of keep it simple right and think about think about here's an apple here's The core of AI is an Apple. And the core is Nvidia. So then what else do you want to own around that? And two or three in terms of every kind of theme, whether or not software or cybersecurity, but especially with respect to how you're the electrification of that, which would be the semi- How many, quickly here, how many stocks is a minimum portfolio for Brian Belski? For us to fill a minimum portfolio, to be properly diversified in large-cap money, we believe, and we've done a lot of back testing on this, 50 stocks. 5-0. 5-0, because you can get as high- As a Fidelity 50. 5-6-year-old. 5-7% on the top end in terms of a position, 1% on the low end. For our small mid-cap money that we run a hemolyss, it's anywhere between 60 and 75. And I think going into, as we progress through this broadening out, you want to own more names so you have the opportunity to make more bets. Brian Belski is all over the country, folks, in this industry of investing away from what we do here. I'm not a fan of this, but we're going to get his knowledge base. James Diamond on the cover of Barrens this week, Mary Recep Tayyip Erdogan's front and center for J.P. Morgan, and they've had huge success with their... hedged ETF, whatever it is, JPMI, whatever the code is. Brian Belski on the modern rage of only S&P.

hedge it for a more stable income and give away the upside. Your thoughts on this, what we see out there right now. Well, and Jamie, we trust. You know, one of my great friends in the business, Hamilton Reinder does a lot of these things that worked, that was a great client of mine when I was on the institutional side. I think those products are important. What we like to think is that the passive market has peaked, active investing, own stocks, keep it simple. 1990 added the ability to meet Charles Schwab, Peter Lynch, and Warren Buffett in the first six months of the business at William O'Neill. Okay? And Warren Buffett said, don't buy anything unless you can reach out and touch it. Keep it simple. And I think sometimes we try to outsmart ourselves. That's why we got in trouble, I think, in private equity, Tommy, this time around. How big is the upset in private credit? We got to run out of time. I think we see an unwinding there. That is ultimately not going to, it's not systemic. We've already, I think we've already established that. But ultimate, that ultimate unwinding is actually going to be positive for publicly traded securities, especially small midcaps. Is the twins just a funding place for baseball teams before they go to the Dodgers, the Giants, and the Yankees? The answer is yes. So your socks, right? They've been after Joe Ryan. They should just take him out of his misery. I mean, the twins are going to win 70 games. They beat the socks. The Twins beat the socks yesterday's 15 to 6, but who cares? I wish you'd get animated about equities like it does a lot. It's a beautiful ballpark. 26 years, Tommy, 26 straight years of season tickets. What did they get me? Here's your code to log into your tickets. Nothing. I mean, it's a great divide. It's a beautiful ballpark, but even the Yankees. You don't remember Don Zimmer ended his career with the Yankees. It was a great trade like Babe Ruth. You know. Okay, this is a problem. Sarah emails it and says, Tom, there's not enough Orioles talk. Right. I was talking to Mindy Ripkin yesterday up in the flute court. She can't even concentrate. She's so pumped. Twins open in Baltimore. Tomorrow. Oh, really? Handen yards. Must watch. You know they're our favorite team. I know, I know. They're going to get crushed. Give me like a 12th of two game. Mr. Bloomberg's got a bag of cheeses in a name going, Tom, I don't hear enough for you. Yeah, exactly. Brian, thank you so much. This is going to see a millist thing going okay for you. It's going amazing. Thank you so much. You look tanned and rested. Wow, it's Naples. This is my lunchtime walk routine, and then I process and I listen to Bloomberg Radio on my walk. See how you did that? It was very nice. I liked it a lot. I mean, are you squeezing like a 70-hour work weekended about 80-hour work? You know, when you're the chief bottle washer, the chief compliance officer, the chief of staff in picking stocks, it's a lot. Courage to stay in a market. He owns a high ground on that. Brian Belski, a millis. Stay with us. More from Bloomberg Surveillance coming up after this. As markets move and headlines break, what matters most is context. A Bloomberg subscription gives you unmatched reporting, sharp analysis, and powerful tools that help you connect the dots. Visit Bloomberg.com slash podcast offer to learn more.

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg business app or watch us live on YouTube. To celebrate Francois Tahan, just wonderful with his work over the decades, now chief investment strategist, BMO at Capital Markets. Did you fly in from the Carolina game last night? Were you in the Loge BMO, as they call it? No, but I did watch it. I thank you for remembering. Can they keep going? I'm watching every game this show. I'm loving it. Oh, yeah. This is their year. I mean, it's a complete Canadian hockey is for the rest of the world? Montreal Canadians. The Rangers had nine shots last night. Okay. It's magical up in Montreal right now, isn't it? Yeah, I mean, for a team that's been in rebuilding mode for so long. Yeah. The finally. feel like we're getting there. Are we rebuilding with AI? You walked in the studio and you said, I want to talk about AI. Your synthesis is so odd and wonderful about the way you bring economics, finance, investment in, synthesize AI out when the Canadians win the Stanley Cup. Well, AI, you know, it's a big pushback on our thesis. And so, you know, it was easier, by the way, to pitch this a month ago, to be perfectly honest. But, you know, if you look at the overall thesis, there's a lot of stimulus in the pipeline. The type of stimulus that you see when you have a recession, the issue is we never had a recession. And so we don't have a lot of excess capacity in the economy. To see this kind of stimulus. with a forehandle on the unemployment rate is a recipe for inflation that comes back. more quickly than we've been accustomed to. So I don't think this time around we get Goldilocks for very long. So the pushback time is people say, all right, we can't have non-inflationary growth because we don't have excess capacity. Why can't AI play that role with productivity? And that sounds logical when you think about it. When you dig into the data, you realize that it's not feasible in 2026. And so, and the reason for this is that AI is really, for now, a phenomenon of the very large companies. Small Business America has not really embraced it. And Small Business America creates three quarters of jobs in the U.S. And so until... You know, this is adopted broadly. I don't think we're going to see the employment phenomenon that a lot of people are looking for. So are you calling for higher inflation here in the near-to-immigate term? Yeah, and this is before, you know, the events in the Middle East. So how does that impact kind of where you want to allocate capital here? What are the conversations you're having with your clients? Yeah, so it's not easy because, to me, it is a pretty constructive backdrop, but really for cyclical assets.

The issue is that there's not a whole lot of that left in the S&P nowadays. You know, the S&P is now a growthier benchmark. You know, growth stocks are kind of allergic to higher inflation. And so when you have this amount of stimulus... You know, it is the tie that lifts all boats for earnings. But I think when it comes to growth, their PEs are going to be, you know, are going to see a bit of a headwind in the form of higher inflation later in the year. Doesn't it sound like you're very constructive in the equity markets. I am. I mean, if you gave me the S&P's version of 20 years ago, would be jumping up and down, you know, because that was 79% of your earnings came from cyclicals when you're going into the GFC. That was a very pro-cyclical. index, it's just a different story nowadays. And so I would say my comments, I have more enthusiasm for the Russell 2000 index or the S&P 600, you know, the smaller indices that just have more cyclicals in them. From late 2025, maybe autumnal 2025, Microsoft's enjoying a drawdown of 32%. Max 7, in particularly these selected hyperscale, it's whatever you want to call them. Is that enough of a pullback for Francois-on to load the boat? Not yet. I think, you know, the issue is that, and this is part of the problem in pitching this story, is that there's a real love affair with the Mag 7 because it's been so profitable for so long. And so when you're telling people, there's a lot of opportunities in the marketplace. It's just in an unusual spot that you haven't looked at in a while. And so to me, Tom, the ideal time to load up on big growth stocks like that is when we're going to be at the top. of the cycle and i don't think that's the story of 2026 we saw a rotation beginning um i guess late last year out of some of these tech names, growth of your names, hire multiple names, into maybe it's more cyclical. Correct. Is that a investable trend in the next 12 to 18 months or was that a trade? Because we saw a little bit of a pulling back on that as we kind of got. Yeah. No, I think it's the beginning. It's the early innings of a recovery. You know, if you didn't know about all the craziness going on in the world and you're only looking at the market's behavior. You know, you've seen the Fed cut rates, then we had fiscal stimulus, and leading indicators started to pick up. And alongside that, we saw change in leadership toward the more pro-cyclical segments. I want to say that starts like late summer, early fall, pretty normal stuff. And so, you know, you tell me when the cycle tops out, and then we can talk about when it will be time. to revisit the growth stock story again. Francois-Taron with us with the Bank of Montreal. I'm sorry, I'm old-fashioned. It will always be the bank. It's so spiritual where their offices are across from this most beautiful church in North America, really in the Western atmosphere, just extraordinary. BMO capital markets in Montreal. You guys own with your acquisitions in Minneapolis.

The study of the Great Lakes. We, Paul, when did we last mention tariffs? Yeah, exactly. I mean, I think it was an expoes were going down. French Rutherhan here, a tariff update in the impact on the Canadian Great Lakes, the Gordon Lightfoot territory. You want to know what the impact is on the Great Lakes? What's the impact from the Bank of Montreal on tariffs? We haven't talked about it in three months. Um, of tariffs on inflation more broadly. Inflation more broadly and Windsor, you know, autos and, you know, they're going over the two bridges, which Carney's arguing with Trump about. And so it's, uh, look, it's, uh, I think, uh, Prime Minister Carney sees it as, uh, it's intended. This is a structural change in how we do business. And so, you know, I don't think it's unusual to think that there's going to be a little friction in negotiations, to be honest. Um, you know. Economists of my generation aren't fans of tariffs because they're inflationary. And the reality is our economy is consumption-based nowadays. 68% of our GDP comes from consumption, and inflation is like a variable tax rate, if you will. And so, you know, but it is the policy we're dealing with. One of the themes in 2025 that worked out very well is, as well as the U.S. equity markets did the rest of the world. A lot of parts of the rest of the world did really well, in part due to the falling dollar, but other drivers as well. How do you think about the U.S.? or North America vis-a-vis the rest of the world here. Yeah. So, um, You know, we've had very U.S.-centric comments here, but the reality is the story I just told you is the story of the world. 89% of the world's GDP is in countries that have monetary stimulus in the pipeline. There's only a few large economies that have raised rates. So it really is a global story. Up until the events in Iran, most equity markets are outpacing U.S. equities, which is what you see in a global recovery. U.S. equities have been really resilient in the last month because we're a large oil producer. That insulates us to a certain extent. Unlike the countries that import, you know, much of their energy needs. We have a lot of stimulus in the pipeline that also helps insulate us. Our earnings were growing before all of this. And our stock market, our main benchmark, the S&P 500, is very growthy. Those are stocks that tend to do well when... The economic outlook gets a little murkier, if you will. What's the energy component of the standard and pores 500? Oh, it's single digits. Oh, yeah, single digits. I think it's like 6%. Should that, is it a normative basis? Does that expand over a decade? I think it will, yes.

You know, it's shrunk dramatically. Largely, you know, it's been squeezed out by what's taking place in technology. There's so, and I've got a distraction here. We're going to have to go to in a moment here off of Dubai's, the Bloomberg desk in Dubai. But, Fras Shahan, the earnings season is upon us. Can you even model double-digit earnings growth? I guess before the war. That's what we're going to see. Before the war, yeah, I think you can. Absolutely. Again, when you have the amount of stimulus that you get typically when you have a recessionary backdrop without one, our earnings were still growing, I think you can get the double-digit earnings territory. How much credit risk are you taking in the fixed income market these days? I want to say that I'm a little bit less concerned than the headlines when it comes to that. You know, we're in this transition period, right, where we have stimulus. We're starting to see it in leading indicators of the economy. You know, all the PMIs basically have these smile patterns that start late last year, as you pointed out a little earlier. But we haven't seen it in the economic data itself in retail sales, industrial production. that sort of stuff. And that's usually when the earnings really kick into gear. So it's really rare that something breaks when you're in recovery mode. You know, recovery tends to patch a lot of things, if you will. It's more on the other side of this that I think you'll want to be concerned. Meaning, once we have tightening and we have a slowdown in the pipeline, which is probably a couple of years away. Transyl, thank you so much. Congratulations on the new effort at Vimo Capital. This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 7 to 10 a.m. Eastern, on Bloomberg.com, the Iheart radio app, tune in, and the Bloomberg business app. You can also watch us live every weekday on YouTube, and always on the Bloomberg Terminal.

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