Here's the next big investing theme in the Trump economy

Yahoo

18-06-2025

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It could be a pressure cooker of a summer for the US economy, and not because of the warmer weather. Tariffs from the Trump administration don't appear to be going anywhere anytime soon, forcing businesses to raise prices on consumers and delay key projects. At the same time, the Federal Reserve is in no hurry to cut interest rates amid stagflation fears. Economic data has also begun to weaken, with the latest evidence being the employment readings from the last three months. Yahoo Finance executive editor Brian Sozzi talks on the Opening Bid podcast with the deputy head of BlackRock's portfolio management group, Mike Pyle. Pyle has spent considerable time in top economic advisor roles in the White House administrations of both Biden and Obama. Before rejoining BlackRock in the fall of 2024, Pyle led President Biden's international economic policy efforts. He was Biden's 'sherpa', serving as the lead in key economic negotiations with the G7, G20, and APEC. Pyle reveals his latest outlooks on the economy and markets with Sozzi, as well as his biggest concerns as Trump tariffs begin to take root inside corporate America.
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Welcome to a new episode of the opening bid podcast. I'm Yahoo Finance executive editor Brian Sai. Like I always say, it's the podcast that will make you a smarter investor, period. And you're of course gonna get smarter off of this next featured guest. Uh, joining me now on the pod at the NASDAQ in Times Square, it's Mikey, deputy head of BlackRock's portfolio management group, and Mike, I, I.Tick through some of your prior positions here to you know set the stage on everything you've done. You are the former deputy national security adviser for international economics during the Biden administration. You were the chief economic adviser to Vice President Harris in her first year, and of course you worked in the Obama White House. So I mean you've been a busy guy the past 10 years,
something like that.
Uh,
plenty to keep me plenty to keep me occupied. So
you, if I have it right, you, you help, uh, lead what, $3.2 trillion in assets under management at BlackRock.
So the portfolio management group at BlackRock oversees our active investment strategies in public markets across asset classes. So active fixed income, active equities, active multi-asset.Uh, so, uh, a range of different strategies and we're fortunate to get to manage, um, assets on behalf of a lot of clients globally.
The way I summarize it, it's a tough gig. It's a tough job. So you, you know, I, I was trying to think of a way to, to get this going, and I, and I love what the Wall Street Journal recently. They're calling it, um, it can be an uncomfortable summer for the economy. Would you agree with that?
Yeah, listen, I think thatUncomfortable in the sense that there's a lot of uncertainty out there, but I think if you take a step back, you know, right now the underlying momentum of the economy still seems relatively healthy, and we got of course the most recent pulse check on that uh on Friday, you know, a pretty solid employment report, unemployment hanging steady.Uh, you know, yes, there seems to be some modest step down in in uh economic momentum. yes, uh, there's a shock that we're beginning to work our way through both on the growth side and on the inflation side from the trade policy uncertainty and the fact of tariffs, but.You know, stripping that away it does continue to look like the underlying momentum is, is still relatively healthy is
the next step off a cliff, and I, I ask this because you know I, I saw that jobs report what 139,000 on the headline, but then the prior.Months were revised sharply lower, you know, in my view, so we had weaker growth for the for the employment market prior months. We had a headline that's below that 200,000 growth rate we saw in many respects under the the body administration, you know, what is that next move in the economy?
So I, you know, I think that it's not surprising to me that we're seeing some step down in the underlying economic momentum out there, you know, you think about a couple of things one.Um, you know, net immigration is now considerably lower than it has been in past quarters and years. That means that the breakeven level of job growth month on month is just gonna be less even for a comparatively healthy economy. And like I said, you know, there is a shock playing out because of the trade policy.Changes that we're seeing that's gonna play out both now and in the months and quarters ahead that's gonna cause growth to step down that's gonna cause prices and inflation move somewhat higher, at least temporarily, but I think those things can coexist against an underlying economy that still continues to grow, continues to expand.Uh, at a healthy, even if slower rate, and I think that's what we mostly saw in the jobs report and what I would expect to continue. Why do you
think the economy hasn't slipped into a recession?
You know, I think, I think the economy at the end of the day in the US is, you know, a dynamic, resolute, um, healthy one, you know, this is an economy that, you know, has among the world's leading corporations, the world's leading innovators, it's incredibly dynamic on its own terms. There's a reason why if you roll the clock back, you know, just 5 or 6 months ago.Uh, the question investors were asking is, is there any place else in the world to invest but the United States, because of that economic dynamism, because of the innovation of our corporate sector, our technology sector. So I think, you know, let's just remind ourselves where we were 5 or 6 months ago and where we were 5 or 6 months ago was, you know, the United States is a world leading world leading economy. The things that made that true then are.Mostly still true now even in the face of uh some of the uncertainty and policy shocks we've seen and I think that if you're looking for why the United States continues to be I think a relatively uh healthy economy on a relatively healthy trajectory, that kind of underlying structural strength is where I'd point
as someone that was in the trenches, uh, during the Biden administration working on various economic policies.Is this an economy you think that is still benefiting from a lot of those policies that the prior administration put in? I talked to, I remember smack in the middle of, um, you know, maybe towards the tail end of the pandemic thinking about all the investments that the administration put forth and I think of chip production. I remember talking to the CEOs of Intel and AMD and how they're now at the time were spending billions of dollars to ramp up their businesses because of that. Is that is the economy still feasting on that momentum?
I mean, you know, I think that what you highlight is the fact that the problem that this administration has pointed itself at the problem of our manufacturing capacity, the problem of our industrial capacity, uh, is not a new problem. It's something that, uh, President Obama focused on, it's something that President Trump focused on in his first term. It's certainly something that President Biden focused on, and now it's something of course that President Trump is focused on in a second term.You know, I think that exactly to your point, whether it was the chips and Science Act, whether it was the inflation reduction Act, you know, a lot of the, um, relatively kind of robust health that we saw in terms of investments into manufacturing and uh and the industrial economy, uh, was, you know, showing real momentum, real signs of bearing fruit.Uh, and I think you know a lot of that, that momentum from the last couple of years is persisting into this year, uh, and, uh, you know, the hope is that we see that that continue.
Do you think that the US becomes a great manufacturing hub again? Of course we have auto plants in here, but we've heard the Trump administration really lean into, of course, making getting things made in the US. Do you think that happens and what would that mean for the economy?
So you know, listen, the way I think about it is you know we are um engaged in a very significant geopolitical competition uh with China that has a bunch of different aspects to it economic, technological, financial, uh, many other respects as well and.It's important to have a um robust manufacturing sector, uh a robust set of industrial capacities uh precisely because, uh, our national security demands it, but I think what we were pointed at when I was in the Biden administration was looking to work with our allies.Partners to you know have the broadest based uh set of international partners that we were working together with to achieve those ends, and I'm hopeful that as we get deeper into the Trump administration as they focus on how we're really going to expand industrial capacity in ways that serve our national interests and our national security.that uh that same spirit of recognizing that we've got to do this together with others in addition to investing in ourselves uh is uh is is the order ofthe day
as someone that worked really closely, um, in various negotiations with China, Asian, other Asian countries, I talked to a lot of CEOs and they're moving aggressively out of China, uh, their supply chains. What, what impact do you think that will have on the Chinese economy but also to our relationship with them over time.
Yeah, I mean, I think that this has been a long standing trend really dating back to the first Trump administration. We saw a tremendous amount of relocation of investments and uh trade activity away from China into economies in Southeast Asia, uh, Mexico, other uh uh important economies around the world.I think only continued in the Biden administration. I would expect to continue during this Trump administration as well, you know, I think it reflects the fact that this is a world that's uh fragmenting geopolitically, reflects a world where companies that are making investment decisions want to do so in a way that um.You know, balances their risks and recognizes that you know the the producing in China carries a different set of costs and benefits than it has historically and being sure that they're diversified both in terms of production here at home where possible production in other economies that don't have the same kind of risks associated with them, being sure that they're resolute.And resilience of the types of shocks and fragmentation that have happened and will likely continue to happen, uh, that's what's, you know, in the best interests for them as, as, as a business and I think ultimately reflective of, like I said, these underlying trends. So is
this tariff policy by the Trump administration, I think we can agree it's been chaotic and all over the map, but at its very core hasn't been good, has been good for the US economy.
So listen, I think that the the core feature we've seen thus far is a lot of uncertainty without a great deal of clarity in terms of where this is ultimately going to land and I think that you know a couple things one.You know, the tariff policy that we're seeing regardless of where it lands is going to be a negative shock for US growth. Uh, it is going to be a positive shock for inflation and the price level, and so in that sense, it is going to cause short and medium term dislocation and less growth than we would otherwise see.I think beyond that, um, you know, the uncertainty is itself its own driver of um of uh you know uh economic, um.You know, of, of economic softness as we were, you know, talking about before this air, you know, corporate executives are, you know, right now kind of frozen,
totallyfrozen. I can't tell how many executives are telling me, yeah, we're getting ready to go into 2026 budget planning season, and we have like 8 different scenarios and a lot of them suck,
yeah, and so you know I think we're talking about before about that momentum and industrial investment.Manufacturing investments around chips around data centers around uh energy infrastructure, you know, those are the kinds of things that are being disrupted because of the uncertainty because of uh corporate executives, corporate leaders waiting to see where policy lands where they can rely on it before resuming those investments that's the kind of disruption that.You know, concerns me in terms of both the underlying trajectory of uh investments and capacity over time, but you know shorter term, you know, about you know how big that step down and growth has to be
right, hang withus, uh, Mike, we're gonna go off for a quick break. We'll be right back on opening bid.Welcome back to Opening bid, and we're here at the Nasdaq in Times Square having a great chat with Mike Pyle, deputy head of BlackRock's portfolio Management Group. This has to be prime time for you in the sense that you have all of this, um, international economic experience and we're coming up on the key date for the, I guess for the lifting of the pause between China and the US on on tariffs was July 9th, I believe, um.What are you telling investors right now as we get to this critical date?
Listen, I think that as we were talking about this is a period of heightened uncertainty, um, and I think that one of the things that's been really noteworthy looking at markets this year is that heightened uncertainty has manifested itself in very large swings in investment sentiment and swings in investment sentiment that are.Far greater than the actual underlying changes in the fundamentals that we've seen, uh,
today. Economy still it maybe be economy might be growing slowly, but it's still growing. Absolutely recession hasn't happened yet,
yeah, and, and may well not, um.And yet we've seen at a minimum 3 very different investor sentiment regimes here to date. Again, you know, you roll the clock back to the start of the year, uh, it was, you know, US exceptionalism, Uberrais, you know, there was no other place in the world to deploy capital, uh, but the United States.
The excitement, I was in the, uh, Dalls of the World Economic Forum at the end of January, and you thought we were gonna get GDP growth in the US September.I mean, the optimism on the ground was absurd. It was just, yeah, I never seen it in manyways.
I, I point to that moment in late January because I was like, like, exactly. But if you roll the clock forward from there like literally 6 weeks, everything was reversed. It was the end of the dollar, the end of US exceptionalism, um, you know, just the nadir of, um, you know, investor views towards the United States and its long term health and well-being.Uh, and then, you know, kind of post, uh, the pull back, uh, in, uh, the global tariff post in particular, uh, some of that temporary respite with, with China, uh, you know, you've seen investors move to a considerably more constructive and I think kind of more balanced place, uh, and I think, you know, where I think we're at is a place where you have to be able to hold two ideas simultaneous in in your head that they're a little at odds with one another.You know, one is, yes, again this is a trade policy shock that's going to mean growth is lower, that's going to mean inflation is somewhat stronger, it's a trade policy shock that in the medium term is gonna leave us with the costs of uncertainty that we've talked about, but at the same time.The US is still the world's most dynamic economy, the world's most innovative economy, the world's most resilient economy, uh, and that basic underlying structural health can continue to shine through, shine through in terms of.Ongoing economic expansion shine through in terms of financial assets continuing to perform even in the face of the shock that means that things are perhaps less good than they could be otherwise.
Are investorsthough still are they are they too optimist optimistic right now? I look.A lot of executives are telling me they're pushing through double digit price increases, and oh yeah, we still have tariffs on. It's unclear to your point. Uh, there's considerable uncertainty what happens between the US and China relationship. Are they just forgetting about some of the dynamics that are happening?
I think you know.Our view in the face of broad uncertainty in the face of I think a set of questions that are going to shape the global economic environment pretty profound and tectonic ways over the coming 2345 years is it's pretty hard to forecast where things are gonna head on that type of horizon.Uh, making kind of big bets one way or the other directionally is probably not the right way of approaching, um, investing from the perspective of, you know, a mom and pop investor or a large institutional investor. I think what the moment calls for is a couple of things one.Um, you know, kind of sticking to your knitting, staying invested, staying close to your strategic asset allocation, but bearing in mind a couple of things, uh, diversification and return is harder to come by, uh, and so looking to strategies that can be relatively uncorrelated from these big.Um, directional moves that can generate that diversification return things like, you know, market neutral strategies including hedge funds, we think that has a really important role in portfolios and then I think secondly thinking through geographic diversification more carefully, you know, there's been one trade that's really worked over the last 15 years and that's being long the United States versus the rest of the world.I think it's totally plausible that continues to play out, but sitting where we sit today, being more thoughtful around some of those geographic exposures, asking if, you know, as opposed to being overweight, the US and underweight the rest of the world, underweight Europe makes sense, maybe being more neutral weight, you know, maybe that's the right way of thinking about being balanced and resilient against a bunch of different potential outcomes of the coming 2345 years.you know, those are the types of conversations we're having with investors, and we think that that's, um, you know, the best way to navigate this uncertainty sitting where we sit today.
I was joking, uh, I'd love to get your, uh, in the final two minutes we always got a hot take from our guest. Um, I was talking to Rick Rieder, of course, uh, BlackRock, um, friend of a friend of the show, so to speak, and we were talking a lot about the debt situation in the country. When you talk to investors, um.Are they really that concerned about the country's debt and what it might mean for markets whether it's stocks or fixed income or is this more of a daily headline driven story and maybe something we should investors shouldn't pay a lot of attention to.
Listen, I think it comes up in my conversations with investors, uh, much more regularly today than it did, you know, winding the clock back 4 or 5 years, we talked about the bottom market. Yeah, it's, it's a, it's a, it's a lot more prominence of feature and conversations today, uh, I think as prominent as it was back in the early 2010s when kind of deficits and debt were last really in the headlines, you know.I honestly think that investors today are more rightly focused on our fiscal trajectory today than they were 10-12 years ago. I think 10 or 12 years ago actually what we needed was more fiscal support of a low growth economy. Today I do think that the the deficit and fiscal picture.Is potentially much more risky, is potentially at risk of crowding out investments and consumption because of the push in interest rates higher from the types of debt and deficits that we're seeing. So I do think that investors are are rightly focused on it and I think one reason why you know Rick and others of the farmer.Cautious on longer dated, uh, government bonds, including treasury is, you know, this kind of fiscal picture is gonna put upward pressure on those rates on term premia, you know, and out over the, the, the medium term horizon in our
time, our time, we're still young guys, but nonetheless, um, we're never not gonna pay back our debt and that's just not gonna happen,
right? So listen, I mean I would say, you know, to, to jump ahead with uh with my hot take, uh, you know, I'd say at some level my hot take is, um.You know, I think investors are right to be concerned uh about our fiscal picture I think um for for all the reasons that we just described and yet when I look at American history.I see examples of how our political system was able to come together and really change our fiscal trajectory in ways that ultimately put us on a solid footing, but that doesn't happen overnight though, you know, if you look at the, the period that perhaps most rhymes with our own, uh the period in the late 70s, early 80s, mid 80s, early 90s where fiscal policy did look unsustainable, where it was front of mind for investors last time.You know, the United States across parties over a 10 or 15 year horizon really embarked on a bipartisan effort to reduce deficits, and it didn't happen all at once. It didn't happen overnight, but on 5 or 6 different occasions across 15 years, either one party or both parties came together to take a bite out of that deficit and again over that course of a decade and a half we adjusted our.Fiscal trajectory by about 5% points of GDP and put ourselves in a much more sustainable path. I think a good state of the world is one where we see that happen again, but we have a relatively recent historic episode in both your and my lifetime, even as young guys, we've done it before.
Well, uh, I'm an optimistic guy by nature, so I appreciate your optimistic hot take, uh, Mike Pyle, deputy head of BlackRock's portfolio management group.To see you in person. Appreciate it.
Thank you. All right,
that's it for the latest episode of Opening bid here at the NASDAQ in Times Square. Continue to hit us with all those hearts and thumbs up all over the podcast platforms and YouTube. Love your feedback and uh if you want to know a little bit more behind the scenes from this episode or had questions, of course hit me with the comments sections on YouTube or on Twitter at Brian Sazi or I should say X at Brianazi. We'll talk to you soon.