Ontario to Pause Anti-Tariff Ad Campaign After Trump’s Ire

Summary

Bloomberg Businessweek – Episode Summary

Episode Title: Ontario to Pause Anti-Tariff Ad Campaign After Trump’s Ire
Date: October 24, 2025
Hosts: Carol Massar, Tim Stenovec, David Westin
Guests: Laura Dylan Cain (Bloomberg News Ottawa Bureau Chief), Michael McKee (Bloomberg TV & Radio Economic Correspondent), Katie Kaminsky (Alpha Simplex Group), Drew Mattis (MetLife Investment Management), Amy Rubenstein (Clear Investment Group)

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Overview

This episode examines the escalating trade tensions between the United States and Canada following an Ontario government ad campaign critical of U.S. tariffs, which triggered President Trump to halt trade negotiations. The episode explores the political context and economic repercussions, dissects recent inflation data amid a U.S. government shutdown, and discusses developments in the distressed commercial real estate market.

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Key Discussion Points

1. US-Canada Trade Tensions and the Ontario Ad Campaign

• Trigger Event

  • Ontario launched a major U.S. ad campaign criticizing American tariffs on Canadian goods.
  • President Trump reacted by ending negotiations, calling the ad "fake" ([03:05]).
  • Ontario Premier Doug Ford announced via social media the ad campaign would pause on Monday after discussions with Canadian Prime Minister Mark Carney ([02:19]).

• Insight from Laura Dylan Cain

  • Trump initially had a muted response but later expressed anger, surprising the Canadian side ([04:17]).
  • The Ontario government spent $75 million (CAD), and Trump's response amplified the campaign: "If their goal was to get U.S. attention to this ad, they have done their job... The views are way up ever since Trump made this announcement. So well done, Canada." – Laura Dylan Cain ([04:17])

• The Streisand Effect

  • Tim Stenovec: "It's the Streisand effect, truly." ([05:17])
  • Laura Dylan Cain agrees: "It is definitely the Streisand effect."
  • The ad will still run during the first two World Series games before being paused ([02:49]).

• Substantive Trade Issues

  • The main friction points: U.S. sectoral tariffs on Canadian steel, aluminum, autos, and lumber—especially hurting Ontario ([06:18]).
  • Progress was reportedly being made on a steel/aluminum deal, possibly in exchange for more Canadian energy exports. Talks were disrupted by Trump’s reaction to the ad ([06:18]).

• Political Dynamics & Mark Carney’s Strategy

  • Mark Carney, as PM, aims to reduce Canada’s economic reliance on the U.S. while acknowledging practical constraints ([07:40]).
  • He has stated, "the old relationship between the U.S. and Canada is over" and plans to double non-U.S. exports over the next decade ([07:40]).
  • Contrasts between Carney’s and Ford’s approach: Carney is diplomatic and pragmatic, Ford is more ‘populist’ and confrontational ([09:15]).

Notable Quotes:

• "Mark Carney has said multiple times that the old relationship between the U.S. and Canada is over." – Laura Dylan Cain ([07:40])
• "Doug Ford has really advocated punching back. He talks tough. He's kind of a populist in some ways. He can be a bit of a mirror, a Canadian mirror image of Trump..." – Laura Dylan Cain ([09:15])
• "It was surprising that [Trump] then cited this ad in what seemed like...an angry truth social post about the ad." – Laura Dylan Cain ([04:17])

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2. Inflation, Fed Policy, & the Government Shutdown

• Current US Government Shutdown

  • The shutdown has stymied the release of some government data, but an important inflation print was still published due to required Social Security cost-of-living adjustments ([13:45], [15:26]).

• Inflation Data

  • Michael McKee: “It was a slightly softer print. But... services prices were still rising, with a big exception for home prices...” ([15:51])
  • Specifics: Rent increase stabilized, used car prices dropped, but furniture and other tariffed goods rose in price—indicating that tariffs are starting to bleed through ([15:51]).

• Fed Rate Cut Expectations

  • Debate over the size of Fed rate cuts: Most guests agree 25 basis points is likely, not 50 ([18:10]).
  • Katie Kaminsky: "The less likelihood of a shift in policy is what has kind of soothed the markets right now." ([19:01])

Notable Quotes:

• “You want to get on [Bloomberg] Surveillance, you have to be outrageous if you want to talk the truth.” – Michael McKee ([18:10])
• "I do think it kind of relieved the market from concerns. I think the bigger shocks would be if you had any sort of shift in policy." – Katie Kaminsky ([19:01])

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3. Economic Signals: Yield Curve, Consumer Health, and the K-Shaped Economy

• Yield Curve and Recession Warnings

  • The inverted yield curve may not signal recession as reliably as in the past due to unique factors (fiscal spending, healthy consumer balance sheets) ([19:29]).
  • Campbell Harvey, who popularized the yield curve signal, and Michael McKee both suggest not to rely on it currently ([20:16], [20:40]).

• K-Shaped Economy

  • Richer "top end" consumers seem insulated, but stress is appearing.
  • Drew Mattis: “Upper income consumers are increasingly saying that their real incomes are expected to decline over the next year and their job separation anxiety is actually quite high..." ([24:23])
  • Evidence suggests service sector spending is rolling off, which could indicate an economic turn ([25:42]).

Notable Quotes:

• "I think the top end is doing just fine...It's the people who are on fixed income, right, and low wages who are struggling now because inflation is still going up..." – Michael McKee ([21:09])

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4. The Impact of Tariffs

• Tariff Pass-Through
  • Tariffs are leading to some pass-through in prices, especially in goods like furniture.
  • Drew Mattis: “It's not going to be a full pass through...it's going to be a one-time adjustment and the Fed should look through it.” ([27:25])
  • Credit card surcharges are another “hidden” inflation concern ([27:25]).

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5. Distressed Real Estate & Credit Markets

• Distressed Multifamily Sector
  • Amy Rubenstein: There’s "a ton of opportunity" in distressed multifamily real estate, especially as sellers walk away from their equity ([32:49]).
  • Bank spreads narrowing, thanks to both recent Fed rate cuts and the influx of private debt capital. Deals are focused on secondary and tertiary markets (e.g., St. Louis, Tuscaloosa) ([36:09]).
  • Primary markets like D.C. still see deals, but hot growth markets like Austin or Nashville are less attractive due to overinflation ([36:28]).
  • She notes stress is higher among lower-income renters, with higher evictions and delinquencies post-Covid ([38:22], [38:46]); however, no signs of overall recession in the rental sector yet ([39:00]).

Notable Quotes:

• "We have seen a lot of distress over the last couple years and continue to see it. Although I think we might have bounced off the bottom and might be starting to come back." – Amy Rubenstein ([32:49])
• "We tend to stay away from California right now because we just don't get cash flow there. So that ends up being an appreciation market." – Amy Rubenstein ([36:51])

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Memorable Moments & Quotes with Timestamps

• [05:17] Tim Stenovec: "It's the Streisand effect, truly."
• [07:40] Laura Dylan Cain: "Mark Carney has said multiple times that the old relationship between the U.S. and Canada is over..."
• [09:15] Laura Dylan Cain: "Doug Ford has really advocated punching back...a Canadian mirror image of Trump..."
• [15:51] Michael McKee: "It was a slightly softer print. But...services prices were still rising..."
• [18:10] Michael McKee: "You want to get on Surveillance, you have to be outrageous if you want to talk the truth."
• [24:23] Drew Mattis: "...upper income consumers are increasingly saying that their real incomes are expected to decline over the next year..."
• [32:49] Amy Rubenstein: "...there's a ton of opportunity [in distressed real estate] right now..."

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Key Timestamps for Important Segments

• US-Canada Trade Drama: 02:01 – 10:29
• Inflation Data & Fed Reaction: 13:34 – 20:41
• K-Shaped Economy & Consumers: 21:03 – 28:30
• Distressed Real Estate Analysis: 31:34 – 39:08

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Summary

This episode offers an in-depth look at how political posturing and social media rhetoric can derail international trade negotiations—with Ontario’s anti-tariff ad campaign unexpectedly halting progress between the U.S. and Canada. The discussions underscore the persistent challenges of tariffs, economic dependencies, and the diverging strategies of Canadian leaders. The hosts and expert guests also analyze recent U.S. inflation data amidst a federal shutdown, debate the reliability of the yield curve, assess the health of American consumers (especially in a K-shaped recovery), and dig into opportunities and stress in distressed real estate markets. The tone throughout is insightful and conversational, with pointed observations and memorable soundbites from both journalists and their expert guests.

Transcript

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Bloomberg Audio Studios podcasts Radio News this is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg Business Week Daily Podcast with Carol Massar and Tim Stenbec on Bloomberg.

[Tim Stenovec]

Radio oh, we've got to talk about the latest between the US And Canada. President Trump said late Thursday he would end all negotiations with Canada over an ad critical of his tariffs on Canadian goods. Just in the last 34 minutes. Trying to keep track here, Carol.

[David Westin]

Well, I got to say, in the last not even 24 hours, there's been.

[Tim Stenovec]

So much Ontario Premier Doug Ford said in a social media post that the province will pause its US Ad campaign effective Monday after having spoken to Canadian Prime Minister Mark Carney in the hopes that trade talks can resume. He said this on social media. You can see the tweet on the screen right here in speaking with Prime Minister Carney, Ontario will pause its US Ad campaign effective Monday so that trade talks can resume. Here's some of that ad, which Ford said will run over the weekend, quote, so that we can air our commercial during the first two World Series games.

[Laura Dylan Cain]

Throughout the world, there's a growing realization.

[Drew Mattis]

That the way to prosperity for all.

[Laura Dylan Cain]

Nations is rejecting protectionist legislation and promoting.

[Drew Mattis]

Fair and free competition. America's jobs and growth are at stake.

[Tim Stenovec]

Well, President Trump posted on social media that that ad was, quote, fake and ended all of those trade negotiations. Then later, Canadian Prime Minister Mark Carney spoke to reporters this morning before boarding a plane to Kuala Kuala Lumpur, Malaysia, where he will attend the Asian Summit. Our officials, my colleagues, have been working with their American colleagues on detailed constructive negotiations, discussions on specific transactions, specific sector, steel, aluminum and energy.

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And a lot of progress has been.

[Tim Stenovec]

Made, and we stand ready to pick up on that progress and build on that progress. That's Mark Carney, Canadian Prime Minister. Before heading to the ASEAN Summit, I want to bring in Laura Dylan Cain, Bloomberg News Ottawa Bureau Chief. She joins us from the Bloomberg News bureau in Ottawa. Okay, I'm kind of out of breath trying to bring everybody up to speed on what happened over the last 24 hours, Laura. But does it, does it seem like, I mean, does it seem like the ad from Ottawa really struck a nerve with the president? And that was unexpected.

[Laura Dylan Cain]

It was unexpected because this ad from the Ontario government, Trump actually saw it earlier in the week and he offered a pretty muted reaction when he first saw it. He said, if I were Canada, I would probably run the same ad. So it was surprising that he then cited this ad in what seemed like, if I may interpret his truth social post, an angry truth social post about the ad. So it seems he had a couple of days to absorb it and then it did trigger this response from him. So it was very surprising from the Canadian side. But, you know, with Ontario Premier Doug Ford deciding to pull the ad as of Monday, you know, he did note that if their goal was to get us attention to this ad, they have done their job. They spent $75 million Canadian dollars on this ad campaign. And Trump has really amplified it. The views are way up ever since Trump made this announcement. So, you know, so well done, Canada.

[Tim Stenovec]

It's the Streisand effect, truly.

[Laura Dylan Cain]

I don't know about that. It is definitely the Streisand effect. You know, definitely not good to have trade talks paused. As Mark Carney noted this morning, trade talks had been progressing. We believed that a steel and aluminum sector tariff deal was, you know, if not Im that there was real momentum happening toward that. So now that Trump, now that Ford has said he will pull the ad as of Monday so that trade talks can resume, what we're looking to confirm is whether or not the US Agrees with that. They go back to the table.

[David Westin]

So what's at stake here? Because I, I'm going to be quite honest with you, I've kind of lost where we are in the U.S. canadian trade talks. So where are we, what are we discussing? I mean what's crazy is we know the US And Canada have been longtime trading partners and important trading partners in terms of goes back and forth between the borders between these two countries. So what's being what's at issue right now and yeah, what's at stake basically?

[Laura Dylan Cain]

Well, what is really hurting Canada are those sectoral tariffs on steel, aluminum, autos and lumber. Now autos and lumber, it doesn't seem we're anywhere near a deal on those. Trump has said many times that the US doesn't want to buy Canadian cars and he doesn't appear to be interested immediately in preserving the North American vehicle supply chain. But on steel and aluminum sectoral tariffs which have had a devastating effect, particularly in Premier Ford's province of Ontario, it did appear that the Canadian and U.S. negotiators were getting closer to a deal. Those talks reopened after Mark Carney visited the White House on October 7th and there was a discussion about maybe Canadians selling more energy to the US in exchange for lowering those steel and aluminum tariffs. So that's what we were getting close to. That was really upended by this truth social post.

[David Westin]

What about Prime Minister Carney, the Canadian prime minister, you know, formerly on the Bloomberg board, formerly within the private investment world. You know, this is a man who's had several different hats and I'm just, you know, is, is the relationship between US And Canada going to be different from now on as a result of what's going on right now?

[Laura Dylan Cain]

Absolutely. So Mark Carney has said multiple times that the old relationship between the U.S. and Canada is over. In some ways that was sort of his campaign rallying cry that allowed him to become elected earlier this year was taking that really tough stance against US Protectionism and saying that he would diversify cannabis trading relationships. That's a big part of the reason he's in Asia right now is to try and find new export markets for Canada's goods. And in fact he just gave a speech in which he said he plans to double non U S exports over the next decade. It remains to be seen whether that's feasible. But these are some of his goals. This is some of what he talks about. He wants to reduce our economic dependence on the US at the same time, I think he being a businessman, an economist, he understands the reality of Canada's very serious dependence on the US and how difficult it is to untangle those chains. So he is, in the near term, trying to reach some kind of deal that would preserve U.S. market access for Canada. And a new focus will be USMCA next year.

[Tim Stenovec]

Did that go ahead?

[David Westin]

And let's not forget he was a governor of the bank of England 2013-2020. A long time.

[Tim Stenovec]

We've interviewed him.

[Katie Kaminsky]

Yeah.

[David Westin]

I mean, listen, we've interviewed. Yeah. He understands market countries, right?

[Tim Stenovec]

Prime Minister Yeah, yeah.

[David Westin]

From so many different perspectives.

[Tim Stenovec]

So I wonder about, you know, preserving access to the US Market and whether or not this advertisement undermined that. In the long run, we know in the short term what it did. But in the long run, does it, does it set back negotiations?

[Laura Dylan Cain]

It's hard to say in the long run in a world where Trump is president because announcements can just come out of nowhere late at night on a true social website. So it is hard to sort of predict the future of how things unfold. We have seen him end trade talks with Canada before, and then they're back on once Canada sort of backs down on its particular policy. We saw that over the summer with Canada planned to bring in a digital services tax that would have hit American tech giants. Trump canceled trade talks, Carney pulled the tax, and then the trade talks resumed. What I will say is that to be clear, this was not a Canadian government ad. It was the Ontario government and Mark Carney's approach versus Ontario Premier Doug Ford's approach. They've been very different. And so Doug Ford has really advocated punching back. He talks tough. He's kind of a populist in some ways. He can be a bit of a mirror, a Canadian mirror image of Trump in some of the ways that he talks. So I think that we've seen a few times where Doug Ford has created a bit of friction between the Canada, U.S. relationship that Mark Carney is not, you know, does not want to have.

[David Westin]

It definitely sounds like an important distinction. And I'm guessing some phones are ringing or some text messaging was going back and forth. Laura, thank you so much, Laura. Dylan Cain, she's Ottawa bureau chief, joining us from our Ottawa bureau here at Bloomberg News.

[Tim Stenovec]

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[David Westin]

Are in a US government shutdown. It's now in its fourth week.

[Tim Stenovec]

Is it 24, 24 days, I believe, Mike, is that right?

[Michael McKee]

24, 24, 24 days counting.

[David Westin]

We are.

[Tim Stenovec]

Well, I'm trying to, but sometimes I forget what the weirdest thing.

[David Westin]

It just feels like nobody cares. But anyway, we should point out though, in the absence of a lot of official data from the US Government, we did get a highly anticipated read on inflation today. It's a bit of a welcome surprise, Tim.

[Tim Stenovec]

Yeah, that's particularly for several policymakers who are leery of cutting rates further here with the data and the market and the Fed implications. We've got Bloomberg TV and Radio International economics and policy correspondent Michael McKee.

[David Westin]

Isn't it kind of wild though, we're in this shutdown and I feel like in the past when we've covered it, our coverage, shutdowns, we're all over it nonstop. And it's just the weirdest thing.

[Michael McKee]

Well, yesterday the president tore down half the White House. So I know it's kind of hard to I know know what to focus on these days. The economy is chugging along is probably one reason that we're not seeing as much focus on it because people are still, we're not seeing big layoffs yet, although a number of layoff announcements came this week and people are still, their incomes are coming in, they're still spending. If, if things continue to weaken, then it'll become much more of an issue.

[David Westin]

And then we want to talk about an inflation report too as well. We've also got another guest with us.

[Tim Stenovec]

Yeah, Katie Kaminsky is joining us. She's chief research strategist and portfolio manager with Alpha Simplex Group. She joins us from Boston, Mike here in the studio. Mike, let's go back to the inflationary print though, and really the focus of it. Look, we don't know if we're going to get one for this month. We don't. Or do we know if?

[Michael McKee]

We know? We don't know. The White House suggested that we wouldn't.

[Tim Stenovec]

But, but it's not definitive.

[Michael McKee]

It's not definitive.

[Tim Stenovec]

Why did we get one for last month?

[Michael McKee]

Social Security.

[Tim Stenovec]

It's because of the cost of living increase. The cost of living increases 2.8%, I believe.

[Michael McKee]

Yeah, 2.8% calculated based on the average of the third quarter CPI's. So they needed this last one from September to be able to put that out and it legally has to go out by the first of November.

[Drew Mattis]

So that's why we got that.

[David Westin]

So not too worried about inflation right now?

[Michael McKee]

No, we're worried about inflation right now.

[David Westin]

Okay. I thought this was a softer print.

[Michael McKee]

It was a slightly softer print. But you know, what people were watching for was two things. One is were services prices still rising and services prices were still rising, with a big exception for home prices. The way they calculated with owner's equivalent rent. And it they almost collapsed down up just a tenth after being up, you know, 4/10, 5/10, 3/10 for some couple of years. So that could be noise and is an anomaly and we don't know. But if you take that out, then you have still regularly about the same as we've been with the service prices and then tariffs, used car prices dropped a lot during the month. And if you take out autos, you still have core goods prices rising. And we saw things like furniture up 9/10 of a percent, almost a full percentage point, and other other tariffed goods rising in price. So it does show that that's starting to bleed through.

[David Westin]

Hey, listen, Katie, we want to bring you into this because, you know, if I look at the treasury trade over this month, we've seen benchmark, benchmark 10 years below 4%. It's kind of where we are, although we've had some volatility in today's trade. Bring in your read on the inflation print and what it means for the treasury trade.

[Katie Kaminsky]

Well, this is a good question because what we've seen is a little bit of jitters around this potential CPI print. But to be honest, bond trends haven't moved that much. They've been up and they've been back down. So there doesn't seem to be a lot of movement in that asset class in reaction to the Fed. The movement is actually much more in other asset classes, like a strong dollar.

[David Westin]

Which makes no sense. Right, if we're getting lower rates.

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[Katie Kaminsky]

Lower rates, strong dollar. And then the movements today that are consistent with the, the CPI move or the equity market just, you know, showing relief about some concerns about not getting rate cuts because of the shutdown. I think so.

[Tim Stenovec]

Mike, come on in on this. Push it to next week. I mean, does that mean that we might not get rate cuts as a result of the shutdown?

[Michael McKee]

No, we'll get, we'll get the rate cut.

[Tim Stenovec]

The Fed folks on surveillance talking about 50 basis points this morning. Not going to happen.

[Michael McKee]

Well, you want to get on surveillance, you have to be outrageous if you want to talk the truth.

[Tim Stenovec]

His name rhymes with Tom Keane.

[Michael McKee]

Yeah. No, we're not going to get 50 basis points, we're get 25. The question is will we even have any dissents other than Steven Myron who's already sort of advertised he's going to dissent every time unless he gets, unless he gets 50 or 75 basis points or whatever. I mean that's why they sent him there. But the Fed came into this meeting letting the markets believe in a 25 basis point cut and there's nothing in the inflation data that's going to say screamingly you can't do that. So the Fed will just go ahead and cut rates. But I wouldn't put any bets yet on what's going to happen in December.

[David Westin]

Katie, you were on surveillance this morning. Tim and I were listening. Were you one of those crazy kids who said 50 basis points? I don't think so.

[Katie Kaminsky]

No, definitely not. I'd say I was surprised though because I think the numbers did come in a little bit. I thought they'd come in as expected. So coming in a little better than expected definitely accelerated some of the trends that we're seeing. I do think it kind of relieved the market from concerns. I think the bigger shocks would be if you had any sort of shift in policy. So the less likelihood of a shift in policy is what has kind of sued the markets right now.

[David Westin]

There's an interesting story in the Bloomberg that caught my attention. I'm curious what you guys think about this. The bond markets movements have been suggesting a US downturn for three years since three month treasury yields first pushed above 10 year ones. A right through on this notes, the yield curve's predictive power may be sounding a false alarm this time. This is from Campbell Harvey. Due to factors such as massive fiscal spending and healthy finances of consumers and corporations. Do you agree Katie?

[Katie Kaminsky]

I would have to say it is very contextual because when you look at the inverted yield curve over different periods of time, you know, I think some of the potential inflation and other issues with policy is this kind of not necessarily means that there's a recession right away. So I think it's been sort of a false signal during this market environment.

[Michael McKee]

Yeah, we should mention that Campbell Harvey is the Duke professor who came up with the idea of the inverted yield curve signaling recession. And I think there's been general consensus at the Fed and among economists since we went through almost since we went through the great financial crisis, but certainly coming out of COVID that it's not reliable now for a whole host of reasons.

[David Westin]

So ignore it.

[Michael McKee]

Ignore it. Yeah.

[Tim Stenovec]

Hey Mike, we're Going to be speaking with Drew Mattis over at MetLife Investment Management in just a minute about the consumer preface for that conversation. Like lay the, lay the groundwork here. How is the consumer doing?

[Michael McKee]

Well, I think you advertise it as the K shaped economy or not. That explains kind of where we are with the consumer.

[Tim Stenovec]

But as we'll hear from Drew, he kind of argues that the, the top end isn't doing as well as people think.

[Michael McKee]

Well, I, I think the top end is doing just fine because when you get to the top, the higher top end, you're making all your money off of interest and dividends. And the stock market just keeps going up and up and up. It's the people who are on fixed income, right, and low wages who are struggling now because inflation is still going up. And they're, they're, they're, they're trying to make ends meet and finding it harder and harder. If you've gone to the grocery store lately to buy hamburger or something like that, so you have this bifurcation and the question is how long can people hang out before they start pulling back on spending? And there's anecdotal evidence that they're starting to pull back in some areas already. Then if we get any layoffs, as some of these companies P and G today had, you know, good, good earnings. But oh yeah, by the way, we're going to get rid of 1800 people.

[David Westin]

Hey, Katie, I want to go back to just one, you know, about the idea of what we're seeing in equity markets versus bond markets versus the dollar strength. I mean, I'm trying to, you know, gold silver rally, then more recently dropping back to the market. Metrics fit together, make sense. They tell one story or no. And if not, then what does that mean?

[Katie Kaminsky]

So this is a good question. I think for me the question has been, you know, it's been a growth story in equities having good GDP numbers. So you're seeing that very strong equity trend, but coupled with that seeing also very strong gold and a weaker dollar has made me feel a little nervous about that. You know, there's a chance that we might have an overstimulation. So low rates, high growth, and you kind of have inflation potential. I think today's print is helpful in the short term, but those are the themes that I'm seeing where there's sort of a hedge out there against, you know, things look good, but you know, we need to proceed with caution. We could have inflation, we may have issues especially with the weaker dollar. So this firm dollar is also kind of interesting to me. I think probably the most interesting recently.

[David Westin]

All right, great stuff. Great. When we can do a double dip with Katie Kaminsky on this morning. On this afternoon. She's chief research strategist, portfolio manager with Alpha Simplex Group. Hey, we're going to stay on this. Mike's going to stay with us. We want to bring your to something that JP Morgan's asset management's chief global strategist David Kelly said this morning too on BTV on surveillance talked about the Fed inflation and the case shaped economy.

[Tim Stenovec]

I think the Fed's going to keep on cutting rates is generally a better than expected report.

[David Westin]

But I think what it really shows.

[Tim Stenovec]

Is we have a K shaped economy.

[David Westin]

And it's sort of a K shaped CPI report. It is clear that that mainstream retailers don't believe they can pass on the tariff increases right now and that's what's making this inflation rate a little bit tamer than people feared want to bring in. Of course, that was JP Morgan's David Kelly earlier today. But right now I want to add to the mix. The senior economist actually was a former senior economist at Lehman Brothers. We've been talking to him for a long time. We're talking about Drew Mattis. He is the chief market strategist at MetLife Investment Management joining us from New Jersey. Drew, your recent note caught the attention of our Talia Choir Ella about how the consumer is not okay. Walk us through that.

[Drew Mattis]

Well, there is a K shaped recovery or consumer. The upper end is doing reasonably well. But the question is always kind of how what's the change look like. And the change for the upper end consumer is beginning to show signs of stress. Now, whether that's because a lot of the federal workers would fall in that 100,000 plus category or whether it's something else. What we are seeing is that upper income consumers are increasingly saying that their real incomes are expected to decline over the next year and their job separation anxiety is actually quite high, particularly relative to kind of lower income cohorts probably because a lot of the jobs that had been being created were actually kind of health care and other jobs that in many cases tend to be, you know, kind of lower income side of things. And so I think yes, they're doing fine for now, but there are signs of stress and ignoring them is something that can lead to trouble.

[Tim Stenovec]

I got to tell you, Drew, I see that anecdotally right now with people looking for jobs who have been making good money and got laid off. And you know, I've been looking for jobs for months at this point. When do we, if we haven't already, how does that then manifest in data? And we're not necessarily getting it from the government, but how does that manifest in data that investors can react to?

[Drew Mattis]

Drew Well, I think that one way it will manifest itself is a decline in service sector spending, which we have been seeing at least through the August numbers, which were the latest ones we had before the shutdown. You know, what tends to happen when you have to worry about things or when people begin to adjust their lifestyles in ways that shouldn't really be adjusted, trusted. And by that I mean, you know, buying a cup of coffee in the morning is not a decision that should really tax most people's brains or that they should really think about if they're feeling good about their job prospects or that they have a job. And what we're seeing is people are pulling back on those kinds of purchases. And when that happens, you know, if you're not buying a cup of coffee, you're not going to buy a car. And so we're beginning to see that roll off on the service sector spending side of things. Things. And yes, maybe people are in the upper income tier are still splurging on certain things, or maybe there's a cohort within that upper income cohort that's still splurging on certain things. But the reality of it is it seems like it's beginning to shift into a kind of a lower growth dynamic. And of course we can't find any of the data or we don't have the data to know whether or not that in fact is happening.

[Michael McKee]

DREW how much of tariffs are a problem given what we saw today, that there is some leakage in and there may be more coming. It's obviously not what was feared back in April, but how, how bad is it, Johnny, as that big man used.

[David Westin]

To say, and Google that if you don't know what he's talking about, because.

[Michael McKee]

You should old enough, he'll know.

[Drew Mattis]

I know, I do know, unfortunately, because I am old enough.

[David Westin]

I meant that for the rest of the audience out there in our control room.

[Drew Mattis]

You know, I do think we're going to see pass through. I think it's going to happen. It's not going to be a full pass through, nor is it going to lead to kind of this kind of wage price spiral type inflation story. It's going to be a one time adjustment and the Fed should look through it. You know, I was just complaining to you, Mike, though, you know, what about all the credit card surcharges that I'm now paying for? It seems like everything went up by 3% on top of the 3% inflation rate because every time I pull out my credit card, I have to pay a lot more. Just, they kind of just use it. And so I think, you know, once again, it's, it's going to be something that people notice and are affected by it. But one of the things that's actually helping people right now is that gas prices are actually extraordinarily low, particularly relative to where they had been. And so we look at gas prices relative to kind of how much you have to work to get there. So how many minutes of your work life does it cost you to buy a gallon of gasoline? And when you look at it that way, it's actually, you know, quite contained, well below where it had been the last couple of years, which is probably helping people continue to spend.

[David Westin]

All right, we're going to leave it on that note. I know we will be continuing this conversation in the future. Drew Mattis, thank you so much. Chief market strategist at MetLife Investment Management. Of course, our thanks always to our own Mike McKee, TV and Radio International economics and policy correspondent.

[Tim Stenovec]

Stay with us. More from Bloomberg businessweek Daily coming up after this.

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[Carol Massar]

The Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[David Westin]

Interesting couple of weeks. We've talked about Zions a couple of regional banks Zions tumbling. Last week the firm said it was the victim of fraud on loans to funds that invest in distressed commercial mortgages. After the collapse of subprime auto lender Tricolor holdings and auto parts supplier First Brands Group. Some investors said they are becoming concerned about cracks in the credit market. And then of course there was Dun dun dun dun. JPMorgan Chase CEO Jamie Dimon.

[Tim Stenovec]

You can't forget what he said last week that there's really just one cockroach which some private credit executives size a barb aimed at them. Blue Owl Capital Co CEO Mark Lipschultz responded by saying banks should look at their own books.

[David Westin]

All right, we've got a view on the distressed market specific area. Back with us is Amy Rubenstein. She's CEO of Clear Investment Group. It's Chicago based specializing in opportunistic real estate investments, specifically in the distressed mid sized multifamily sector in mostly secondary and tertiary markets around the United States. She is lucky for us in studio. How are you?

[Carol Massar]

I'm great. Good to be Back here.

[David Westin]

Well, it's great to have you back here. And I'm just curious big picture, the environment. There's been a lot of stuff over the last week. Tell us about the distressed market. Certainly the area that you play in. Are there more distress situation opportunities out there for you?

[Carol Massar]

Yeah, there's a ton of opportunity right now there always.

[David Westin]

Or is there more than there have been?

[Carol Massar]

I will say when we're in buyers markets we see more distress. Right now we have seen a lot of distress over the last couple years and continue to see it. Although I think we might have bounced off the bottom and might be starting to come back.

[Tim Stenovec]

Why do you think that?

[Carol Massar]

Well, I think that the drop in interest rate that we recently had was a little bit helpful. That was only 25 basis basis points. But what we've really been seeing is that bank spreads are coming in as well. So while we only saw a 25 basis point drop from the Fed, we're really feeling something more like 100 basis point drop based on the fact that banks are coming in.

[David Westin]

That makes it some situations not so.

[Carol Massar]

Stressful or does it help people have existing that might have gone up on interest rates but as people are refinancing, we are finding a better lending environment than we were about a year ago.

[David Westin]

So talk to us about a deal that you've recently done.

[Carol Massar]

So we are doing a deal right now that we're getting a spread. We're actually assuming a loan that is being purchased at debt. So we're seeing a lot of that in the market right now where you do see distress from people and people are walking away from their equity in order to save their personal guarantee.

[David Westin]

And that's more than you saw maybe three months ago, six months ago.

[Carol Massar]

Happens to be that we've had our last five deals that we've looked at have had loans where we're assuming the loan at debt and we're and the sellers walking away losing all of their equity.

[Tim Stenovec]

Why are sellers walking away? Well, what are they not? What are they not able to do that then you can come in and.

[Carol Massar]

Do so what this particular lender is doing for us is dropping that interest rate. The lender does, doesn't want to lose any of their equity in exposure. Yeah. So they instead are saying, all right, we know that there things were a little bit off. We know that interest rates were high and we know that that seller or that owner was struggling. Here we have a new borrower coming in who's going to be solid, who's going to maintain the integrity of Our investment. Let's give them a little break for a little while so they can get through this period.

[Tim Stenovec]

Are lenders doing that without a transaction going, going through? Could that seller have gone to the lender and said, look, we can't handle this rate. Can we renegotiate? So then you don't have to bring someone new. And you know us.

[Carol Massar]

I do think that happens as well.

[Tim Stenovec]

Okay.

[Carol Massar]

So, yes, I think that's a possibility, and I think that's something that borrowers need to ask for. And I think when they do ask, they're often able to negotiate something with their lender.

[David Westin]

Amy, how many of these deals have some kind of private credit in them as well, or is it separate?

[Carol Massar]

So I think that is the reason that spreads have come in, because private debt really flooded the markets. And while banks took a step back, I would say over the last couple of years, banks kind of pulled back, wanting to see how the market was going. And then all of this private debt flooded the market, which is what really caused. When banks wanted to come back in beginning of 2025, they started to enter the market and they saw more competition than they had before. And so then what happened is they started to bring in their spreads. And that's what brings us to have that feel of a much lower interest rate than just that 25 basis points.

[David Westin]

So give us an idea. You do work in multifamily. Give us an idea of the types of properties or the regional variations where maybe these deals are happening.

[Carol Massar]

Sure. We have a deal under contract right now in St. Louis, a deal under contract right now in Tuscaloosa. So we're talking about, you know, those are secondary and tertiary markets. We're also in D.C. so that's a primary market. So it really depends on where we're finding the right deal.

[Tim Stenovec]

Where are you not seeing deals because the market is so good?

[Carol Massar]

So some of the places we won't buy are places that got a little bit overinflated. So some of those growth markets that are now starting to show some.

[Tim Stenovec]

Austin, Texas.

[Carol Massar]

Sure, Austin, Nashville, South Carolina. Yeah, absolutely.

[Tim Stenovec]

What about California? There's a lot of questions about the future governor, who that is, a lot of questions about regulations and red tape during the next administration.

[Carol Massar]

Absolutely. We tend to stay away from California right now because we just don't get cash flow there. So that ends up being an appreciation market. And so we never really find that, that cash flow to be able to go into that market.

[David Westin]

So would you go as far as to say, you know what we've Seen over the past few months and just the past week that you know, Tricolor first brand, I mean, I mean there have been knock on effects when it comes to financing. As a result of this or no.

[Carol Massar]

As a result of.

[David Westin]

Well, any like of the real estate financing deals have what we have seen with these and nervousness within the credit market. Has it had an impact?

[Carol Massar]

No, I actually think that we are seeing enough money in the market to be lending. So I don't see that there's an issue of borrowing. I see that there are fundamentals that are still strong. Although even in September I'm sure everyone's kind of watching this drop in rental rates.

[David Westin]

Right.

[Carol Massar]

September was that first month where we really saw a big drop. I think 30 basis points in just that month alone. And if you kind of pull it apart and look at it, what's causing this? If you dissect it, you're getting about half, about 50 basis points drop in lifestyle renters. So renters who are choosing between home ownership and renting and that probably is coming from, from people wanting to go back into the home market. You're only getting about 10 basis points of drop in renters by necessity. So you got to like dissect that number.

[Tim Stenovec]

How are delinquencies with tenants right now?

[Carol Massar]

That's an interesting question. We have seen that delinquencies and evictions have been a higher trend than usual but that hasn't been just as of recent. We've seen that over the last couple of years.

[Tim Stenovec]

So that hasn't changed at all in the last six months or so.

[Carol Massar]

I haven't seen seen it in the last six months that that's growing. It definitely is a trend that I think started post Covid who's struggling.

[David Westin]

Who are those people in those properties? Just got about 30, 40 seconds.

[Carol Massar]

Yeah, well you know the rents are staying stronger in these C class assets but I think it's also that lower income zone that is struggling more than the higher brackets.

[David Westin]

Are you talking recession at all or like or just.

[Carol Massar]

No, no, we're still seeing things being very strong as far as employment sounds. Still seeing tenants come in that have qualifications to rent.

[David Westin]

Well listen, you're the perfect person to check in considering this environment and the conversations we've had over the last week. Amy, thank you so much. Thanks for coming in studio.

[Carol Massar]

Thanks for having me.

[David Westin]

Yeah, great to have you here. Amy Rubenstein, she's CEO of Clear Investment Group joining us right here.

[Carol Massar]

This is the Bloomberg businessweek daily podcast available on Apple, Spotify and anywhere else you get your Podcasts Listen live weekday afternoons from 2 to 5pm Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, 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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