Bloomberg Intelligence Podcast Interviewer (2:57)

No, but I mean, they're talking is the fact. I mean, Scarlett and I were just saying, just the fact that they're talking feels a little bit better.

Ethan Brauner, Israel Bureau Chief for Bloomberg News (3:05)

I guess so. I mean, you know, it's. It's interesting question about good and bad. I mean, obviously, from the most perspective abroad, everybody would like this thing to come to an end. I've just written a story that we put on the Bloomberg Wire a couple of hours ago that says in this country, in Israel, that is not the goal. The goal is victory, not stopping the war. So, you know, the idea is to stop Iran from having the capacity to threaten Israel and the region any longer. And if the war stops, that won't happen unless it stops on the. Under the terms that President Trump has put forward. And that doesn't assume very likely.

Bloomberg Intelligence Podcast Market Analyst (3:43)

At the same time, Iran is moving forward. For instance, it's been able to export a lot of oil, make a lot of money by sending oil to China, for instance. It's also charging some ships a transit fee to get through the Strait of Hormuz. So financially, you know, they're pocketing some money.

Ethan Brauner, Israel Bureau Chief for Bloomberg News (4:03)

They are. I mean, I'm not sure you'd let us change places with them. They're losing all their infrastructure by pocketing a few bucks in oil. I mean, sure, look, I am not saying that it's. The war is going great from the American perspective. I don't know. It's very difficult for us to assess. And there's always a propaganda war underway. At the same time, there's an actual physical war, an attempt to persuade the other side to back down. And it doesn't look at the moment that either side is. Now, it is also true that from an American perspective, rising oil prices and all this kind of stuff for what is seen to be a war of choice is causing a lot of political trouble for the president. And in Iran, I think there's less political trouble. It's, after all, an authoritarian situation, so. And they may be willing to put up with a lot more suffering than the west is. We shall see.

Bloomberg Intelligence Podcast Interviewer (4:52)

Ethan, if. If President Trump were to decide to end this war for whatever reason he sees fit, is it a fair assumption that Israel will go along with that?

Ethan Brauner, Israel Bureau Chief for Bloomberg News (5:03)

It's a fair assumption, yes. I mean, as much as this country would like to see it completed appropriately. It is much more important to it to maintain its strong relationship with the United States, with this administration. And it is certainly made clear that it will take its cue from the President on this. Absolutely.

Bloomberg Intelligence Podcast Market Analyst (5:25)

Ethan, what are you looking at next? How are you determining how to kind of keep score here?

Ethan Brauner, Israel Bureau Chief for Bloomberg News (5:31)

I'm trying not to keep score. I'm not really sure it's all that useful for me. I mean, what I'm, you know, there are a bunch of things we're watching all at once. One is the level of attacks by, by the, by the Iranians on their neighbors and on Israel. So those have gone down to some extent. In the first days of the war, there were maybe 75 or 80 a day here and now there are about a dozen or eight, 10, 12, that kind of thing. Is that because the Israelis have successfully taken out their launchers? Possibly. Is it because the Iranians are husbanding their stuff? Possibly. Another issue, of course, is in addition to the growing international and markets pressure to end this thing, is the interesting fact that the Emiratis and the Saudis seem now, although they didn't want this war to happen, more enthusiastic about ending it. Along the same lines as Israel's argument has been because they feel there's a sort of Damocles hanging over their heads with these Iranian attacks of the last week. So will that make a big difference? It'll make some difference. And of course, are there going to be airborne ground troops from the Americans heading there? Looks like they are in the coming days. So there's a lot that we're watching. A lot.

Bloomberg Intelligence Podcast Market Analyst (6:42)

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Bloomberg Intelligence Podcast Host (8:21)

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

Bloomberg Intelligence Podcast Market Analyst (8:35)

Let's get a check on how this is all shaking out for the markets. Clearly the Venezuelan case is not what's driving markets. It's all about oil prices. And oil prices right now are higher by more than 3%. Brent crude, the global benchmark at $106. That is of course raising concerns about inflation and stagflation and demand destruction. Let's bring in Kathy and Twissell. She is managing director and private wealth advisor at Morgan Stanley, joining us from Delray Beach, Florida. Kathy, the rise in oil prices has remained elevated. It, you know, day in and day out. It might backtrack, it might come back again. Yet we know that oil prices are unlikely to go down anytime soon, even when the Strait of Hormuz opens up. How does that color how you view investing in risky assets?

I (9:26)

Absolutely. There's a lot of different things that we're thinking about right now and clearly this, you know, this Iran war war, oil shock is the big event. However, we want to think about our clients and what they're think about and how we can better position portfolio. So you know, last week's data confirmed our inflation fears. PP PPI came in hot and the longer oil stays elevated, the harder it will be for the Fed to control these upstream price pressures. And what that means for, you know, clients and just the general population is that everything is more expensive. They're getting like a tax on gas. And they're also very, very concerned about their portfolios because usually when we have these issues with oil, we will see some downward pressure on both the equity and the bond market. So what we're looking at is favoring some high defensive stocks such as like energy, financials, health care, reducing overbought semiconductors, unprofitable tech and low quality credit. What's interesting, the market looks like on the surface like surprisingly resilient but underneath it's like a violent rotation going on in energy and AI. Infrastructure structure are booming while software companies and private credit lenders are showing signs of stress. So these are all things we think about and we're trying to remove some of the risk in the client's portfolio and add some more forward looking investments.

Bloomberg Intelligence Podcast Interviewer (10:49)

About on the fixed income side here, how much credit risk do you think folks should be taking in this environment? Because boy, you could just sit there at a two year treasury and get close to 4% here right now.

I (11:00)

Yeah, no, we, we, we think that investing right now in safer risk assets is the smarter move and the smarter play. We are advising clients not to be in high yield because you're not getting paid for high yield. And these are the times where you'll start to see high yield assets start to crumble a little bit. So we want to avoid that. I look at it, if you've got money in investments and money in the bank, you've won the game. We wanna protect it and we want to grow it methodically, not take undue risk.

Bloomberg Intelligence Podcast Market Analyst (11:31)

Where does gold fit into that? For a while everyone was flocking to gold and they saw it as almost a risk asset given how it was performing. And they've definitely pulled back from that as concerns about the prospect of fewer rate cuts and now even talk of a rate hike really infect the market.

I (11:48)

Yeah, on the rate hike issue, we don't anticipate a rate hike. We are still looking at two rate cuts towards the end of the year. So it will be interesting to see that unfold. In terms of positioning with gold, we still like real assets. We like energy infrastructure, commodities, reeds and gold and metals still play a position there. Basically, again, when oil driven inflation fears take over, stocks and bonds tend to drop at the same time. So real assets provide a natural, natural shield against inflation. So that's why we like to add that to the portfolio too. So we've been adding real assets.

Bloomberg Intelligence Podcast Market Analyst (12:27)

Even though gold is down about 16% since the start of the war, it hasn't done very much.

I (12:31)

No, it hasn't. But it also, you know, any time there's a downward trend, there also might be a buying opportunity there. And just with the thought of where we are in the markets and the economy right now and with the oil prices going up, it's just basically a hedge. And we don't put a large percentage of clients into gold, but we do a small percentage.

Bloomberg Intelligence Podcast Interviewer (12:52)

Interesting. Scarlet, just as you were talking about gold, piece of research just hit my inbox from Richard Rosenberg Rosenberg Research first bullet point we maintain our long term bullish call on gold and are looking for the most attractive reentry point since we trimmed our position. So he says maybe buy on the weakness here. Kathy how about municipal bonds? I know down in Florida you guys famously do not have those state taxes, but for those of us in high tax jurisdictions, munis have been, you know, really, really attractive here. How do you allocate to municipal bonds for your clients?

I (13:25)

Absolutely, that's a great question. And we have lots of clients in high tax rate states including New York, so we are using municipal bonds. The short term and intermediate term municipal bonds are very pricey right now and not as attractive. So we are using long term municipal bonds which have still great value for clients and placing them there. So we do like the municipal bonds and we are continuing to utilize them especially in an environment where, you know, taxes are high and they may go higher at some point.

Bloomberg Intelligence Podcast Host (13:57)

This is the Bloomberg Intelligence Podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 10am to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You you can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.

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