Bloomberg Talks: Jim Bianco Talks Bond Yields

Date: February 26, 2025
Host: Bloomberg
Featured Guest: Jim Bianco (Bianco Research)
Guest Analyst: Torsten Slok (Apollo)

Episode Overview

In this Bloomberg Talks episode, renowned market strategist Jim Bianco discusses persistent inflation, the outlook for Federal Reserve policy, and the implications for bond yields and equity markets. The episode delves into how segmentation (the reversal of globalization) is driving structural changes in inflation and the global economy, and how investors should navigate the current volatile newsflow and high market valuations. Bianco also reviews the recent corporate earnings season and its significance for U.S. equities.

Key Discussion Points & Insights

1. Sticky Inflation & Its Consequences

[00:29 - 01:40]

• Jim Bianco reiterates his longstanding position that inflation remains "sticky," refusing to fall meaningfully below 3-3.5%.
• Both consumer surveys (University of Michigan and Conference Board) show rising inflation expectations, suggesting anxieties are not just theoretical.
• The Federal Reserve faces continued pressure, as a 3-3.5% inflation regime doesn’t justify major cuts in bond yields from current levels (~4.3%).
  • Quote [00:59]:
    "It's still sticky and you're starting to see signs that even people are starting to become nervous about it...3, 3 and a half percent problem means that interest rates, even though the bond market is rallied down to 4.3, you know, we don't have a whole lot more on the downside to go if we've got that kind of sticky inflation." — Jim Bianco

2. The Fed and ‘Fiscal Space’

[01:40 - 03:11]

• The host probes how the Fed will adapt to an evolving fiscal environment with rising debt and new policy ideas.
• Bianco critiques the Fed’s “wait and see” approach, arguing they’re not fully recognizing the administration’s interconnected strategies (referenced as the "Mar A Lago plan"): tariffs, currency management, defense spending negotiations, and a potential sovereign wealth fund.
• Bianco claims these moves are part of a coordinated plan to lower the dollar, strengthen U.S. competitiveness, and relieve debt—yet the Fed treats them as piecemeal.
  • Quote [02:01]:
    "Their attitude right now has been, well, we have to wait and see and we have to sit on our hands...the Fed seems to think there's kind of three random things happening side by side and hasn't put that together. Once they do, hopefully they'll understand the plan." — Jim Bianco

3. De-globalization (‘Segmentation’) and Inflationary Pressures

[03:11 - 04:27]

• Analyst Torsten Slok introduces the idea of "segmentation" as the new de-globalization, with supply chains fragmenting and contributing to long-term inflation pressures.
• Bianco agrees, noting that the U.S. is an economic outlier versus struggling Europe and China.
• The move toward segmentation—accelerated by the pandemic and recent policy trends—means inflation and rates likely stay elevated.
  • Quote [03:35]:
    "It will put upward pressure on inflation. And if you look at the global economy, especially if you look at the European economy, they're not doing very well right now. The Chinese economy is not doing well at all right now. The bright spot in the globe is United States, at least at the top line." — Jim Bianco

4. Market Participation Amid Volatility and Politics

[04:27 - 06:05]

• With the fast-paced news cycle (e.g., Elon Musk’s headline-grabbing Trump cabinet attendance), investors are urged by Bianco not to let daily news dictate their strategy.
• Bianco advises a longer-term perspective and warns that current high valuations, especially in the "Magnificent 7" mega-cap stocks, mean markets require near-perfection to justify these prices.
• Investors’ rising caution is more about these valuation risks than day-to-day headlines.
  • Quote [05:02]:
    "You want to definitely get yourself away from getting bogged down into all of these situations...take a longer term perspective and decide what you like, what you don't like...they need everything to go right when you have those kind of valuations." — Jim Bianco

5. Earnings Season Takeaways

[06:05 - 06:56]

• With earnings season nearly complete, results for the S&P 500 have been strong: 12-13% year-over-year EPS growth, and 5.5% sales growth.
• Even with generally positive forward guidance, high market valuations could temper positive earnings reactions.
  • Quote [06:14]:
    "The earnings numbers have looked great so far...these numbers have been looking very good. Now that I've said that, remember that those are the numbers they reported. They don't have much forward guidance, but even the companies are offering guidance that is somewhat positive right now...So even though those numbers might be good, they might not be good enough." — Jim Bianco

Notable Quotes & Moments

• Sticky inflation, limited bond rally:
  "...interest rates, even though the bond market is rallied down to 4.3, you know, we don't have a whole lot more on the downside to go..." — Bianco [00:59]

• On the administration’s plan:
  "It's the Mar A Lago plan. That is the plan. And we're getting all the phases of that plan. And the idea is to lower the value of the dollar and ...relieve us of the debt burden..." — Bianco [02:01]

• De-globalization’s impact:
  "...that segmentation or that de globalization...that's been underway now pretty much since the financial crisis and got accelerated post Covid. And I suspect we're going to continue to see that happen." — Bianco [03:35]

• Valuations into earnings:
  "When you have those kind of valuations, you know, to put it in, you know, in baseball terms, you need to score eight runs and if you score six, that's not enough, even though six runs sounds like a lot..." — Bianco [05:02]

Important Timestamps

• 00:59: Bianco’s core inflation argument—why it remains persistent
• 02:01: Bianco on fiscal strategies and the “Mar A Lago plan”
• 03:35: Impact of segmentation/de-globalization on inflation and global growth
• 05:02: Bianco’s guidance for investors navigating political and news risks
• 06:14: Strong corporate earnings but the challenge of high valuations

Tone & Takeaways

Jim Bianco’s commentary is direct, pragmatic, and slightly contrarian. He underscores the resilience of U.S. economic growth amid global weakness but remains cautious due to sticky inflation, policy uncertainty, and stretched asset valuations. His advice is to stay focused on fundamentals and not get swept up by the noise.

This summary covers the core content and insights from the podcast, omitting ad reads and introductory filler.