Jim Bianco Talks Bond Yields

Summary

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Bloomberg Talks: Jim Bianco Talks Bond Yields

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

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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.

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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

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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

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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

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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

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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

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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]

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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

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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.

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

Transcript

[Jim Bianco]

Indiana University is shaping the future of healthcare, advancing discoveries that become treatments for Alzheimer's, obesity, cancer and rare diseases. And training the providers trusted to deliver them from the lab to the clinic. IU powers medical breakthroughs and the talent behind them. See how IU solves What's next iu Edu Impact.

[Narrator/Announcer]

Bloomberg Audio Studios Podcasts Radio.

[Host/Interviewer]

News Joining us from the land of Schlitz and Paps Blue Ribbon, Jim Bianco, I believe is with us right now. Rich, do we have Mr. Bianco? Okay, we do. Thank you, Rich Truman, for that. This morning, Jim Bianco is nailed the sticky inflation call. We get an update. Jim, like good news this morning. Futures up 25. We're getting knocked around here in immense emotional volatility. What is the Bianco view on inflation?

[Jim Bianco]

That it's still sticky and that you're starting to see signs that even people are starting to become nervous about it. The surveys like Michigan and the Conference Board are showing that people are expecting even higher levels of inflation. The Fed might call that being a bit unanchored. And I think that it's going to stay with us and be a problem. Now, now that I've said that it's a 3%, 3 and a half percent problem. It is not an 8, 10 or Zimbabwe problem. But even still, 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.

[Host/Interviewer]

How will the Fed adapt to our new, I love this phrase, fiscal space. How does the Fed adapt to, you know, forget about the legislation overnight and the ramifications of X numbers, of zillions of dollars of debt added on where we are now. How do they adapt to our fiscal policy?

[Jim Bianco]

Well, I'll answer the question by saying I hope they adapt because their attitude right now has been, well, we have to wait and see and we have to sit on our hands and see what happens with tariffs and see what happens with the budget and then kind of assess it from there. And that's why the market doesn't expect the Fed to move until June at the earliest at this point. So I think the Fed is going to have to learn to adjust that. There is a plan out there by this administration and it isn't just a bunch of disconnected things like, you know, tariffs or a sovereign wealth fund or demanding that Europe pay for more security so that we could relieve our own defense budget. It's what I've been talking about for the last couple of weeks. 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 is to bring the US Into a more competitive position, is to relieve us of the debt burden and bring down interest rates. But right now, the Fed seems to think like there's kind of three random things that are happening side by side and hasn't put that together. Once they do, hopefully they'll understand the plan.

[Guest/Analyst (Torsten Slok)]

So it's interesting, Jim Torsten Slok over at Apollo is out with a note this morning and just kind of talking about the the reverse of globalization. He calls it segmentation as and talking about how that puts structural upward pressure on inflation, goods inflation in labor, keeping interest rates structurally higher for longer. How do you think about that? Is that, is that something that can be a real headwind for global economy?

[Jim Bianco]

Oh, I think it is a headwind for the global economy and it will be for both that and inflation. Torsten's right about that. 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. The United States economy is stronger than most of the other developed countries and it continues to do well. But that segmentation or that de globalization, as it was called before that, 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. That's the impetus behind tariffs. And why President Trump keeps talking about we have unfair deals is that he's trying to correct that, but that means we're going to see more segmentation.

[Host/Interviewer]

Jim Bianco, we've had a series of conversations. If you're just joining us, James Bianco with us from Chicago throwing he could be with us with Jim Bianco research. Jim, I look at the last couple days of conversations and a lot of people are, yeah, yeah, but we're cautious and it's the politics and all that. A headline out three minutes ago, Elon Musk will attend Trump Cabinet meeting today that according to Fox News, Jim Bianco, how do you participate in the market, in the stock market, given the news flow we're all having right now?

[Jim Bianco]

Well, that is the thing you want to definitely get Yourself, you know, away from is getting bogged down into all of these situations. Whether you know there's this or that that's happening or even the Mar A Lago Accord. I think you'd want to take, take a longer term perspective and to decide what you like, what you don't like. Now, now that I said that, I'll give a note of caution. The other problem that the stock market has, while I think it's having indigestion more than anything else, is we started the year with very high valuations in the market. And the Max 7 stocks had extremely high valuations. They need everything to go right 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 run runs, that's not enough, even though six runs sounds like a lot because that's the problem when you have high valuation. And that I think is why we're starting to see people be more cautious more than anything else is those type of issues and it gets kind of wrapped up into, you know, the news flow of the day.

[Guest/Analyst (Torsten Slok)]

Jim, we're about 90% of the way through the S&P 500 reporting season here. Obviously. Nvidia big, big, big name after the close. What have you learned from earnings?

[Jim Bianco]

Yeah, Nvidia is the biggest name, but the earnings numbers have looked great so far. The year over year earnings numbers for the fourth quarter to fourth quarter for the S&P 500 is running around 12 or 13%. That's been a very good number. Even sales, which is kind of analogous to nominal GDP because they're like trillions of dollars of sales, is five and a half percent. And so 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 that is, that is a good thing. But that is also running into that high valuation thing. So even though those numbers might be good, they might not be good enough.

[Host/Interviewer]

Jim Bianco, way too early from. Jim Bianco, thank you so much for joining us.

[Narrator/Announcer]

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