Harris vs. Trump: The Markets React — ft. Robert Armstrong

Robert Armstrong, US financial commentator for the Financial Times, joins the show to break down a question: is the election moving the markets, or is it inflation? He shares his thoughts on why small-cap companies are surging, and discusses why the Federal Reserve has good reason to cut rates in July, but likely won’t until September. Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:31Speaker 02

  This episode is brought to you by Subaru. You know that place your mind always wanders to? The lake, the mountains, the homes of the people you love most? The completely redesigned 2026 Subaru Outback is built to help you get there. With legendary capabilities, standard symmetrical all-wheel drive, and the confidence to go further. The 2026 Subaru Outback: Love Never Looked So Good. Visit Subaru.com/Outback to learn more.

• 0:56Scott Galloway?

  Today's number: $163 million. That's how much LVMH is paying to be a top-line sponsor at the Paris Olympics. True story, Ed. The last time I was in Paris, I saw a mime, and he was masturbating. And the police showed up, but the good news, Ed? He came quietly.

• 1:23Scott Galloway?

  Ah, that makes me happy. I don't care what happens in this show. I see it as a win. Welcome to Prop G Markets. Today, we're speaking with Robert Armstrong, U.S. financial commentator for The Financial Times, who, after listening to this show, will not be on again. But first, here with the news is Prop G media analyst and part-time mime Ed Elson. Ed, what is the good word?

• 1:51Ed Elson?

  Yeah, I was watching, I was watching that JD Vance performance at the Trump rally. He kind of reminded me of you a little bit, the way he.

• 1:58Scott Galloway?

  Me and Vance, someone who, who attains levels of success they haven't earned, someone who's out of shape, what, what, someone who's a total fucking kiss ass who can be bought? Yeah, okay, I see it. I see it.

• 2:11Ed Elson?

  Someone who delivers a bad joke and then laughs at their own jokes.

• 2:16Scott Galloway?

  Laughs at himself?

• 2:16Ed Elson?

  Yeah, that's what happened.

• 2:18Scott Galloway?

  So I'm, I'm, I'm being serious now. I think one of the keys to having a good sense of humor, you want, either have to be funny, that's not easy. It's hard to be funny. I think actually humor, so let's go back to mating, which I always like to go back to. And you need help here, so listen carefully. The three things, this is true, that make a man attractive romantically to a woman are in reverse order, three, kindness, it's important over the long term, people don't want to mate with assholes. The number one reason is your ability to signal resources. We talk a lot about this on the show, but the number two thing is intellect. And there's some nuance here, and that is the quickest way to express intellect is humor. If you can be funny, that was the, that was what

• 3:01Scott Galloway?

  I tried to develop because it wasn't going to be, I was six foot two, 140 pounds with bad acne, so it wasn't going to be based on my devilish good looks. But this is my imitation of a woman. I'm laughing, I'm laughing, I'm naked. Oh, no, but where I was going, I'm sorry, I'm sorry, back to me. Where I was going is, the easiest way to have a good sense of humor is it's hard to be funny, but what's not hard is to laugh at other people's jokes. If you laugh a lot, you're nice to be around. I always thought a great way to have a good sense of humor is just to laugh a lot at other people's jokes.

• 3:31Ed Elson?

  I think you basically just described my job description.

• 3:34Scott Galloway?

  Yeah, just to laugh at my jokes. And compare me to fucking JD Vance? Yeah, that way to go.

• 3:39Ed Elson?

  And then laugh it off.

• 3:40Scott Galloway?

  Way to go.

• 3:42Ed Elson?

  That's what I do.

• 3:42Scott Galloway?

  Me and JD.

• 3:44Ed Elson?

  Let's get to the headlines.

• 3:47Scott Galloway?

  Now is the time to fly. I hope you have plenty of the well of all.

• 3:54Ed Elson?

  Twenty four hours after entering the presidential race, Vice President Kamala Harris raised more than eighty one million dollars. That's a single day record for fundraising in a presidential campaign, and it nearly doubles the funds she's inheriting from Biden. Netflix memberships rose more than sixteen percent in the second quarter from a year earlier. That's higher than expected and will be one of the last subscriber updates from the company before it stops reporting quarterly subscriber numbers next year. A faulty software update from cybersecurity firm CrowdStrike caused major technology disruptions on Microsoft-powered systems worldwide. The IT outage, which some are calling the largest in history, affected airlines, banks, and healthcare systems. And finally, just a week after the deal was announced, Google's

• 4:36Ed Elson?

  twenty three billion dollar acquisition of Wiz has been called off. Wiz told employees it would now target an IPO after members of both boards thought regulators would likely block the deal. Scott, your thoughts?

• 4:49Scott Galloway?

  Well, so this is there's kind of one story in the seven doors this week, and that story is Vice President Kamala Harris. Basically, as far as I can tell, being coronated, she is going to be, it looks like, the nominee here. And the, I was thinking about it. The analogy I would use is, in November, the sun goes behind a cloud in London. And from November to May, you're like, okay, it's, I get it. It's a good city. It's got good food and interesting people and wonderful culture. Okay, it's fine. Okay, it's a little bit depressing. Oh, God. And by February, like, I just fucking hate it here. And this is an awful place. And how can anyone live here? And then sometime in May, the sun comes out on a brilliant day, and the whole city comes alive. And you think

• 5:33Scott Galloway?

  to yourself, this is the most beautiful, interesting city in the world. You're just so desperate for some sunshine. And that kind of describes my mood since for twenty twenty four. And that is, I haven't been a huge fan of Vice President. Harris, but when the announcement was made, I was relieved. And in the last 48 hours, just the enthusiasm and the mania around her and the hopefulness and the way the Democratic Parties and potential competitors for the spot immediately kind of fell in line and rallied behind her and the love she's getting from Gen Z, the love she's getting from social, the record take, the 24 hour take, it is literally for me as if the sun

• 6:18Scott Galloway?

  has come out on America and the Democratic Party. It has been, just in terms of how I feel about the world and America, it's been probably the best, and we're going to get a bunch of shit in the comments from the Trumpers, but it's been the nicest 36 hours for me personally that I've had in a while. And I think it's been great for the Democratic Party. What are your thoughts? I'm just gonna rain Olivia Parade now. Go for it. I'm used to that. Wait, let's enjoy it for a moment.

• 6:51Scott Galloway?

  Okay, go ahead. Okay, thanks for that.

• 6:54Ed Elson?

  Look, I agree, the fundraising has been phenomenal and there's just a new sense of energy in the party, 100%. But you use that word coronate, and I think there has been a question, are they just going to anoint Kamala as the next candidate, or are they going to hold some sort of pseudo electoral process? Are we going to have a competition? I'll just express my view on this. For the party that has been crying out about this threat to our democracy, some would say to a sensational degree, the idea that democracy's at stake in this election, that the Republicans are running an anti-democratic candidate,

• 7:36Ed Elson?

  for that party to then, when given the choice, decide to just coronate their next candidate internally, to me, that is going to look to the American people at the general election, that will look, at best hypocritical, at worst corrupt.

• 7:53Scott Galloway?

  I think that's a really powerful argument. I was a fan of the competition versus the coronation. Just the practical reality is the majority of the people to which she would have been competing against have backed her. They've bowed out. So a debate would be her and Manchin and Dean Phillips. It just wouldn't be very interesting. I mean, have at it. The other thing that I would offer up, lending credence to your argument around the benefits of a competition, is I think a competition, A, if she wins it, and she'd be the odds-on favorite to win that competition, would bode really well for her.

• 8:28Ed Elson?

  Perfect.

• 8:29Scott Galloway?

  And she'd be more battle-tested. The other thing I think it would be good for is down-ballot Democrats, because I think a lot of people who go in and aren't sure whether, you know, haven't done the research around local races, might think, you know, I'm really impressed with Democrats. I think they might be more inclined to vote blue. I think it would be an amazing commercial that would be run across 60 million people for four or five hours over two weeks for the Democratic Party. So I'm theoretically, and from a brand strategy standpoint, totally on board with what you're saying, but the reality is, all of the competition has rallied behind her. It's sort of, it's sort of done. And the other thing is, it reminded me of what you said, that Trump was immediately

• 9:13Scott Galloway?

  out with the kind of post-verdict boast that they'd raised $53 million. And you pointed out, I thought really interestingly, that 50 million of it came from one person. In the last 36 hours, the Harris campaign has announced that they've raised over $100 million, and it's come from, I think, 1.1 million unique donors. The groundswell support is just, is really encouraging and shocking right now.

• 9:39Ed Elson?

  Yeah, I saw another stat that 60% of those donors are first-time donors. Having said that, I would like to see a more detailed analysis of how much of that money is coming, because there have been some big-name billionaire donors as well, you know, Soros immediately got behind.

• 9:57Scott Galloway?

  We have our billionaires. We have Reid Hoffman. We have, I bet, you know who I bet's gonna play a big role in this, is Melinda French-Gates.

• 10:04Ed Elson?

  Oh, 100%.

• 10:04Scott Galloway?

  I think this is the season of the billionaire, billionaire woman for, in the donor class.

• 10:11Ed Elson?

  And I will say, I mean, this, my, it's ironic to say this, we're two white dudes on a podcast, but this-

• 10:18Scott Galloway?

  That's redundant. That's what you call two white dudes, a podcast.

• 10:24Ed Elson?

  But this election in particular, I mean, most conversations are dominated by men. One thing that I have found striking about this election, especially all the conversations going on about the RNC, this election conversation feels particularly bro-y in a way that I haven't really seen before.

• 10:42Scott Galloway?

  Well, did you see that donor list, the big tech? It was like the worst gay club ever. It was like, oh my God, I wouldn't want to fuck any of these guys.

• 10:50Ed Elson?

  The nightmare blunt rotation, yeah.

• 10:53Scott Galloway?

  Just for a quick palate cleanser, this is a true story. During the RNC convention in Milwaukee, Grindr crashed.

• 11:02Ed Elson?

  Yeah, it did.

• 11:04Scott Galloway?

  I mean, you gotta love that, right? Let's take away their rights, but not before I meet some guy in the men's room. That's right. Marriage should be between a man and a woman, but hot, steamy butt sex should be between two men at the Milwaukee Holiday Inn.

• 11:20Ed Elson?

  Netflix.

• 11:24Scott Galloway?

  Netflix, Umbrella Academy. Like, this company, the thing that I think is interesting here, and it's sort of a sub-story, but I think it's interesting. I said when they launched ads, it was a bad idea. I think it's totally contrary to the brand positioning of Netflix, and that is it's uninterrupted storytelling. And I just don't think, and their attitude was, well, why, why wouldn't we offer people who are willing to endorse some ads, a $5 offering? I don't think it's working. I think there's evidence it's not working, and I think that the brand denigration of Netflix, my prediction is within a year, two years, Netflix is going to let their ad-supported model just flow away. They won't cancel it, but they're not going to put any money behind it.

• 12:05Scott Galloway?

  But I think deep buried within these great numbers was evidence that their ad-supported memberships are not. I mean, they say they rose 34% from last year, but I think that's off, I think that's off a tiny base. It's just not, I would have thought it would double or tripled. Anyway, any thoughts from you, man?

• 12:23Ed Elson?

  Their share of the ad market is still miniscule. I think it's like, less than 1% of the TV ad market. And that, yeah, agreed, that 34% number seems good until you realize it's barely any ad subscribers to begin with. Having said that, they added 8 million new subscribers.

• 12:41Ed Elson?

  That's 65% higher than what Wall Street was expecting. They expected 5 million. So just off of the subscriber base, Netflix is crushing it. They are winning the streaming wars. The question now is, have they won? And the stat I will leave you with is the following. Apple TV Plus, which has spent $20 billion on content since it launched, 20 billion. Apple TV Plus currently receives fewer views in one month than Netflix receives in one day. As far as the streaming wars go, I believe they've won. I believe it's somewhat over. The next question now is, can they take on the streamer that no one is talking about, which is YouTube?

• 13:25Scott Galloway?

  Or TikTok.

• 13:26Ed Elson?

  Or TikTok, yes. Both of those platforms. If you look at it numerically, YouTube is still, if you count it as a streaming service, and I would argue you should, the most popular platform in the US today as measured by TV viewing time. Not tablets and phones and TVs put together, just TVs. People watch YouTube on TVs more than they watch Netflix. So as we've said before, YouTube is the elephant in the room here. I think it is interesting, this ad challenge that Netflix is facing, as you've mentioned. But I think the next big challenge for them is YouTube.

• 13:57Scott Galloway?

  We wrote a post, and my idea was that Netflix should partner with a cloud-based company to figure out the algorithm, and they should put a bid in for TikTok to divest it, or once it's forced to be divested, which I think it will be. And I wrote up this thing, and Ted Sarandos, the co-CEO, called me and said, let's grab coffee. I've known Ted sort of loosely for a couple of years now. And I kind of explained my thesis, and he just wasn't buying it. He's like, TikTok's this incredible free marketing tool for us, and we have so many growth prospects internationally, why would we take that kind of risk on a, you know, on a market and a format we don't understand? But my idea was that they could do, they could take their original, their base, their massive base, arguably the biggest library in the world right now, of kind of current topical content,

• 14:42Scott Galloway?

  and start slicing it in different ways, and even crowdsource, you know, take. Season one, episode three of The Last of Us and have at it creators and see what you can do on TikTok. And I thought it would just be, I thought, I thought the idea was genius. But he wasn't, he was like, he kind of said, no, that's not, I'm much smarter than you.

• 15:01Ed Elson?

  And you haven't had lunch with him since?

• 15:02Scott Galloway?

  He hasn't called me back, hasn't called me back. He's like, okay, I don't know who on my team. I don't know what 22 year old suggested I meet with this Yahoo.

• 15:12Ed Elson?

  Well, maybe you could solve CrowdStrike's problems. Thoughts on CrowdStrike?

• 15:15Scott Galloway?

  What this says to me is that this is not a robust industry. What do I mean by that? If McDonald's goes out of business, the fast food industry is fine. There's a bump in the road, but you can still find cheap, high caloric food on your path to obesity. Too much? Anyways, but so the fast food market or the restaurant market is a robust market. If Jamie Dimon called Janet Yellen or Chairman Powell and said, I have some rogue trader in Singapore and he got past compliance and somehow he lost $95 billion. And if you don't give me 100 billion in liquidity tomorrow, that is bail us out, we have to declare bankruptcy. And, and the implicit threat would be global economy might

• 15:56Scott Galloway?

  come down, boss. That's the definition of an industry that is not robust. And I wonder if technology, because of essentially acquisitions and a few companies performing so well that they have access to cheap capital and can invest at a rate that others, they end up with, you end up with a small number of players creating kind of an anti, creating sort of a fragile industry or an anti-robust industry. And for me, it's another reason why, A, they should either be broken up, or some people, they'll argue, there's benefits to scale. Okay, if there's benefits to scale, but it creates this sort of systemic risk, the term for that is utility, and it needs to be more thoughtfully and stringently regulated. But for me, this is just another example of how concentrated the tech industry is and the dangers it presents.

• 16:41Ed Elson?

  Moving on to our final headline, which is Google, Google's acquisition of Wiz for $23 billion. We talked about this last week. It is now called off. In fact, Wiz was the one that is pulling out of the deal. Thoughts?

• 16:55Scott Galloway?

  I think it's directly related to CrowdStrike. And that is, I mean, a couple of things have happened. One, as of today, it's no longer a fait accompli that it's going to be Trump as president. And I think, I thought this acquisition, or them plodding this acquisition by Alphabet, was essentially them betting that it was more likely than not that a business-friendly, non-antitrust administration would take control of the White House, specifically the Trump administration. And I think as of this morning, now it's kind of a toss-up, and I would argue it even maybe leans a little bit to the vice president's advantage. And I may be biased here, but I

• 17:34Scott Galloway?

  think more than anything, this concentration of power that results in a cybersecurity firm, essentially taking down big parts of the economy, that is not the time to present to the FTC and the DOJ, an acquisition of a cybersecurity firm. So I think their lobbyists came back to them and said, you know, while we'd love for you to pay us a lot of money to try and get this through, let's be honest, we think this is fucked. We think that we go into, we go into Congress and try and get support, and they say, well, I'm sorry, my flight was canceled. There's, there's too much concentration of power here. This is, we need to head the other way. So I have a story here. My firm, L2, was acquired by

• 18:19Scott Galloway?

  Gartner. We hired a banker and said, all right, go out, I sent some letters out to people saying, we've been approached. Are you interested in speaking now or forever holding your peace? And we had like seven firms sign an NDA, put together a data room. They came in, I think we ended up with four offers, and we ended up, we picked three. We picked Accenture, Corporate Executive Board, and Gartner. And really liked the guys from Accenture. I thought they were super smart. And they said to me, we've got great news. We're gonna, we're gonna, basically, we service 400 of the 500 biggest corporations in the world. We're going to position you as a central thought leader, and we're going to have you meet with all these CEOs around the world, and you're going to get to have

• 19:01Scott Galloway?

  such an impact, and so much influence. And the idea of spending the next 10 years of my life on a plane, it sounded like a fucking nightmare to me. And so I just politely said, no, this isn't, this isn't the right partnership. So we're down to two, right? Corporate Executive Board and Gartner. And I wake up on a Monday morning, and I hear the news, Gartner acquires Corporate Executive Board. So in a matter of a week, I've gone from three bidders to one. And then I called the guys at Gartner and I'm like, okay, you just made a $2 billion acquisition. Are you going to still want my shitty $160 million acquisition? Like, oh yeah, no problem. We're still on board, not to worry.

• 19:44Scott Galloway?

  Two days later, they call me and say, if it's okay, we'd rather, we'd like to wait and close in six months, just so we can get this thing digested. And I'm like, in a polite manner, if possible, I said, go fuck yourself. You want a free option on my company? Want me to stick around for six months, see how high perform over the next two quarters? And then decide if you're going to close on the same price? I'm like, if you want to acquire us in six months, you have my number, call me and I'm going to ask for, I'm going to ask for more money because we're doing really well and the firm will be more valuable in six months. But I need you to send me a letter saying that we are no longer in this due diligence period. And I basically said, I'm walking. And anyways, the CEO called me the next day and said, we'll close in the next 30 days.

• 20:27Scott Galloway?

  And I think, other than all my stories, which make me look good, isn't true, I'm pretty good open about my failures, but the, the learning here is the following. In any negotiation, you have to show a willingness to walk away. You don't make it personal, you don't make it win lose. And obviously I was much more delicate with my words, but I basically said, no, that doesn't work. We're, we're, we're exiting these discussions. Anyways, and we ended up closing and, and I ended up leaving 14 months later because I wanted to put a gun in my mouth every time I thought about going into work. But anyways, too much, Ed? Too much? Not a, not a great cultural fit. Not a great cultural fit. By the way, great firm and I think their stock has outperformed every other stock in

• 21:08Scott Galloway?

  the, I think their stock has literally been the Nvidia of, of services. Anyways, I don't know where we are. Where am I, Ed? Bring me back to the story. What am I talking about? What am I talking? Oh, we're talking about M and A.

• 21:20Ed Elson?

  Yeah, talking about Google and Wiz, willingness to walk away. Um, yeah, I mean, I- It sounds like that's kind of what happened here with these, with the founders of Wiz, is that they looked at the regulatory environment. They actually looked at what was possible and they were like, yeah, we don't want for this to get shut down, or we don't want to go through, even if it does go through, we don't want to go through the process,

• 21:45Ed Elson?

  which is going to be long and grueling and just, for lack of a better word, shitty. I will shout us out. Last week, I warned Wiz employees that they should not get their hopes up. This is why you recommended that Wiz employees sell secondary shares so they can take some money off the table. I would, I would love to know if any Wiz employees were listening and actually went ahead and did that. If you did, let us know.

• 22:11Scott Galloway?

  And yo, it's dinner, bitches. Take us out, take daddy, take daddy and little Ed out for a little, like a little beef in a little strip club. Because I like to call it a Tuesday night.

• 22:23Ed Elson?

  We'll be right back after the break with our conversation with Robert Armstrong.

• 22:35Speaker 00

  Are your ad campaigns lighting up the dashboard? But not the pipeline? That's bullspend and marketers are calling it out in. Dashboard Confessions.

• 22:44Speaker 01

  My boss asked for results, so I opened my dashboard for the only positive sounding metric I had. Impressions.

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  Cut the bullspend. See revenue, not just reach. LinkedIn delivers the highest return on ad spend of major ad networks. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 23:06Speaker 02

  This episode is brought to you by Subaru. You know that place your mind always wanders to? The lake, the mountains, the homes of the people you love most? The completely redesigned 2026 Subaru Outback is built to help you get there. With legendary capabilities, standard symmetrical all wheel drive, and the confidence to go further. The 2026 Subaru Outback. Love never looked so good. Visit Subaru.com/Oback to learn more.

• 23:33Speaker 05

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends. Like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra because it's not just a superior light beer. It's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 24:07Ed Elson?

  Welcome back. Here's our conversation with Robert Armstrong, U.S. Financial commentator for the Financial Times. Robert, thank you so much for coming on.

• 24:14Robert Armstrong?

  Pleasure.

• 24:17Ed Elson?

  So I just want to start this interview by letting you know that we have been trying really hard to not talk about politics recently.

• 24:25Robert Armstrong?

  Me too. But sometimes the universe insists.

• 24:29Ed Elson?

  So that's exactly where I'm headed here. It feels unavoidable at this point.

• 24:35Robert Armstrong?

  Yes.

• 24:35Ed Elson?

  It is having an effect on the markets and it's dominating the news. So we're just going to dive in and we'll try to be as apolitical as we can. But let's start with this. Biden has dropped out of the race. He has endorsed Vice President Harris as the new candidate. Give us the rundown on how the markets are reacting to this news.

• 24:57Robert Armstrong?

  Well, in fact, markets have been pretty calm. And the first reason for that is that if you look at, for example, the betting markets, Biden leaving, by the time Biden left, Biden leaving was pretty well expected. And so there wasn't a big change in the probability, the kind of betting market probability that Trump will win was around 60% and it stayed around 60%. So there wasn't a massive reshuffle. There hasn't yet been a massive reshuffling of the electoral deck. One thing that makes this question very sort of subtle and tricky is that the political

• 25:42Robert Armstrong?

  events of recent weeks are overlaid.

• 25:46Robert Armstrong?

  On a big change in the inflation outlook. So we had Biden's very bad debate was at the end of June. And on the 7th and the 11th, I think of July, we had this wonderful June CPI report, which was like Fed clear to cut rates, inflation very near target indeed. And so the market has been digesting that fact at the same time as it digests the political facts. So it's hard to sort out what is what. So I'll give you an example.

• 26:26Robert Armstrong?

  One thing that happened a week or so ago was that small American stocks went completely bananas for about a week. Small American stocks have been performing very poorly compared to big ones. And then all of a sudden, uh, they staged a very brief, very sharp, historically sharp rally. And there is two ways to read that fact. One way to read it is Trump is a tariff guy. Trump Vance are not very enthusiastic about big American tech companies. We want to own companies that have most of their supply chains and most of their customers in the United States.

• 27:11Robert Armstrong?

  Let's own small cap stocks which have those characteristics. That's one way to read the news. The other way to read the news is small cap stocks are very, very rate sensitive. So if you, because of the good inflation report, you think rates are going to come down, who is going to benefit most from that? Companies with more debt, uh, which are small cap stocks and companies that are more economically sensitive, which are small cap stocks. So you can have a kind of political reading of this remarkable doings in one quarter of the market, or you can have an economic reading.

• 27:45Ed Elson?

  What are some of the other dynamics going on in the market right now that are either? Reacting to politics, or as you point out, maybe they're not.

• 27:54Robert Armstrong?

  The consensus is that the Trump trade in capital letters is a curve steepener trade. And what that means is that long term rates are going to go up and short more than short term rates do. And that is like Wall Street consensus. You ask your average Wall Street strategist, what's going to happen? You say Trump is a steepener. And the reason they think that is that Trump is kind of inflationary. He likes tax cuts, which if they're not funded are inflation, you know, classically economists would say that's inflationary.

• 28:33Robert Armstrong?

  He likes low rates. He likes spending and he likes tariffs. He doesn't like immigration and under a certain economic interpretation, all of these things push prices up. You get reinflation and long term rates respond to that and the curve steepens. But the most important, the most important, the overarching fact here is that for all of the political turbulence,

• 29:01Robert Armstrong?

  the, the sort of probability that Trump will be the next president doesn't seem to have changed that much. So that has kept the market moves from being anything like cataclysmic or violent.

• 29:13Scott Galloway?

  Implicating that statement is the notion that if what looks like the coronation of Vice President Harris is the nominee, if she were to win, that somehow that the markets might perceive that negatively. And my sense is that, is that the Biden economy, and I think they've done a terrible job messaging, but I think it's hard to be anything but fairly impressed with this economy the last three and a half years, I would argue.

• 29:38Robert Armstrong?

  I mean, corporate profits have gone bananas.

• 29:41Scott Galloway?

  We've got the lowest, lowest inflation and the highest growth. Or I mean, kind of figured out a Goldilocks economy here, markets touching new highs, corporate profits new highs. But, and I would think that the vice president winning the election would signal sort of a continuation or steady as she goes.

• 29:57Robert Armstrong?

  A lot of people remember how strongly stocks went up in the early months of the first Trump administration.

• 30:09Robert Armstrong?

  They had a great rally and a lot of that had to do with the fact that Trump promised and then delivered pretty significant corporate tax cuts. And just mechanically, if the corporate tax rate goes down, corporate earnings go up, all else being equal, stocks go up. The problem is, things are very different right now. Stocks are much more expensive now than they were 2016. Risk premiums are much more stretched than they were. Valuations are much more stretched than they were. And the tax cut has already been delivered.

• 30:48Robert Armstrong?

  And you will notice that in his big interview with Bloomberg, he's not banging the table on doing the main trick he did last time, which is cutting that corporate rate. So I think your instinct is correct, actually. Just assuming that there will be a Trump rally because he is a businessman and says business many things is probably a mistake.

• 31:13Scott Galloway?

  I like what you said earlier, or I'm old enough to recognize that the cycles of the market are in fact cyclical, that there are cycles. And I feel as if we've fallen into this sort of cold comfort or this generally or this conventional wisdom that will no longer be wisdom. That is, American big tech will consistently outperform every market in the world. And it strikes me that at some point, things become too expensive, no matter how strong the underlying fundamentals are. And on the other side, things become so cheap, it's distinctive how poor the underlying fundamentals are, they're a good trade. I would expect that if you look at the cycles, that there's a lot of opportunity in the Russell, small cap, that it just overdo.

• 31:58Scott Galloway?

  It feels like a spring that's been wound with non-performance for the last, better part of the last decade. And also, I think the same is true for markets like the UK market.

• 32:07Robert Armstrong?

  Huge gap between the US and the rest of the world in terms of how much assets cost.

• 32:12Scott Galloway?

  Is there a trade, is there a trade there? What are your thoughts?

• 32:15Robert Armstrong?

  I, this is something I had thought about a lot and.

• 32:20Robert Armstrong?

  The comment you have to make at the outset is that valuation is useless as a timing mechanism. Stocks don't go down because they're too expensive and they don't go up because they're too cheap. Those, as I think your spring metaphor is good, you're loading a spring or building up a kind of catalyst, but something else has to happen to release that, the kind of energy in valuations that are too low or the trouble in valuations that are too high. So what is that catalyst going to be? That's point number one. Point number two is that I think American assets are more, especially big American assets,

• 33:02Robert Armstrong?

  are more expensive than global assets, partly because capital just wants to get into the United States. We have the biggest, deepest, most liquid market in the world. There's a lot of global capital, excess savings, if you will, and America is its natural home. So there is a like a non-value based reason that American assets have become so expensive. So I agree with you, but I think that the gap that you refer to between the prices, the values, the valuations of American assets and global assets can close some, but it's not like they're going to be at par. Because like the American dollar, American assets generally enjoy a kind of exorbitant privilege.

• 33:47Ed Elson?

  It reminds me of these de-dollarization conversations, like where else is capital supposed to go if not America?

• 33:53Robert Armstrong?

  That is always the question. Where are you gonna go? Another factor, and then this gets back to Scott's point that I think is very important to keep in mind when you're thinking about the recent US rally. And this comes back nicely to politics, actually, is that something that a lot of people don't understand, but that is very important, is that budget deficits are very, very good for stocks. When the government is spending more money than it is taking in in tax revenue, that is pushing cash into the economy, in effect, right? And that cash has to go somewhere. And if you look at the national accounts over history, where it tends to show up is as corporate profits.

• 34:40Robert Armstrong?

  Right, so when the government, or you could state it even more simply this way, when the government is in deficit, somebody else has to be in surplus. That's just the accounting, right? And where does that surplus tend to show up? Corporate balance sheets. So one thing that could change the regime is, for whatever reason, inflation, resurgence, something else, the government gets serious about deficit reduction. And at first, all your deficit-hating friends will be like, yay, yay, financial sanity is coming back to the world, the government isn't spending all this money that it's borrowing, na, na, na. And then they will realize that the first effect of a serious change in the US budget balance is that markets are going to go down.

• 35:25Ed Elson?

  I want to go back to what you were saying about these Trump trades. And the idea that I'm getting from you, which I haven't really seen from anyone else, is that there are very significant other factors at play. And I'm wondering if you think that perhaps we as financial analysts in the media and possibly analysts on Wall Street as well are overestimating how much politics is influencing the markets, perhaps because it's the easiest and most exciting thing in the headlines?

• 36:01Robert Armstrong?

  I think that is A, true, and B, particularly true in the case of Trump. Trump's superpower is that he gets people excited, negatively or positively. He is like an emotion pump of this incredible way. So you just think about Trump and you start to think about extreme outcomes and big ups and big lows and downs, disaster or whatever. I think if you look at the first four years, his rhetoric is extremely strong.

• 36:32Robert Armstrong?

  But the reality might be a bit milder. And I'll give you an example. Trump loves to talk about how the dollar is too strong. And how, you know, he wants to tariff other countries to force them to intervene in their own currency markets, to let their currencies strengthen and, you know, all, you know, the yen, the yawn, et cetera. The thing is, Trump also likes to think of the stock market as a measure of his performance. And if he starts fiddling around with the US dollar, he's going to start getting extremely strong messages from the stock market and from the treasury market. Right? And so there, there is a kind,

• 37:15Robert Armstrong?

  if he continues to believe that he is the man who causes the stock market to go up and wants to continue to be that man, that puts kind of natural guide rails around him, just as it would around maybe any other president. So I think, um, I tend to think that, for example, this idea that Trump will be hugely inflationary is maybe a little bit overblown. These policies are hard to get passed and hard to execute once you pass them. Walls are hard to build. Currencies are hard to change. Tariff negotiations are hard to do.

• 37:58Robert Armstrong?

  All of this, the reality will have an effect. We'll be right back.

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• 39:42Ed Elson?

  We're back with profit markets. We've got a Fed meeting next week. It's your job to predict what's going to happen to interest rates and rate cuts. But what, what are you focusing on? What do you think we should be focusing on going into this next Fed meeting?

• 39:56Robert Armstrong?

  Well, the market, the futures markets tell you that the chance of a rate cut at this meeting is very, very low. And the chance of a rate cut in September is very, very high. So we got a brilliant, I mean brilliant inflation, CPI inflation report last time around.

• 40:18Ed Elson?

  Can you shed, sorry, can you shed some light on how brilliant that report was?

• 40:22Robert Armstrong?

  Okay. So if you, if you look at here, let me put it this way. If you look at core inflation, meaning inflation minus food and energy, and you just annualize it for the month of June, you mean you take how fast it's growing for that month and then you just turn it into a years of inflation. We're, we're a target. We've done it.

• 40:45Ed Elson?

  We're at 2%.

• 40:46Robert Armstrong?

  In a year over year basis, it's about 2%.

• 40:48Ed Elson?

  Okay.

• 40:48Robert Armstrong?

  We're there and.

• 40:51Robert Armstrong?

  The most important thing about it was that housing, which is the kind of inflation that was refusing to go down, finally showed signs that rent and owner's equivalent rent, those are going down. That was like the last holdout was housing inflation. That's coming down now, too. And so it looks like it's happening. And, you know, historically inflation is bumpy. It's not one of these things that tends to go down in a straight line historically. So there is room for surprises, which is why, precisely why the Fed won't cut rates at this meeting is because they want to see a couple more reports like that one, that June report. But if they do,

• 41:35Robert Armstrong?

  I think they have good reason to cut, partly because in the most rate sensitive markets like housing, these high rates are already causing trouble. We keep these rates too high for too long, that's going to spread. And that's, you know, the classic Fed mistake, and we don't want to do that. Now, this, this podcast began with the discussion of politics. So there's an extremely interesting question about whether are you going to cut ahead of an election? Does that look partisan or whatever? I like to think of this in terms of incentives, the incentives of the members of the Monetary Policy Committee. So here are guys who are appointed,

• 42:19Robert Armstrong?

  who are kind of hard to fire, which we could discuss later in terms of Trump. And the reputational damage that they will suffer, especially the, the chair, Jay Powell, they will suffer if they allow, either allow inflation to reignite.

• 42:42Robert Armstrong?

  Or they stay tight too long and they put the country into a recession is extremely bad. Like your people are calling you Arthur Burns for the rest of your life, right? I don't know if you remember Arthur Burns, he was a Fed chair, screwed it up in the 70s. You don't want to be Arthur Burns, right? So they their lifelong reputation is based on them getting the rate cycle correct. I don't think consciously, at least they're going to think, oh, we would cut now, but that would look political. So or, or, you know, we want to, or we wouldn't cut and we will cut because we want Biden to be president or whatever. I think at a conscious level, I just psychologically, I don't buy that

• 43:27Robert Armstrong?

  analysis. Now unconsciously, we all have our biases, right? We do things for reasons we don't understand. We all have strong political opinions. Could that influence the committee? I guess. But like when they are thinking to themselves, I just think all the incentives are them to just think about the economy, think about inflation, think about employment and make the right call.

• 43:49Scott Galloway?

  I was really heartened to see that amongst the issues that has the most influencers, most important to young voters, I think number three or four in this shocked me in a good way was the deficit. Does the deficit, you know, if and when does it matter?

• 44:04Robert Armstrong?

  It matters when Treasury investors say it matters. So it's like, you know, we're playing dice with them. Because if you look at the interest expense we're paying, you know, it's more a function in our current situation. What matters is the rate much more than the volume. Right? So if Treasury investors say, you know what, if you want me to buy this crap paper from the United States, you got to pay me 6%. No, man, man, man, take it back. A seven and a half percent. When you and I were kids, Scott, what was it? 15% you had to pay? So that happens and suddenly it's on. The issue is the one exactly

• 44:48Robert Armstrong?

  the one we talked to earlier. Global and domestic Treasury investors are very patient with the United States because where are you going to go? Where is all the global savings going to go other than by far the biggest market in the world, which is the US Treasury market? It's a question of hydraulics. Money's got to go somewhere. The treasury market is the biggest container.

• 45:17Scott Galloway?

  What do you do with your money? What's your investment approach? Do you pick stocks, index funds? What do you do?

• 45:23Robert Armstrong?

  You should read Dr. Ruth's obituary in the New York Times, which is very amusing. So Dr. Ruth is the great sex advice, American sex advice columnist. And, and she, she was great. And somebody asked her husband, so how's your guy's sex life? And his answer was, uh, the shoemaker's children have no shoes.

• 45:48Scott Galloway?

  The Cobos kids have no shoes.

• 45:53Robert Armstrong?

  So I, you know, my basic approach is I get passive exposure to diversified markets. And what I should do is put the same kind of attention into my portfolio as I do into my column, but I don't. So I have, you know, I'm overweight America, but probably not as much as other people. I have a lot of international exposure for the very reasons you point out, Scott. It's been a very painful position to have, but I just have all ETFs, all passive products. And I have, you know, an American bucket, Asia, Europe, small caps, and it's sort of spread around. But, you know, and I've had this basic portfolio. This, this is actually what I think explains a lot of what is going in the market.

• 46:35Robert Armstrong?

  I look at my, at these buckets in my portfolio, right? And I look at how they performed now for 15 or 20 years, as long as I've had any money to speak of. Right? And there's been one trade and it's been the S and P 500. Everything else stinks. You know, that has a psychological impact. I can remember back in like 2007, when, for example, emerging market stocks, which are very cheap right now, had a great run, an astonishing run. And over time, over the extremely long run, different stock markets all tend to return that kind of magical number, like seven and three quarters percent a year over the extremely long run.

• 47:17Robert Armstrong?

  So these big divergences in performance should close. But when this lesson has been pounded into your poor aching head for 15 years, that the thing to own is big US stocks and everything else underperforms.

• 47:32Robert Armstrong?

  It's like, how do you, the psychology becomes very difficult.

• 47:36Ed Elson?

  Candidly, I think you're one of the best writers and commentators in finance.

• 47:40Robert Armstrong?

  Say more.

• 47:41Scott Galloway?

  Go on.

• 47:41Robert Armstrong?

  Give me some details.

• 47:47Ed Elson?

  And I think the thing that I think you're really good at is boiling down very complex topics and just boiling them down to very simple premises, which is very hard to do in finance. I'm wondering if you have any writing advice.

• 48:02Scott Galloway?

  Great question.

• 48:02Ed Elson?

  For our listeners, are there any sort of skills or principles that you use?

• 48:07Robert Armstrong?

  I think it is always turns out badly when you start actual writing sentences and working your way towards your conclusion. I always start working in bullet points and I have all the bullet points. So I know where I'm going. And when I write my bullet points, as it were, my outline for the piece, I make a point to use the simplest, most declarative grammatical structures I possibly can. So like a 500 or 1,000 word piece might be like five or eight bullet points. You use the term boil down. That's what journalism is reduced. It's like making sauce. As Marcela Hazan said about making pasta sauce, reduce,

• 48:47Robert Armstrong?

  reduce, reduce. And it's the same principle. And what helps you do that is not pretending to be a genius. You know, people get in a lot of trouble trying to make the story they're telling neat. It saves you a lot of, of bad prose to just sometimes be able to say, and this is the part I don't really understand.

• 49:08Ed Elson?

  Right.

• 49:10Ed Elson?

  Yeah, it's refreshing.

• 49:11Robert Armstrong?

  I'm confused about these things. I can see this, but this doesn't make sense. And you kind of ask your readers for help and, you know, markets are bigger than us. Right? That's the point. It's a complicated beast. And, you know, if you're not humbled by them, you're making a big mistake.

• 49:28Scott Galloway?

  Markets are bigger than us. I love that. Robert Armstrong is US commentator for Financial Times and writes the Unhedged newsletter. By the way, great name. Previously, he was the FT's US Financial Editor and Chief Editorial Writer. Before becoming a journalist, he worked in finance and studied philosophy. Robert, we always, we really do love your writing. Thanks for your good work and thanks for joining us here today.

• 49:49Robert Armstrong?

  It's fun to talk to you guys.

• 49:50Ed Elson?

  Thank you, Robert.

• 50:01Ed Elson?

  Algebra of Wealth. Scott, we discussed with Robert this idea that we might be overthinking the election's impact on the markets, and it makes me think about the importance of long-term thinking when it comes to investing. And you wrote in your book, quote, "Our minds don't understand time. We have heuristics and models that betray us. We overvalue the present and near future." Can you offer some advice around maintaining some stoicism as we approach this election?

• 50:27Scott Galloway?

  Occurrence is in the moment. The present value or the discount rate is just incredibly high. When something happens to you, the emotional impact, the long-term impact, don't foot to each other. The long-term impact is much, much less than the emotional impact it has on you in that time. My life's over. How will I recover? How will I get another job? I'll never find someone who I love as much, or who, you know, I'll never find someone who loves me. And you just find that that isn't the case. And I also, I don't like some of the framing around the election that Democrats say, you know, "America is over if Trump wins." I don't believe that. I do think this is an important election. It's

• 51:10Scott Galloway?

  very, it would be very disheartening for me as an American to see someone re-elected who is an election denier. I think the peaceful transfer of power is fundamental to our democracy. So I can see why people are upset, but I don't think it would be the end of America. And at the same time, on the other side, just some of the demonization and, you know, the stark terms around, around America going, you know, to hell in a handbasket at the, at the feet of these, you know, cultural elites. I don't think that's true either. The bottom line is, we're all going to be fine. Is that true? Do I believe that? I think you got

• 51:49Scott Galloway?

  to maintain, I'm falling into my own trap here. I think, whatever you think about this election, you're going to regret, you're going to be upset about what potentially what happened, but you're going to be more upset about how upset you were. Try and maintain some distance. Realize that the keys to your happiness are outside likely of this election.

• 52:16Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our executive producers are Jason Stavis and Catherine Dillon. Mia Silverio is our research lead and Drew Burrows is our technical director. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. We'll be back with a fresh take on markets on Monday.

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