CNBC's full interview with PIMCO's Libby Cantrill

[00:00:00] Speaker 1: Let's hear more now from Libby Cantrell. She's PIMCO's head of U.S. public policy. She joins us here on set. Libby, it's great to see you. Great to be with you. So top-level point of view, perhaps this isn't too much of a surprise. How would you describe everything that's gone down beginning with the events of the weekend, the Revolutionary Guard, as my understanding is what Nikki Haley told us yesterday, that they shot at the ships because they hadn't gotten permission to pass through the strait. Now the U.S. has retaliated. Now we say there's no MOE. So how would you describe the state of play right now? Yeah, I mean, I think maybe underappreciated [00:00:32] Libby Cantrell: in the market is that there hadn't really been even an agreement on what they were negotiating. This MOU, of course, were about halfway through the sort of 60-day window, and they were sort of still negotiating what was even in the MOU for all intents and purposes. So while I think the market, the geopolitical risk had receded in the market, it did feel like this was not necessarily totally surprising that this, what seemed to be a quite fragile ceasefire even to begin with, has now, you know, gone sideways. With that said, though, is, as Steve said, is this just sort of President Trump's trying to kind of restore negotiating leverage, you know, going into, you know, potentially, maybe another extension of the MOU, you know, we'll sort of see. But I think that, you know, from a markets perspective, maybe not totally surprising that this is, you know, this is going sideways. [00:01:25] Speaker 1: Could he once again, I like what you're saying there, actually, could he be using a playbook we've seen before, which is he escalates to de-escalate, in other words, escalating the situation now and actually ending up de-escalating by, as you say, extending the MOU, or kind of now moving beyond the, if 30 days from now is not a long period of time. And does it matter? I mean, one of the most sort of significant outcomes, both geopolitically, but also for the markets, as if they do end up with tolls or some kind of system like that on the strait. How big of a deal is that? The CNBC had a piece the other day saying, you know, the Strait of Malacca could be next. I guess that's off the coast of Indonesia. So everyone's looking around at this and saying, yeah, if we're going to start charging for global commerce, we'd like our piece, too. [00:02:06] Libby Cantrell: Yeah, of course. I mean, Iran went into this with sort of this theoretical source of leverage around, you know, potentially closing the Strait of Ramirez. If you talk to national security folks on both the right and the left, this, of course, had been sort of the biggest risk had there been conflict with Iran. Now, of course, that theoretical source of leverage has sort of turned into a real practical source of leverage. Both the president and Secretary Rubio have said that sort of this tolling, this complete control of the Strait of Ramirez by the IRGC is just not tenable. So that cannot sort of stand as part of this sort of negotiated settlement. So we'll see. As it relates, though, to kind of the politics here in the United States, I mean, the president, of course, I think, really is interested in having this come to an end. He does not want to go into the midterm elections with there being any sort of uncertainty premium kind of priced into both the price of oil and then also the price of gas. The axiom that still holds, you know, the price of, you know, gas and groceries, the price of a gallon of milk, the price of a gallon of gas. This is what really matters to voters. What we know from polling is it really does matter to voters. You add to the price of health care, the price of housing, affordability, a huge issue going into the midterm elections. So politically, the president has every incentive to extend this negotiating window to come to some sort of, you know, potential, again, another ceasefire. However, you know, the IRGC may not let him do that. [00:03:30] Speaker 1: There's also now the fight with Spain is escalating a little bit. He's upset with them. Defense spending is part of it. I think it's broader than that as well. And is suspending trade or talking about doing so with Spain, is that is that impactful? [00:03:46] Libby Cantrell: Well, I mean, I think it's impactful. I think that the real question is, is it likely? And, you know, what tools does he have in order to put a complete prohibition on trade with Spain? They're limited. What we've seen with the Supreme Court and the ruling against IEPA, the International Emergency Economic Powers Act, that sort of broad act that he had used to put those sort of far reaching tariffs on, he can't do that. Could he pursue something called Section 301, which could limit trade with Spain? Sure. But he has to go through an investigation process. There's a lot of sort of, you know, protocol and process that would be involved in doing that. So I think, again, we sort of need to take this with a grain of salt, that obviously the president is, you know, he has his beef with European countries, you know, maybe with Spain in particular around other things, defense spending and what have you. But the tools to actually put a prohibition on tariffs are quite limited. [00:04:44] Speaker 1: Yeah. You mentioned the midterms. Yes. And what are what is the sort of what are the prospects at this point? What kind of gaming it out in terms of outcomes? I mean, we're starting to get close. It's what it's it's July. So we've just got a couple of months to go. And now with everything happening in Maine, and it looks like that's going to be a harder seat for. [00:05:03] Libby Cantrell: Yeah. But you see with voters is that their views going into an election start to sort of cement around Labor Day. So we're still we're still early ish, but it's definitely getting, you know, kind of later. And in terms of this early cycle, if you will, you know, I think that that with the generic ballot is showing is that, yes, Democrats are favored going into this election cycle. That means that, you know, that the Democrats probably do have a higher chance of taking back the House, the Senate. And this is where we would agree with the betting markets and the setting that the Senate is just an uphill battle for Democrats. And basically, the Senate goes through Maine. It's possible that they win the Senate. They need to win four seats net in order to take back the Senate. It's possible they can do that with Maine. It's really difficult, though. And so this issue with Graham Plattner, we'll see how it resolves. Presumably, he will drop out. Presumably, there will be a replacement. But instead of focusing on Susan Collins and making this a referendum on the Republican incumbent in Maine, they're obviously just infighting. And I think this has been sort of the theme with the Democratic Party since 2024. They haven't really settled on who they want to be and who they're going to [00:06:18] Speaker 3: be going into this election. You put, do you, have you heard of the Koushi K-Pow index, the power index? Do you watch that? Is that on your radio? Yes, we watch a lot of those. Because we deal with, we have, that's not why I'm mentioning it. We had to wreck on. But we do have a deal, you know, we're in bed with Koushi. But plus 2.3, and it switched. It's R, plus 2.3 R. That stands for Republicans. And you can see where it switched. You don't think that this socialist stuff ever nationally comes home to roost? Does this seem normal to you as a, even at PIMCO, does it seem normal to you? I'm not sure what that means, Joe. I think you know what that means. I mean, you got Bill Gross, Mohamed El-Aryan. You're out. [00:07:04] Libby Cantrell: No longer work there. Yes, yeah, yeah. Well, look, we do try to call balls and strikes on behalf of our clients. Yeah, that's what everyone says. Yeah. Well, I think we really do try to do that. We're fiduciaries, of course. You've been coming on a long time. Yes. So, but I mean, I think the, I mean, is this going to, I think, hurt them more into a general election? Absolutely. I mean, can Republicans demagogue the Democratic Party, label them the party of socialists and communists and what have you? You know, absolutely. I'm not sure that is going to necessarily drown out or kind of trump, if you will, the political environment going into the midterm elections, which, as you know, you know, just benefits the party out of power. The midterm elections just, except for two times since World War II, has the party out of power [00:07:52] Speaker 3: gained seats in the House in particular. It might change if you run communists or socialists, [00:07:57] Libby Cantrell: right? In deep blue districts, I just don't think that's going to, you know, make a difference. What it will do is how do you govern? It doesn't spread nationally at all? How do you govern in [00:08:05] Speaker 3: June? I mean, who is a person supposed to think in the nation is the head of the Democratic Party? [00:08:11] Libby Cantrell: Yeah, and again, I think this will have implications for 2028, which is obviously a national [00:08:15] Speaker 3: election. So you don't think it does for the House? I mean, I think that the midterms, again, you know. When we have Mike Johnson on with somebody who says, or Thune, we still have a chance in the House. Do you just think that they're [00:08:25] Libby Cantrell: whistling? No, I don't disagree with that. I just. They have a chance, yeah. I mean, look, of course they have a chance. I mean, but. If they keep it, this is only the third time [00:08:33] Speaker 1: that the party in the White House. [00:08:35] Speaker 3: It's in, in, in, in. I think this changed, the Cape, I think, changed on some of the redistricting stuff, what happened in Virginia and some of the others. Yeah, and I think, you know, [00:08:42] Libby Cantrell: net redistricting, the Republicans have been more savvy than Democrats, you know, net eight to nine seats. However, again, the Republican majority right now is three seats, Joe. I think you just know the average number of seats, the party out of power wins is 20. Even in baseball. It's just, it's just an uphill battle. But I would agree with you in 2028, unless the Democrats have coalesced around a more sort of centrist message, you know, this could absolutely, you know, have big implications going into the general election. [00:09:11] Speaker 3: Who's my other friend at PIMCO? He went and lived on a mountaintop and grew a beard. You know him, right? Paul McCulley. Oh, Paul McCulley, of course, yes. [00:09:21] Libby Cantrell: He's a big right-wing guy. He's done a mountaintop and grew a beard. [00:09:24] Speaker 3: Also no longer a big beard. Uh-oh. It's a corporate culture. You're in that beautiful building. In Orange County. In Orange County, yes. Aren't you in that beautiful building in Fashion Island? [00:09:31] Libby Cantrell: There's a bastion of liberalism, Joe. [00:09:35] Speaker 3: Even in baseball, balls and strikes are now looked at, okay? Because they're not all, I mean, thanks for putting up with me. I appreciate it.