Prof G Markets - EU Strikes Deal With India in Shift From U.S.

Episode Date: January 28, 2026

Ed Elson speaks with Liz Hoffman, Business and Finance Editor at Semafor, about the implications of the free trade deal between India and the EU. Then, he’s joined by Michael Ha, Senior Research Analyst at Baird, to break down the healthcare stock selloff and why it matters for consumers. Finally, Ed shares his takeaways from a new essay on AI from Dario Amodei, CEO of Anthropic. Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [e-mail] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Let's check in on yesterday's Market Vitals. The S&P rose to a record high on optimism for big tech earnings. That gain came in spite of U.S. consumer confidence data, which actually fell to its lowest level since 2014. Meanwhile, United Health dragged the Dow into the red. More on that, in a moment. The yield on 10-year treasuries rose ahead of the Fed's decision out this afternoon, and the dollar continued its slide to a four-year low as President Trump dismissed concerns about the currency's decline. He said, quote, I think it's great. He also said, quote,

I could have it go up or go down like a yo-yo. Okay, what else is happening? The EU and India have finalized a historic free trade agreement, the deal which comes after two decades, decades of talks will phase out tariffs on the vast majority of goods. That move is expected to double European exports to India within the next six years. The timing of the deal is also telling. It landed just after President Trump's threats over Greenland-strained relations with Europe. Meanwhile, India faces U.S. tariffs as high as 50% on key goods, which raises an important question are America's allies hedging their bets? Here to help us answer that, we're speaking with Liz Hoffman, Business and Finance Editor at Semaphore.

Liz, welcome back to Profite Markets. Hey, Ed. So we want to get your reactions to this new trade deal, confirmed between Europe and India. It'll phase out most of the tariffs. It's going to double the value of European exports to India within the next six years. People are calling it historic, the mother of all deals,

any initial reactions? Yeah, I mean, unless you live in the EU or India, which is, in fact, a lot of people, I think that the numbers will either bear out or not. But to me, sort of directionally what this signals is that a lot of countries around the world, particularly these middle powers that are really big economies, but not sort of hegemon adjacent, are starting to realize that they can go around Washington rather than simply being forced to kind of knuckle under. And so you're starting to see these new trade patterns emerge, new trade alliances emerge. this deal has been years in the making. And the thing that got it over the finish line was

Donald Trump picking fights all over the world. Yeah, I was going to, I mean, my read on the situation is it's clear that America is, I guess, sticking up the finger to Europe and various other allies in various ways. We saw what happened in Davos, and now just a few days later, there's this announcement of this deal. It looks like this is very much a reaction to what happened, in Davos, you were at Davos. Is that the correct conclusion? Yeah, look, the big story at Davos

was Donald Trump, but the event that really stuck with me was a speech that the Prime Minister of Canada, Mark Carney, gave. I mean, really just like immediately a historic document, kind of a speech for the ages, is what Larry Fink, the CEO of BlackRock called it when I talked to him at the end of

the week. And really, he was this was a call to arms to these middle powers to say, you know, there's been this rupture, he called it, in the world order, and we can either forge our own way or really recede under that wave. And, you know, Carney had, I think either just been or was on his way. I think he'd just been in China where he had signed a huge trade deal between Canada and China, that taking a step back is actually a remarkable alliance. You know, it wasn't that long ago, if you remember, there were these huge geopolitical tensions between Canada and China. Canada had arrested a Chinese Huawei executive. I mean, this was really fraught relations between the two countries. And now you have this big trade deal that among other things will bring Chinese EVs, these really fantastically futuristic, that tech is great. They are cheap electric vehicles to Canada right on America's

doorstep. And it all felt like a bit of a middle finger to Donald Trump. Also, he gave like the first couple of minutes of the speech in French, which really felt like standing up for, you know, a kind of multilateralism and globalism that Donald Trump has really tried to dismantle. So, you know, that was kind of a call to arms. And then right on the back end of it, we see this, this huge trade deal between India and the EU. And these are goods that, you know, in a different tariff regime would be headed here. Right. And, you know, will not be because of the tariffs that the White House has put on, particularly India. I recently saw Mark Carney spoke about that speech, which, as you said, I mean, everyone

considered it to be groundbreaking. I've seen Canadian saying it's the best speech that Prime Minister of Canada has ever given. Apparently, he told the president, I meant what I said. That is that those were his words. It seems like he is doubling down on this. It appears that perhaps Europe is also doubling. down on this position. We're going to find allies elsewhere. Do you expect that we will see more of these trade deals? I mean, it seemed like maybe the ball was starting to get rolling. I was wondering

whether it would stop in 2026, but it appears to be accelerating. Would you agree with that? I would. The EU has opened in extended trade talks with some of their other partners. the thing that that really crystallized for Europe in particular, but for a lot of other countries, when Donald Trump started this trade war back in the spring of 2025, was they said, oh, we are really reliant on the U.S., right? I mean, there was, and that's what gave the White House so much of its power on the way in.

And, you know, they had some early success striking some of these trade deals. But the alternative, if you were Europe or India or Japan, or Canada, is to say, oh, we are too reliant on the U.S. and to go find partners elsewhere. And, you know, the world is a big place, and it is fragmenting, you know, one word that was, Davos always coins these slightly ridiculous phrases. And one that I heard a lot last week was mini-lateralism, kind of as a replacement for multilateralism, and that these big global trade webs that largely flowed through the United States kind of as a, as a global protector and hegemon and kind of, you know, good corporate citizen,

are being replaced by these more localized, more bilateral agreements and arrangements that increasingly are going to flow outside of Washington and around Washington, probably at least, you know, to some degree in the near term, to the detriment of American consumers. Okay, Liz Hoffman, Business and Finance Editor at Semmel, Liz, appreciate your time. Anytime, that. Always a pleasure. After the break, healthcare stocks take a dive. For even more markets content, you can subscribe to my weekly newsletter at edwardelson.substack.com.

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Healthcare stocks cratered yesterday on the Trump administration's plan to keep Medicare rates flat next year. The Center of Medicare and Medicaid Services announced just a 0.09% payment increase for Medicare Advantage plans. That is far below the 4 to 6% increase that analysts were expected. This announcement coincided with United Health's earnings miss, which also added fuel to the sector-wide sell-off. CVS Health closed down 14%. United Health dropped nearly 20% and Humana fell 21%. Here to help us break down what is happening in the health insurance industry, what this plan means. For health insurance companies,

we're speaking with Michael Haas, senior research analyst at Baird. Michael, thank you for joining us on Profji Markets. Thank you very much for having me. It's a pleasure. So this proposal, this plan, it's a 0.09% payment increase for Medicare Advantage plans in 2027.

Not really clear what that even means, but I'm looking at CVS Health, United Health, Humana, all of these stocks are cratering right now. Why is this happening? Great question. And let me take it at a very high level. And then I'll drill in. And basically, Medicare, I'll take it the highest level. Medicare is health insurance for seniors over the age of 65. So think of it as health care, U.S. health care is about a $4 to $5 trillion market. Medicare itself is about a quarter of that, right? Call it a trillion. So when you think about how important of a role it plays

in the overall health care within the U.S., it's significant. And your largest players are your United Health, your Humana, your CVS, the names that you just called out, and they're all down close to 20%. So the way to think about it is this is run by the federal government and how their pricing works is clearly at volume price, volumes and membership. Pricing, is determined by the federal government under HHS via a department called CMS. And every year in January, they provide a proposed rate notice, called the advance rate notice. And basically, if there's a benchmark rate that every health plan gets for a senior, that rate should, in theory, every year, go up to track cost trend.

And long story short is a flat rate increase, 0.9% like you mentioned, it does not cut it. Because right now, the cost trend environment in Medicare Advantage world, it's mid-single digit to high single-digit. So 1% rate increase, there's a huge delta. That's incredibly insufficient. And the importance of this is this might catalyze into 2027, because remember this rate notice is for 27. seniors getting their benefits cut across the board and it impacting membership next year in a very significant way. Because remember, if the health insurers are going to hit on rate and revenue,

their levers are benefits. That's the main lever right there. I was going to ask you what are the implications for the consumer? Whenever I see something like this, my sort of knee-jerk reaction is, oh, he's pulling down profits for these, health care companies, maybe that means more money in the consumer's pockets, less money in the insurance company's pocket. Maybe that's why the stock's down, but it sounds like that's actually not right. This could negatively impact the consumer. Is that right? Exactly. Negatively will

impact the consumer and negatively impacts the health insurance companies themselves. And when you think about benefits, right, the ones that you can really feel and that's most tangible to you, It might be your dental benefits, your vision, things of that nature for seniors matter a lot. And there's a multitude of them. So it'll be felt. It'll be very impactful to 2027. And actually, this is what has been happening, transpiring over the past couple of years. Because under Biden's administration, rates were terrible.

They were abysmal. They were similar to what we were seeing in 2027. So what we have already seen over the past two years, and you can look at CVS, the stock chart, Humana Stock shirt, United's now, is that the rates have been insufficient to match trends, and it's created, it's retabbit on health insurance. And if you look at seniors and membership, I mean, for personally, my father had a CVS health plan, and he was looking to re-enroll, but they cut the plan. So that's what you're seeing right now across health insurance. They're cutting benefits. They're cutting plans. They're sculpting their geographic. They're

market, they're doing what they can to maintain margins in an environment where rates are, quite frankly, very insufficient. How much of this has to do with Trump's great healthcare plan that he announced just the other week? I mean, when he proposed this, he put this proposal out there, you know, we read through it, we couldn't really see much detail at all when it appears that the markets agreed. I mean, the consensus among the markets was, you know, this doesn't really mean anything. this isn't going to mean much change, and that's why there wasn't really a reaction from the markets.

But now we're seeing, you know, a huge reaction. What is the relationship between what we saw today and the Great Healthcare Plan that was announced a couple weeks ago? Is there a relationship? A loose relationship. I would just, when we think about the Great Healthcare Plan, Trump, his focus is laser focused on something called

the ACA, the Exchange Marketplace, that was created during the Affordable Care Act. Yeah. For individual, where now there's over 20 million people enrolled. So this is different from Medicare Advantage, right? There's three sub-segments within health insurance. There's Medicare Advantage, which we're talking about. There's Medicaid for low-income individuals,

and then there's commercial employer and individuals. So when Trump is making his remarks, the Great Healthcare Act plan, he's talking about commercial and individual. So with Medicare Advantage, it's, it's, different. I think for Trump, he really has two goals. And one, it's cutting premiums for the individual marketplace and passing money back to them, perhaps via HSAs or checks. And for Medicare Advantage and everything, Medicaid as well, he wants to eliminate fraud, you know, right, reduce waste. And when you think about Medicare Advantage and how it relates to what just happened last

night, this rate notice, the biggest surprise within this rate notice is what they're doing on risk model changes. And I know this is going to be very technical and granular, but it's important to understand because what the government believes is that there's a lot of fraud in risk coding, in risk adjustment. There's been a lot of articles from Wall Street Journal, for example, about companies like United Health, Optum Health, improperly risk coding because, and if you bear with me, for 15 seconds, I'll explain why it matters. So we mentioned how every Medicare Advantage plan gets paid a benchmark rate for every senior. And let's call it even number $1,000 per member per month, so $12,000 annually. But it's unfair if, for example, your member might have diabetes

and cancer and AIDS. You're incurring much more costs. So as a health plan, you should be getting paid more to match the utilization, which is why the government created something called the risk score. And basically, it's a multiplier effect. If you're healthy, you might be 1.0, 1.0 times 1,000. But if you have a multitude of comorbidities, that might be 2.0. That might be 10.0 times 1,000. And this risk score is justified by health insurers collecting codes to justify your health status. And there are a lot of players in the game, a lot of health insurers who've been very aggressive arbitraging that risk code payment mechanism because it's clearly so impactful to revenue, drops right to bottom line. So to basically circle back, this rate. notice, the most surprising impact is what it's done to risk adjustment in tightening it,

making it less difficult to be aggressive, if you will. So you're seeing the most aggressive risk coders like United Health seeing the biggest impact today. While conversely, plans like Al-HC, my favorite plan, the best Medicare Advantage plan in the country, most conservative in risk code, they're seeing much less of an impact. So I think it's important to really focus on that point. It seems like just if I had to translate pretty simply, it seems like that's maybe a good thing now. If we're cracking down on those practices that's been reported on, is that not something to get behind? It is a good thing. I agree. I think crack down on all

fraud across all of health insurance is a positive, but the implication is if health plans get hit on revenue and earnings, they're going to look to find it somewhere. And unfortunately, it'll be seniors' benefits. So that'll be the first toggle. And it will save the government money. However, it will impact seniors. So positives and negatives to this.

Yeah. Well, one thing is clear is that healthcare is incredibly complicated. Has been my experience. So we'll have to cover it again soon. Michael Haarth, senior research analyst at Fed. Michael, appreciate your time. Thank you very much. Anthropic CEO Dario Amaday just released an essay that journalists are calling a, quote, grave warning about AI.

The piece is called The Adolescence of Technology. It was published on Monday. It's a fascinating essay. However, there is a catch. And that is that the essay is also 38 pages and 20,000 words long. It also features no charts, no graphics. It is a giant wall of text, and therefore it is high. unreatable. So, we decided to do the hard part, and we read the whole thing, that way you don't have to.

So here is our summary of Dario Amadez essay. These are the Cliff Notes. So the first section is called, I'm Sorry, Dave, and that is a reference to the famous scene in 2001 Space Odyssey, where how the AI system decides to betray Dave, the astronaut, and he tries to kill him. And Amiday's point in this section is that AI pulling a hal, or betraying its creator, betraying humanity, his point is that that is actually possible. In fact, tests have shown that Claude Anthropics chatbot can, in certain situations, engage in blackmail and deception. They have seen this, and that is obviously very scary. And so Amity explains how we should navigate this. One suggestion is that AI companies should be more transparent about their models,

how they work. And the other suggestion, the more important suggestion perhaps, is that we need real legislation to address this problem. And this is a theme that continues throughout the piece. The next section is about AI and nuclear weapons, AI and biological attacks, systems, breaches, all the sci-fi stuff that is, again, very possible in a world of superintelligence. Amiday explains how Anthropic is working to prevent this, how they're investing more money to build guardrails within their AI systems, and he ends again with another call for more regulation, more oversight in America. Next, he discusses what would happen if authoritarian government started to use AI. It talks about the dangers of autonomous weapons, mass surveillance, AI-generated

propaganda. His solutions here are a little bit vague, but ultimately the point is something that I think most of us can agree on, and that is, authoritarian plus AI is a pretty bad combo. Now, the fourth risk is one we've discussed before, specifically, what will AI do to jobs? What will it do to the job market? And his view

is very clear, it will do a lot. He predicts AI could displace roughly half of white-collar jobs in the next five years. He also discusses how this could worsen inequality and how the probability of a, quote, economic concentration of power is actually rising quite fast. Finally, the last section discusses all the potential downstream effects of AI. Maybe we start to integrate

AI into our biology. Maybe we become functionally dependent on AI. Maybe humans lose their sense of purpose altogether, et cetera, et cetera. The biggest message from the whole essay, however, is quite simple. The message is that AI needs more. regulation. It needs more oversight, it needs more guardrails, AI needs policy that recognizes just how dangerous it could really be. And what's striking about this isn't necessarily the message. I think a lot of people know that. What is striking is from whom that message is coming. It's not coming from a regulator or a lawmaker or a senator. It's coming from the CEO of one of the largest AI companies in the world. The guy who makes AI is literally begging his own government

to regulate AI. And that's significant. That tells you something about the state of our government and its approach to AI. The problem isn't even that America has a bad AI strategy. The problem is that America doesn't have an AI strategy, and that is potentially even scarier. Now, one last note, before we go here, one of Amadei's complaints in the essay is that this whole AI conversation has been dominated by the wrong people. It's been dominated by sensationalists and doomers and these figures on social media who aren't really asking the right questions. He says, quote, the least sensible voices rose to the top.

And personally, I would probably agree with him. But we should also recognize why those voices rose to the top. And the reason is because, those voices are good at social media. They're good at getting a message across. And that is something that Anthropic should also recognize. So my unsolicited advice to Daria Amadee, I like your comments. We think your message is a good one. But enough with the 38-page essays. No one's reading 20,000 words. Go fight the battle where the battles are actually being fought. Get on TikTok. Get on Instagram. get on YouTube, talk to the camera, throw in some visuals.

The problem isn't that people aren't listening to you. The problem is that people don't even hear you. You're not even in the same room as them. So if you want to win the game of attention, unfortunately, you have to play by the rules of the game. So my advice to Dario Amadee, it is time to put away the pen. Enough with the blogging, enough with the essays. It's time to take out the camera.

Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss, edited by Joel Patterson and engineered by Benjamin Spencer. Our research team is Dad Shalon, Isabella Kinsel, Chris Nadonoghue, and Mia Silverio. Thank you for listening to Profitee Markets from Profitri Media. If you liked what you heard, give us a follow. I'm Ed Elson, and I will see you tomorrow.