WEBVTT - Bloomberg Presents "What Goes Up" 0:00:00.120 --> 0:00:03.560 Hello, odd lots listeners. It's Joe Wisenthal. I wanted to 0:00:03.560 --> 0:00:06.280 share with you a new podcast from Bloomberg called What 0:00:06.400 --> 0:00:09.680 Goes Up. Each week, host Sarah pon Second Mike Reagan 0:00:10.039 --> 0:00:13.800 speak with expert guests about the main themes influencing global markets. 0:00:14.240 --> 0:00:18.000 They explore everything from stocks to bonds, to currencies and commodities. 0:00:18.360 --> 0:00:20.720 If you're curious about the latest plazz on Wall Street, 0:00:20.920 --> 0:00:23.439 this show is for you. We're going to play you 0:00:23.520 --> 0:00:25.960 the latest episode of What Goes Up and if you 0:00:26.000 --> 0:00:28.200 like what you hear and want to hear more, this 0:00:28.240 --> 0:00:30.520 show is out now and you can subscribe to it 0:00:30.600 --> 0:00:34.200 on Apple Podcasts or wherever you get your podcasts. Thanks 0:00:34.280 --> 0:00:49.479 and enjoy. Hello and welcome to What Goes Up, a 0:00:49.560 --> 0:00:53.560 Bloomberg weekly markets podcast. I'm Sarah Ponza, a markets reporter 0:00:53.640 --> 0:00:55.960 on the Cross Asset Team, and I am Mike Reagan, 0:00:56.120 --> 0:00:58.480 a senior editor on the Markets Team. This week on 0:00:58.520 --> 0:01:01.600 the show, from long shot to base case, Wall Street 0:01:01.640 --> 0:01:05.080 is growing increasingly pestimistic, but a trade deal might not 0:01:05.160 --> 0:01:08.200 be reached over the summer months, and even as the 0:01:08.240 --> 0:01:11.640 Fed preaches patients, bonn yields continue to fall with the 0:01:11.720 --> 0:01:15.880 ten year treasury yield reaching the lowest level since and 0:01:16.080 --> 0:01:18.760 of course, Sara, we will finish the show with the 0:01:18.760 --> 0:01:22.880 ever popular the craziest thing I ever saw in markets 0:01:22.920 --> 0:01:24.840 this week, at least this week. I hope you have 0:01:24.880 --> 0:01:26.520 a good one. You have a good crazy thing. I 0:01:26.600 --> 0:01:28.160 will have a good one by the end of the podcast. 0:01:28.160 --> 0:01:29.960 All right, I've got a good one. No pressure on 0:01:29.959 --> 0:01:32.759 our guests. The mind's mind's pretty good. I'm just throwing 0:01:32.800 --> 0:01:36.360 it out there. That's it. I'm not trying. Well, that's 0:01:36.400 --> 0:01:38.560 one of our guests there, Emily Barrett, you better have 0:01:38.640 --> 0:01:43.240 something good. Uh. Emily is our correspondent straight fresh from 0:01:43.280 --> 0:01:45.960 the trade Wars covering the bonds and FX markets. That's 0:01:46.000 --> 0:01:50.200 exactly how it feels, and also joining us on the show. 0:01:50.280 --> 0:01:55.160 Geno Martin Adams, the chief equity strategist here at Bloomberg. 0:01:55.200 --> 0:01:58.040 Gina spent many years as a strategist, said, Wells Fargo 0:01:58.320 --> 0:02:00.640 Waucobia Corp. Before that. But Sarah, I was looking at 0:02:00.680 --> 0:02:03.640 Gina's bio. Something I did not know about her. She's 0:02:03.640 --> 0:02:07.880 a Gator. Yes, you know that. I am from South 0:02:07.920 --> 0:02:10.560 Florida as well. I'm a Gator by birth. That's too 0:02:10.680 --> 0:02:13.720 Florida women on the show. I don't know, Florida women 0:02:13.760 --> 0:02:17.919 don't make the news quite as entertaining. Yeah, but maybe 0:02:17.919 --> 0:02:23.600 we can change that. I don't underestimate it. But this 0:02:23.680 --> 0:02:26.600 week We've been talking about US China trade for a 0:02:26.600 --> 0:02:29.000 while now, but it seems like we got a bit 0:02:29.040 --> 0:02:31.840 of a step up. We think about what's changed, for 0:02:31.960 --> 0:02:35.280 one being the Huawei blacklist. We've also heard talks that 0:02:35.560 --> 0:02:39.160 other surveillance companies out of China could be blacklisted as well. 0:02:39.400 --> 0:02:42.160 And we even have a fight song out of China 0:02:42.320 --> 0:02:45.400 and for gators. I went to school at Michigan. You know, 0:02:45.480 --> 0:02:48.320 a good fight song can really rile people up. Gina. 0:02:48.840 --> 0:02:53.120 From your perspective, is this becoming something that traders investors 0:02:53.160 --> 0:02:56.480 can really no longer ignore. Yeah, I don't necessarily think 0:02:56.520 --> 0:02:59.000 they have ignored it, but it did take a new 0:02:59.120 --> 0:03:01.080 step this week, and it took a step into a 0:03:01.120 --> 0:03:03.680 tech war as opposed to just a trade war. I 0:03:03.720 --> 0:03:05.440 think when you look back over the course of the 0:03:05.520 --> 0:03:08.480 last year, that's been the most dangerous aspect of the U. S. 0:03:08.560 --> 0:03:12.440 China relationship shift. It's not the tariffs. The tariffs are 0:03:12.440 --> 0:03:15.120 a teeny tiny portion of GDP growth. They're a teeny 0:03:15.160 --> 0:03:18.079 tiny portion of earnings growth. You know, you've run through 0:03:18.120 --> 0:03:20.959 the quantification of tariffs and you find out real quick 0:03:21.280 --> 0:03:24.000 how small they are, which is why stocks could sort 0:03:24.000 --> 0:03:26.640 of bounce around in the one to three percent decline 0:03:26.760 --> 0:03:29.240 range up until this week, and we did see an 0:03:29.280 --> 0:03:32.680 elevated level of volatility this week. We've seen a lot 0:03:32.760 --> 0:03:37.400 more angst evident in broad market classes, with the rise 0:03:37.440 --> 0:03:40.160 in gold as a good example. This week. Small caps 0:03:40.200 --> 0:03:43.720 really getting creamed this week, so much bigger risk off 0:03:44.080 --> 0:03:46.400 sentiment this week than last week. And I think the 0:03:46.400 --> 0:03:48.920 reason for that is this week it became about tech, 0:03:49.360 --> 0:03:53.120 not about trade. Gee, I'm curious, in uh, your career, 0:03:53.120 --> 0:03:55.400 have you ever thought about politics as much as as 0:03:55.440 --> 0:03:57.680 we have through these days. It seems like a very 0:03:57.760 --> 0:04:04.600 uncomfortable thing for numbers ended fundamental technical analysts. Yeah, it's uh. 0:04:04.720 --> 0:04:07.840 I have thought about politics a lot over the course 0:04:07.880 --> 0:04:10.720 of the last several years. I mean, I can distinctly 0:04:10.760 --> 0:04:14.640 remember sixteen as a year in which it was all 0:04:14.680 --> 0:04:17.840 you know, the popular sentiment on Wall Street was if 0:04:17.920 --> 0:04:21.600 Hillary Clinton wins, stocks should do fine. If trade, if Trump, 0:04:21.600 --> 0:04:24.560 when stocks are going to get pummeled, right, and the opposite, 0:04:24.600 --> 0:04:27.640 The exact opposite thing occurred right after the Trump election 0:04:28.080 --> 0:04:32.000 in seen, then the thing was stocks just climbed this 0:04:32.040 --> 0:04:34.400 wall of wari because everyone was really concerned about Trump. 0:04:34.680 --> 0:04:37.640 I think throughout my career, I've always had to focus 0:04:37.680 --> 0:04:40.640 on policy in general, but more so on monetary policy 0:04:40.680 --> 0:04:44.600 than on fiscal policy, and certainly never on trade policy. 0:04:45.240 --> 0:04:48.600 And you know, even the smartest trade policy movements in 0:04:48.720 --> 0:04:51.719 the Bush administration weren't so meaningful for the broad market. 0:04:51.920 --> 0:04:55.640 So it's definitely a very different kind of policy that 0:04:55.680 --> 0:04:58.560 we were now focused on. Though policy is always important, 0:04:58.600 --> 0:05:01.480 it's just usually monetary other than than trade or fiscal 0:05:01.560 --> 0:05:04.280 that really matters. And you mentioned how and I think 0:05:04.320 --> 0:05:09.040 everyone's doing this now. You take the x percent tariffs 0:05:09.080 --> 0:05:12.800 on x dollar value of goods, and you get why 0:05:12.880 --> 0:05:15.560 you get a certain effect on earnings on revenue, But 0:05:15.600 --> 0:05:17.800 I wonder is there more to it than that or 0:05:17.839 --> 0:05:22.400 there's sort of unquantifiable risks, uh to confidence, to sentiment, 0:05:22.800 --> 0:05:24.440 that sort of thing, and and how you know, how 0:05:24.480 --> 0:05:26.360 do you wrap your head around that as the type 0:05:26.360 --> 0:05:29.480 of strategists you are who is deep into the numbers. Yeah, 0:05:29.520 --> 0:05:33.640 it's it's frankly, very very difficult because behavioral analysis is 0:05:33.640 --> 0:05:36.080 a huge part of markets and I think the only 0:05:36.120 --> 0:05:39.240 way to really analyze the potential impact to this is 0:05:39.279 --> 0:05:42.280 through price itself. You know, we can all speculate as 0:05:42.320 --> 0:05:44.760 to what it means for GDP growth globally. We can 0:05:44.800 --> 0:05:47.560 all speculate as to how much this is either inflationary 0:05:47.600 --> 0:05:50.600 or deflationary. But the hard truth is nobody knows. We 0:05:50.640 --> 0:05:52.760 could try to quantify it, we could try to pretend 0:05:52.800 --> 0:05:54.919 we know more than anybody else, but the reality is 0:05:55.400 --> 0:05:58.039 the market itself, which is an aggregate of millions and 0:05:58.120 --> 0:06:01.000 millions of people's opinions, is probably smarter than any of 0:06:01.080 --> 0:06:03.039 us in this room. Right I've made a whole career 0:06:03.040 --> 0:06:08.080 out of pretending I know more than uh, and so 0:06:08.160 --> 0:06:10.839 I watch price very very carefully, and what price tells 0:06:10.839 --> 0:06:14.200 me right now is okay. So far the risk of 0:06:14.279 --> 0:06:17.520 this there's somewhat contained five percent correction and stucks is nothing. 0:06:17.560 --> 0:06:20.080 These things come around every nine months or so on average. 0:06:20.880 --> 0:06:24.240 But if we start to work our way toward ten percent, 0:06:24.320 --> 0:06:26.920 we break that ten percent line, it becomes very clear 0:06:26.960 --> 0:06:29.440 that the market's impression of this is something much worse. 0:06:29.680 --> 0:06:31.960 Right now, something I've been hearing as to why markets 0:06:31.960 --> 0:06:34.680 have been decently resilient. We're not too far off the highs. 0:06:34.720 --> 0:06:37.040 Like you said, is that you look at the economic data, 0:06:37.080 --> 0:06:40.680 you look at the fundamentals, and they're still largely strong. However, 0:06:40.680 --> 0:06:43.640 this past week we did see some weak er pm 0:06:43.640 --> 0:06:47.279 I numbers in the US, not yet contracting, but pretty 0:06:47.320 --> 0:06:50.680 close on the cusp. What could it take to really 0:06:51.080 --> 0:06:55.400 push us off the edge? Yeah, so historically you're not 0:06:55.440 --> 0:06:57.760 pushed off the edge until manufacturing p m I in 0:06:57.800 --> 0:06:59.520 the US is all the way down at forty three. 0:06:59.680 --> 0:07:05.360 We got I think the market will absolutely hesitate reach 0:07:05.400 --> 0:07:08.200 a point of very big insecurity if I s M 0:07:08.240 --> 0:07:11.760 falls below fifty. Uh. That's one of the big keys 0:07:11.800 --> 0:07:15.520 that we watch. Initial claims is another one incredibly important 0:07:15.560 --> 0:07:18.600 to the direction of equities, long term initial claims. If 0:07:18.640 --> 0:07:21.040 initial claims start rise, saying, and especially if they rise 0:07:21.120 --> 0:07:23.960 more than fifty, thou start to move towards seventy in 0:07:23.960 --> 0:07:28.040 a rise, you're pretty much assured that you're falling into recession. Uh. 0:07:28.080 --> 0:07:30.360 The other thing to watch is, of course the bond markets. 0:07:30.440 --> 0:07:32.520 We you still haven't had that inversion of the two 0:07:32.560 --> 0:07:35.320 stents at least last I checked, and that's a big 0:07:35.400 --> 0:07:38.119 key trigger for the equity market sentiment as well. So 0:07:38.440 --> 0:07:40.400 there are a lot of different things that I think 0:07:40.440 --> 0:07:44.680 you want to watch for the economic data. You know, frankly, 0:07:44.720 --> 0:07:47.320 consumer confidence, which is still near a fifteen year high, 0:07:47.440 --> 0:07:49.760 is still pretty supportive, so you need to see a 0:07:49.760 --> 0:07:53.200 big deterioration and consumer confidence as well. What's a good 0:07:53.240 --> 0:07:56.800 segue into our next guest on the Bonds team, Emily, 0:07:57.560 --> 0:08:00.880 You had a story out this week talking about the 0:08:00.920 --> 0:08:04.200 market expectations for inflation. I just want to read one 0:08:04.200 --> 0:08:07.240 line because I think it's it's pretty important, uh, right 0:08:07.280 --> 0:08:09.760 that since consumer price gains have been lagging the FEDS 0:08:09.760 --> 0:08:12.440 two percent target for much of the past decade, it's 0:08:12.440 --> 0:08:14.840 a little wonder that inflation isn't a hot topic in 0:08:14.880 --> 0:08:18.000 the market yet. Don't don't done, But it may be 0:08:18.080 --> 0:08:20.720 warming up with the Fed actively debating how it can 0:08:20.760 --> 0:08:24.160 meet its inflation goals, including a June fourth the Fifth 0:08:24.200 --> 0:08:27.520 Conference to discuss different approaches. I feel like the trade 0:08:27.840 --> 0:08:32.559 tensions are UH causing a lot of confusion about what 0:08:32.640 --> 0:08:36.360 we should expect for inflation. Obviously, the market is pricing 0:08:36.400 --> 0:08:39.800 in lower inflation going forward, um, but a lot of 0:08:39.800 --> 0:08:43.679 people are talking about the pure inflationary effects of the 0:08:43.720 --> 0:08:47.400 tariffs on the consumer. What is sort of the consensus 0:08:47.400 --> 0:08:50.080 out there or what's the smartest take you've heard about 0:08:50.200 --> 0:08:54.040 what we should expect as far as inflation in the 0:08:54.080 --> 0:08:56.160 trade trade war, right, Yeah, I mean this is the 0:08:56.200 --> 0:08:58.800 interesting thing. I think people trying to segregate what's the 0:08:58.800 --> 0:09:02.640 short term issue in terms of the inflation impact, and 0:09:02.679 --> 0:09:05.600 directly I've seen some Golden Sacks Golden Sacks analysis saying, 0:09:06.000 --> 0:09:07.440 you know, this is the boost that we might see 0:09:07.480 --> 0:09:09.240 two cp I and the mean in sort of the 0:09:09.280 --> 0:09:12.199 medium term, but people are really focusing on that longer 0:09:12.280 --> 0:09:15.480 term potential drag on growth. And as they're looking to that, 0:09:15.480 --> 0:09:17.600 they're sort of seeing if growth starts to slow, then 0:09:17.600 --> 0:09:20.520 you have more and more headwinds to that inflationary impulse. 0:09:21.080 --> 0:09:23.719 And so really that's where we're seeing this decline and 0:09:23.760 --> 0:09:26.160 break evens, which is the inflation premium that have built 0:09:26.200 --> 0:09:29.040 into treasuries. Um, we're seeing that just coming down and down. 0:09:29.080 --> 0:09:31.439 And that's despite the fact that you know, we've had 0:09:31.440 --> 0:09:33.520 tariffs put on their other things, there's been oil price 0:09:33.600 --> 0:09:36.760 gains sort of uh in the year to date hasn't 0:09:36.800 --> 0:09:39.240 been reflected at all, and normally break evens would follow 0:09:39.280 --> 0:09:42.240 that pretty closely. So we're seeing this kind of really 0:09:42.280 --> 0:09:46.160 sort of counterintuitive moving inflation markets. And it's because you know, 0:09:46.400 --> 0:09:49.440 people talked for ages about secular stagnation. You've got bored 0:09:49.440 --> 0:09:52.360 of hearing about this. But it seems that the forces 0:09:52.400 --> 0:09:54.600 that are pressuring inflation lower. It's not just in the US, 0:09:54.640 --> 0:09:57.600 it's globally and so much stronger else where. People would argue, 0:09:58.440 --> 0:10:00.800 really our top of mind from a investors and so 0:10:00.840 --> 0:10:02.920 that's going to be hard to fight. And this is 0:10:03.000 --> 0:10:05.560 this is where it comes down to people's expectations for 0:10:05.679 --> 0:10:08.480 rate cuts. I mean, there's a sense in the market 0:10:08.600 --> 0:10:11.079 that the FED, if it's going to be serious about 0:10:11.120 --> 0:10:13.559 hitting its two percent inflation target, is really going to 0:10:13.679 --> 0:10:16.480 need to take some action on rates to lower them UM. 0:10:16.600 --> 0:10:18.360 And people have gone so far as to say, a 0:10:18.360 --> 0:10:20.200 couple of people I spoke to, you know, it's not 0:10:20.240 --> 0:10:22.320 just one cut, it's probably two or three if you 0:10:22.360 --> 0:10:25.400 want to hit UM. The thing that's interesting about where 0:10:25.480 --> 0:10:27.640 c p I is at the moment is relative to 0:10:27.720 --> 0:10:31.920 the Fed's target. The FED prefers consumption expenditure, so they 0:10:32.000 --> 0:10:34.599 look at a PC rate which is actually forty to 0:10:34.720 --> 0:10:39.400 forty basis points below where CPI is, so UM, so 0:10:39.480 --> 0:10:41.800 that's it's even worse really if you look at the 0:10:41.480 --> 0:10:45.199 Fed's preferred measure. I know a lot of people are 0:10:45.200 --> 0:10:46.920 looking at the FED minutes that came out this week 0:10:46.960 --> 0:10:49.400 and calling it old news, um, but I ran a 0:10:49.440 --> 0:10:52.120 little control fine just to see where the word transitory 0:10:52.200 --> 0:10:55.400 comes up, and transitory appeared twice as it relates to inflation, 0:10:55.520 --> 0:10:58.960 whereas the last time around we saw the word transitory once, 0:10:59.000 --> 0:11:01.360 but it was related to g d P and first 0:11:01.400 --> 0:11:06.480 quarter slower growth being transitory. What else did we possibly 0:11:06.640 --> 0:11:10.240 learn from the minutes, if it's possible to clean anything 0:11:10.240 --> 0:11:12.559 more from what we've heard from FAT officials, I think 0:11:12.559 --> 0:11:14.199 what people wanted to see. I mean, this must be 0:11:14.200 --> 0:11:18.040 the shortest lived transitory impact on markets ever, because after 0:11:18.440 --> 0:11:21.440 you know, when Fed, the Fed's power was really pushing 0:11:21.440 --> 0:11:24.199 that transitory message. You know, what's weighing on inflation is 0:11:24.200 --> 0:11:26.160 going to be very short lived. You did see a 0:11:26.240 --> 0:11:28.960 market correction that started to sell off a little. Oh right, Okay, 0:11:29.000 --> 0:11:30.600 we might come back if the FED believes this is 0:11:30.600 --> 0:11:33.000 going to happen, But that just got crushed. And what 0:11:33.080 --> 0:11:36.360 the minutes gave us was this sense that at least 0:11:36.400 --> 0:11:39.600 among the f O m C, that the FEDS committee, 0:11:39.600 --> 0:11:42.760 there is a broad agreement that these or at least 0:11:42.760 --> 0:11:45.440 they're on message that people seem to think that, yes, 0:11:45.480 --> 0:11:48.480 this could be a transitory impact. But from the people 0:11:48.520 --> 0:11:50.960 I've spoken to, they're listening at the fact to the 0:11:51.000 --> 0:11:54.560 fact that the transitory effects don't quite make up for 0:11:54.600 --> 0:11:57.000 the short form inflation. They really do believe that there 0:11:57.000 --> 0:11:59.560 are stronger forces at work here. So what we learned 0:11:59.559 --> 0:12:01.400 from the minut it's it's a really good question. I mean, 0:12:01.520 --> 0:12:04.200 I'm not even sure that, uh, you know, the trade 0:12:04.240 --> 0:12:07.120 impact wasn't factored in because obviously most of the trade 0:12:07.160 --> 0:12:10.360 fall out really happened after the minutes were released. Um, 0:12:10.679 --> 0:12:13.480 so the bump that we should have got, I've got 0:12:13.520 --> 0:12:15.719 a much more hype of getting it back. Really at 0:12:15.720 --> 0:12:19.960 this point, if the break evens are right and we're 0:12:20.280 --> 0:12:25.000 due for some weak inflation going forward, what does that 0:12:25.559 --> 0:12:28.760 make certain sectors, certain factors look more attractive to you? 0:12:29.240 --> 0:12:32.560 How would how would you recommend playing sort of low 0:12:32.640 --> 0:12:35.880 inflation environment. Well, it depends on if we are indeed 0:12:35.920 --> 0:12:38.880 in for a transitory or a longer term sort of 0:12:38.920 --> 0:12:42.760 disinflationary deflationary trend first start. But if we assume that 0:12:42.800 --> 0:12:46.760 it's very very short term, more than likely it pushes 0:12:46.800 --> 0:12:49.199 you into more defensive sort of sectors, and I think 0:12:49.200 --> 0:12:51.040 we've seen that over the course of the last couple 0:12:51.080 --> 0:12:54.320 of months. Our sector strategy model even pushed us into 0:12:54.320 --> 0:12:57.600 defensive sectors as early as the end of April. And 0:12:57.640 --> 0:13:00.400 that largely reflects what's happening in right. Some rates are 0:13:00.480 --> 0:13:04.800 rallying so much, indicating that this inflation pressure is somewhat nil, 0:13:04.840 --> 0:13:07.920 at least in the short run, suggesting that the downside 0:13:08.040 --> 0:13:11.000 risk to growth is still pretty evident. And at a 0:13:11.040 --> 0:13:14.240 time after stocks had already rallied tremendously in the first quarter, 0:13:14.600 --> 0:13:17.240 the valuation multiple started to shift as well on the 0:13:17.240 --> 0:13:20.600 cyclicals versus defensives. Call I can tell you one sector 0:13:21.520 --> 0:13:24.120 it absolutely suggests you want to stay away from, and 0:13:24.320 --> 0:13:27.600 this is manifestans price performance as well as energy. There's 0:13:27.679 --> 0:13:30.400 one sector that is just constantly the inflation play in 0:13:30.440 --> 0:13:34.120 the equity market. It's energy, and then to a lesser extent, materials. 0:13:34.679 --> 0:13:36.840 As much as this last month of weakness in the 0:13:36.840 --> 0:13:39.480 equity market seems to have been about tech, the energy 0:13:39.520 --> 0:13:42.760 sector is down four bases points more than tech stocks. 0:13:43.160 --> 0:13:46.520 I mean, it's just getting crushed. It's making new relative 0:13:46.559 --> 0:13:49.280 price lows in comparison to the SMP five hundred and 0:13:49.320 --> 0:13:52.200 has been persistently for the last several years, So the 0:13:52.240 --> 0:13:57.520 equity signal is actually very deflationary. If not deflationary, then 0:13:57.520 --> 0:14:01.760 at least disinflationary, and as persons sisted through a long 0:14:01.800 --> 0:14:03.719 period of time. At the beginning of the year, I 0:14:03.760 --> 0:14:05.800 heard the case being made a lot that we needed 0:14:05.800 --> 0:14:09.040 to see energy prices close the gap with oil prices 0:14:09.040 --> 0:14:11.200 because we had seen oil rally so much. Well, now 0:14:11.440 --> 0:14:14.440 clearly we're seeing oil prices roll over, we're seeing energy 0:14:14.440 --> 0:14:17.840 stocks roll over. Is the case for that, for energy 0:14:17.880 --> 0:14:20.040 prices to move up to oil prices and close the 0:14:20.080 --> 0:14:23.400 gap kind of disintegrating? Yeah, you know, that gap has 0:14:23.400 --> 0:14:26.360 been existing for the last three years, so you could 0:14:26.400 --> 0:14:28.880 even take it all the way back to eleven when 0:14:28.880 --> 0:14:31.760 the gaps started to widen. You know, I think that 0:14:31.720 --> 0:14:36.880 the terrible fate for energy stocks is unfortunately, every time 0:14:36.920 --> 0:14:39.640 oil prices rise, it's met with a new wave of supply, 0:14:40.120 --> 0:14:44.320 which constrains profitability and constrains the inevitent and constrains the 0:14:44.360 --> 0:14:48.480 oil price from continuing to rise. And that's very well 0:14:48.520 --> 0:14:52.120 played out in energy stocks and energy investors. Investors just 0:14:52.160 --> 0:14:54.680 don't want to touch the sector on that premise alone. 0:14:55.440 --> 0:14:58.560 From a sentiment perspective, you got a love energy for 0:14:58.600 --> 0:15:01.880 a long term sort of sentiment call. You're looking at 0:15:01.880 --> 0:15:04.080 a sector that's now less as a share of market 0:15:04.080 --> 0:15:06.960 cap of the SMP five hundred than it was when 0:15:07.000 --> 0:15:10.280 oil prices were ten dollars of barrel. So nobody wants 0:15:10.320 --> 0:15:14.040 to touch this stuff. But how do you jump in 0:15:14.040 --> 0:15:17.400 in the face of clear signals from the rates market 0:15:17.880 --> 0:15:21.680 generally sort of depressed economic signals relative to where we 0:15:21.680 --> 0:15:24.520 were at least a year ago, stock price signals that 0:15:24.560 --> 0:15:28.760 are still very, very negative, and frankly, the dynamics of 0:15:28.800 --> 0:15:31.320 oil supply and demand are different today than they were 0:15:31.680 --> 0:15:35.440 ten years ago. So it's a tough space. And there's 0:15:35.480 --> 0:15:38.640 just not a lot to suggest that that gap necessarily 0:15:38.680 --> 0:15:42.560 needs to close, because frankly, oil prices keep closing back 0:15:42.640 --> 0:15:45.840 toward energy stocks every time they try to rally, and 0:15:45.880 --> 0:15:50.080 that's just the fracking boom. I take it, just the supply. Yeah. 0:15:50.120 --> 0:15:51.880 I mean, if you think about sort of how things 0:15:51.880 --> 0:15:54.680 have changed over the last decade or so, go back 0:15:54.680 --> 0:15:57.280 to two thousand seven, two thousand and eight, when oil 0:15:57.280 --> 0:15:59.520 prices were moving towards a hundred and fifty dollars in 0:15:59.520 --> 0:16:02.160 the center, it was We're never going to find supply again. 0:16:02.280 --> 0:16:04.240 I mean, there's just just not enough oil in the world. 0:16:04.920 --> 0:16:07.360 And oh yeah, over the course of the next several 0:16:07.480 --> 0:16:09.160 years we found out, oh lo and behold, there is 0:16:09.200 --> 0:16:11.400 actually plenty of supply. We just needed to use new 0:16:11.440 --> 0:16:15.800 technologies to get to it. That's created this massive downtrend 0:16:15.840 --> 0:16:19.360 and oil prices really since they peaked in twenty seven 0:16:19.360 --> 0:16:22.720 and then again in and the result of that is 0:16:22.840 --> 0:16:26.880 just this this persistence of supply, or even the perceived 0:16:26.960 --> 0:16:30.320 persistence of supply, con strange your upward potential for price growth, 0:16:30.760 --> 0:16:49.160 and it's feeding through the energy stacks emily. To get 0:16:49.160 --> 0:16:52.080 back to the Fed minutes, there's this weird situation that 0:16:52.120 --> 0:16:55.760 happens where, okay, the trade war escalates a couple of 0:16:55.800 --> 0:16:58.800 weeks ago with President Trump's tweets, and then he follows 0:16:58.800 --> 0:17:02.160 through and raises the terror Then along come the minutes, 0:17:02.520 --> 0:17:06.240 which are reflecting a meeting that occurred before it. So 0:17:07.000 --> 0:17:10.040 yet people still seem to react to them. I mean, 0:17:11.000 --> 0:17:15.119 assuming this is the last best evidence we've gotten from 0:17:15.160 --> 0:17:17.800 the Federal Reserve on their thinking, but at some point 0:17:17.800 --> 0:17:20.760 to people just to ignore them. You've talked to a 0:17:20.760 --> 0:17:24.800 lot of investors after the minutes, Presumably they're still reading 0:17:24.840 --> 0:17:27.240 these minutes even though so much has changed since then, 0:17:27.480 --> 0:17:29.680 or did they discount them to some degree. I think 0:17:29.680 --> 0:17:31.199 this is the weird thing, and this is the thing 0:17:31.200 --> 0:17:33.360 that always makes me just sigh and kind of want 0:17:33.359 --> 0:17:35.240 to scream sometimes when you look at the minutes, because 0:17:35.280 --> 0:17:38.640 like this is essentially stale news, right, and particularly at 0:17:38.640 --> 0:17:41.280 this point because it's prior to all of the trade 0:17:41.320 --> 0:17:44.040 stuff that happened. So I was actually really interested myself 0:17:44.080 --> 0:17:45.560 to see what the market was going to do to this, 0:17:45.600 --> 0:17:47.479 And it just it's funny because I don't know if 0:17:47.520 --> 0:17:50.840 people actually forget they're still they're so busy reading the 0:17:50.880 --> 0:17:53.919 Fed's ruins sometimes that any signal like this sort of 0:17:53.920 --> 0:17:56.160 smoke signal is going to tell them what to do. 0:17:56.400 --> 0:17:58.159 But I think the interesting thing that most people are 0:17:58.160 --> 0:18:00.600 trying to pause out of that document is how much 0:18:00.640 --> 0:18:03.520 consensus is there, how firmly held a belief is this 0:18:03.680 --> 0:18:05.359 in the fit, and how difficult it might it be 0:18:05.400 --> 0:18:08.600 to dislodge, Like how much they're looking at the data 0:18:08.680 --> 0:18:10.960 really and what what is their interpretation of the data, 0:18:11.000 --> 0:18:12.520 So people are constant. The thing that I find most 0:18:12.560 --> 0:18:14.840 amusing is looking at how people understand the word few 0:18:14.960 --> 0:18:17.840 versus several versus a number of us some know as 0:18:17.880 --> 0:18:20.359 a measure of how many people on the committee actually 0:18:20.440 --> 0:18:23.080 hold a certain view. So that's that's one of the 0:18:23.080 --> 0:18:25.119 things you talk about stale news. If you looked at 0:18:25.160 --> 0:18:28.800 the staff economic projections in the minutes, they actually talked 0:18:28.840 --> 0:18:32.080 about how trade the U. S and China coming together 0:18:32.320 --> 0:18:35.880 was positive. It was optimistic. So how that's changed since 0:18:36.240 --> 0:18:39.440 good minutes were actually written. I want to ask you, though, 0:18:39.960 --> 0:18:43.439 how far off does it seem like the bond market 0:18:43.680 --> 0:18:47.080 is from where the Fed actually stands at this point 0:18:47.080 --> 0:18:49.639 in time. This is starting to feel as if that 0:18:49.720 --> 0:18:53.200 disconnect is actually widening again. I mean, we saw earlier 0:18:53.240 --> 0:18:55.960 this year there was, you know, the market was really 0:18:55.960 --> 0:18:58.359 doubling down to say even as many as you know, 0:18:58.400 --> 0:19:00.920 sort of too high extarting to get We're getting closer 0:19:00.920 --> 0:19:04.600 to that now. I think that the interesting point from 0:19:04.640 --> 0:19:06.600 what the market is pricing in is there is actually 0:19:06.680 --> 0:19:08.760 now still more than one hike priced in by the 0:19:08.840 --> 0:19:11.200 end of the year, just a little more the Fed. 0:19:11.520 --> 0:19:14.560 I think that after giving that message of transient, they're 0:19:14.640 --> 0:19:16.960 just sitting there with that for the time being, and 0:19:17.040 --> 0:19:22.919 it seems as if that that conviction among policymakers is 0:19:23.000 --> 0:19:26.600 really at odds with the markets movements lately. Um, But 0:19:26.640 --> 0:19:28.680 it's hard to see. I mean, as as you, Jina, 0:19:28.720 --> 0:19:31.400 you were discussing before, you know, the data are still 0:19:32.000 --> 0:19:35.280 reasonably strong. There's there's actually looking at it objectively from 0:19:35.280 --> 0:19:37.840 a dispassionate viewpoint, it's hard to see whether the FED 0:19:37.840 --> 0:19:41.159 would find a decent case to cut rates at this point. 0:19:41.480 --> 0:19:43.639 And now that they're starting up their inflation review, this 0:19:43.720 --> 0:19:46.680 is going to become a really interesting topic to follow 0:19:46.680 --> 0:19:48.560 over the next couple of months because they're really going 0:19:48.600 --> 0:19:51.240 to have to look at what other kinds of strategies 0:19:51.240 --> 0:19:54.600 they might take to try and meet their mandate. Now, Gina, 0:19:54.680 --> 0:19:57.440 you have a lot of letters after your name, C 0:19:57.640 --> 0:20:01.280 F A, CMT. I also have three names, and I'm 0:20:01.320 --> 0:20:04.720 just trying to extend their business parts as continued on 0:20:04.840 --> 0:20:09.359 the confusion part of the game here. So I was 0:20:09.920 --> 0:20:13.359 I was curious to see your technicals, putting your CMT 0:20:13.520 --> 0:20:18.959 head on Chartered Market Technician and and looking at the technicals. UM, 0:20:19.040 --> 0:20:22.160 So walk us through two things. I'm curious a sort 0:20:22.160 --> 0:20:25.879 of what levels you're looking at, but also is it 0:20:25.960 --> 0:20:30.119 the time, uh right now where technicals kind of take 0:20:30.160 --> 0:20:32.760 a back seat to the fact that everyone's waiting for 0:20:32.760 --> 0:20:34.879 the next headline, waiting for the next tweet. You know, 0:20:35.119 --> 0:20:38.480 are there times when you sort of uh discount technicals 0:20:38.480 --> 0:20:40.960 to some degree and don't give them as much weight 0:20:41.000 --> 0:20:43.119 as you normally would, And are we in a period 0:20:43.160 --> 0:20:47.080 like that now? I never discount technical I am a technician. 0:20:47.520 --> 0:20:50.840 I think they're actually always valuable at every market stage, 0:20:51.480 --> 0:20:54.800 and they're valuable in different ways. They give you different signals, 0:20:54.840 --> 0:20:58.119 either they're confirming or not confirming your fundamental case. That 0:20:58.160 --> 0:20:59.560 gives you a reason to go back and look at 0:20:59.560 --> 0:21:03.239 the fundament until case. Nonetheless, I think you know right 0:21:03.280 --> 0:21:06.320 now what the technicals are saying is near term there's 0:21:06.400 --> 0:21:09.800