WEBVTT - Surveillance: Return To Work With Dimon 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene. Along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Ley, we bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:22.440 international relations. To find Bloomberg Surveillance on Apple Podcast, Suncloud, 0:00:22.840 --> 0:00:26.280 Bloomberg dot Com, and of course on the Bloomberg terminal. 0:00:29.440 --> 0:00:32.960 He is the offspring of Greek immigrants. He went to 0:00:33.000 --> 0:00:37.320 Tufts University and he wrote an essay on Shearson Way 0:00:37.360 --> 0:00:40.920 before it was Shearson Lehman. The essay was so impressive 0:00:40.960 --> 0:00:43.640 a guy named Wile hired him and thus began the 0:00:43.640 --> 0:00:47.680 banking career of one James Diamond, of course, of JP Morgan, 0:00:47.760 --> 0:00:51.199 their chairman and their chief executive officer, A Baker scholar 0:00:51.240 --> 0:00:54.000 at Harvard. Jamie Diamond went from bank one out in 0:00:54.040 --> 0:00:58.920 the Midwest to Commanding Fortress Diamond at JP Morgan. Harry 0:00:59.000 --> 0:01:02.280 is on COVID with there Ed Hammond. Getting through COVID 0:01:02.360 --> 0:01:04.720 is absolutely critical and we're still in it though God 0:01:04.720 --> 0:01:06.000 knows what looks like. There's light at the end of 0:01:06.000 --> 0:01:08.280 the tunnel, you know, by the beginning of summer or 0:01:08.319 --> 0:01:11.680 something like that. But it's not a binary subject. I 0:01:11.720 --> 0:01:14.680 think you know, Democrats Republicans are like ships passing the night. 0:01:15.160 --> 0:01:17.959 There are legitimate complaints about stuff from this bill. Has 0:01:18.000 --> 0:01:20.280 nothing to do with COVID. There are a lot of 0:01:20.280 --> 0:01:23.000 people suffering. You need help. Both are true. So if 0:01:23.000 --> 0:01:24.479 you want to go through, you go through all the detail. 0:01:24.800 --> 0:01:28.320 Unemployed they definitely need help. Small businesses they definitely need help. 0:01:28.560 --> 0:01:30.880 People at the lower end, they definitely need help. Women 0:01:30.880 --> 0:01:32.959 who had to go home, who basically stopped working. Is 0:01:33.000 --> 0:01:34.679 that it go take care or something like that. They 0:01:34.720 --> 0:01:37.480 definitely need help. You know, does every I don't know 0:01:37.480 --> 0:01:39.640 if you know this, but like half the states revenues 0:01:39.680 --> 0:01:42.000 went up, they needn't go down. Do they need help? 0:01:42.360 --> 0:01:44.160 You know? And we're just throwing money at people at 0:01:44.160 --> 0:01:46.200 one point, so and there will be another side to 0:01:46.240 --> 0:01:48.559 that mountain. So they should be cautious about overdoing it. 0:01:48.680 --> 0:01:51.320 Get us through the problem, get the country growing, but 0:01:51.440 --> 0:01:53.160 you know, don't try not to overdo it too much. 0:01:53.320 --> 0:01:56.560 But isn't the risk exactly that if you have places 0:01:56.600 --> 0:01:58.720 and states people that don't need help and getting to 0:01:58.760 --> 0:02:01.160 help you out of the cyst to you do create 0:02:01.200 --> 0:02:03.520 this huge risk of inflation. And the system already has 0:02:03.520 --> 0:02:04.680 a little bit of that so if you look at 0:02:04.720 --> 0:02:06.840 which in the system that looks to us like there's 0:02:06.840 --> 0:02:10.239 a trillion dollars a trillion is unspent. That's before there's 0:02:10.240 --> 0:02:13.560 billion nine trillion nine, So there will be money. Like 0:02:13.639 --> 0:02:15.040 you know, there's a very good chance you're gonna have 0:02:15.120 --> 0:02:17.720 a game buster economy for the rest of this year 0:02:17.880 --> 0:02:21.239 and you know, easily into two. And the question is 0:02:21.280 --> 0:02:23.400 does that overheat everything? And we just don't know yet. 0:02:23.520 --> 0:02:25.639 But I would put that on the things to worry 0:02:25.680 --> 0:02:28.520 about now. I wouldn't worry too much about it. I 0:02:28.480 --> 0:02:30.799 would worry more about COVID and nuclear war that I'd 0:02:30.800 --> 0:02:33.079 worry about that, but I would. I would suspect there's 0:02:33.080 --> 0:02:34.840 a pretty good chance you're gonna see why he's going up, 0:02:34.880 --> 0:02:37.040 and you know, people starting to worry about that at 0:02:37.040 --> 0:02:39.600 one point. Let's talk about COVID for a second. I've 0:02:39.600 --> 0:02:41.840 been very clear I would not buy ten year treasuries, 0:02:42.520 --> 0:02:46.600 just so you know. Um On on COVID. We are 0:02:46.600 --> 0:02:48.840 obviously doing a interview in person, which is fantastic with 0:02:48.919 --> 0:02:51.160 doing it in your offices here in New York, but 0:02:51.320 --> 0:02:53.960 still largely empty as of my officers, as probably are 0:02:54.000 --> 0:02:56.400 a lot of people's offices. How important is it to 0:02:56.440 --> 0:02:59.040 a business like Jeplegan to actually have people physically coming 0:02:59.040 --> 0:03:01.359 back to work. It's very important. I mean, I look, 0:03:01.400 --> 0:03:03.240 I do think would be part of the world where 0:03:03.280 --> 0:03:06.720 a certain amount of people work from home permanently, certain sales, 0:03:06.760 --> 0:03:10.080 certain opts, so you can track the productivity, etcetera. I 0:03:10.080 --> 0:03:12.480 think there'll be a large portion who permanently work in 0:03:12.520 --> 0:03:16.320 the office. Think of our branches, cash management, probably most 0:03:16.360 --> 0:03:19.400 the trading floors, etcetera. And there'll be some hybrids where 0:03:19.440 --> 0:03:21.160 you spent two days two weeks at home and two 0:03:21.160 --> 0:03:22.480 weeks in the officer of three weeks at home a 0:03:22.480 --> 0:03:24.560 week in the office, or three days and two days 0:03:24.560 --> 0:03:26.560 and two days three days. But so I think it 0:03:26.600 --> 0:03:29.000 will reduce the need for commercial real estate. But they 0:03:29.040 --> 0:03:31.800 are huge weaknesses to the zoom world. I mean, most 0:03:31.800 --> 0:03:34.400 of us learned by an apprenticeship system by you know, 0:03:34.440 --> 0:03:37.320 seeing mistakes, going to trips. How do you handle a client, 0:03:37.320 --> 0:03:39.640 how do you handle the problem. So it's hard to 0:03:39.680 --> 0:03:43.320 inculcate culture and character and all those things. When you 0:03:43.480 --> 0:03:47.920 have the Zoom world spontaneous combustion, it goes away hard 0:03:47.960 --> 0:03:49.920 to manage, you know, it's hard to be very critically 0:03:49.960 --> 0:03:52.800 got fifteen people on the screen. So before it was 0:03:52.840 --> 0:03:56.320 like a deep dive question, now looks a little bit rude. 0:03:56.520 --> 0:03:58.120 And I took a trip to California and met a 0:03:58.200 --> 0:04:01.120 hundred people all outside, all one breakfast, lunch, and dinner. 0:04:01.400 --> 0:04:03.320 It's amazing how much you want about your own business, 0:04:03.480 --> 0:04:07.080 your own bankers, your own clients, your own products. And 0:04:07.320 --> 0:04:09.720 you know, I met with Snowflake and Marcatta. What you 0:04:09.800 --> 0:04:12.600 learn about technology and systems, you're not going to do 0:04:12.640 --> 0:04:16.240 that in the zoom world. And you know, so bankers relationships. 0:04:16.279 --> 0:04:18.680 I think it's very hard to build and develop a 0:04:18.720 --> 0:04:21.200 deeper relationship on the zoom world. So you still, you 0:04:21.240 --> 0:04:23.559 know there'll be more zooming people like me will travel 0:04:23.640 --> 0:04:25.440 just as much as I did in the past. As 0:04:25.440 --> 0:04:28.160 a win, the vaccine does become available, feel workforce, Will 0:04:28.160 --> 0:04:29.640 you make it mand a treat for people to take 0:04:29.640 --> 0:04:31.360 it if they do one of the time. It's hard 0:04:31.400 --> 0:04:34.599 to make it mandatory, and their laws about that. I 0:04:34.600 --> 0:04:35.919 think what we'd like to do is kind of have 0:04:35.960 --> 0:04:38.160 cacharroacts and sticks. We want people to take it. Think 0:04:38.160 --> 0:04:40.800 it's a far better thing. You certainly can't make it 0:04:40.839 --> 0:04:43.960 mandatory before it's fully accessible, so that question can even 0:04:43.960 --> 0:04:47.400 be answered until June UM. But but I do think 0:04:47.400 --> 0:04:49.040 you may see some companies do it. I mean I 0:04:49.040 --> 0:04:51.000 can see an airline doing it, or a hotel company 0:04:51.080 --> 0:04:53.320 doing it. I can see some people saying if the 0:04:53.360 --> 0:04:55.880 folks in our branches aren't vaccinated and not going in 0:04:55.960 --> 0:05:00.400 so there will be pressure. Uh. And I would say 0:05:00.440 --> 0:05:05.120 Charroton sticks not in mandatory, Jamie Diamond, JP Morgan Chairman, 0:05:05.120 --> 0:05:13.920 and see how speaking with Bloomberg's at Hammond, Let's get 0:05:13.920 --> 0:05:17.320 to Abraham rach Bary, City, Global head of Effex Analysis. Abraham, 0:05:17.400 --> 0:05:20.559 let's start with this question, who leads the global cycle? Here? 0:05:20.680 --> 0:05:22.520 Is it the United States with all its stimulus, so 0:05:22.600 --> 0:05:26.120 the prudent approach from China, So we think there is 0:05:26.279 --> 0:05:29.039 clearly a bit of a handover going on where China 0:05:29.200 --> 0:05:32.839 was essential and early in staging the global recovery. But 0:05:33.480 --> 0:05:36.240 right now I think the weight is clearly shifting towards 0:05:36.480 --> 0:05:38.520 the US, and the types of growth numbers that we 0:05:38.600 --> 0:05:41.960 are expecting alongside many others in the US should give 0:05:42.040 --> 0:05:45.040 us some hope that even some slowing of momentum in 0:05:45.120 --> 0:05:48.320 China will allow the global recovery to power ahead pretty 0:05:48.400 --> 0:05:52.560 vigorously on on the back of and on the shoulders 0:05:52.600 --> 0:05:56.039 of the U s. Recup, Abraham, your Edward Moore so wonderful. 0:05:56.120 --> 0:05:59.039 Edward Mores published this morning on oil, reaffirming a range 0:05:59.040 --> 0:06:01.920 bound area, and he's below the eighty dollar hysteria we're 0:06:01.920 --> 0:06:05.280 seeing right now. I get the same temperament from you 0:06:05.800 --> 0:06:09.239 and even killed what you see in the foreign exchange market. 0:06:09.600 --> 0:06:12.760 Does your world now correlate with the rest of the 0:06:12.800 --> 0:06:15.800 markets or is it separate and distinct? So they are 0:06:15.839 --> 0:06:19.360 important linkages between broader markets and the economy and foreign 0:06:19.400 --> 0:06:22.719 exchange markets, but it has effects has also been playing 0:06:22.720 --> 0:06:25.280 to its own two. So we have seen in particular 0:06:25.279 --> 0:06:28.280 dollar trends correlate with the global recovery that all that 0:06:28.320 --> 0:06:32.279 has generally speaking been on the back foot. But of late, 0:06:32.320 --> 0:06:36.000 for instance, we have seen that when US interest rates 0:06:36.040 --> 0:06:39.719 rose quite quickly, the dollar wolves effectively pretty range bound 0:06:39.760 --> 0:06:42.320 in G ten. And that's in part because interest rates 0:06:42.400 --> 0:06:45.240 rose elsewhere in the world almost as much as they 0:06:45.279 --> 0:06:50.480 did in the US, and because we have seen the 0:06:50.520 --> 0:06:54.560 behavior of investors focus more on equity markets and commodity 0:06:54.600 --> 0:06:57.920 markets as a primary expressional. That's called them reflation trades. 0:06:58.600 --> 0:07:02.560 Then in foreign ex aim Abraham if the weight is 0:07:02.560 --> 0:07:05.680 shifting toward the United States and the strength in the 0:07:05.760 --> 0:07:08.440 US has led people to go further into the dollar 0:07:08.520 --> 0:07:11.880 more than perhaps I'm expected at the end of can 0:07:11.960 --> 0:07:15.280 we see the dollar materially weaken from here with the 0:07:15.400 --> 0:07:19.080 US also leading the global economic recovery. Yes, that's a 0:07:19.200 --> 0:07:22.000 very good question and one that we've dealt with intensively, 0:07:22.040 --> 0:07:25.400 and our answer is yes it can, but we need 0:07:25.440 --> 0:07:28.640 two conditions to hold for that to play out. And 0:07:28.760 --> 0:07:31.520 condition number one and most important is we do need 0:07:31.640 --> 0:07:34.640 still a vigorous global recovery. So even if the US 0:07:34.640 --> 0:07:38.160 outperformed but the global economy it does okay, then the 0:07:38.200 --> 0:07:40.560 dollar can sell off, just as it did after the 0:07:40.640 --> 0:07:43.800 previous two global recessions. And the second is we do 0:07:43.880 --> 0:07:47.200 need US real yields and particularly US front end real 0:07:47.280 --> 0:07:50.360 yields to stay pretty low. And for that it is 0:07:50.400 --> 0:07:53.960 important that we see a fairly forceful, dubbish message from 0:07:54.000 --> 0:07:56.840 the Fed on an ongoing basis. Do you expect that 0:07:56.880 --> 0:08:00.600 from Chairman Powell on Thursday? Abraham we afect the pretty 0:08:00.680 --> 0:08:02.680 nuanced message, so I think he will trade a fine 0:08:02.720 --> 0:08:07.000 line where he will reinforce his policy intentions. No consideration 0:08:07.040 --> 0:08:10.880 for tapering anytime soon. No intention to change hiking plans 0:08:11.040 --> 0:08:13.560 based on the recent development, but equally that he will 0:08:13.560 --> 0:08:16.040 continue to endorse the good news and that the good 0:08:16.040 --> 0:08:19.920 news are expressed in in bond deals as well. So 0:08:20.200 --> 0:08:22.040 it's gonna be nuanced. It's not going to be a 0:08:22.080 --> 0:08:25.440 major pushback in our expectation to product the commodity market. 0:08:25.480 --> 0:08:28.080 So let's finish their Abraham and get to the commodity 0:08:28.120 --> 0:08:31.280 currencies in the fex market. At the moment, given what's 0:08:31.280 --> 0:08:34.280 happening in China, how comfortable are you with a conversation 0:08:34.320 --> 0:08:37.760 around another commodity supercycle getting along the commodity currency states 0:08:37.760 --> 0:08:41.360 for that reason over a long time morison. So we 0:08:41.440 --> 0:08:43.880 think that the commodity currencies still have upside, and in 0:08:43.920 --> 0:08:46.600 G ten that's for us, the Australian dollar, the Norwegian 0:08:46.720 --> 0:08:49.760 corona keep dollar, and and and and and and can't 0:08:49.760 --> 0:08:52.559 as well. We wouldn't talk of the supercycle per se, 0:08:52.600 --> 0:08:56.520 but we do think they'll be vigorous demand for all 0:08:56.600 --> 0:09:01.479 kinds of commodities, for oil, on the reopening store, for industrials, 0:09:01.480 --> 0:09:07.040 on restocking and infrastructure. Even with some slowing in in 0:09:07.160 --> 0:09:09.680 Chinese demand, we won't have the supercycle like in the 0:09:09.720 --> 0:09:12.600 two thousand's, but we think that bolts well for a 0:09:12.679 --> 0:09:15.840 further pickup in quality prices after a bit of froth 0:09:16.480 --> 0:09:19.560 comes out in in the last couple of weeks, and 0:09:19.559 --> 0:09:22.280 maybe that has a little bit further Remember I'm amazed 0:09:22.280 --> 0:09:24.280 at how when the euro comes down and comes down, 0:09:24.360 --> 0:09:26.160 granted it's within range. We had a little bit of 0:09:26.160 --> 0:09:29.240 a one nine team print here earlier this morning. What 0:09:29.400 --> 0:09:33.200 is your twelve month call on euro? Is it tradeable 0:09:33.400 --> 0:09:37.000 or is it a mystery m hm. So we still 0:09:37.200 --> 0:09:39.559 have upside in our euro dollar forecast, and we think 0:09:39.559 --> 0:09:43.080 it will pick out nearer to one thirty sometime this year. 0:09:43.400 --> 0:09:45.880 That being said in the short term. That being said, 0:09:45.920 --> 0:09:48.120 in the shorter we think that the euro will lad 0:09:48.280 --> 0:09:51.199 and that's for two reasons. One is because European rates 0:09:51.280 --> 0:09:54.480 have lack and will lack global rates, and two because 0:09:54.520 --> 0:09:56.959 the CD has actually pushed back against the rising rates 0:09:56.960 --> 0:10:00.120 more forcefully than in particular the Fed has. And it's 0:10:00.120 --> 0:10:03.040 a very opportune moment for the e c D because 0:10:03.040 --> 0:10:05.600 it can actually do something. It can buy more bonds, 0:10:05.880 --> 0:10:07.920 So it's a good moment for it to show to 0:10:08.000 --> 0:10:10.120 the market that is not out of ammunition. So we 0:10:10.200 --> 0:10:13.720 think the euro goes lower first, but then higher. It's Abraham, 0:10:13.800 --> 0:10:15.840 great to see, is always good to catch up, Abraham 0:10:15.920 --> 0:10:24.240 rock Barry, their City global head of Effects Analysis. Let's 0:10:24.240 --> 0:10:27.480 bring in David Costa now goalmus Saxis chief US security strategist, 0:10:27.520 --> 0:10:30.800 David Aligned from your research, cyclicals with negative earnings and 0:10:30.800 --> 0:10:35.920 falling sound in have returned year today. Do you stick 0:10:35.960 --> 0:10:39.560 with it? The answer, Jonathan is yes, you have to 0:10:39.559 --> 0:10:42.640 be from a tactical point of view. The companies that 0:10:42.760 --> 0:10:46.400 lost money last year but are actually recovering UH this year. 0:10:46.600 --> 0:10:49.480 That is the benefit of a tail wind from better 0:10:49.559 --> 0:10:53.040 economic activity, the vaccine you just mentioned, fiscal stimulus that 0:10:53.080 --> 0:10:57.400 we anticipate we'll get past relatively soon. All that benefits 0:10:57.440 --> 0:11:00.240 some of the cyclicals. Now that's not to say the 0:11:00.880 --> 0:11:04.120 some of the tech heavy secular growth companies will not 0:11:04.200 --> 0:11:07.400 perform well, but just from a relative near term perspective, 0:11:07.559 --> 0:11:10.400 probably the cyclicals UH will will will lead the market. 0:11:10.480 --> 0:11:12.240 It takes a strike to the mechanics of the benchmark, 0:11:12.280 --> 0:11:15.800 doesn't it. The SMP five hundred, the overweight waiting of 0:11:16.040 --> 0:11:19.319 information technology and growth stalks. David, And if that's why 0:11:19.360 --> 0:11:21.400 you should be, how do you get to forty three 0:11:21.520 --> 0:11:24.480 hundred on a headline index. Well, I think you think 0:11:24.480 --> 0:11:28.119 of it what I think about as a Barbell strategy. 0:11:28.280 --> 0:11:32.640 So of the index SMP five hundred is technology, is 0:11:32.679 --> 0:11:34.959 he just indicated? And so that has certainly got to 0:11:34.960 --> 0:11:37.240 be a core part of the portfolio. You're getting very 0:11:37.240 --> 0:11:41.360 strong revenue growth, uh from the a lot of these companies, 0:11:41.400 --> 0:11:46.199 and you think about it relative to pre pandemic profits, 0:11:46.320 --> 0:11:50.520 pre pandemic sales and profits. The the overall market is 0:11:50.559 --> 0:11:53.560 actually higher than it was at this time last year. 0:11:54.080 --> 0:11:57.600 That's an important statement. The economy nominal and real basis 0:11:57.679 --> 0:12:01.040 is still a little bit smaller, but hills and earnings 0:12:01.080 --> 0:12:03.240 are back to where it was before and back the 0:12:03.360 --> 0:12:06.760 equity market now about fifty and sixtcent higher than it 0:12:06.840 --> 0:12:10.359 was twelve months ago. So looking forward, as you just indicated, 0:12:10.520 --> 0:12:13.199 where's that growth likely to come? Still likely to come 0:12:13.240 --> 0:12:16.880 in aggregate from technology, but tactically likely to be some 0:12:16.920 --> 0:12:20.840 of the re reopening of America. So, my colleagues in 0:12:20.880 --> 0:12:24.160 the equity research we have an index, uh, the Reopening 0:12:24.160 --> 0:12:27.480 of America Index Tom you'll like that title, and basically 0:12:27.480 --> 0:12:30.280 it's at four. It's been stuck at four. So the 0:12:30.400 --> 0:12:34.280 upside is as people get vaccinated. As the economy continues 0:12:34.360 --> 0:12:37.800 to recovery, which is part of our forecast, well, that 0:12:37.880 --> 0:12:40.839 means you're getting more of these companies. Company level data 0:12:41.040 --> 0:12:45.040 will be reopening, and that's where the positive earnings revisions 0:12:45.120 --> 0:12:48.079 is coming from. Last month, last three months, you've had 0:12:48.120 --> 0:12:52.240 ten of the eleven sectors have had positive earnest revisions. 0:12:52.240 --> 0:12:54.959 And that my view with what's leading the market higher. 0:12:55.080 --> 0:12:58.400 Our forecast a D eighty one earnings for this year, 0:12:58.640 --> 0:13:02.360 that's about seven percent higher than consensus. We think there's 0:13:02.440 --> 0:13:05.400 room for upward earnest revisions. That that's what's taking us higher. 0:13:05.720 --> 0:13:08.440 I'm looking for the reopening of America E t F, 0:13:08.520 --> 0:13:12.120 which I'm sure is coming somewhere to a store near you. David. 0:13:12.200 --> 0:13:15.160 I am curious though. Underpinning a lot of the optimism 0:13:15.200 --> 0:13:17.559 in equity performance is this idea that we're going to 0:13:17.600 --> 0:13:22.200 get gangbusters growth in tandem with relatively low benchmark borrowing 0:13:22.240 --> 0:13:25.920 costs for the United States. At what point do higher 0:13:26.000 --> 0:13:29.839 rates pose a problem to your thesis? They say, that's 0:13:29.840 --> 0:13:32.040 a great question. The number one question we get from 0:13:32.080 --> 0:13:35.800 every client, which is about the relationship between rates and equities. 0:13:35.960 --> 0:13:37.720 So I think you want to think about it two ways, 0:13:37.960 --> 0:13:43.120 both level and speed. And level not concerned about that. 0:13:43.240 --> 0:13:45.640 Right now we've had a fifty basis point backup and 0:13:45.760 --> 0:13:48.360 nominal rates led by a backup and really yields as 0:13:48.400 --> 0:13:54.640 you know, and so that still leaves equities under valued 0:13:54.960 --> 0:13:57.880 in the context of very low absolute level of rates. 0:13:57.880 --> 0:14:01.560 So one and round numbers, you can go to two percent, 0:14:02.240 --> 0:14:05.440 two percent and a tenure treasury yield, say multiple today 0:14:05.600 --> 0:14:08.079 at least, so you'd only be back at the long 0:14:08.200 --> 0:14:12.520 term average relative valuation of equities versus bonds. That's if 0:14:12.520 --> 0:14:15.080 you went to two percent, not our forecast, but that 0:14:15.160 --> 0:14:18.040 gives you a sense of the if you will, the 0:14:18.080 --> 0:14:21.240 flexibility or the capacity of rates to continue to go 0:14:21.360 --> 0:14:24.840 higher and equity prices still to be in a good position. 0:14:24.920 --> 0:14:27.280 On the other hand, the speed of the backup is 0:14:27.280 --> 0:14:29.480 something we are a little concerned about. And you saw 0:14:29.520 --> 0:14:32.320 in the last month bind yields go up by a 0:14:32.400 --> 0:14:35.600 very significant amount, more than two standard deviation move. But 0:14:35.760 --> 0:14:38.160 that you know, in context very unusual in terms of 0:14:38.200 --> 0:14:41.000 the swiftness and the magnitude of the backup, and so 0:14:41.080 --> 0:14:44.480 that usually is associated with some headwind to the equity performance. 0:14:44.480 --> 0:14:47.640 And I think that's why duration is the way to 0:14:47.680 --> 0:14:52.000 think about it. You want to have shorter duration equities. 0:14:52.080 --> 0:14:54.720 This goes back to Jonathan's question a minute ago, which 0:14:54.760 --> 0:14:57.440 is how does that cyclicals do better they have shorter 0:14:57.560 --> 0:15:00.040 duration in terms of their cash flows than the on 0:15:00.120 --> 0:15:02.640 the duration technology stocks. I think that's the way to 0:15:02.720 --> 0:15:05.720 approach equities to the lens of fixed income. So I'm 0:15:05.720 --> 0:15:07.880 going to rip up the scripture David Coston and go 0:15:08.000 --> 0:15:10.280 and thank you for the two standard deviation view on 0:15:10.360 --> 0:15:13.880 fixed income. We certainly lived out, including last Thursday. If 0:15:13.920 --> 0:15:17.400 short duration as cyclicals, does that mean Apple and Amazon 0:15:17.440 --> 0:15:20.560 and the rest of them are long duration and to 0:15:20.680 --> 0:15:25.240 be avoided. Well, they're longer duration, is no question about that. 0:15:25.520 --> 0:15:28.680 In terms of expectations and the faster growth, Uh, they 0:15:28.680 --> 0:15:30.720 don't shouldn't be avoided. I would think of it as 0:15:30.760 --> 0:15:33.440 the Barbell strategy. So they're quite part of the portfolio. 0:15:33.720 --> 0:15:36.760 The tech and the tech sector in particular is a 0:15:36.840 --> 0:15:42.440 key driver. The semiconductors are expected to have uh twenty 0:15:42.520 --> 0:15:47.080 eight percent higher level of profits in twenty David. Look 0:15:47.240 --> 0:15:49.840 just because the times, David, I don't mean to interrupt it, 0:15:49.880 --> 0:15:52.280 just because of time. This is so so so important. 0:15:52.640 --> 0:15:55.320 If they have that cash level and we get a 0:15:55.400 --> 0:15:59.120 six percent, seven percent whatever g DP bubble is, it 0:15:59.320 --> 0:16:01.760 just gonna be one big share buy bic like we 0:16:01.800 --> 0:16:05.480 saw from Intel over the decade, we're gonna see we're 0:16:05.520 --> 0:16:07.560 already seen this year. We're two months into the year. 0:16:07.600 --> 0:16:10.720 We've had near record levels of authorizations by boards to 0:16:11.320 --> 0:16:14.200 a proven an authorized share re purchases for this year. 0:16:14.240 --> 0:16:17.680 And so that's a reflection of management looking at their 0:16:17.680 --> 0:16:21.480 business for this year. Better cash flows, more flexibilion and 0:16:21.560 --> 0:16:25.520 how to spend money. That's one use of that cash 0:16:25.600 --> 0:16:27.480 is the is the biobax chairs. That will be a 0:16:27.560 --> 0:16:31.000 supporting mechanism in my opinion. But the biggest source of 0:16:31.040 --> 0:16:34.600 cash is individuals. Tom, You've had about a five hundred 0:16:34.600 --> 0:16:40.840 billion dollar diminution reduction in money market mutual fund assets. Uh. 0:16:40.880 --> 0:16:42.840 You know in the last several months. A lot of 0:16:42.840 --> 0:16:46.240 that money at a zero rates is going into equities, 0:16:46.280 --> 0:16:47.520 and of course a lot of it's going into the 0:16:47.560 --> 0:16:50.200 spack market. You've had a hundred and seventy five SPACs 0:16:50.480 --> 0:16:54.360 this year alone, fifty six billion dollars. We're on pace 0:16:54.640 --> 0:16:58.200 to exceed last year's record level by the end of 0:16:58.200 --> 0:17:00.440 this month. Are you are you gonna do us back 0:17:00.480 --> 0:17:02.400 with you and hot us. Is that what we're looking 0:17:02.440 --> 0:17:05.399 forward to. I'll have to Uh, I have to, I 0:17:05.520 --> 0:17:08.320 have to go ask him about that. They missed the Sullivan. 0:17:08.359 --> 0:17:11.560 I have other ideas. They're going to see it type 0:17:11.760 --> 0:17:22.439 custing government sacks chief US equity strategists. Let's get some 0:17:22.480 --> 0:17:24.960 stability on the American economy, Sarah House where us with 0:17:25.000 --> 0:17:27.920 Wells Fargo and their senior economy since Sarah, I love, 0:17:27.920 --> 0:17:30.960 I mean target just out with comp sales coming in 0:17:31.119 --> 0:17:34.160 higher than all the geniuses saw, looking for a huge 0:17:35.080 --> 0:17:39.280 statistic to come in rounded up. You say we're flushed 0:17:39.320 --> 0:17:42.439 with cash. John just mentioned that with the stimulus, and 0:17:42.480 --> 0:17:46.400 you're gonna migrate from six point two percent higher higher? 0:17:46.600 --> 0:17:48.680 How much up are you gonna lift? I mean you're 0:17:48.680 --> 0:17:52.359 you're framing six to seven percent g d P or 0:17:52.359 --> 0:17:56.679 are we gonna shift from six percent to China like GDP? Well, 0:17:56.720 --> 0:17:59.200 we're looking for a six percent GDP this year. And 0:17:59.680 --> 0:18:02.920 math of pickup really comes second and third quarter led 0:18:02.960 --> 0:18:06.200 by the consumer with all this fiscal stimulus flowing through 0:18:06.680 --> 0:18:10.760 and the excess savings beginning to to get sent I 0:18:10.760 --> 0:18:13.639 think when we look ahead and in terms of where 0:18:13.640 --> 0:18:16.639 the risks that forecast live Potentially they could be to 0:18:16.720 --> 0:18:20.199 the upside, just given again how much excess saving there is, 0:18:20.320 --> 0:18:23.800 and that has the potential to even get spent further 0:18:23.920 --> 0:18:28.440 into and really still propelled growth quite strongly. In two. 0:18:28.520 --> 0:18:31.199 This is more than just a summer reopening story. Well, 0:18:31.240 --> 0:18:34.280 what's so important here is the idea of six and beyond. 0:18:34.560 --> 0:18:37.199 I mean, you are going through those calculations, as is 0:18:37.240 --> 0:18:41.320 every other house right now. Are those calculations out tents 0:18:41.440 --> 0:18:45.879 of a percent or are they out big figures? So 0:18:45.960 --> 0:18:50.639 we're looking at in terms of the overall the spending picture. 0:18:50.640 --> 0:18:52.920 I mean, I think you can see some some pretty 0:18:53.000 --> 0:18:55.760 big figures just when you look at what's what's driving this, 0:18:55.920 --> 0:18:58.239 you know. So we've seen big figures in terms of 0:18:58.440 --> 0:19:02.000 case count declines recently, we're seen in some ways. I 0:19:02.000 --> 0:19:05.480 think the relief package that's working its way through Congress 0:19:05.520 --> 0:19:08.760 now is even bigger than Democrats may be expected they 0:19:08.800 --> 0:19:10.919 would get. And so I think you are still looking 0:19:11.000 --> 0:19:13.959 at some some pretty substantial numbers when we look at 0:19:13.960 --> 0:19:16.879 the outlook for for not just the middle of this 0:19:17.000 --> 0:19:19.960 year but on into the latter end. When you talk 0:19:20.000 --> 0:19:22.880 about spending, it kind of speaks to John's point, who 0:19:23.000 --> 0:19:25.520 leads the next end of the cycle. The idea of 0:19:25.800 --> 0:19:29.040 you know, if we don't have China leading the dynamism 0:19:29.119 --> 0:19:32.040 and global growth, can an infrastructure spending plan in the 0:19:32.119 --> 0:19:35.960 United States, Can more spending to make energy more green 0:19:36.240 --> 0:19:40.560 throughout the world end up supercharging some kind of cycle 0:19:40.600 --> 0:19:44.040 and commodities and global growth that perhaps is not driven 0:19:44.080 --> 0:19:47.560 from China, It can certainly help. I don't know if 0:19:47.640 --> 0:19:50.880 you can get a full another commodity supercycle. I think 0:19:50.880 --> 0:19:53.679 in many ways that the bounce we've seen is driven 0:19:53.760 --> 0:19:56.960 so much by this this pickup in demand. But you know, 0:19:57.000 --> 0:19:59.600 when we look at just what's happening with just you know, 0:19:59.720 --> 0:20:02.960 real supposable income in the household sector, and even when 0:20:03.000 --> 0:20:05.760 you layer on top of that a possible infrastructure deal, 0:20:06.040 --> 0:20:09.439 you know, these are are are one time boost. And 0:20:09.520 --> 0:20:12.520 so you whether we're we're going to continue to see 0:20:12.600 --> 0:20:14.960 that that pick up and spending I think is a 0:20:14.960 --> 0:20:20.000 harder question. And so that could could could impede really 0:20:20.160 --> 0:20:23.960 the durability of that commodities commodities boost. But I mean, 0:20:24.040 --> 0:20:26.600 right now it's certainly filtering through into some of the 0:20:26.600 --> 0:20:29.879 inflation numbers and pointing to a sharp pick up there. Okay, 0:20:29.920 --> 0:20:32.600 so a one time boost. Let's say that the infrastructure 0:20:32.600 --> 0:20:35.119 spending or the fiscal stimulus that we get pasted in 0:20:35.160 --> 0:20:38.199 March on March fifteen, as the Democrats expect, is a 0:20:38.200 --> 0:20:42.680 one time affair. Does that lead to longer, longer term 0:20:42.720 --> 0:20:46.479 inflation that's higher than people are currently pricing in So 0:20:46.520 --> 0:20:49.680 I think we will see inflation settle at a notably 0:20:49.760 --> 0:20:53.040 faster pace than what we saw over over the last cycle. 0:20:53.119 --> 0:20:55.000 So we'll get a pop here in the second quarter, 0:20:55.400 --> 0:20:58.080 But when we look out further, we're looking for core 0:20:58.160 --> 0:21:01.520 pc inflation to run at all over two percents, maybe 0:21:01.560 --> 0:21:04.280 roughly roughly two and a quarter over over the next 0:21:04.359 --> 0:21:06.880 year and and a half or so. So I think 0:21:06.920 --> 0:21:09.600 that is a meaningful lift, particularly when you just think 0:21:09.680 --> 0:21:12.640 of how much the Fed has struggled with inflation over 0:21:12.880 --> 0:21:16.200 over the past decade. But it remains me seen if 0:21:16.280 --> 0:21:18.960 it if it stays persistently high, and I think to 0:21:19.040 --> 0:21:21.399