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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jaylie.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Place.

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Speaker 1: To say that Johnny us Here in New York City

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Speaker 1: is Luke Tilly, Wilmington's Trust chief Economists. Good money to Luke.

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Speaker 1: Thank you. We will not talk about Tom's time off.

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Speaker 1: We will not talk about the Tesla pickup truck. We

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Speaker 1: will talk about the year ahead. It's really interesting to

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Speaker 1: me at the moment that over the last month or

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Speaker 1: so this year end feel just a lot of people

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Speaker 1: talking as if the year is over, there's nothing left.

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Speaker 1: Would that be a little bit of complacent just to

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Speaker 1: fast forward to January thirst and start thinking about before

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Speaker 1: we get through the remaining data points we have so

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Speaker 1: far the United States and really worked through the trade

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Speaker 1: store as well. Yeah, I think that that you've got

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Speaker 1: it there, because not only do we have more data

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Speaker 1: points to come out, we also have these looming trade deadlines.

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Speaker 1: Right we don't know what's going to happen on December

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Speaker 1: fift with the scheduled tariffs that would go in on

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Speaker 1: US imports from China, and you've got to think that

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Speaker 1: if those tariffs go into effect, you would also see

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Speaker 1: the ones from October fifte that have been delayed. So

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Speaker 1: we are not out of the woods. For the point

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Speaker 1: of your question, how are you framing this for clients

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Speaker 1: at the moment that lake We've gotten pretty optimistic. Actually,

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Speaker 1: just about a month ago, we decided to move from

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Speaker 1: neutral weight to equities back to overweight. We put that

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Speaker 1: in International Developed and basically it's because of some data

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Speaker 1: that appears to be bottoming out. I know this morning's

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Speaker 1: data out of the Eurozone is out of the UK,

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Speaker 1: out of Germany on the week side, but we see

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Speaker 1: it as bottoming out a little bit. And we're also

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Speaker 1: optimistic that we will get some sort of trade deal

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Speaker 1: between the U S and China and that's gonna bean

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Speaker 1: good things for equities all around. So we went back

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Speaker 1: to and overweight, and we think that's the best place

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Speaker 1: to be for our clients. So in terms of the

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Speaker 1: overweight is are there sectors that you guys like are

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Speaker 1: you overweight and saying but I'm still gonna be a

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Speaker 1: little bit defensive utilities, reads, consumer stables, that type of thing. Yeah,

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Speaker 1: it's mostly been a move that back to the pro

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Speaker 1: cyclical so a little bit more tech and a little

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Speaker 1: bit more industrials for some of our portfolio managers and

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Speaker 1: then with our with our factor based investing a little

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Speaker 1: bit more into value. So it basically to the fitting

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Speaker 1: with the story of getting a little bit more optimistic

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Speaker 1: about equities, a little bit more optimistic and the pro

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Speaker 1: cyclical sectors as well. So as it relates to the economy,

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Speaker 1: it seems, you know, the more data we see, the

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Speaker 1: more pressure is on the consumer here because we continue

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Speaker 1: to have weakness in manufacturing business investment, and it seems

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Speaker 1: to put a little bit more pressure on the consumer.

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Speaker 1: I'm guessing you feel pretty good about the consumer heading

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Speaker 1: into We do feel pretty good about the consumer, mostly

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Speaker 1: because we know debt levels are still low, and also

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Speaker 1: the most recent jobs report was very positive. Uh. It

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Speaker 1: actually it took a hit obviously because of the GM strike,

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Speaker 1: but the upward revisi to the previous two months makes

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Speaker 1: it clear that companies are still hiring, not as fast

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Speaker 1: as we had earlier in the circle, but consumers are

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Speaker 1: still in a good spot and then back to the terrorists.

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Speaker 1: If we do not get that that big wave of

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Speaker 1: tariffs coming on December fifteen, consumers are pretty set to

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Speaker 1: keep contributing to the economy. However, that is you balanced

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Speaker 1: by the by the capex specter that you talk about.

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Speaker 1: Firms are very much on their heels here or sitting

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Speaker 1: on their hands because they're not sure how this is

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Speaker 1: going to play out, so they're not really adding much

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Speaker 1: to the recovery. It's been a worry through much of

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Speaker 1: the year Luke that perhaps the manufacturing slowed down worldwide

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Speaker 1: would bleed into services in Germany. A really mixed picture.

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Speaker 1: At the moment, it looks like the pace of the

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Speaker 1: slowdown in manufacturing has sort of bottomed out just a

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Speaker 1: little bit, a really subtle sign of that. But at

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Speaker 1: the same time, on the services side, we're starting to

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Speaker 1: see some damage. And I think a lot of people

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Speaker 1: looking at the day to this morning and concluding, we're

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Speaker 1: not out of the woods yet. What do you say

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Speaker 1: back to that, Yeah, we're not out of the woods yet.

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Speaker 1: I think that the services measure for Germany was something

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Speaker 1: like a thirty eight month low, obviously being pulled down

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Speaker 1: by the manufacturing sector, which is in such bad shape.

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Speaker 1: But you have to be thinking ahead, and you have

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Speaker 1: to be thinking about what's the outlook from here. If

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Speaker 1: the manufacturing sector looks to be bottoming, if you are

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Speaker 1: optimistic about the way the trade war is gonna go,

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Speaker 1: then you think that the Eurozone. We we do believe

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Speaker 1: that the Eurozone is highly levered to that global trade situation.

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Speaker 1: Everything that happens in China, if you see a bounce

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Speaker 1: in Asia, if you see it in China, that's going

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Speaker 1: to help the Eurozone. The market tug of war, it's

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Speaker 1: the front page of your outlook, the interplay of productivity, populism,

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Speaker 1: and portfolios. There's been a real tug of war in

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Speaker 1: the U. S economy as well. And you pointed out

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Speaker 1: business spending versus a stronger consumer. Are you saying that

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Speaker 1: we're going to see business spending pick up before we

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Speaker 1: see cracks in a consumer? Actually, the productivity story is

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Speaker 1: the biggest thing for us in terms of the tug

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Speaker 1: of war. We think that all of the investment that's

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Speaker 1: been done in new technologies is going to keep driving

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Speaker 1: productivity further. Yes, we do expect business capex to pick

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Speaker 1: up in so long as it's not up ended by

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Speaker 1: some of those populist Paul sees right now, that's trade,

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Speaker 1: but there are clearly a lot of other populist policies

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Speaker 1: being talked about on on both sides of the of

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Speaker 1: the election. So that's the way that we view It's

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Speaker 1: productivity versus populism and basically which one wins out. So, look,

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Speaker 1: it looks like the US Federal Reserve has done a

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Speaker 1: relatively very you know, good job in terms of engendering

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Speaker 1: a soft landing. Are you expecting one more rape cut

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Speaker 1: from the Fed or do you think they need to

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Speaker 1: be a little bit more aggressive to support your backdrop.

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Speaker 1: They've been pretty clear about this that the most recent

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Speaker 1: rate cut is where they want to be right now,

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Speaker 1: and they're gonna sit and wait to see how the

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Speaker 1: data plays out. We do know, they say, and we

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Speaker 1: do know that it takes a while for rate cuts

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Speaker 1: to play through and supporting the economy. We are seeing

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Speaker 1: those lower interest rates helping the housing sector and some

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Speaker 1: other interest rates sensitive sectors. So we do think that

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Speaker 1: they are on hold here unless you get a material

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Speaker 1: change in the outlook either for growth or for inflation,

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Speaker 1: we think that they will hold here for quite some time,

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Speaker 1: Like tell great to catch you out with you, Womanton

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Speaker 1: Trust chief economist, join us on the year ahead and

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Speaker 1: the fun a few weeks. Pleased to say that joining

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Speaker 1: pauling myself here in New York City, a man whose

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Speaker 1: resume is so long, I don't think I've got enough

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Speaker 1: time in this segment to read it. And best at

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Speaker 1: a Bob Hornbats kissing your associates, Vice chairman. Good morning

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Speaker 1: to you, Bob, good morning and great to be back here.

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Speaker 1: Fantastic to have you with us. Let's talk about China

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Speaker 1: and what is going on with Hong Kong and what

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Speaker 1: is going on with trade. You've been there recently, and

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Speaker 1: I think a lot of things and a lot of

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Speaker 1: people are trying to grapple with at the moment. Is

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Speaker 1: China's ability and the U s is ability for that

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Speaker 1: matter too, to keep trade on one track and the

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Speaker 1: situation in Hong Kong on another. What are you hearing?

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Speaker 1: I'm hearing both in my conversations recently in Beijing and

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Speaker 1: my conversations with people in Washington, that there is a

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Speaker 1: strong intent on both sides to keep the two separate,

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Speaker 1: that they do not want to have them intermingled. They're

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Speaker 1: on different tracks, and I think they want them to

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Speaker 1: stay on different tracks. Are you confident they can keep

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Speaker 1: it on different tracks? I think they can. I think

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Speaker 1: that it is certainly normally possible, but I think it's

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Speaker 1: what they want to do and it will enable UM

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Speaker 1: I think a better process on both to avoid the

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Speaker 1: two overlapping. So, Bob, I know you are in Beijing recently,

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Speaker 1: give us your sense of kind of the mood of

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Speaker 1: the Chinese. Do they really want a deal? Do they

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Speaker 1: want a real deal or do they want just a

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Speaker 1: deal just on the surface. Uh. Three things. One, I

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Speaker 1: think they do want a deal, but not a deal

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Speaker 1: on any terms at all, UH terms particular terms that

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Speaker 1: are dictated by the United States that are seen by

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Speaker 1: the Chinese as being inimical to their interest or their

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Speaker 1: economic structure. Second, Um, they do not subscribe to the

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Speaker 1: notion that they're the demanders because their economy is weak.

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Speaker 1: They feel that their economy has a lot of strainths

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Speaker 1: to it, even though the growth rates somewhat lower than

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Speaker 1: last year, and that they have the tools the resilience

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Speaker 1: to overcome this weakness. And Third, I think they do

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Speaker 1: want to find some um understanding for a deal, not

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Speaker 1: one and I think from the American point of view,

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Speaker 1: it's the same thing. It's very hard to deal with

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Speaker 1: the whole panoply of issues all at once in one deal.

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Speaker 1: But I do think they would like a deal where

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Speaker 1: they're willing to buy more American agricultural products, which of

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Speaker 1: course President Trump wants. But they have a very strong

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Speaker 1: UH commitment within their own system to getting the United

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Speaker 1: States to lower the tariffs, particularly the tariffs imposed on

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Speaker 1: September one, which they consider to be to have been

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Speaker 1: a surprise that they didn't anticipate, and that that set

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Speaker 1: of tariffs is something that's very important to them. And

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Speaker 1: I think if you can get something on agriculture and

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Speaker 1: some American willingness to cut tariffs, um, there is a deal.

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Speaker 1: And the key point on both sides I think needs

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Speaker 1: to be that whatever deal it is, it should stop

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Speaker 1: the escalation of teriffs, because that neither side once it

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Speaker 1: would be harmful to our economy. Harmful there's a mutually

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Speaker 1: a short disruption. How about in terms of a phase

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Speaker 1: two type of deal, that the really the stuff that

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Speaker 1: really requires some structural changes within Beijing. Is that something

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Speaker 1: that you think is realistically on the table. I think

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Speaker 1: it's on the table if you picture a very long table. Okay,

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Speaker 1: I think that the near term things, the stuff they've

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Speaker 1: been talking about and I was just mentioning, are doable.

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Speaker 1: The phase two Trump talks about Phase one, then Phase

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Speaker 1: two and phase three. It will be phase one and

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Speaker 1: then too Phase two, three, four or five and six.

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Speaker 1: This is a long term process. Are two different economies,

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Speaker 1: two different structures. China has the goal of becoming an

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Speaker 1: advanced technology power and AI, five G, new materials, quantum computing,

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Speaker 1: all those things. And the key is to develop a

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Speaker 1: common set of rules and norms to enable competition to

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Speaker 1: take place without confrontation, to have some generally accepted rules

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Speaker 1: enormous for this competition. The United States has not faced

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Speaker 1: a country as competitive as China in as many areas

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Speaker 1: as China in the last seven the years. So this

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Speaker 1: is and plus a very different system. So working this

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Speaker 1: out for both sides is a big challenge that's gonna

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Speaker 1: take a long time. The problem above for a long

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Speaker 1: long time is that China, Yes, it's become increasingly competitive,

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Speaker 1: but it's cut off foreign competition in domestic markets. Do

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Speaker 1: you see that changing increasingly in the coming years. I

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Speaker 1: think that they are certainly doing things that are preferential

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Speaker 1: to Chinese companies and have been for a while. But

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Speaker 1: I also think that there are a couple of things

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Speaker 1: that are changing. One intellectual property. Now you have Chinese

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Speaker 1: companies developing their own intellectual property they wanted protected. So

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Speaker 1: I think the Chinese now understand that having some common

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Speaker 1: rules that protecting ellectoral property are positive. And second, they

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Speaker 1: do not want decoupling. They still want an active UH

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Speaker 1: and interactive trade relations investor relationship with the United States,

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Speaker 1: So they don't want to separate. They want strengthen their economy,

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Speaker 1: but they also want to play a greater role in

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Speaker 1: the global economy. Poem. That's fantastic as always always great

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Speaker 1: to see your kissing to associates, Vice chamm And joining

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Speaker 1: us on the latest on Hong Kong and China life

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Speaker 1: from the Bloomberg Interactive Broadcast Studios alongside of Post Sweeney.

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Speaker 1: I'm Jonathan Farah. Joining us now is Dan Ives, director

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Speaker 1: of equity research at went Bush Securities. He joins us

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Speaker 1: on Tesla as they unveil their new cyber truck. This

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Speaker 1: is to take from Dan Ives that dropped in my

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Speaker 1: inbox this morning. The Tesla pickup has a still framework

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Speaker 1: that it's impressive and looks more out of a Blade

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Speaker 1: Runner sci fi movie. Dan, I's let's talk about it.

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Speaker 1: That's exactly what it looks like. How many of these

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Speaker 1: things can they sell when they finally start producing them, Well,

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Speaker 1: that's the issue. I mean, it all comes down to demand,

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Speaker 1: and I think when you look at this to rob

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Speaker 1: more niche than I think some expected. I mean, I

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Speaker 1: think we're working to maybe k per year max. And

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Speaker 1: just for comparison, f one fifties over a million per years,

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Speaker 1: So I think a bit disappointing on the mass market appeal,

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Speaker 1: although no doubt this is definitely a bleed runner appeal

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Speaker 1: or anyone that wants to make a splash in two

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Speaker 1: thousand and twenty two. If you pull up to a

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Speaker 1: party in the truck, then there is there any sense

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Speaker 1: that they can make any money with this vehicle, and

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Speaker 1: that's gonna be tough given these price points. You know,

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Speaker 1: I think at least in the first year they'll definitely

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Speaker 1: be running in the red in terms of coming out

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Speaker 1: of the box. But it also comes down to overall

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Speaker 1: demand and what production looks like, because if you can't

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Speaker 1: get the volume on this, then this thing could be

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Speaker 1: dead on arrival, and I think, you know, when you

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Speaker 1: look at it, this is definitely the wow factor, even

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Speaker 1: though I view the launch events as a mini disaster

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Speaker 1: in terms of the glass situation, and yeah, the broken window,

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Speaker 1: and I think that's that's something that definitely is not

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Speaker 1: the type of launch. I think Musk and Fremont wanted

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Speaker 1: well down for any of our listeners, our audience that

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Speaker 1: perhaps missed that moment. They were looking at the vehicle

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Speaker 1: and telling everyone how it was unbreakable. Then threw a

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Speaker 1: brick out of and guess what, It's smashed and then

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Speaker 1: I think they had another guy and it's smashed again. Down.

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Speaker 1: I just wonder what we can and shouldn't take away

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Speaker 1: from that moment. Does that tell you went thing? Does

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Speaker 1: it tell you that there nowhere near to actually following

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Speaker 1: through and producing this thing? Well? I do think that

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Speaker 1: maybe they released this a little too early in terms

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Speaker 1: of released to the initial prototype and launch event. And

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Speaker 1: I think you get one chance to make your first impression.

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Speaker 1: And I think the initial take here from a Wall

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Speaker 1: Street perspective, it comes down to tend to sell significantly

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Speaker 1: three million pickups sold in the US, Ford and GM

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Speaker 1: owned that market. Can they penetrate this? When you look

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Speaker 1: at this, I view it as more small segment of

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Speaker 1: the market. Tessa royalists that they're going to go after

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Speaker 1: UM rather than any sort of mass adoption. I think

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Speaker 1: that's a bit of the disappointment. Even though the mad

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Speaker 1: Max Blade Runner type book they definitely got dan. Where

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Speaker 1: are they going to build this thing? I'm not sure

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Speaker 1: they've got capacity anywhere. I mean, I think that they're

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Speaker 1: trying to build it on Mars, but all jokeing a side,

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Speaker 1: I think, look, I could see them building it potentially

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Speaker 1: in Giga um or you know, in Fremont. They could

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Speaker 1: tool line there, but I think there's not as many

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Speaker 1: parts UM that overlap as we've seen me with a

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Speaker 1: Model Y and a Model three. So I see Giga

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Speaker 1: is probably the biggest potential area where they could build

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Speaker 1: this outer in Nevada down looking at the price section,

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Speaker 1: the stocks lower in the free market by three and

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Speaker 1: a half percent, But what a move we've had off

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Speaker 1: the June low. This stock has doubled. What's driving it?

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Speaker 1: It's a parabox move and I think, look, it definitely

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Speaker 1: overstepped in terms of how negative it got right doomsday.

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Speaker 1: The company was potentially going bankrupt in terms of the

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Speaker 1: knee sayers. So I think got overdone on the downside.

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Speaker 1: But I also think it's overdone in the upside. I

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Speaker 1: think what's happened here is the profitability because when when

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Speaker 1: you've seen demand in Europe and you see the profitability

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Speaker 1: profile that one to punch. It's been a massive shorecovering.

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Speaker 1: And I think you're starting to see many of you

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Speaker 1: this is if they can see Steam profitabilit the stock

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Speaker 1: goes higher, that's gonna be the question over the next

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Speaker 1: two three quarters. That's why in the next two three

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Speaker 1: quarters this is either a four fifty or stock or

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Speaker 1: what I view is a two to two fifty and

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Speaker 1: and I continue to think it's more the latter, just

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Speaker 1: in terms of them continuing to susted demand. So that's

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Speaker 1: why I think going to it all comes down to

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Speaker 1: demand profitability for Testa. But last night I viewed the

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Speaker 1: last night is more noise rather than a demand generator. Dana,

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Speaker 1: I've thanks so much for joining us. Dan, i'ves Wedbush

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Speaker 1: Securities covering all things technology. Margaret Brennan CBS Face the Nation.

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Speaker 1: I don't know where Margaret's going to start her show.

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Speaker 1: So I'm just gonna go, Margaret, where are you going

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Speaker 1: to start your show this weekend? You have so much

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Speaker 1: to choose from exactly We're going to try to make

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Speaker 1: sense of it, tell people what they need to know

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Speaker 1: in terms of what happens next with the impeachment. Since

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Speaker 1: the scheduled hearings are done, we will hear from Jim Himes,

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Speaker 1: Democrat from Connecticut, who sits on that House Intelligence Committee,

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Speaker 1: and had some pretty sharp q and a's, But we'll

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Speaker 1: have to see, you know. The President, i'd say, has

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Speaker 1: just finished about an hour long phone conversation with Fox

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Speaker 1: this morning, repeating many of the things that Dr. Fiona

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Speaker 1: Hill and testimony yesterday called debunked fictional conspiracy theories spread

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Speaker 1: by Russian intelligence. Um. So we're back to a lot

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Speaker 1: of these same um conversations that really don't seem to

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Speaker 1: have been moved forward by some of the testimony all

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Speaker 1: of us heard this week. The president's doing a victory lap,

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Speaker 1: but the article's impeachments still have to be drafted, voted on,

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Speaker 1: and then a trial would still have to start in

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Speaker 1: the Senate. The President says he wants to see that

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Speaker 1: happen because he's confirmed and pretty confident that the Republicans

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Speaker 1: will keep him in office and not vote to remove him. Margaret,

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Speaker 1: the substance of the hearings is one thing. The Public

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Speaker 1: Relations Act is another, and is a cohort of Americans

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Speaker 1: that really don't care, are not going to pay attention,

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Speaker 1: and really do view this as a witch hunt. How

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Speaker 1: are Democrats trying to challenge that? Right? Well, what you

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Speaker 1: also heard this week from a string of career foreign

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Speaker 1: policy officials is a pattern behavior they describe as they

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Speaker 1: all came in, took an oath to the Constitution to

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Speaker 1: work on national security issues, and they found time and

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Speaker 1: again that there were individuals who are using their own

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Speaker 1: proximity to the President the United States for their own

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Speaker 1: benefit in a way that undermine national security. And that's

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Speaker 1: not an insignificant thing to have someone like Rudy Giuliani

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Speaker 1: consistently pointed to as uh at odds and undermining American institutions.

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Speaker 1: But is that explained enough to the American public to

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Speaker 1: move the needle in terms of building support. Not clear?

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Speaker 1: And is that enough to amount to an impeachable offense,

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Speaker 1: which is high crimes and misdemeanors, trusion and bribery. Uh.

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Speaker 1: Democrats don't seem to have one over Republican votes in

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Speaker 1: the House. They still may be to move forward with impeachment,

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Speaker 1: but does that ultimately vote to remove The question is,

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Speaker 1: you know, I guess a political one going into is

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Speaker 1: if this is troubling enough to people at home to

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Speaker 1: say that it is not acceptable. And that's what Speaker

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Speaker 1: Pelosi says this was about, was about sort of exercising

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Speaker 1: that defense of the democracy, um, and the way it's

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Speaker 1: supposed to be carried out. Of course, the President has

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Speaker 1: said from the get go it was a political witch

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Speaker 1: hunt and that there was you know, no successful quid

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Speaker 1: pro quo, therefore there was no bribery. Uh, Margaret. President

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Speaker 1: Trump is out this morning saying that he quote once

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Speaker 1: an impeachment trial. Do you think that's do you think

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Speaker 1: that's going to happen? Is that is that kind of

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Speaker 1: the expectation kind of within the Beltway? Yes. Uh. Leader

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Speaker 1: McConnell as a Republican leader in this end, has said

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Speaker 1: it won't be just a vote to you know, dismissed,

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Speaker 1: it will be a vote to open a trial. Um.

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Speaker 1: He says he's compelled to do that. And the question

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Speaker 1: is sort of what that what does that look like?

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Speaker 1: Do they call their own witnesses? Is that perhaps when

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Speaker 1: we finally hear from former now Security advisor John Bolton,

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Speaker 1: whose name came up repeatedly as someone who is so

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Speaker 1: troubled by what he saw that he told his subordinates

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Speaker 1: to go reported to White House lawyers, the only time

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Speaker 1: he had ever ordered them to report things to what

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Speaker 1: White House lawyers calling Rudy Giuliani a hand grenade, saying

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Speaker 1: this was a drug deal. Uh so, there was clearly

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Speaker 1: real concern. But Bolton has chosen not to testify unless

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Speaker 1: a court orders him to do so, and Democrats have

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Speaker 1: chosen not to wait on that. They want to move

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Speaker 1: more quickly and get this wrapped up before Christmas. Margaret Brennon,

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Speaker 1: thank you so much. We appreciate you stopping by. You can,

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Speaker 1: of course see Margaret and Face the Nation Sunday morning

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Speaker 1: on the CBS Television network. You can hear Margaret Brennan

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Speaker 1: this weekend on Bloomberg Radio as well. Listen to Face

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Speaker 1: the Nation Sunday at two pm in New York, Washington,

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Speaker 1: d C. And Bloomberg One of six, one Boston, Newburyport.

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Speaker 1: That's facin nation. This Sunday at two on Bloomberg Radio,

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Speaker 1: joining us now is pre a misery TV Securities head

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Speaker 1: of Global rate Strategy, And this sort of comes amid

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Speaker 1: a growing swell of concern that perhaps there is political interference.

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Speaker 1: And this is Judy Shelton, one of President Transport recent

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Speaker 1: pects for the FED board. What did you make of

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Speaker 1: this prayer? So I have just I mean, beyond the

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Speaker 1: Judy Shelter issue, which you know, none of us really

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Speaker 1: have enough information to make a comment on that. But

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Speaker 1: I would say the FED actually has been as a

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Speaker 1: political body that they can be. I don't think it

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Speaker 1: helps to have the president or any political interference, even

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Speaker 1: if it's just tweets or it's talk. I think it

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Speaker 1: creates a sort of communication challenge from the FED as

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Speaker 1: they're trying to navigate I think, which is a very

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Speaker 1: difficult macro environment because as the FED has been saying

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Speaker 1: multiple times, we've never had, you know, to deal with

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Speaker 1: will growth slow down and the uncertainty shock and the

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Speaker 1: fact that so far all we've seen is weakness and manufacturing.

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Speaker 1: So the FED has put these insurance cuts in place,

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Speaker 1: and now they're on hold, and so now it gets

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Speaker 1: really tricky because at some point our view is that

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Speaker 1: the FED will have to restart easing early next year.

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Speaker 1: And this is why I don't love the political interference,

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Speaker 1: because I think they have to ease because the consumer

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Speaker 1: and the service sector is going to get impacted. But again,

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Speaker 1: if they suddenly change their stands from on hold to easing,

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Speaker 1: does it look political? And in an election year where

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Speaker 1: I think everything is going to look politicized, I would

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Speaker 1: really wish that there would be less less talk about

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Speaker 1: political interference and have the FED sort of just look

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Speaker 1: at fundamentals. But that's a communication perception issue. I do

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Speaker 1: think that the FED, UH in all my years of

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Speaker 1: following them, I think they will do the right thing um,

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Speaker 1: But it's kind of the preemptive card has been played,

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Speaker 1: so now it's all going to be on the data,

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Speaker 1: financial conditions, and critically this hope that everyone has the

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Speaker 1: U S consumers up. If there's any cracks in that,

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Speaker 1: I do think that the FED will react um, irrespective

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Speaker 1: of the election or any political calls for them to ease.

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Speaker 1: So the consumer has been certainly in the U S.

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Speaker 1: But you know, certainly in a lot of the Western

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Speaker 1: economies as well. The consumer has really been pushing the

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Speaker 1: economy forward as we've seen some weakness and manufacturing and

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00:23:21,720 --> 00:23:25,240
Speaker 1: business investment. What's your sense of consumer right here? Yeah,

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00:23:25,320 --> 00:23:28,680
Speaker 1: So I think globally we've seen some signs that there

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00:23:28,760 --> 00:23:30,480
Speaker 1: is a little bit of a spillover, but I agree.

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00:23:30,480 --> 00:23:33,120
Speaker 1: I think Germany, you look at the German consumer sort

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00:23:33,119 --> 00:23:35,440
Speaker 1: of holding up there despite the fact that I would

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00:23:35,520 --> 00:23:38,680
Speaker 1: argue manufacturing in Germany is already in a recession. UM.

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00:23:38,720 --> 00:23:41,520
Speaker 1: In the U S it's been a similar story, I think,

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00:23:41,520 --> 00:23:45,560
Speaker 1: because this is really emanated from uncertainty um and from

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00:23:45,600 --> 00:23:48,680
Speaker 1: you know, around trade, around global growth, and so what

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00:23:48,720 --> 00:23:50,760
Speaker 1: companies have done is the first thing that they would

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00:23:50,800 --> 00:23:53,520
Speaker 1: do is sort of not invest in something that's hard

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00:23:53,560 --> 00:23:57,000
Speaker 1: to unwind, which would be a big capital investment project.

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00:23:57,280 --> 00:24:00,320
Speaker 1: That's why we've seen business investment globally but also in

448
00:24:00,359 --> 00:24:03,439
Speaker 1: the US take a hit. I think the hope was

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00:24:03,520 --> 00:24:06,920
Speaker 1: that either global growth bottoms out and actually starts moving up,

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00:24:07,080 --> 00:24:10,040
Speaker 1: or that the uncertainty goes away. If that doesn't happen,

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00:24:10,040 --> 00:24:13,040
Speaker 1: in our views, neither happens early next year, then the

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00:24:13,200 --> 00:24:15,440
Speaker 1: next step would have to be for businesses to cut

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00:24:15,440 --> 00:24:17,959
Speaker 1: back on hiring. This is and I think that uh,

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00:24:18,320 --> 00:24:21,159
Speaker 1: some of that already appearing through weekly hours falling, and

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00:24:21,200 --> 00:24:23,399
Speaker 1: so I think the link will be through the labor

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00:24:23,440 --> 00:24:25,440
Speaker 1: market when you cut you offing, No, no no, no, please,

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00:24:25,520 --> 00:24:29,760
Speaker 1: I'm trying to square your your assertion here, which is

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00:24:29,800 --> 00:24:33,920
Speaker 1: a weakening consumer and possibly fed rate cuts early next year.

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00:24:34,200 --> 00:24:38,000
Speaker 1: With the increasing consensus heading into things are going to

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00:24:38,119 --> 00:24:41,760
Speaker 1: chug along, and that actually the US and European equity

461
00:24:41,800 --> 00:24:45,080
Speaker 1: markets will continue to surge and everyone's going to be happy.

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00:24:45,080 --> 00:24:48,639
Speaker 1: Where is the disconnect here? Yeah, I think the disconnect

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00:24:49,119 --> 00:24:53,080
Speaker 1: comes from the view that President Trump into the election

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00:24:53,160 --> 00:24:56,600
Speaker 1: next year, is going to capitulate on China, and there's

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00:24:56,600 --> 00:24:59,679
Speaker 1: an assumption that global growth and investment and all that

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00:24:59,760 --> 00:25:02,480
Speaker 1: is we only because of the U. S Channel trade war.

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00:25:02,880 --> 00:25:04,639
Speaker 1: I actually think if you look at the weakness and

468
00:25:04,680 --> 00:25:07,359
Speaker 1: global growth, it started well before we were talking about

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00:25:07,359 --> 00:25:10,399
Speaker 1: a US channel trade war. So it's preceded it because

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00:25:10,400 --> 00:25:13,480
Speaker 1: global growth has been slowing and I don't see where

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00:25:13,480 --> 00:25:15,920
Speaker 1: the engine of growth will come from. So that's part

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00:25:15,960 --> 00:25:17,840
Speaker 1: one of the call. Part two of the call is

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00:25:17,880 --> 00:25:20,280
Speaker 1: that even if we get a phase one trade deal,

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00:25:20,320 --> 00:25:23,400
Speaker 1: which I actually think it's interesting that we haven't yet

475
00:25:23,400 --> 00:25:25,520
Speaker 1: gotten it. This was the stuff they had agreed upon

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00:25:25,640 --> 00:25:27,800
Speaker 1: in May, and we're still talking about whether we get

477
00:25:27,800 --> 00:25:30,760
Speaker 1: we get the deal or not. Hong Kong absolutely complicated.

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00:25:31,000 --> 00:25:32,719
Speaker 1: But even if we get the deal, which is our

479
00:25:32,760 --> 00:25:37,080
Speaker 1: baseline view, it doesn't affect it doesn't resolve the structural issues.

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00:25:37,440 --> 00:25:40,400
Speaker 1: So I think the assumption is into the election, we're

481
00:25:40,440 --> 00:25:43,880
Speaker 1: going to get a reduction and uncertainty, and therefore businesses

482
00:25:43,920 --> 00:25:47,360
Speaker 1: invest actually make the opposite argument into an election which

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00:25:47,480 --> 00:25:50,760
Speaker 1: is close, very tough to call, as many posters figured

484
00:25:50,800 --> 00:25:54,240
Speaker 1: out in twenty six that are actually business and uncertainty

485
00:25:54,240 --> 00:25:57,280
Speaker 1: will be higher and so. But ultimately it's going to

486
00:25:57,320 --> 00:26:01,160
Speaker 1: depend upon is that actually filtering through to the consumer data,

487
00:26:01,520 --> 00:26:03,879
Speaker 1: and the link will have to come through the labor market.

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00:26:04,320 --> 00:26:06,880
Speaker 1: It's when the job market slows, or if the job

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00:26:06,920 --> 00:26:10,240
Speaker 1: market slows, I think that's when people will really get

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00:26:10,240 --> 00:26:13,280
Speaker 1: nervous about the US consumer. So far, the labor market

491
00:26:13,320 --> 00:26:16,440
Speaker 1: has softened from earlier this year, but it's not weak

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00:26:16,600 --> 00:26:19,760
Speaker 1: on an outright basis. So the next three four months,

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Speaker 1: I think we'll have to see some sort of convergence

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Speaker 1: between where equity evaluations o versus you know, FED pricing

495
00:26:26,320 --> 00:26:29,320
Speaker 1: probabilities create. Thank you so much for joining us appreciate

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00:26:29,400 --> 00:26:33,679
Speaker 1: your thoughts. Thanks for listening to the Bloomberg Surveillance podcast.

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00:26:34,040 --> 00:26:39,080
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

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00:26:39,119 --> 00:26:43,440
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom

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00:26:43,560 --> 00:26:47,440
Speaker 1: Keane before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio two