Speaker 1: Welcome to the Bloombergs Surveillance Podcast Hometown Keene. Along with
Speaker 1: Jonathan Ferrill and Lisa are Brownwitz Jaylie, we bring you
Speaker 1: insight from the best an economics, finance, investment and international
Speaker 1: relations Fine Bloomberg Surveillance and Apple podcast SoundCloud, Bloomberg dot
Speaker 1: Com and of course on the Bloomberg termament, it's crystal
Speaker 1: ball time. It's your outlook for on the SMP five hundred,
Speaker 1: will do bottom three, top three, bottom three, most bearish,
Speaker 1: less constructive, Morgan Stanley at forty four hundred, be about
Speaker 1: forty six, Barclays at top three, Credit Swat at fifty two,
Speaker 1: we've got Deutsche Bank of fifty two fifty, and then
Speaker 1: you've got Bemo Bemo at fifty three hundred, and then
Speaker 1: rounding it out, just shaking up the whole table, going
Speaker 1: number one, a new entry in the last twenty four hours.
Speaker 1: John Stolfus goes to three thirty. He joined us now
Speaker 1: the chief investment strategist at Oppenheimer. John, let's start here,
Speaker 1: where did the extra thirty points come from? And what
Speaker 1: did Brian Baski do to you to upset you? Well?
Speaker 1: Belsky and our own pals from way back. Even though
Speaker 1: we haven't talked with each other for about a year,
Speaker 1: just pre pandemic, we ran into each other outside of
Speaker 1: the exchange. He was coming out, I was going into
Speaker 1: the exchange. But we haven't spoken. But when I looked
Speaker 1: at it, I just looked at the numbers. We were
Speaker 1: looking at the momentum that we've been seeing in these rallies,
Speaker 1: the broadening of interest in equities and the propensity of
Speaker 1: the indexes to essentially self correct in the course of
Speaker 1: rotations and rebalancing. That can cabin day to day, not
Speaker 1: waiting for weeks to week or month to month. So
Speaker 1: a healthy market, the economy coming back, we just wanted
Speaker 1: to edge it up a little bit. John, what you
Speaker 1: had to say about the Fed got my attention. We
Speaker 1: did not expect the FED to slam on the brakes,
Speaker 1: but rather we look for the central bank to pump
Speaker 1: the brakes as lightly as it can. John, What separates
Speaker 1: you and us? Why do you see it as a
Speaker 1: central bank that's gonna step on the break just pumped
Speaker 1: them as a loutly as they can, Jonathan. I think
Speaker 1: it's the context that we bring to it. You know,
Speaker 1: this is a thirty eight years on Wall Street. So
Speaker 1: I remember the Alan greenspan era gas, I even remember
Speaker 1: Walter uh and, so you know, this is a this
Speaker 1: is the Bernankee legacy of Federal Reserve. It's highly sensitive
Speaker 1: when it when it addresses it's it's mandate of full
Speaker 1: employment uh and uh and and a stable economy to
Speaker 1: to achieve that. And so we think they're going to
Speaker 1: be very careful. But the irony though of all of
Speaker 1: this is the market is freaking out because the Fed
Speaker 1: is getting really uh considering, you know, tapering at the
Speaker 1: more aggressive pace. The market has been dying for the
Speaker 1: Fed to taper. It says that if the Feds behind
Speaker 1: the curve, give it a break and let it taper,
Speaker 1: and it'll get to actually probably tweet the the benchmark
Speaker 1: right the Fed funds right probably later next years and
Speaker 1: six months to maybe nine months on from where we
Speaker 1: are now, you're touching on one of the biggest debates
Speaker 1: on Wall Street right now, does a faster taper mean
Speaker 1: a sooner rate hike? And a lot of people seem
Speaker 1: to think that the answer is yes. And can they
Speaker 1: potentially separate those two a little bit more at tomorrow's
Speaker 1: press conference is a key question My issue though, given
Speaker 1: this call, is that you're looking for twelve percent earnings
Speaker 1: growth for the SMP five hundred, a real robust consumer throughout,
Speaker 1: and yet a FED that remains patient and has the
Speaker 1: confidence to do so despite this robust data. Can you
Speaker 1: explain sort of dovetail those ideas well? We we think
Speaker 1: that the right now, you know, we think people are overspending.
Speaker 1: We think the the the what you called the the
Speaker 1: stingy checks, uh, the the amount of people saved when
Speaker 1: they weren't commuting to work, what what have you. People
Speaker 1: have more money on a relative basis, depending upon or
Speaker 1: where they fall in the income strata. Uh, and they're
Speaker 1: spending it, you know, right now at a certain pace.
Speaker 1: But the effects of gas, the gasoline pump prices going up,
Speaker 1: the effects of the prices of neat poultry and or etcetera.
Speaker 1: All of this adds up. The consumer will bring it
Speaker 1: in a little bit, but the consumer is not going
Speaker 1: to stop spending. My big thing has always been don't
Speaker 1: don't bet against the American consumer, as well as don't
Speaker 1: think that technology is gonna end. And we're going back
Speaker 1: to the abacus of the slide rule. Don't bet against
Speaker 1: the consumer. Don't bet against them. In some ways the
Speaker 1: supply chain that's been affecting the consumer as well. John,
Speaker 1: I'm interested in whether you see any risk to your
Speaker 1: overall focus from omicron from any way or indeed the
Speaker 1: way in which the consumer reacts to that. I've gotta
Speaker 1: say the omicron risk is significant. Uh. In some ways,
Speaker 1: it's just as to how is uh it is uh
Speaker 1: looked at from afar by people who are not epidemologists. Uh,
Speaker 1: by the risk and and the the the element that
Speaker 1: can cause over over concerned. I say, let's leave it
Speaker 1: to science. So far, science has done an incredible job.
Speaker 1: If we look back to when people thought it was
Speaker 1: gonna take two years, four years, or who knows when
Speaker 1: for a vaccine of efficacy, we've come a long way. Uh.
Speaker 1: Technology boosting that and UH. And then I'm sorry I
Speaker 1: missed the next part of the question. Oh, the consumer
Speaker 1: is that? Yeah? The consumer has shown you know, the
Speaker 1: consumer has shown a great desire to shop, whether they
Speaker 1: do it online or bricks and mortar, or a mix
Speaker 1: of both. H. The consumer wants to get back to
Speaker 1: the next new normal, or get to the next new normal,
Speaker 1: because I don't think we're going back to what the
Speaker 1: normal was on the memory of this pandemic for quite
Speaker 1: a few years before people forget it. So are you
Speaker 1: gonna call for Apple to be a four trillion dollar
Speaker 1: company by the end of twenty twenty two? Well get
Speaker 1: you know, the firm doesn't like me to comment on
Speaker 1: specific names. But but but needless is it related to technology?
Speaker 1: We think technology continues to be something that the investors
Speaker 1: want to have exposure to. You have to you have
Speaker 1: to break up when you're looking at We like more
Speaker 1: established companies. We think the newer wins. It's it's terrific
Speaker 1: for risk and volatility. But if that's what you want,
Speaker 1: know that you're not going to get those steady earning,
Speaker 1: steady cash flow process of innovation and a uh within
Speaker 1: a culture without a corporation that's established and a certain
Speaker 1: relationship with shareholders that gives you less volatility. Generally speaking, John,
Speaker 1: you squeezed down the extra thirty points. You are the
Speaker 1: most bullish on the street. Gun. It's the next year, John,
Speaker 1: It's great a catch up, sir, as always John Stelfas
Speaker 1: there of Oppenheimer. Thank you, John, Thank you, sir. We're
Speaker 1: gonna talk to the biggest bill on the Street. A
Speaker 1: little bit later, we have to talk to the biggest
Speaker 1: bear on the street as well, Price Target over more
Speaker 1: than Stanley, and we can catch show with Dwann Scaley,
Speaker 1: the head of market research and strategy at Morgan Stanley
Speaker 1: Wealth Management. Different side of the business down, but you
Speaker 1: work very closely with Mike Wilson, who straddles both sides
Speaker 1: at a business. So let's talk about the call for
Speaker 1: a lower equity market. What I hear from you guys
Speaker 1: going through the research, it's not a less constructive view
Speaker 1: per se on earnings, but it's about the multiple down.
Speaker 1: What's going to bring that multiple down down? What is
Speaker 1: it about the multiple that you're focused on at the moment.
Speaker 1: That's exactly right, Jonathan, Good morning and good to see you.
Speaker 1: Happy holidays to you and the team. So look, as
Speaker 1: we've been saying for the last several months, we think
Speaker 1: there's more room to go on multiple contraction. And that
Speaker 1: has historically been the cage Jonathan, as we've worked through
Speaker 1: mid cycle transitions. We think it is basically the same
Speaker 1: scenario this time around. Okay, even though we've had extraordinary
Speaker 1: circumstances in this particular cycle, given COVID, given lockdowns and reopenings, etcetera.
Speaker 1: We think things are somewhat tracking to a normal historical context,
Speaker 1: which has seen the multiple come down anywhere between ten
Speaker 1: to fifteen percent as mid cycle transitions culminated in the past.
Speaker 1: So we do think there's more room to go on valuation.
Speaker 1: And as to this point, you said, we recently haved
Speaker 1: our exposure to the equity like asset classes. Can you
Speaker 1: give us a sense of where you put the money
Speaker 1: as you took down your exposure? Sure, yeah, absolutely so,
Speaker 1: so we put some money into alternatives. We've also put
Speaker 1: some money into a shorter duration credit as well, some
Speaker 1: high quality credit and look, valuations and spreads aren't exceedingly
Speaker 1: undemanding there either, but we do think that could offer
Speaker 1: some ballast in portfolios as we go into a little
Speaker 1: bit more volatile period. You know, as you well know,
Speaker 1: we've been through this anomalous uh smooth sale upwards over
Speaker 1: the last call it, sixteen to eighteen months where we
Speaker 1: really haven't had your typical ten percent correction in the
Speaker 1: in the SMP, and we don't think that's going to
Speaker 1: continue through the winter months. Okay, brace for a ten correction?
Speaker 1: What gets us there? What's the snap element that suddenly
Speaker 1: drives us lower, is there? I mean we get PPI
Speaker 1: data a little bit later today. I know inflation has
Speaker 1: been a key area of risk. You're looking at, correct, Caroline,
Speaker 1: And so we do see a bit of a gradual
Speaker 1: online here, and positioning has already started to move that way,
Speaker 1: particularly when you look at some of the faster moving
Speaker 1: institutional funds out there. Positioning as started to lighten up
Speaker 1: more recently. But we think it's simply the market acknowledging
Speaker 1: that the Fed is about to announce this week the
Speaker 1: big event, of course, about to announce a much faster
Speaker 1: taper schedule that will conclude in March. That's gonna obviously
Speaker 1: remove the maximum accommodative stance that we've had. And even
Speaker 1: though folks have known about this, they've been preparing for it.
Speaker 1: I think there's a difference in terms of the actual
Speaker 1: effect and markets over the next several months down when
Speaker 1: they secuity market do you like? I know there's going
Speaker 1: to be much more emphasis from you and the team
Speaker 1: at individual names, individual sectors. What do you like right now, Jonathan,
Speaker 1: and this type of backdrop. We favored defensive, high quality names. Okay,
Speaker 1: so from a sector's perspective. Think healthcare, which is shaded
Speaker 1: trading extremely cheap after underperforming this year, but has all
Speaker 1: the benefits of innovation and growth, but it's not priced
Speaker 1: like many of the growth sectors. Think areas like consumer staples.
Speaker 1: I know pricing uh power was just mentioned earlier. You
Speaker 1: have to be selective. Not every global consumer franchise has pricing,
Speaker 1: so you have to do the bottom up work. And
Speaker 1: then Jonathan on the other end of the barbel we're
Speaker 1: actually not shying away from growth names either, except here's
Speaker 1: the nuance. We want to focus very much so at
Speaker 1: growth at a reasonable price. We're looking at actually names
Speaker 1: we've added to our team's portfolios recently, names like MasterCard,
Speaker 1: names like Team Mobile. These are actually structural growers that
Speaker 1: are significantly off their fifty two week haus and if
Speaker 1: we do get into an environment where rates finally start
Speaker 1: to back up into two, they won't be as acutely
Speaker 1: sensitive to higher rates as some of the really high
Speaker 1: multiple growth stops that work this year. Dan, you and
Speaker 1: others have been talking about a ten to fifteen percent correction,
Speaker 1: which is overdue. For a while a lot of people
Speaker 1: have been saying things have been flying a little, too
Speaker 1: high for too long to be really justified in any
Speaker 1: fundamental level. And yet every dip has been viable, and
Speaker 1: that dip doesn't matter how small it is, it is
Speaker 1: a viable dip. Has that made you rethink your thesis
Speaker 1: based on the fact that you're seeing cash piles increase
Speaker 1: in the at least according to the fund manager survey
Speaker 1: coming out of Bank of America, and a sense of
Speaker 1: caution among some of your peers. Uh, you know, it's
Speaker 1: a it's a fair point least. One thing I would
Speaker 1: say is that particular dynamic innovo of itself has not
Speaker 1: made us back away from the call or change the call.
Speaker 1: We do acknowledge that the individual investor, in particular, given
Speaker 1: the amount of in particular millennial wealth coming in and
Speaker 1: the new investors coming into access this market via technology
Speaker 1: and absence so forth, that has been a particularly strong
Speaker 1: force and frankly higher than we would have presumed coming
Speaker 1: into this year, But nonetheless that hasn't made us change
Speaker 1: the call. What would help us change the call, make
Speaker 1: us adjust the call would be Number one, we're wrong
Speaker 1: on rates, right, So instead of getting to two percent
Speaker 1: or two point one percent, which is Matt Hornback's call,
Speaker 1: we we hang out around these levels and equity risk
Speaker 1: premium for the SMP aren't his challenge. And number two,
Speaker 1: we've been calling for a bit of a pushback or
Speaker 1: a slowdown. And the consumer, the consumer is eaten through
Speaker 1: a tremendous amount of the savings that you just reference,
Speaker 1: and so they've also been pulling forward tremendous demand for
Speaker 1: particularly durable goods. Given we've been all at home for
Speaker 1: for so so long, we don't see some of those
Speaker 1: trends continuing as well, and that's part of our more
Speaker 1: near term caution. That being said, if we're wrong about rates,
Speaker 1: if we're wrong about the consumer, those would be some
Speaker 1: of the aspects that would change our call. And can
Speaker 1: I just like thank you You've been a good friend
Speaker 1: of this show, what aful partner over the last year.
Speaker 1: Send up best to to Mike, to Ellen, to Matt
Speaker 1: two leaks of Shallott just fantastic down as alwise and
Speaker 1: good to hit from you my pleasure. That's Kelly, thank you,
Speaker 1: enjoy the holidays and send out best to the scene.
Speaker 1: Let's begin with liftoff Mike McKee. We can do that
Speaker 1: right now with Mike Gap and the Chief US economist
Speaker 1: at Barclay's Mike Gap And I said, you were at
Speaker 1: May threatening to move to March. You've already done it.
Speaker 1: Marches the care now for liftoff, Mike, what separates you
Speaker 1: in the pack? You're at March, the packs in the summer.
Speaker 1: June out, two September. Good morning, Jonathan and Lisa, thank
Speaker 1: you for having me on. I think we would say
Speaker 1: it's it's exactly what has been just mentioned, the concern
Speaker 1: about inflation, where inflation is coming in, and I'd say
Speaker 1: it's a twofold argument for for us. One is the
Speaker 1: November Minutes say risk management is now the guiding principle
Speaker 1: of monetary policy, and in the extreme that means you
Speaker 1: don't necessarily need to meet all your liftoff criterion to
Speaker 1: move rates higher. You can just be worried about the
Speaker 1: risk of higher inflation. So that's one argument. The second
Speaker 1: would be that employment report that we received last week,
Speaker 1: very solid, a decline in the unemployment rate, a one
Speaker 1: percentage point declined in the unemployment rates since August. And
Speaker 1: we think other members will think, hey, we're probably a
Speaker 1: lot closer to maximum employment than we thought before. The
Speaker 1: economy is accelerating fairly rapidly in the in the fourth quarter,
Speaker 1: so o Macron concerns aside, which are certainly valid. There's
Speaker 1: a lot of momentum. Labor market progress has been healthy.
Speaker 1: If you're concerned about inflation, we think that puts March
Speaker 1: on the table. So that would be our argument. Michael.
Speaker 1: We were just hearing from Jonathan Stole's first overt Abenheimer,
Speaker 1: and he was saying he thinks it's different to accelerate
Speaker 1: the taper from saying that we're going to raise rates
Speaker 1: sooner at the Federal Reserve. What do you say in
Speaker 1: contrast to that, with your call going very much against that,
Speaker 1: given the fact that the Fed has basically been saying
Speaker 1: something of that nature until a sharp pivot in the
Speaker 1: past couple of weeks, right, So prior to this very
Speaker 1: sharp pivot, I would say that that was That was
Speaker 1: our view too, that you could do risk management to
Speaker 1: start taper to create optionality, but then you'd kind of
Speaker 1: watch the data under your feet as it came in
Speaker 1: in terms of deciding when to lift off. So risk
Speaker 1: management was about the beginning of taper, not necessarily about
Speaker 1: rate hikes. But if risk management is now the guiding
Speaker 1: principle in the conduct of monetary policy. Then tapering, the
Speaker 1: pace of taper, the start of hikes, the pace of hikes,
Speaker 1: all that can be done for risk management purposes. Again,
Speaker 1: it's about the risk of higher inflation, not necessarily where
Speaker 1: current inflation is. So you could argue that a decision
Speaker 1: to taper and taper more quickly does send a signal
Speaker 1: about your willingness to hike rates. So I think would
Speaker 1: be my response to that would be, it's about you know,
Speaker 1: how much you think risk management is the umbrella over
Speaker 1: all policy choices at this point in time. How significant
Speaker 1: is it from your perspective, Mike, that we have seen
Speaker 1: such aggressive rhetoric from former FETE officials, including former uber
Speaker 1: doves like a former Minneapolis FED president Coachur of Lakota
Speaker 1: coming out this morning and basically saying the FETE is
Speaker 1: risking a five type scenario where inflation looks containable and
Speaker 1: ends up not being. So I think they're there. It's
Speaker 1: a reflection of the pressure that they're getting across the board.
Speaker 1: So you saw the comments from from Congress, both sides
Speaker 1: of the aisle stating concerns about inflation for for different
Speaker 1: reasons wanting the FED to respond to it. So it's
Speaker 1: this isn't you know, necessary what i'd say, a partisan issue.
Speaker 1: It's coming from your kind of you know, your traditional economists,
Speaker 1: your non orthodox economists. It's coming from Republicans and Democrats
Speaker 1: in Congress. There is a chorus of calls for the
Speaker 1: FED to respond to this. I personally think, or we think,
Speaker 1: the risk of a sixties or seventies style inflation story
Speaker 1: is overblown. But that doesn't mean the FED shouldn't be
Speaker 1: responding to what they see are our risks to inflation
Speaker 1: in the near term. We think inflation ultimately will come
Speaker 1: down and and the FED will be will have its
Speaker 1: credibility maintained in terms of achieving two percent outcomes over
Speaker 1: over the long term. I just think the risks of
Speaker 1: a wage price spiral are overblown, and the quicker the
Speaker 1: FED move of the less likely that that it's to
Speaker 1: come to play. Mike Caroline in London here, and I'm
Speaker 1: interested in how much the other side of the Fed's
Speaker 1: mandate was of course inclusive jobs market overall, and that's
Speaker 1: had to be to certain extent put on the backbone
Speaker 1: because inflation perhaps peaches into inequality even further. But how
Speaker 1: much do you think that becomes a focus point once more? Caroline,
Speaker 1: that's it's a great point because risk management again, just
Speaker 1: to come back to this, means you may very well
Speaker 1: be lifting off even though you might not think you're
Speaker 1: at maximum employment. And the committees hasn't really gone to
Speaker 1: great lengths to clarify to you what broad based and
Speaker 1: inclusive means. It doesn't really even define what full employment
Speaker 1: is and its statement of longer run policy goals. It's
Speaker 1: more of a we'll know it when when we see it.
Speaker 1: So optically it could look, you know, difficult for them
Speaker 1: where they're raising rates, but still several million workers are
Speaker 1: are out of the workforce and participation is subdued, so
Speaker 1: it's not a great position for them to be in,
Speaker 1: but it is the one where where they're in currently.
Speaker 1: What I would say is if inflation does start coming
Speaker 1: down rapidly over the course of two then maybe they
Speaker 1: pause any rate hike cycle that they've started and and
Speaker 1: kind of shift back in the direction of saying, well,
Speaker 1: now it will be a little bit easier for us
Speaker 1: to ride out an expansion and improve labor market outcome.
Speaker 1: So right now it's about heading off risks of inflation,
Speaker 1: but there are worlds in which they could shift back
Speaker 1: to to promote full employment. How much could the strengthen
Speaker 1: the dollar be the thing that eats away at inflation
Speaker 1: at that rapid rate. So that's a great question, because
Speaker 1: in the last cycle, of course, any kind of movement
Speaker 1: to high rates came with with a lot of dollar appreciation,
Speaker 1: which fed back into lower growth and lower inflation outcomes.
Speaker 1: Um at least the FEDS shift in kind of our
Speaker 1: change and call brings, brings our rhetoric and the FEDS
Speaker 1: communication in line with where markets are. So we're not
Speaker 1: necessarily thinking a pivot at this point or rate hikes
Speaker 1: in two may bring about a much stronger dollar. H
Speaker 1: So I think you'd have to You'd have to have
Speaker 1: the FED maybe moving more rapidly than the market is expecting.
Speaker 1: I don't think that that we're there yet, so I
Speaker 1: think it's less likely, but certainly it's something that we're
Speaker 1: watching out for. I would say over the long term,
Speaker 1: it's part of the reason why the market things the
Speaker 1: terminal rate is lower, that that the FED will be
Speaker 1: raising rates more than other developed economies, which would likely
Speaker 1: keep the dollar buoyant over time, So I think it
Speaker 1: is part of the story on the terminal rate, but
Speaker 1: maybe not in the near term performance of the economy.
Speaker 1: Michael cape and worked with me here year over at
Speaker 1: three thirty tomorrow. Yeah, send the team home. That we've
Speaker 1: done for the year pretty much. Yeah. Wait seriously, of course, Mike,
Speaker 1: come on, what happens if something happens at ECB or
Speaker 1: Bank of ang are you? I'm the U S economist.
Speaker 1: Cathy Jones joined us now chief Fixed and come strategistic Chap. Kathy,
Speaker 1: We've got to talk about this bawn market. We went
Speaker 1: through it with Lisa. When we were at these levels,
Speaker 1: we were talking about a global recession. What are we
Speaker 1: doing now? Yeah, it's really a conundrum, I think for
Speaker 1: the FAT because as they try to signal that their
Speaker 1: tightening policy, all we get is a flatter yield curve
Speaker 1: and lower long term rates. And I think that that
Speaker 1: tells you that the market's view is that inflation isn't
Speaker 1: going to last a long time and the growth will
Speaker 1: decelerate next year, and that we have enough demand at
Speaker 1: the long end of the curve to prevent yields from
Speaker 1: rising very much. So it places a lot of pressure
Speaker 1: on the fat. How high can they go in terms
Speaker 1: of rate hikes and not invert the yield curve? And
Speaker 1: that's going to be probably the biggest problem they face
Speaker 1: over the next twelve months. Kathy, what would you say
Speaker 1: to the argument that the bond market, I don't want
Speaker 1: to say is wrong, but it's distorted by quantitative e sing,
Speaker 1: by the savings glut, by what's going on overseas. You know,
Speaker 1: I don't think it's distorted, but those are certainly factual. UM,
Speaker 1: that's actual evidence for that can contribute to low bond yields.
Speaker 1: And clearly, if there's one surprise that the Fed could
Speaker 1: pull off, it would be quantitative typing. Right. If they
Speaker 1: really wanted to see long term rates move up, they
Speaker 1: could start selling bonds and reducing the size of the
Speaker 1: balance sheet. I don't think that's going to happen anytime soon,
Speaker 1: but that would certainly be one way to do it.
Speaker 1: But I think the collective wisdom of the market here
Speaker 1: is that, yeah, we have a lot of factors holding
Speaker 1: down long term rates. The global um savings glut isn't
Speaker 1: going to go away tomorrow, aging populations aren't going to
Speaker 1: disappear tomorrow, and UM that continues to make demand at
Speaker 1: the long end of the curve. For you know, twenty
Speaker 1: thirty year paper very very strong, and that's the reality,
Speaker 1: uh in the bond market. I think that's reflective in
Speaker 1: this flattening curve, and that's why you cool a terminal
Speaker 1: right at one point seven pc. Cathe talked to us
Speaker 1: therefore about looking out further along the risk spectrum. How
Speaker 1: much are we going to see in our performance of
Speaker 1: potentially high yield if you are going to see such
Speaker 1: tamed long end in government? Yeah, you know, high yield
Speaker 1: um and and investment grade have been doing great um. Again,
Speaker 1: credit has good, strong fundamentals here. The problem is of
Speaker 1: worth the yield, right, So you're not getting much spread
Speaker 1: over treasuries to take that risk um. But it's hard
Speaker 1: to see in this environment that credit won't continue to
Speaker 1: outperform treasuries in two. It's really just a question of
Speaker 1: how much risk you want to take in terms of
Speaker 1: moving into the lower credits for the event that we
Speaker 1: get some sort of an accident in the market, or
Speaker 1: certainly if we were to get an inverted yield curve,
Speaker 1: that would be a negative signal. So it's all good
Speaker 1: except the yield in the credit world, but I do
Speaker 1: think it will outperform in two Kathy, just finally something
Speaker 1: later and I talked about in the last hour, what
Speaker 1: would hawk Is surprise look like Tomorrow the Federal Reserve
Speaker 1: can just give us a little bit more detail on
Speaker 1: that on how they could surprise hawkishly the FMC. Yeah,
Speaker 1: I think you know, they could raise that terminal rate.
Speaker 1: I'm not sure that the result would be a sell
Speaker 1: off at the long end. It might actually be a
Speaker 1: rally at the long end if they did that. But
Speaker 1: they could move up that terminal rate um or again
Speaker 1: quantitative tightening. They could start announcing a roll off sooner
Speaker 1: rather than later, and I think that that would be
Speaker 1: a surprise to the market. Kathy, A ton of people
Speaker 1: write again, do you know what they miss they missed
Speaker 1: the most. She knows the piano. They missed, the piano
Speaker 1: contro not let the piano win too. The office that
Speaker 1: might be have you left open a window? We'll sort
Speaker 1: the crane out for next time. Kathy Jones and Kathy,
Speaker 1: thank you for everything this year. Just absolutely wonderful on
Speaker 1: this show and others. Just a wonderful partner as we
Speaker 1: worked through some really, really complex issues. Viser releasing two
Speaker 1: separate studies of the COVID nineteen pill. They talked about
Speaker 1: how they do seem to reduce hospitalizations and they prevent
Speaker 1: of hospitalizations and unvaccinated individuals. However, they do not reduce
Speaker 1: symptoms and healthier individuals. Uh. Talking about this is the
Speaker 1: main key. How much do we start to pay attention
Speaker 1: to hospitalizations and not infections? When do we cross that
Speaker 1: threshold into treating this like the common cold rather than
Speaker 1: something that must be stopped at all costs. It's not
Speaker 1: a conversation right there with doctor Amish of down Chair,
Speaker 1: the senior scholar at Jones helpkin sense of a house security.
Speaker 1: Don't always go to cash out with you, said Telsa's question.
Speaker 1: How much closer are we to the ultimate objective treating
Speaker 1: this like the common code. Every time we get a
Speaker 1: new tool to use to treat people to keep them
Speaker 1: out of the hospital, we get closer to that goal.
Speaker 1: And I think that the anti viral proviser is one
Speaker 1: of those tools because it has a tremendous ability to
Speaker 1: prevent people from becoming hospitalized. And that is what this
Speaker 1: is all about. That's what flattening the curb was about
Speaker 1: because rving hospital capacity, So I do think we're getting there. Obviously,
Speaker 1: the vaccine is the best way to get there, and
Speaker 1: we still have about the population that's not vaccinated, including
Speaker 1: sixty million people eligible to be vaccinated. That's the biggest thing.
Speaker 1: But I think the anti viral does bring us a
Speaker 1: lot closer to that. We are looking also at the
Speaker 1: omicron variant and anecdotal data out of South Africa showing
Speaker 1: that perhaps it is less virulent. How much are we
Speaker 1: looking at that being a breaking point to the upside
Speaker 1: and getting us out of the pandemic. Have you got
Speaker 1: enough data to get a sense of that yet? The
Speaker 1: fact that all we're hearing about are mostly milder cases,
Speaker 1: not completely mound. There are people being hospitalized, but less
Speaker 1: I see you use less oxygen used. I think that's
Speaker 1: reassuring because we haven't heard anything different. We know that
Speaker 1: in the US, I think only one of our cases
Speaker 1: have been hospitalized. It's a little bit difficult though, to
Speaker 1: completely extrapolate that to the rest of the world, or
Speaker 1: even to this country, because South Africa is a country
Speaker 1: that's a little bit younger, has different comorbid conditions. We
Speaker 1: want more data on unvaccinated people especially high risk, But
Speaker 1: it does seem that for the unvaccinated, it's all might
Speaker 1: be just the same as delta, and we may be
Speaker 1: trading Delta for O macron. But if it's if it's
Speaker 1: more transmissible, but even just just a little bit less virulent,
Speaker 1: and may end up being a wash overall from what
Speaker 1: we're dealing with. So it all depends on how this
Speaker 1: all plays out in the US. We've been talking about
Speaker 1: how the two course dose of either the Fizer BioNTech
Speaker 1: or the moderna A vaccine does seem to have some
Speaker 1: preventative aspect against O macron in terms of how ill
Speaker 1: you get, but not necessarily infectionate. It seems a lot
Speaker 1: less efficacious. People are saying that the booster is really important.
Speaker 1: I know you said you did not get a booster.
Speaker 1: Have you changed your mind based on some of the
Speaker 1: incoming data. No, I haven't because I'm forty six years old,
Speaker 1: I don't have any come morbid conditions, and I think
Speaker 1: that a booster will just inevitably just kick a breakthrough
Speaker 1: infection down the road. With these first generation vaccines. If
Speaker 1: you're somebody that's above the age of sixty five, have
Speaker 1: a high risk condition, got the J and J vaccine.
Speaker 1: Those people absolutely should be getting boosted today before I
Speaker 1: help you people. I think that's not going to change
Speaker 1: the trajectory of omicron. It's not going to prevent omicron
Speaker 1: from hitting our hospitals. What's going to prevent omicron from
Speaker 1: causing a problem our first and second doses. And as
Speaker 1: you said, the Fiser data shows that people are protected
Speaker 1: against what matters severe disease with a two dose regiment
Speaker 1: if you're healthy. And I think that's what we need
Speaker 1: to be emphasizing, because if we continue to boost to
Speaker 1: prevent mild illness, I don't think that this ever really ends.
Speaker 1: And I think we really have to focus on severe disease.
Speaker 1: And maybe there'll be a second generation vaccine that gives
Speaker 1: us different types of protection than our first generation vaccines
Speaker 1: and and and that that will change the equation. But
Speaker 1: right now, I haven't seen anything that changes what I
Speaker 1: would say for healthy, healthy people. I might be in
Speaker 1: the minority, but there there are a few of us
Speaker 1: that that really are focused on hospitalizations and not so
Speaker 1: much preventing mild disease with these vaccines. Okay, so Dr Adlger,
Speaker 1: as I sit here in the United Kingdom, and I
Speaker 1: see the absolute focus on booster shots, perhaps over and
Speaker 1: above getting the unvaccinated with the first realm of injections.
Speaker 1: How does that pan out in the UK? Because we're
Speaker 1: talking to Robert Read a little bit earlier, who's one
Speaker 1: of the advisors to the government, and is saying that
Speaker 1: the reason is to stop the transmissibility, to prevent people
Speaker 1: getting and being able to spread if you help with
Speaker 1: the boosters. But does that not work from your minds on,
Speaker 1: it's not going to be the most significant way to
Speaker 1: stop spread. The best way to stop spread is going
Speaker 1: to still be to get the unvaccinated vaccinated. Because if
Speaker 1: you look, it's not a surprise that this variant arose
Speaker 1: likely in Southern Africa where vaccination rates are very low.
Speaker 1: So if everybody in the UK that was eligible for
Speaker 1: a booster got boosted today, you would still have an
Speaker 1: omicron problem. And the same is true in the United
Speaker 1: States of everybody that's eligible to get boosted, we still
Speaker 1: would have hospitals busting at the seams in many rural
Speaker 1: up counties. This is this is really about reaching the unvaccinated,
Speaker 1: and many policymakers have given up, so they continue to
Speaker 1: boost the people that are already vaccinated, but that's of
Speaker 1: much less value than getting first and second doses into people.
Speaker 1: And I think that we they've recalibrated to focus on
Speaker 1: cases because they've given up on the unvaccinated. And I
Speaker 1: think we can't give up on the unvaccinated because I
Speaker 1: have to work in the hospital and that's all I
Speaker 1: deal with. I don't deal with boosted people coming into
Speaker 1: the hospital or fully vaccinated people come being into the hospital.
Speaker 1: I deal with people who lack first and second doses.
Speaker 1: And if we want to end this pandemic, we have
Speaker 1: to get first and second doses into people in the US,
Speaker 1: the UK, and all around the world. DCOR, what have
Speaker 1: been the most effective ways of doing that bar making
Speaker 1: it illegal not to? From your perspective, what are the
Speaker 1: ways you convince your patients who are still thinking and
Speaker 1: on the on the fence about it a certain degree?
Speaker 1: The only thing you can do is talk to them
Speaker 1: one on one and try and figure out what bit
Speaker 1: of misinformation they swallowed, Offer them alternatives, look at their concerns.
Speaker 1: Maybe they don't want an m R and A vaccine,
Speaker 1: so you can you can direct them towards the J
Speaker 1: and J vaccine. Or vice versa. Get them to get
Speaker 1: at least one dose and then maybe wait a little
Speaker 1: bit longer to get the second dose. There's ways to
Speaker 1: work with people, but you have to actually sit down
Speaker 1: and do it. It's not me on television that gets
Speaker 1: people vaccinated. It's actually when I'm sitting in a room saying,
Speaker 1: what are your concerns and let me let's go through
Speaker 1: the ingredient. Let's let's go through this. That's how it
Speaker 1: really works on a on a detailing basis, just like
Speaker 1: if someone is making up a purchase that you have
Speaker 1: to go through all their questions and then you I
Speaker 1: think you do nudge them appropriately. But we didn't do that,
Speaker 1: and we did a lot of pontificating and talking on
Speaker 1: high and I don't think that really moved that group
Speaker 1: of people who were vaccine hesitant. Doctor, appreciate you at
Speaker 1: times and always your perspectable mos Hammnig inside the room.
Speaker 1: Don't amish it down to that of John's Holkins. This
Speaker 1: is the Bloomberg Surveillance Podcast. Thanks for listening. Join us
Speaker 1: live weekdays from seven to ten a m. Eastern on
Speaker 1: Bloomberg Radio and on Bloomberg Television each day from six
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Speaker 1: the terminal. I'm Tom Keene, and this is Bloomberg.