WEBVTT - Bloomberg Surveillance TV: April 10th, 2026 0:00:02.360 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.840 Terminal and the Bloomberg Business App. 0:00:36.320 --> 0:00:39.160 Here's the view from Wall Street this morning. Tiffany McGee 0:00:39.159 --> 0:00:42.040 of Pivotal Advisors, running markets are sensitive to any changes 0:00:42.040 --> 0:00:45.440 in energy flows or escalation risk. The recent movement equities 0:00:45.520 --> 0:00:50.159 reflects relief around geopolitics, but not a full resolution. Tiffany 0:00:50.240 --> 0:00:54.200 joins us now for more so, Tiffany, when it comes to. 0:00:53.600 --> 0:00:55.560 The two key points going to the weekend. 0:00:55.360 --> 0:00:58.080 We have inflation data at eight thirty and then of 0:00:58.120 --> 0:01:00.720 course these talks on Saturday. What do you think the 0:01:00.720 --> 0:01:02.040 market's going to be more focused on? 0:01:02.760 --> 0:01:05.040 Well, I think you know a good example of this 0:01:05.120 --> 0:01:07.000 is we can look at what happened yesterday, right and 0:01:07.040 --> 0:01:10.080 so you know, yesterday looked like a strong day on 0:01:10.120 --> 0:01:12.959 the surface, but the details kind of really tell a 0:01:12.959 --> 0:01:13.800 more nuanced story. 0:01:13.840 --> 0:01:14.840 So you had stocks. 0:01:14.600 --> 0:01:18.360 Hire, but yields were also moving up a little over 0:01:18.440 --> 0:01:20.920 like four point three percent, and oil back to near 0:01:21.680 --> 0:01:24.400 one hundred dollars, And so this really wasn't a clean 0:01:24.800 --> 0:01:27.679 risk rally at all. It was really more markets adjusting 0:01:27.680 --> 0:01:30.720 to uncertainty and not pricing it away. So I think 0:01:30.760 --> 0:01:33.280 as we kind of go into the weekend, we still 0:01:33.280 --> 0:01:35.920 have a lot of uncertainty. So that's something that we 0:01:35.959 --> 0:01:37.800 really need to need to continue to watch. 0:01:38.000 --> 0:01:41.119 How much of all of this this tiffany is just positioning. 0:01:41.120 --> 0:01:44.480 This is something I've been asking constantly over the past. 0:01:44.200 --> 0:01:46.240 Week, because the market moves. 0:01:46.360 --> 0:01:50.080 Yes on ceasefire hopes but otherwise have been odd. For example, 0:01:51.000 --> 0:01:55.800 software stocks plunged five percent over the past three days 0:01:55.840 --> 0:01:58.720 alongside energy. There's no logical reason for software to be 0:01:58.760 --> 0:02:01.160 falling in a ceasefire unless. 0:02:00.840 --> 0:02:03.040 It's just hedge funds re upping. 0:02:02.880 --> 0:02:05.360 On their short positions just because this allows them to 0:02:05.400 --> 0:02:07.480 go back to the bets they had before. So how 0:02:07.560 --> 0:02:10.480 much of this market is not really being priced on fundamentals, 0:02:10.720 --> 0:02:11.960 but it's just simply positioning. 0:02:12.639 --> 0:02:14.480 Well, I think it's a combination of both, you know, 0:02:14.720 --> 0:02:17.720 and so we've got I think that we are really 0:02:17.760 --> 0:02:21.600 in an headline environment, and so that's really moving the markets. 0:02:21.760 --> 0:02:21.960 You know. 0:02:22.000 --> 0:02:24.120 We can look at even what's going on over the 0:02:24.160 --> 0:02:27.560 past few weeks with the price of oil, with the 0:02:27.600 --> 0:02:30.520 fact that even about you know, two weeks ago, we 0:02:30.600 --> 0:02:34.040 see we saw all this volatility market, but yet earnings 0:02:34.120 --> 0:02:38.480 expectations continue to continue to increase, and that's one thing 0:02:38.520 --> 0:02:40.800 we'll also kind of be looking at going in heading 0:02:40.840 --> 0:02:43.959 into like earning season. We are really in a fundamentals 0:02:44.000 --> 0:02:46.639 driven market right now. It's really not about hype anymore. 0:02:47.919 --> 0:02:50.440 Big of America's Michael Hartnett is out with a note 0:02:50.480 --> 0:02:53.680 this morning saying that investors should flock into commodities for 0:02:53.680 --> 0:02:56.520 the next few years, eat things, that a surge in 0:02:56.560 --> 0:02:59.040 commodities is going to last for that a few years, 0:02:59.080 --> 0:03:03.720 and that in importance, it might even supplant popularity around equities, 0:03:03.760 --> 0:03:06.880 that this becomes a big chunk to diversify away from bonds. 0:03:07.160 --> 0:03:10.080 Do you think commodities deserve that big shiny place in 0:03:10.080 --> 0:03:12.000 a portfolio as well? 0:03:12.000 --> 0:03:15.480 Listen, so our clients are institutional investors and so you know, 0:03:16.600 --> 0:03:19.000 a diversification is really the key for us when we 0:03:19.040 --> 0:03:22.440 think about positioning, We're really focused on our client's strategic 0:03:22.480 --> 0:03:25.800 acid allocation and making those technical moves. Commodities do have 0:03:25.880 --> 0:03:28.080 a place in a portfolio. We'd like to really invest 0:03:28.120 --> 0:03:33.760 in real assets. We have a combination of ural assets, infrastructure, commodities, 0:03:34.280 --> 0:03:39.280 all of those things act as a diversifier to traditional 0:03:40.040 --> 0:03:42.000 dots and bonds, and so yeah, I definitely do think 0:03:42.000 --> 0:03:43.200 that they have a place in a portfolio. 0:03:43.320 --> 0:03:46.480 What place does gold have in the portfolio? Tiffany that 0:03:46.600 --> 0:03:49.440 this should be to a political angst concern about what 0:03:49.440 --> 0:03:49.880 the FED is. 0:03:49.880 --> 0:03:50.160 Going to do. 0:03:50.200 --> 0:03:52.119 It seems like a good time to be piling into 0:03:52.120 --> 0:03:54.640 the precious metal, but it's been trading a lot, just 0:03:55.080 --> 0:03:56.240 like a momentum trade. 0:03:56.520 --> 0:03:59.320 It has, so you know, when I think about how 0:03:59.440 --> 0:04:02.880 we position portfolios for our clients, again, we set that 0:04:03.560 --> 0:04:07.480 strategic acid allocation. First. Gold is always a portion of 0:04:07.480 --> 0:04:11.280 our client's portfolio, but we do so through a fun 0:04:11.360 --> 0:04:13.760 structure where we have exposure to other metals as well, 0:04:14.440 --> 0:04:17.640 So we don't have a ton of direct exposure to gold, 0:04:17.880 --> 0:04:19.599 but that's how we'd like to play it. We like 0:04:19.640 --> 0:04:22.000 to play it in a more diversification, in a more 0:04:22.040 --> 0:04:23.440 diversified position. 0:04:23.839 --> 0:04:25.880 So if there aren't enough for as headlines today with 0:04:25.960 --> 0:04:29.359 CPI talks and negotiations, over the weekend, next week we 0:04:29.440 --> 0:04:32.039 really get into the earning season in earnest. It'll kick 0:04:32.040 --> 0:04:34.960 off with Goldman Sachs on Monday, Tiffany, what are you 0:04:35.040 --> 0:04:37.840 looking out for? What signals are you hoping to hear 0:04:37.920 --> 0:04:40.880 from the big banks in order to understand where we 0:04:40.960 --> 0:04:44.120 are in this American economy and in the financial sector. 0:04:44.680 --> 0:04:47.040 Yeah, so I think as we head into earning season, 0:04:47.080 --> 0:04:50.839 I think the numbers really matter, but the messaging matters more. 0:04:51.080 --> 0:04:53.760 So we're watching a few things. We're definitely looking at margins. 0:04:54.080 --> 0:04:57.200 Can companies really absorb the higher energy costs or are 0:04:57.240 --> 0:05:01.279 they passing them through to their customers. We're also, you know, 0:05:01.400 --> 0:05:04.560 on the AI front, looking for that AI payoff. So 0:05:04.800 --> 0:05:08.160 you know, we know AI is driving growth, but are 0:05:08.200 --> 0:05:11.240 we seeing real return yet? That's really important, And so 0:05:11.320 --> 0:05:14.919 we'll also be paying attention to guidance and so you know, 0:05:15.040 --> 0:05:19.240 with much uncertainty, right we're in this period of uncertainty, 0:05:20.160 --> 0:05:22.800 you know, forward guidance really matters more than the quarter 0:05:22.960 --> 0:05:26.839 to us. And also we're looking at consumer sensitivity. You know, 0:05:26.960 --> 0:05:31.279 our higher prices, our higher energy prices starting to impact demands. 0:05:31.360 --> 0:05:33.919 So it's really like a show me earning season, not 0:05:34.520 --> 0:05:35.760 a tell me earning season. 0:05:36.480 --> 0:05:37.120 Stay with us. 0:05:37.440 --> 0:05:39.320 Mulble Impock surveillance coming up. 0:05:39.480 --> 0:05:40.000 Off to this. 0:05:49.200 --> 0:05:51.800 Under surveillance this morning, all eyes on the straight of 0:05:51.800 --> 0:05:55.000 her moves. Should her mom be able to charge a 0:05:55.120 --> 0:05:58.680 toll for the straight upons they're charging some vessels to 0:05:58.760 --> 0:05:59.320 go through. 0:06:00.600 --> 0:06:01.560 Or should they be able to? 0:06:02.279 --> 0:06:03.560 I mean they shouldn't be able to. 0:06:04.920 --> 0:06:06.039 They're doing it a little bit. 0:06:06.440 --> 0:06:06.840 I don't know. 0:06:06.839 --> 0:06:09.479 Look, the capability is a lot less than it was 0:06:09.520 --> 0:06:13.440 two weeks ago. And with every week and every day 0:06:13.440 --> 0:06:15.880 frankly guests less and less, all I can tell you 0:06:15.960 --> 0:06:17.839 is they're begging to make a deal. So let's see 0:06:17.839 --> 0:06:18.320 what happened. 0:06:18.480 --> 0:06:21.120 Here's the latest, President Trump demanding Iran reopened the straight 0:06:21.200 --> 0:06:24.680 up for moves, warning Tehran against charging fees for passage. 0:06:25.080 --> 0:06:27.839 Joining US now is Maha Yahya, a director of the 0:06:27.839 --> 0:06:32.200 Middle East Tenter at the Carnegie Endowment for International Piece. Maha, 0:06:32.320 --> 0:06:35.200 the fact that they're meeting is that basically the success 0:06:35.279 --> 0:06:36.440 of this weekend. 0:06:37.320 --> 0:06:40.680 In short, Yes, the fact that they're meeting but I 0:06:40.720 --> 0:06:43.120 don't think any of us are holding our breath, so 0:06:43.160 --> 0:06:46.320 to speak. It's very clear that the maximum Iran is 0:06:46.320 --> 0:06:49.560 willing to offer does not meet the minimum of what 0:06:50.160 --> 0:06:53.479 President Trump is requiring. They're speaking at each other, not 0:06:53.600 --> 0:06:57.120 with each other, and a lot of the news that 0:06:57.160 --> 0:07:00.000 has come out over the last few days just point 0:07:00.200 --> 0:07:02.880 to that between President Trump saying he's through the ten 0:07:02.920 --> 0:07:07.600 point plan, the garbage, uh, the Iranians saying the ceasefire 0:07:07.720 --> 0:07:11.120 includes Lebanon, and you know, and we've seen a lot 0:07:11.160 --> 0:07:16.280 of confusion, strategic confusion. I would say, so we'll wait 0:07:16.320 --> 0:07:17.520 and see what happens. 0:07:17.560 --> 0:07:19.000 But I just I. 0:07:19.040 --> 0:07:23.280 Don't see these talks at least leading somewhere. It's positive. 0:07:23.360 --> 0:07:28.040 It gives everyone a breather for now, and we have 0:07:28.080 --> 0:07:29.160 to wait and see where this goes. 0:07:29.280 --> 0:07:31.440 Do you think it's a breather to more escalation. 0:07:32.680 --> 0:07:34.760 It could be, it could be. I mean it's very 0:07:34.760 --> 0:07:40.600 clear that uh, the you know, the the IRG see 0:07:40.600 --> 0:07:44.720 the demands of the Iranian regime control over the Straits 0:07:44.720 --> 0:07:49.600 of almost as your reporters said, their nuclear capacity, negotiating 0:07:49.800 --> 0:07:52.920 over their partners and proxies across the region. I mean, 0:07:52.920 --> 0:07:56.120 these are non starters for the United States, let alone Israel, 0:07:56.160 --> 0:07:58.840 which is a major player in this, in this UH 0:07:59.280 --> 0:08:03.880 and the maybe between the US and Iran, that's where 0:08:04.320 --> 0:08:08.560 these are the to negotiating parties, at least upfront. But 0:08:08.760 --> 0:08:14.960 the real partner in this is Israel. And already we've 0:08:15.200 --> 0:08:22.560 seen rumbles of discontent because from what we understand, President 0:08:22.600 --> 0:08:27.840 Trump announced the ceasefire without really consultation with his partner, 0:08:28.760 --> 0:08:33.200 Benjamin san Yahoo. So it is a breather. We may 0:08:33.240 --> 0:08:36.520 see escalation again, but it is a breather for now. 0:08:37.160 --> 0:08:39.640 And just just on that note, Maha, one of the 0:08:39.640 --> 0:08:43.000 big areas, if not the biggest area of concern with 0:08:43.080 --> 0:08:45.480 this ceasefire on the side of the Iranians was Israel 0:08:45.480 --> 0:08:48.520 continuing to attack Lebanon. We learned yesterday that they're going 0:08:48.559 --> 0:08:51.320 to be holding direct talks. Wall Street Journal reporting this 0:08:51.400 --> 0:08:55.280 morning that their preparatory talks. It's happening at the ambassador level. 0:08:55.760 --> 0:08:58.480 How big of a factor is this going to be 0:08:58.880 --> 0:09:01.480 heading into the weekend and as a separate thing, that 0:09:01.520 --> 0:09:03.520 could derail any hopes of a ceasefire. 0:09:04.480 --> 0:09:07.920 Look, the talks themselves, I think are important in the 0:09:08.000 --> 0:09:13.280 sense they really break a decades all taboo in the 0:09:13.360 --> 0:09:18.000 past When Israel and Lebanon have negotiated, they've always negotiated 0:09:18.120 --> 0:09:21.720 via third parties, never face to face. So this is 0:09:21.760 --> 0:09:25.240 the first time that you have direct talks between a 0:09:25.320 --> 0:09:30.319 Lebanese representative and an Israeli representative. Will these lead anywhere? 0:09:30.360 --> 0:09:33.440 Not at the moment, No, it's a It's very difficult 0:09:33.520 --> 0:09:38.160 to negotiate with someone that's bombing you on that. On 0:09:38.240 --> 0:09:42.280 one hand, the Lebanese government itself is trapped between the 0:09:42.440 --> 0:09:47.200 rock and a heart place because the decision to stop 0:09:47.600 --> 0:09:51.720 any kind of military activity rests elsewhere, not with the government. 0:09:53.040 --> 0:09:56.600 You have to bring Iran into the game. And frankly, 0:09:56.960 --> 0:10:00.560 for Benjamin Latagil, he has no interest in stopping the 0:10:00.600 --> 0:10:04.920 conflicts in Lebanon. It's it's a war that is popular 0:10:04.960 --> 0:10:07.680 with his own base uh and with the broad Dan. 0:10:07.720 --> 0:10:10.959 According to the polls we're seeing, the war is quite 0:10:11.000 --> 0:10:16.080 popular politically. He promised residents in the north that he 0:10:16.240 --> 0:10:19.000 is not it's not about stopping the attacks. He wants 0:10:19.040 --> 0:10:23.280 to completely destroy in dismantle Hezbola, something he promised in 0:10:23.360 --> 0:10:26.400 Gaza and hasn't been able to do with Hamas. So 0:10:26.760 --> 0:10:31.600 it's very difficult to see how they're going to again uh, 0:10:31.840 --> 0:10:35.400 they will not go for a ceasefire, and Hesbella saying 0:10:35.440 --> 0:10:38.320 we will not, uh, you know, we want to complete 0:10:38.360 --> 0:10:41.440 cease fire. Iran is saying the same thing. So it 0:10:41.520 --> 0:10:44.560 puts everybody in a very murky situation. What we might 0:10:44.640 --> 0:10:48.280 see is again another breather in the sense that the 0:10:48.280 --> 0:10:52.719 conflict is ongoing in the South. The bombings has not 0:10:52.960 --> 0:10:55.360 has not, has not stopped in the South at all. 0:10:55.880 --> 0:11:02.440 But we may see Lebanon spare another black Wednesday. What 0:11:02.559 --> 0:11:06.000 we saw two days ago of an entire complete blitz, 0:11:06.080 --> 0:11:08.720 one hundred air strikes in the space of ten minutes. 0:11:08.800 --> 0:11:14.000 It was absolutely terrifying. To this moment, you know, it's 0:11:14.040 --> 0:11:17.880 more than three hundred people killed, thousands injured, and to 0:11:18.000 --> 0:11:21.040 this moment, it just doesn't make any rhymemen reason or 0:11:21.120 --> 0:11:23.440 reason beyond terrorizing the country. 0:11:24.160 --> 0:11:27.640 Stay with us multile IMPERG surveillance coming up after this. 0:11:36.920 --> 0:11:39.160 Matt Lazetti is joining us around the table now of 0:11:39.280 --> 0:11:39.920 Deutsche Bank. 0:11:40.200 --> 0:11:41.960 Matt, just what's your reaction for the CPI. 0:11:42.200 --> 0:11:44.320 Yeah, I think, as Mike highlighted, you want to kind 0:11:44.360 --> 0:11:48.320 of disentangle some of the stickier items from the volatile items, 0:11:48.320 --> 0:11:50.160 and I think for this print, it is important that 0:11:50.240 --> 0:11:50.760 rent to know we. 0:11:50.760 --> 0:11:51.560 Are we're stronger. 0:11:51.640 --> 0:11:53.640 That does tell you either a little bit higher than 0:11:53.679 --> 0:11:57.120 we expected. Maybe on a four looking basis, those things 0:11:57.120 --> 0:11:59.520 tend to be a little bit more persistent. Used car 0:11:59.559 --> 0:12:02.600 pricesly materially weaker than I think we were anticipating. 0:12:03.200 --> 0:12:05.160 You had the decline that Mike had noted. 0:12:05.440 --> 0:12:06.839 I think over the next seven months, THO should be 0:12:06.880 --> 0:12:09.320 picking up given what we see from wholesale prices. 0:12:09.559 --> 0:12:11.560 You did see airfares rose pretty strongly. 0:12:11.800 --> 0:12:13.920 Maybe that's reflecting a little bit of the rising jet 0:12:13.960 --> 0:12:15.760 fuel prices as we look ahead, but. 0:12:15.760 --> 0:12:16.960 Overall very strong. 0:12:17.160 --> 0:12:20.559 Headline print, core print weaker than expected, but we'll have 0:12:20.600 --> 0:12:22.120 to see over the next seven months, probably get a 0:12:22.160 --> 0:12:22.480 pick up. 0:12:22.520 --> 0:12:24.319 But this isn't the worst case scenario, is it. 0:12:24.800 --> 0:12:25.000 No. 0:12:25.080 --> 0:12:27.880 I think for the FED, you can look through a 0:12:27.920 --> 0:12:31.000 particular month, particularly driven by by gas prices. I think 0:12:31.040 --> 0:12:33.320 more important for the FED would be yesterday's print, which 0:12:33.360 --> 0:12:36.120 was core PC that is running at three percent year 0:12:36.120 --> 0:12:38.760 every year. It's a percentage point above their own target. 0:12:38.800 --> 0:12:42.040 Now they think that fifty to seventy five basis points 0:12:42.040 --> 0:12:43.240 of that is from tariffs. 0:12:43.480 --> 0:12:44.880 But the starting point is just not good. 0:12:44.880 --> 0:12:47.559 When you're overlaying another energy price shock on top of that. 0:12:48.320 --> 0:12:50.920 So you have those two in hand the market, and 0:12:51.040 --> 0:12:52.640 Marie was just pointing this out to me that you 0:12:52.679 --> 0:12:55.000 do have markets starting to price in more bets of 0:12:55.000 --> 0:12:57.040 a cut or something around twenty percent. Odds we get 0:12:57.040 --> 0:12:59.200 one by the end of this year, given what you 0:12:59.240 --> 0:13:01.560 were just saying, is this a setup where you can 0:13:01.640 --> 0:13:02.240 get cuts? 0:13:02.640 --> 0:13:04.400 So our baseline is that we will get a cut 0:13:04.440 --> 0:13:06.960 in the back half of the year, but kind of 0:13:06.960 --> 0:13:09.960 confidence in that has waned, I think, and the story 0:13:10.000 --> 0:13:11.920 and narrative to get there, I think has changed. So 0:13:12.720 --> 0:13:14.400 coming into the year, we thought that we would see 0:13:14.440 --> 0:13:16.640 some meaningful disinflation over the back half of the year, 0:13:17.000 --> 0:13:19.679 core PC falling below two and a half percent, and 0:13:19.720 --> 0:13:21.840 with that the FED being able to cut rates, you know, 0:13:21.880 --> 0:13:24.320 potentially as you get a more dubbish reaction function under 0:13:24.320 --> 0:13:27.760 a Kevin wash led FED. We're not there yet, obviously, 0:13:28.360 --> 0:13:30.320 but I think that story has changed. Inflation is now 0:13:30.360 --> 0:13:33.120 too high. I think the probability that we get enough 0:13:33.160 --> 0:13:35.240 disinflation this year where the FED cuts on an inflation 0:13:35.320 --> 0:13:38.520 story alone is less likely, and you likely need to 0:13:38.520 --> 0:13:40.440 see some weakness in the labor market to get the 0:13:40.440 --> 0:13:42.760 FED to cut later this year. As we saw the 0:13:42.800 --> 0:13:45.280 last Friday's jobs report, we don't see that weakness. You 0:13:45.280 --> 0:13:47.319 have a labor market that looks very resilient. The unteployment 0:13:47.360 --> 0:13:49.560 rate is actually declining a little bit, payroll gains are 0:13:49.559 --> 0:13:52.559 picking up, and so I do think the market, yes, 0:13:52.600 --> 0:13:54.640 we're pressing a little bit of a cut, but the 0:13:54.640 --> 0:13:55.960 probably is pretty low at this point. 0:13:56.559 --> 0:13:58.760 And this is where, and Lisa's talked about this a lot, 0:13:58.800 --> 0:14:01.600 where scenario analysis becomes kind of the only thing you 0:14:01.640 --> 0:14:03.920 can do considering how big the left tail is. We're 0:14:03.920 --> 0:14:06.079 talking to Bob McNally wrap it in earlier, who was 0:14:06.080 --> 0:14:08.120 saying one of his scenario is not his base case, 0:14:08.320 --> 0:14:10.840 but one scenario is where you get a huge hit 0:14:10.920 --> 0:14:13.439 to growth because of higher energy prices and you need 0:14:13.440 --> 0:14:15.480 to start talking about recession. For you, what is the 0:14:15.559 --> 0:14:17.600 level where that can come into the picture. 0:14:17.840 --> 0:14:18.040 Yeah. 0:14:18.120 --> 0:14:20.360 I think the way that we think about oil prices 0:14:20.400 --> 0:14:23.680 is there is this strong historical parallel between oil price 0:14:23.720 --> 0:14:26.320 shocks and recessions. I think nine out of the eleven 0:14:26.720 --> 0:14:29.800 recessions that we had after World War Two were coincided 0:14:29.800 --> 0:14:30.720 with a meaningful. 0:14:30.400 --> 0:14:31.160 Oil price shock. 0:14:31.360 --> 0:14:33.320 But the structure of the economy has changed materially over 0:14:33.360 --> 0:14:36.560 the past ten years. We're now a net energy exporter 0:14:37.560 --> 0:14:40.840 record production that we're seeing. Households still take a hit, 0:14:41.360 --> 0:14:43.040 but households are buffered given the. 0:14:42.960 --> 0:14:44.000 Tax cuts that we see. 0:14:44.040 --> 0:14:46.280 So the price level that we are kind of worried 0:14:46.280 --> 0:14:48.880 about would be about one hundred and fifty dollars per 0:14:48.920 --> 0:14:52.640 barrel for oil. That would eliminate the benefits that households 0:14:52.640 --> 0:14:55.560 have from the Trump tax cuts. We're not there, and 0:14:55.560 --> 0:14:58.240 obviously we've moved away from those levels over the past week. 0:14:58.440 --> 0:15:00.080 I just want to bring in Mike McKee another mo home. 0:15:00.120 --> 0:15:02.880 I always been digging into the data. Mike, what else 0:15:02.920 --> 0:15:03.440 are you seeing. 0:15:04.840 --> 0:15:07.680 Well, we've got some interesting surprises and some not so 0:15:07.840 --> 0:15:10.480 surprising news. You look at airline fares, they were up 0:15:10.560 --> 0:15:13.800 two point seven percent. Of course, the airlines raising prices 0:15:13.880 --> 0:15:16.640 to keep up with the fuel problem that they have, 0:15:16.840 --> 0:15:19.000 but it's also the season where they start to raise 0:15:19.080 --> 0:15:23.600 prices going forward for summer vacations. But some areas did 0:15:23.680 --> 0:15:26.040 not rise, and that is a bit of a surprise. 0:15:26.160 --> 0:15:30.320 Medical care services we're pretty much flat down two tenths 0:15:30.400 --> 0:15:34.000 on the month after a series of big increases. We 0:15:34.080 --> 0:15:37.520 also see motor vehicle insurance flat on the month that 0:15:37.680 --> 0:15:42.280 had been going down. So some offsetting moves in things 0:15:42.360 --> 0:15:44.960 that actually will show up in the PCE when we 0:15:45.080 --> 0:15:49.680 get to that later in the month. But overall, kind 0:15:49.720 --> 0:15:53.400 of as Matt said, expected in terms of inflation, and 0:15:53.760 --> 0:15:57.520 we get the usual volatility in various individual categories. The 0:15:57.640 --> 0:16:01.240 question is how strong is underlying and going forward that's 0:16:01.320 --> 0:16:02.720 the Fed's job to figure out. 0:16:03.000 --> 0:16:06.040 Right, So there are some really negative pockets, but Mike 0:16:06.120 --> 0:16:09.840 is pointing even Matt to some decent improvement when it 0:16:09.880 --> 0:16:12.040 comes to inflation in some scenarios. I guess the FED 0:16:12.160 --> 0:16:14.320 could breathe somewhat of us sigh relief because they knew 0:16:14.320 --> 0:16:15.920 the gas lean shock was going to be there. 0:16:16.320 --> 0:16:18.000 Yeah, you knew the gas line shock was going to 0:16:18.040 --> 0:16:18.280 be there. 0:16:18.680 --> 0:16:21.640 You got some weakness in medical care, commodities, use car prices. 0:16:21.680 --> 0:16:24.080 I think the one thing is as you look ahead, 0:16:24.400 --> 0:16:26.680 the fact that rent and oer are stronger is important. 0:16:26.840 --> 0:16:29.640 Those are very persistent components. They are much larger share 0:16:29.680 --> 0:16:32.600 of CPI than the RFPC. But nonetheless is if those 0:16:32.680 --> 0:16:34.720 pick up, you building a little bit more inflation as 0:16:34.760 --> 0:16:36.760 you look ahead. And then again some of the weakness 0:16:36.800 --> 0:16:38.840 and use car prices where we have pretty high confidence 0:16:38.880 --> 0:16:40.720 that over the next several months those are going to 0:16:40.760 --> 0:16:42.920 bounce back given what we see from wholesale prices. The 0:16:43.000 --> 0:16:45.840 key question remains how much passed through do you have 0:16:45.920 --> 0:16:49.400 from this oil and energy price shock to core components. 0:16:49.720 --> 0:16:52.920 The FEDS modeling on that reaches different conclusions. The FED 0:16:53.000 --> 0:16:55.120 staff's model suggests that you have very little pass through 0:16:55.200 --> 0:16:55.840 to core inflation. 0:16:56.320 --> 0:16:57.480 They had some other modeling that. 0:16:57.520 --> 0:16:59.960 They did after the twenty twenty two oil price shock 0:17:00.200 --> 0:17:02.240 which suggests that you get a more persistent past there. 0:17:02.280 --> 0:17:04.080 So I think that's the key question for the FED. 0:17:04.480 --> 0:17:06.480 I still just go back and you're great on this, 0:17:06.960 --> 0:17:09.159 just the setup that the setup wasn't great for this 0:17:09.280 --> 0:17:11.720 then PCE. We saw this rise come before and the 0:17:11.800 --> 0:17:15.000 sticky inflation. If we couldn't get inflation down to target 0:17:15.040 --> 0:17:17.040 for the past sixty months, even before the outbreak of 0:17:17.080 --> 0:17:19.680 war in another energy shock, how do we even get 0:17:19.720 --> 0:17:20.680 there at this point? 0:17:21.040 --> 0:17:23.320 Yeah, And I think that's the real issue for the FED, 0:17:23.400 --> 0:17:26.439 right because even before this shock, the core PC inflation 0:17:26.560 --> 0:17:29.000 was still a percentage point above their target. We are 0:17:29.080 --> 0:17:34.320 now five six years into the initial inflation shock that 0:17:34.400 --> 0:17:38.000 we saw after COVID. Yes, there are reasons why this 0:17:38.200 --> 0:17:40.600 time inflation is higher than it should be, and tariffs 0:17:40.840 --> 0:17:43.320 the culprit at this point. But I think what you've 0:17:43.359 --> 0:17:45.560 seen is just more FED officials growing kind of frustrated 0:17:45.600 --> 0:17:47.640 with the progress or lack of progress that they've seen 0:17:47.680 --> 0:17:49.840 on the inflation front. So even if you were to 0:17:49.960 --> 0:17:52.920 exclude another energy price shock and the fact that that 0:17:52.960 --> 0:17:55.960 could lift inflation on a four looking basis, you still 0:17:56.000 --> 0:17:59.200 are left with very little inflation progress over the past 0:17:59.240 --> 0:18:02.359 eighteen months and a labor market that looks very close 0:18:02.400 --> 0:18:03.320 to the Fed's targets. 0:18:03.880 --> 0:18:04.879 In that environment, I. 0:18:04.880 --> 0:18:07.680 Think the Fed it would be leaning towards keeping rates steady, 0:18:08.040 --> 0:18:10.200 and even in a normal environment, could be thinking about 0:18:10.200 --> 0:18:12.400 that they are not restrictive enough to bring inflation down 0:18:12.760 --> 0:18:15.080 and the potential for rate hikes. Now, we don't think 0:18:15.359 --> 0:18:18.040 that that's a baseline, but I think it's a normal 0:18:18.160 --> 0:18:22.160 environment where growth is solid, the labor market is resilient 0:18:22.200 --> 0:18:24.320 and close to target, and inflation is a percentage point 0:18:24.320 --> 0:18:24.840 above target. 0:18:25.200 --> 0:18:27.960 We just had the Vice president depart for these talks 0:18:28.000 --> 0:18:28.720 in Islamabad. 0:18:28.760 --> 0:18:30.200 What are you looking forward to this weekend? 0:18:30.760 --> 0:18:34.159 Yeah, I think the market has taken this view that 0:18:34.200 --> 0:18:36.520 both sides have just shown their hand and wanting to 0:18:36.640 --> 0:18:39.840 de escalate right now. The path between here and a 0:18:39.920 --> 0:18:42.399 full reopening of the straight orform moves seems to be 0:18:42.520 --> 0:18:43.520 very unclear, and we've. 0:18:43.400 --> 0:18:45.080 Had very little progress on that front so far. 0:18:45.600 --> 0:18:47.880 But I think as long as the market sees continued 0:18:47.960 --> 0:18:51.680 progress or movements in that direction, then we will see 0:18:51.720 --> 0:18:54.520 oil prices that I think remain somewhat more subdued. The 0:18:54.560 --> 0:18:57.040 markets can remain more buoyant, and the market will be 0:18:57.040 --> 0:18:59.520 a little bit less worried about rate hikes. 0:19:00.160 --> 0:19:02.399 You know. Speaking with clients, I. 0:19:02.400 --> 0:19:04.800 Think that they have really meaningfully taken down the view of. 0:19:04.800 --> 0:19:06.040 The risk scenarios around us. 0:19:06.040 --> 0:19:08.920 I think they think that the peak market impact of 0:19:09.000 --> 0:19:12.520 this event is behind us. So there could be some 0:19:12.640 --> 0:19:15.800 complacency on that front, and so you do worry a 0:19:15.840 --> 0:19:17.480 little bit about that that we just because we have 0:19:17.560 --> 0:19:20.119 had these headlines, we believe that the escalation is going 0:19:20.200 --> 0:19:21.679 to be in place, and that we're a little bit 0:19:21.720 --> 0:19:23.040 too complacent around escalations. 0:19:23.240 --> 0:19:24.720 The market is really holding on to the idea that 0:19:24.800 --> 0:19:25.920 this ceasefire can last. 0:19:26.960 --> 0:19:30.480