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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
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Speaker 2: Terminal and the Bloomberg Business app. Bran Weinstein and Morgan
Speaker 2: Stanley writs in the FED is now seen as a
Speaker 2: head of the curve. The door is totally open for
Speaker 2: another fifty, but the bar is high. The FED is
Speaker 2: better off dragging this one out from here, having gotten
Speaker 2: off to a good start. Brian joins us now for
Speaker 2: more so. Brian easing in China rake US in the
Speaker 2: United States. The prospect of some inflationary prolcies in DC
Speaker 2: dependent on the outcome of the US election. A lot
Speaker 2: of people ask him the same question, why aren't bond
Speaker 2: yields higher, not lower?
Speaker 3: I think we'll get there. It's going to take a
Speaker 3: little while.
Speaker 4: If the playbook says when the feed is easing, you
Speaker 4: buy bonds, right, people want to lock in rates.
Speaker 3: It's very rare.
Speaker 4: In fact, it's never happened before that we've come from
Speaker 4: such an inverted deal curve right right into an easing cycle.
Speaker 4: And so I think people are missing that the trades
Speaker 4: more or less already happened. But in the meantime, any
Speaker 4: weaker data, you know, any FED easing, people will buy bonds.
Speaker 4: So I believe bond yields will be meaningfully higher than here.
Speaker 4: I think it's going to take a little while to
Speaker 4: get there.
Speaker 2: Let's just take into that word meaningful. Can we talk
Speaker 2: about that? And you think we're at the bottom of
Speaker 2: a much bigger range. How big is that range? What
Speaker 2: is meaningfully higher?
Speaker 3: You know?
Speaker 4: So I came into this year saying three ninety to five,
Speaker 4: and obviously I'm a little bit off on the low side.
Speaker 4: So let's say it could be even a little lower
Speaker 4: twenty five three fifty. I think when you look at
Speaker 4: a FED with a terminal fund rate near three, the
Speaker 4: eald curve should be at least one hundred and fifty
Speaker 4: basis points steep. So that puts us at four to fifty.
Speaker 4: If the Turmo rates three and a half or four, well,
Speaker 4: then you go a lot higher. And I don't think
Speaker 4: we've seen the highs and yields for this longer cycle yet.
Speaker 4: So if we touch just short of of five percent,
Speaker 4: I think you could see a five and a half
Speaker 4: percent tenure note if the Fed does everything right, if
Speaker 4: the data it gets better, and China easing is a
Speaker 4: big part of that story. So you need more stimulus,
Speaker 4: more spending, all the things we're going to get. I
Speaker 4: think you can get ten year notes outside the range
Speaker 4: of which we've seen to the high side much later
Speaker 4: next year.
Speaker 1: This is counter consensus in terms of how high the
Speaker 1: yield could potentially be in this cycle. It is not
Speaker 1: counter consensus when it comes to just volatility expected, especially
Speaker 1: heading into the election.
Speaker 5: How do you trade around this? How do you position
Speaker 5: for that type of whipsaw?
Speaker 4: Yeah, what's amazing is nothing's happening, right, We're kind of
Speaker 4: stuck in this three seventy to three ninety range, and
Speaker 4: this is the tightest range. The rally happened over five
Speaker 4: months and now now we're stuck. So I think the
Speaker 4: answer may be, don't expect what I just said to
Speaker 4: happen anytime soon again. People like fixed income, they want
Speaker 4: to buy bonds. As the FED eases and listen to
Speaker 4: the election, I don't know that unless there's a red
Speaker 4: sweep or a blue sweep and there's a big outcome
Speaker 4: that's unexpected, I'm not sure the market isn't ready for right.
Speaker 4: We know we're going to get some more stimulus after
Speaker 4: we know we're going to help out the hurricane victims.
Speaker 4: It's a little slower than we'd like, and so they'll
Speaker 4: be more spending, but there's also going to be an
Speaker 4: economic slowdown, right, I mean, I don't think it's going
Speaker 4: to be huge from here, but inflation is still falling.
Speaker 3: So I think we're stuck in a bit of a
Speaker 3: range maybe for stocks. Two.
Speaker 4: And then when we get through this, when we get
Speaker 4: into January February of next year and you see the
Speaker 4: effects of the FED easing, I think you start to
Speaker 4: see higher rates.
Speaker 3: But it seems a little bit boring for right now.
Speaker 1: Well, see, this is what I was really struck with,
Speaker 1: And over the weekend I spend a lot of time
Speaker 1: thinking about the idea of how you navigate bifurcated tails.
Speaker 1: This idea that you have potential hotter than expected economy
Speaker 1: or you have a potential weaker than expected economy, and
Speaker 1: right now people aren't willing to make any kind of
Speaker 1: best so they're just betting on perfection in the middle
Speaker 1: for the foreseeable future. You're saying that we're not going
Speaker 1: to get a catalyst to change that until next year,
Speaker 1: that even though we're saying that Friday is the most
Speaker 1: importants ever, that that's not necessarily going to tip the
Speaker 1: tide one way or another.
Speaker 3: I think it's by the way. I think you're right.
Speaker 4: I think were priced for perfection, and I think the
Speaker 4: tails are in play. The problem with say Friday's payroll
Speaker 4: is if the FED hadn't gone fifty, right, if the
Speaker 4: FED had been stubborn, the payroll would matter a lot.
Speaker 4: The fact that they're ahead of the curve. Now we
Speaker 4: know if it's weaker, they can go fifty again, so
Speaker 4: you can get a response. If it's not weak and
Speaker 4: they did a little too much, the curve might bear
Speaker 4: steep in a little bit, or maybe even bear flatten. Right,
Speaker 4: maybe we take out an extra ease, But at the
Speaker 4: end of the day, is it going to change the
Speaker 4: course of what they're doing.
Speaker 3: I don't think so. Right.
Speaker 4: We know inflation went from a to close to two.
Speaker 4: We know that employment is weaker than it has been,
Speaker 4: maybe not super weak. So it leaves me thinking, as
Speaker 4: much as I don't like it, as someone who wants
Speaker 4: to help their clients make money, you're stuck in a
Speaker 4: range for a little bit longer, despite the fact that
Speaker 4: you do have these tail risks, and if we overreact
Speaker 4: to one, you probably want to fade it right, which
Speaker 4: puts you right back into that range concept.
Speaker 2: Does this remind you of the inverse of pre twenty
Speaker 2: twenty The line that really got that going in my
Speaker 2: mind was we're a long way for neutral. I remember
Speaker 2: that line, and they ended up being a lot closer
Speaker 2: to it than they realized. Are we going to see
Speaker 2: a repeat of that? But on the other side, I.
Speaker 4: Think it's possible, right, I mean, it feels like we're
Speaker 4: a long way from neutral, but we don't know where
Speaker 4: neutral is and we didn't expect five and a half
Speaker 4: to be necessary and it was, which suggests that neutral
Speaker 4: is higher.
Speaker 3: Right.
Speaker 4: The economy did not fall off the cliff when we
Speaker 4: got to five and a half, and we're easing, not
Speaker 4: because we are in danger, but because we don't want
Speaker 4: to be, and that's why I'm so embolden with a
Speaker 4: higher rate call for later. I don't think neutral is
Speaker 4: going to be two point eight or three. I think
Speaker 4: it could be three point five or four. And so yes,
Speaker 4: Johnny ditch where we are right. I think it looks
Speaker 4: like we're far from neutral, and we won't know until
Speaker 4: it's a little bit too late. And the impact of
Speaker 4: the eases won't be known until the middle.
Speaker 3: Of next year.
Speaker 4: So a lot to learn, a lot to get through,
Speaker 4: and I would be thinking not about what this easing
Speaker 4: cycle looks like in the next couple of months.
Speaker 3: I think it might be boring. It's what's on the
Speaker 3: other side of that.
Speaker 2: A great Brian is going to catch up. Thanks for
Speaker 2: catching up with us, Brian. Wise that of more fen
Speaker 2: standing Venu Krishner Barclays is staying Courtius, saying we would
Speaker 2: note that despite upbeach sentiment in financial markets, our macro
Speaker 2: research colleagues believe that impacts the Chinese real economy are
Speaker 2: likely to be limited. Vena Joints napomorph Any it's good
Speaker 2: to see you, good to see you, and you're not
Speaker 2: buying the happy talk out of China in the last week.
Speaker 6: I think in the short term all these measures could work,
Speaker 6: given how negative the positioning has been in the sentiment.
Speaker 5: But I think the issue with China is much bigger.
Speaker 6: It's structural demographics, the property market, consumer sentiment, a host
Speaker 6: of things, domestic consumption, which is you can't export your
Speaker 6: way out forever, which is what they're trying even now.
Speaker 5: I think that is the question.
Speaker 6: So I think in the short term it's tough because
Speaker 6: the questions of what is it a gun or is
Speaker 6: it a bazooka or whatever? Right, so you fine, you
Speaker 6: bring your bozuga and that what structurally over the longer term.
Speaker 5: What changes?
Speaker 2: How would you just write to move over the last week,
Speaker 2: is that your shorts coming off new long scoing garn
Speaker 2: a positioning squeeze that turns into a bit of a
Speaker 2: mount up and a short term what would you call this?
Speaker 5: It's a combination.
Speaker 6: It's a big relief as well, because so far the
Speaker 6: concern has been that in the past, you know, they've
Speaker 6: thrown in a huge amount of stimulus, they weren't doing
Speaker 6: it this time, and so the concern was that they
Speaker 6: don't care as much. But now the opinion is that
Speaker 6: they do care, and now they're saying that this is
Speaker 6: very important and they're won't to do something about it. Right,
Speaker 6: So I think it's a combination of all those and
Speaker 6: perhaps it has some staying power. But I take a
Speaker 6: step back and say, just at the US economy. The
Speaker 6: reason you're optimistic is structurally, the a lot of things
Speaker 6: different in the US. It's not the same in China.
Speaker 6: So when you put all those facts together, I think
Speaker 6: it's a wait and say.
Speaker 1: So, you said that there are some structural things in
Speaker 1: the US that are good, So you're bullish on the US.
Speaker 6: Yes, I'm still bullish on the US, though I'm a
Speaker 6: little concerned in the pace at which we are going ahead.
Speaker 5: I think it looks too fast, too soon.
Speaker 6: But structurally, for example, you know, I mean, the US
Speaker 6: remains at the forefront of the technology front unparalleled. We
Speaker 6: you know, are still you know the world's biggest economy, right,
Speaker 6: we are the world's biggest oil producer now, uh, and
Speaker 6: we still are the center, are probably the leader of
Speaker 6: the global financial architecture. And the dollar still remains a
Speaker 6: reserve currency unlikely to change. So I think when you
Speaker 6: start putting all that together, mainly, I would say in
Speaker 6: tech because the secular shift in the market's rightnised around technology,
Speaker 6: and the shift in technology, if you take a step back,
Speaker 6: is not something which is new. It's been going on
Speaker 6: for about three to four decades now, from the PC
Speaker 6: cycle to the internet to mobile devices.
Speaker 5: We were in the middle of a cloud.
Speaker 6: Transition and then they've got AI on top of that.
Speaker 6: And at the center of it is the action is
Speaker 6: coming from the US and the ecosystem we have in
Speaker 6: the US, mainly around the Valley is unparalleled and cannot
Speaker 6: be replicated just by infusing capital.
Speaker 1: That's a great story. You expect losses by the year end.
Speaker 1: How much short term do you expect this story to
Speaker 1: have been overplayed? And basically, uh, everything is to really
Speaker 1: face a whole lot of volatility based on potential growth, headwinds,
Speaker 1: potential regulation, potential geopolitics.
Speaker 5: The election absolutely raise a lot of right points.
Speaker 6: And that's why if a C my base case price
Speaker 6: target is fifty six hundred already about that, but we
Speaker 6: do have an upside case of sixty one hundred and
Speaker 6: in all fairness a downside case of close to five thousand.
Speaker 5: So I think the way to.
Speaker 6: Think about it is Bittech has corrected reasonably healthily multiples
Speaker 6: which had gone to about thirty four times and now
Speaker 6: back to what twenty nine times, so just about the
Speaker 6: threshold where we feel comfortable. I think anything in the
Speaker 6: mid twenties to twenty nine in the range is reasonable
Speaker 6: because their growth is decelerating, so they are comping the
Speaker 6: comp In other words, now they are looking at sixty
Speaker 6: percent plus growth rate to sort of match against in
Speaker 6: the coming quarters, and the expectation is that their growth
Speaker 6: will decelebrate to around the twenty percent range, so pretty healthy.
Speaker 6: You're paying a PEG ratio of one point three one
Speaker 6: point four, which is quite full, but it's not broken.
Speaker 6: But for the rest of SMP, the comps get easier,
Speaker 6: so you had bad numbers. Now the streete expectation is
Speaker 6: it goes up fifteen sixteen percent.
Speaker 5: I am skeptical.
Speaker 6: I think it's going to be less than that, but
Speaker 6: still they're Actually what's happened is the composition of growth
Speaker 6: has changed, so Bittech still leading but moderating, reasonably priced,
Speaker 6: and the rest of their SMP quite fully valued or
Speaker 6: argue but growing at you know, expected to grow in
Speaker 6: my view maybe around ten ish percent. Which is not
Speaker 6: a bad combination. It leaves me to your question that
Speaker 6: what about the levels right now? I think we probably
Speaker 6: need to take a little bit of a breather. And
Speaker 6: I don't know what the catalyst is going to be.
Speaker 6: Maybe it's elections, maybe it's some geopolitical event.
Speaker 5: But we haven't cared.
Speaker 6: About geopolitics forever, so I'm not too sure why we'll
Speaker 6: start caring now.
Speaker 7: You have such a big gap when it comes to
Speaker 7: the upside and the downside. Yeah, and you say, yeah,
Speaker 7: you don't know the catalyst for what could be. Is
Speaker 7: there a potential of what the catalyst though would be
Speaker 7: to the upside if you're unclear about what it would be.
Speaker 5: In terms of taking a breather.
Speaker 6: Sure, I think the catalysts are very clear. You talked
Speaker 6: about the jobs numbers just now. So the big shifting
Speaker 6: sentiment over the last call it month or two months
Speaker 6: has been this growth scare, right, and so based on
Speaker 6: historical experiences, the market is very concerned and we are
Speaker 6: that is the label market as robust as it seems,
Speaker 6: you know, is it a fact that labor market can
Speaker 6: discilerate very quickly?
Speaker 5: We don't know. We don't think so.
Speaker 6: But The point is, it is very clear that the
Speaker 6: odds of even a shallow recession have increased over the
Speaker 6: last two months.
Speaker 5: They haven't decreased, right, So that is your case downside case.
Speaker 6: If you start certainly seeing a detivation in the labor market,
Speaker 6: which nobody is expecting, including us, but it is a
Speaker 6: real possibility because the odds have increased, you could start
Speaker 6: testing the downside. On the other hand, we are still
Speaker 6: printing with robust numbers. You saw the Atlanta GDP number.
Speaker 6: It came even stronger. Consumer sentiment marginally increasing.
Speaker 5: So I think if growth.
Speaker 6: Does accelerate and there's a reasonable likelihood even though that's
Speaker 6: come down a little bit, there you have my upsideks
Speaker 6: is sixty one hundred. So I think you know, it
Speaker 6: all depends, and the derivative market is telling you that
Speaker 6: the one thing they care about is a NF piece, right, So.
Speaker 5: You know that's where the action is.
Speaker 2: So good news is good news still? That doesn't change.
Speaker 6: Yes, right now, the good news is good news. We've
Speaker 6: shifted from that paradox of flipping it back. But I
Speaker 6: think the question is good news is good news still?
Speaker 6: Something breaks? Right, and so the disconnect right now is
Speaker 6: between the raids market and the equity market.
Speaker 5: Right, And what I would suggest is that the raid's
Speaker 5: market has been all over the map for the last
Speaker 5: two years.
Speaker 6: We're expecting seven cuts, then zero, now you know, nine
Speaker 6: cuts in a middle year, middle of next year. So
Speaker 6: the equity market has been more right than wrong. Right,
Speaker 6: And so that's an interesting situation we are in.
Speaker 2: Right, you've thrown some shindy at your colleagues on the
Speaker 2: other side of the room. So the pond mark has
Speaker 2: been all over the place. Did you hear that? I
Speaker 2: heard that.
Speaker 5: I heard that.
Speaker 1: So you know, basically is that your your accusation.
Speaker 6: Well, my point is that everybody looks at the rates
Speaker 6: market a big barometer.
Speaker 5: Of what to extend.
Speaker 8: Yeah, so, which is true.
Speaker 6: But the point is if you tried to follow that,
Speaker 6: you're gone crazy because you will know what to do
Speaker 6: a week from week.
Speaker 5: Right, slipping all.
Speaker 1: Right, hold on a second in fairness, not a defendant
Speaker 1: pod market, but it's a defendant bond market.
Speaker 2: Equities have had s and P five.
Speaker 1: Hundred has had five straight months of gains. If we
Speaker 1: close out the month of September with a gain, it
Speaker 1: has come in tandem with to your yields having five
Speaker 1: straight months of yields going down. You're saying that that
Speaker 1: isn't directly correlated.
Speaker 6: Well, what you really care about for equities is the
Speaker 6: ten year rates, right, and if you look at ten
Speaker 6: year rates wherever, they're moving around. But that is a
Speaker 6: discount factor because we're a long duration asset, right, And
Speaker 6: we were hovering around five percent a few months ago, right,
Speaker 6: and then we went to three and a half percent.
Speaker 6: Now you're again going back towards the four percent range.
Speaker 6: So I'm not trying to sort of reduce the importance
Speaker 6: of the rate. It is very, very important because it's
Speaker 6: a discount age of factors in trying to bring back
Speaker 6: his bond.
Speaker 1: Market colleagues carry on, Can I keep going at the
Speaker 1: end of.
Speaker 5: The day, you know it's been all over the map.
Speaker 5: And let me tell you something.
Speaker 6: So everybody, everybody in the macro market is concerned about deficits, right,
Speaker 6: So you would expect that shows up in the term premium.
Speaker 5: Where is it?
Speaker 2: Some big egos on that side of the room, as
Speaker 2: you know. Y, thank you Kiney Krishna. Print of Park
Speaker 2: Please market's looking ahead to the week's biggest catalysts, including
Speaker 2: today's remarks from Fed Schad Jay Powell ahead of September
Speaker 2: payrolls on Friday at ECHA Bave of Bank of America
Speaker 2: Securities expecting a print of one hundred and fifty thousand,
Speaker 2: with unemployment holding steady at four point two percent. A
Speaker 2: details with us in a studio here in New York.
Speaker 2: A teacher, good mornits you, sir, good morning, Thanks for
Speaker 2: having me, Thank you for being here. We've heard from
Speaker 2: consumers they say jobs aren't as plentiful, they're getting harder
Speaker 2: to get. Are we going to see that in jump
Speaker 2: openings this week?
Speaker 8: It's certainly a possibility.
Speaker 9: So if you look at the Joel's report, this will
Speaker 9: of course be for August rather than September. But if
Speaker 9: you look at the recent Joel's stata, the job opening's
Speaker 9: number has been dropping like a.
Speaker 8: Stone, and that's not sustainable.
Speaker 9: At some point, that's not going to be benign, right,
Speaker 9: It's going to start affecting the lave market. So that's
Speaker 9: something we're watching quite carefully. The openings rate now looks
Speaker 9: quite consistent with where it was before the pandemic, so
Speaker 9: further sharp decreases and openings.
Speaker 8: Will be a point of concern.
Speaker 2: There's a missing feature in the parish narrative. It's layoffs.
Speaker 2: What's happening with layoffs? Where aren't we?
Speaker 9: Layoffs are still very low, and that's the reason that
Speaker 9: we're holding on to our soft landing Outlook. If you
Speaker 9: look at the layoff rate, that's been low. If you
Speaker 9: look at jobless claims that's been low as well. And
Speaker 9: even within the unemployment data, you can look at kind
Speaker 9: of voluntary versus involuntary unemployment, where involuntary would be layoffs, right,
Speaker 9: So that only accounts for a little more than.
Speaker 8: Half of the increase in the uneployment rates.
Speaker 9: So no matter how you slice it, layoffs have been low,
Speaker 9: and that gives us more confidence about a soft landing.
Speaker 1: Also, revisions, and this is sort of counterintuitive because some
Speaker 1: people are saying the revisions to jobless claims and to
Speaker 1: the job's figures have been downward and significantly so. But
Speaker 1: the revisions to GDP and GDI were the opposite direction.
Speaker 1: It suggested a bit more growth in the couple of
Speaker 1: years in the direct aftermath of the pandemic. How much
Speaker 1: are you looking at that and saying we did to
Speaker 1: rethink the strength of the economy.
Speaker 9: Oh, absolutely, those revisions were remarkable. So there was a
Speaker 9: big gap between GDP and GDI going into the revisions,
Speaker 9: with GDPI being significantly softer. So the bearish view on
Speaker 9: that was that eventually GDP would get revised to GDI
Speaker 9: because income is more easily measured or something like that.
Speaker 9: But actually what happened was that GDP got revised up,
Speaker 9: GDI got revised up even more, and it's now basically
Speaker 9: cut up to GDP. So across the board, you look
Speaker 9: at the components of income and compensation for example, got
Speaker 9: revised up a lot. You look at the components of GDP,
Speaker 9: consumer spending capex cut revised up. So these were very
Speaker 9: positive revisions, and I think there's two potential implications, right
Speaker 9: The first one is that productivity growth has really picked
Speaker 9: up more than we expected. The other is, look, there's
Speaker 9: this Eventually there's going to be a relationship between activity
Speaker 9: and the labor market, and which way will it go.
Speaker 8: We'll activity backstop the.
Speaker 9: Label market, which is now looking like a bigger risk
Speaker 9: given the revisions, or will activity collapse under the weight
Speaker 9: of a softening label market, and now that's looking less likely.
Speaker 1: Okay, So this to me brings me to sort of
Speaker 1: the paradox that we're dealing with right now in Marcus,
Speaker 1: which is you've got two tail risks that are diametrically opposed.
Speaker 1: Brian Weinstein earlier this morning really highlighted that, and he
Speaker 1: said people are underestimating the growth in this economy, are
Speaker 1: overestimating how low the neutral rate is.
Speaker 5: It actually is going to be much.
Speaker 1: Higher than the Fed says, and that really they don't
Speaker 1: have as long of a way to get to neutral.
Speaker 1: Do you agree based on some of these revisions in
Speaker 1: the amount of momentum that there seemed to be in
Speaker 1: the economy heading out of the pandemic.
Speaker 9: So to the extent that productivity growth has really picked
Speaker 9: up very mechanically, that does mean a high neutral rate.
Speaker 9: I think eventually we'll know the neutral rate when we
Speaker 9: get there.
Speaker 8: So that's probably enough.
Speaker 5: Come on, give us advanced notice.
Speaker 9: It's probably higher than it was before the pandemic. Chepowell
Speaker 9: said that as well. The question is is it high twos?
Speaker 9: Before the pandemic it was low toos, right, so is
Speaker 9: it high twos? Is it mid threes or is it
Speaker 9: even closer to four percent? And I think all we
Speaker 9: can honestly say about the neutral rate is that it's
Speaker 9: somewhere between two and a half and four, and we'll
Speaker 9: know when we get there.
Speaker 7: Aditya qui ask what's potentially going to happen in the
Speaker 7: next few hours, We know what's going to happen.
Speaker 5: Where's going to be strikes at port? What could be
Speaker 5: the impact on the economy.
Speaker 9: So there's two things that we focus on when we
Speaker 9: think about the impact of strikes on economic activity. The
Speaker 9: first one is that the longer they last, the more
Speaker 9: of a drag they are, but not in a linear sense,
Speaker 9: but rather in a nonlinear sense at some point, because
Speaker 9: then they start to affect supply chains, right, So one
Speaker 9: or two week strike is pretty painless. Right. The other
Speaker 9: thing is that, because GDP is a flow variable, whatever
Speaker 9: impact they have usually gets paid back the following quarter
Speaker 9: when the strikes end, so it'll be a temporary impact.
Speaker 8: It'll show up.
Speaker 9: It won't show up in because when you're striking you
Speaker 9: can't apply for jobless claims, but it will show up
Speaker 9: in employment.
Speaker 2: So what's the.
Speaker 7: Cutoff when it actually can become more damaging down the line.
Speaker 9: It really depends on how many people are striking, how
Speaker 9: broad the strikes are, So there's.
Speaker 8: No fixed sort of cutoff, right.
Speaker 9: But when we were thinking about the auto strikes last year,
Speaker 9: for example, we were thinking, you know, once you go
Speaker 9: beyond four to six weeks, it gets a lot more painful.
Speaker 2: So how much do I need to strip out from
Speaker 2: Friday's number? Do you need to strike adjust this number?
Speaker 9: Not really no, because the survey period was the week
Speaker 9: of September twelfth.
Speaker 2: Do I need to cut off sixty because of revisions?
Speaker 9: You need to account for the fact that Chair Powell
Speaker 9: is cutting off something, right, He didn't say what, maybe
Speaker 9: it's forty to sixty.
Speaker 8: But this I thought was really interesting.
Speaker 9: In his press conference, what he said was we are
Speaker 9: mentally adjusting down the jobs data that we get, right. So,
Speaker 9: there was a question about whether the downward revisions from
Speaker 9: the QCW, which ended as of this March, would extend
Speaker 9: to April and beyond, and he's saying that the Fed
Speaker 9: is working on the assumptions that they will, which is
Speaker 9: quite dubbish, right, because if you're trending around one hundred
Speaker 9: and twenty one hundred and thirty, you could easily just
Speaker 9: idiosyncratically get a soft number around sixty seventy eighty, and
Speaker 9: then you know Powell's thinking of that as being very
Speaker 9: close to zero. So that actually makes a pretty strong
Speaker 9: case for another fifty from our perspective.
Speaker 1: So just I'm going to take a line from market's
Speaker 1: philosopher Jonathan Farrell, who is talking about.
Speaker 8: The whiff of Goulesby.
Speaker 1: If we hear the whiff of Goulesby at one fifty
Speaker 1: five pm today from Jerome Powell, how much does that
Speaker 1: risk a reacceleration in the market with a series of
Speaker 1: fifty basis point rate cuts that reignite the growth.
Speaker 8: Side of the equation, It's a risk.
Speaker 9: The question is how many fifties can can Powell pull off? Right,
Speaker 9: So if you look at the dot plot and you
Speaker 9: take it at face value, which I would recommend you
Speaker 9: don't do, but if you did, then you know it
Speaker 9: would say that they're not going to do any more fifty.
Speaker 8: Right. We think they'll do one more. But each one
Speaker 8: that Powell pushes through, we now have a strong.
Speaker 9: Sense that he's more dubbish than the rest of the committee.
Speaker 9: It's going to be harder, They're going to face more
Speaker 9: resistance because each one you do, you're telling the markets
Speaker 9: that we're not going.
Speaker 8: To stop, and you're getting closer to neutral, so maybe
Speaker 8: you don't want to do too many.
Speaker 9: So our base case is one more fifty and then
Speaker 9: back to twenty fives. But honestly, everything's on the table
Speaker 9: for this FED. You could get to twenty fives if
Speaker 9: the job's data are good. You could get very very
Speaker 9: fast cuts if the job's data deteriorate further.
Speaker 2: What are you focused on this soufternoon? Just to final question,
Speaker 2: what are you looking for from the FED Reserve chair?
Speaker 9: I think he's going to be pretty noncommittal. There's two
Speaker 9: more jobs reports before the next meeting. He really really
Speaker 9: wants to keep his options open, so it's going to
Speaker 9: be data dependence. You know, he'd probably used the word
Speaker 9: recalibration again, which again for us, if you're recalibrating, why.
Speaker 8: Only do that one extra twenty five basis point increment?
Speaker 5: Right?
Speaker 8: You want to do at least one more.
Speaker 9: But he's probably going to talk about recalibration, and he's
Speaker 9: going to mix this very optimistic message about the economy
Speaker 9: with a more dubbish message around you know, we'll do
Speaker 9: what it takes to to accommodate the liberal market.
Speaker 2: Two pay Rose report, I think, one CPR report, and
Speaker 2: a presidential election in between the next decision.
Speaker 1: Yeah, it's going to be a really tricky You gotta
Speaker 1: imagine that if he's laid a groundwork now for we're
Speaker 1: gonna Dove, that will just, you know, take away a
Speaker 1: lot of the uncertainty and the potential.
Speaker 2: Actimmy actually spoke like that, we're going to dove a teacher.
Speaker 2: It's going to see you a teacher rather thank from America.
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