1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordernt. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,560 Speaker 2: Terminal and the Bloomberg Business App. Keith Lerner of truest 10 00:00:37,560 --> 00:00:40,000 Speaker 2: writing the S and P five hundred Ballmarket, just marked 11 00:00:40,000 --> 00:00:43,680 Speaker 2: his third anniversary and delivered the sixth strongest six month 12 00:00:43,760 --> 00:00:46,560 Speaker 2: rebound inner history. As we enter the final two months 13 00:00:46,560 --> 00:00:48,800 Speaker 2: of the year, history is on a bull side. Keith 14 00:00:48,840 --> 00:00:50,559 Speaker 2: joins us now for more. Keith, good morning, good more. 15 00:00:50,600 --> 00:00:51,239 Speaker 3: I'm ready to be here. 16 00:00:51,280 --> 00:00:51,920 Speaker 2: Great to see you. 17 00:00:51,960 --> 00:00:52,080 Speaker 4: One. 18 00:00:52,080 --> 00:00:54,400 Speaker 2: Are the toawl winds that you're so confident about right now? 19 00:00:54,560 --> 00:00:56,880 Speaker 4: Well, I think the main thing, Rob Front, I think 20 00:00:56,880 --> 00:00:59,080 Speaker 4: this board market deserves the benefit of the data, and 21 00:00:59,120 --> 00:01:02,400 Speaker 4: we have all these of concerns. As one concern receives, 22 00:01:02,400 --> 00:01:04,880 Speaker 4: we have another one to talk about, which makes it interesting. 23 00:01:05,440 --> 00:01:08,600 Speaker 4: But the north storrow of this bull market has been simple. 24 00:01:08,600 --> 00:01:10,959 Speaker 4: It's been profits, in our view, and those profit trends 25 00:01:10,959 --> 00:01:13,400 Speaker 4: are still moving higher. Forward twelve month estimates for the 26 00:01:13,480 --> 00:01:15,440 Speaker 4: S and P are moving higher, but they're also moving 27 00:01:15,520 --> 00:01:17,360 Speaker 4: higher for the average stock. They're moving higher for the 28 00:01:17,400 --> 00:01:19,399 Speaker 4: small caps as well. And we also have a global 29 00:01:19,400 --> 00:01:22,240 Speaker 4: bull market. It's not just the SMP. We have ninety 30 00:01:22,280 --> 00:01:24,959 Speaker 4: percent of global markets in up trends, and we're seeing, 31 00:01:25,360 --> 00:01:27,440 Speaker 4: you know, the e fee maker of fresh fifty two 32 00:01:27,480 --> 00:01:29,840 Speaker 4: week high emerging markets make fifty two weeks high. 33 00:01:29,880 --> 00:01:30,880 Speaker 3: And then even as we get. 34 00:01:30,760 --> 00:01:34,920 Speaker 4: Some kind of uncomfortable or some headlines around the tech trade, 35 00:01:35,080 --> 00:01:35,839 Speaker 4: money's not leaving. 36 00:01:35,880 --> 00:01:36,600 Speaker 3: It's rotating. 37 00:01:36,640 --> 00:01:40,679 Speaker 4: And then lastly, this morning, look at the AAII sentiment 38 00:01:41,000 --> 00:01:43,520 Speaker 4: this morning, it's up to forty nine percent barishness. 39 00:01:43,640 --> 00:01:44,920 Speaker 3: That's the highest since May. 40 00:01:45,319 --> 00:01:47,400 Speaker 4: And we're still as we're talking this morning, the downs 41 00:01:47,400 --> 00:01:48,240 Speaker 4: at an all time high. 42 00:01:48,440 --> 00:01:51,360 Speaker 2: I've asked this question fifty different ways. Earning it's a 43 00:01:51,400 --> 00:01:53,760 Speaker 2: great job States for is not? When does the job 44 00:01:53,760 --> 00:01:55,480 Speaker 2: States is stunt to matter to this market? 45 00:01:55,760 --> 00:01:57,440 Speaker 3: It's a good question. I mean, you know, we. 46 00:01:57,440 --> 00:01:59,400 Speaker 4: All talk about people talking about the y shaped. 47 00:01:59,160 --> 00:02:00,520 Speaker 3: Economy we're talking talking about. 48 00:02:00,600 --> 00:02:02,720 Speaker 4: We talk about the two speed economy and the two 49 00:02:02,760 --> 00:02:07,040 Speaker 4: speed stock markets. So you know, at some point, you know, 50 00:02:07,040 --> 00:02:11,440 Speaker 4: when you think about it, profit margins can benefit from 51 00:02:11,520 --> 00:02:14,000 Speaker 4: wage growth slowing, but at some point you need that 52 00:02:14,040 --> 00:02:16,799 Speaker 4: consumer spending to help the economy move forward. So I 53 00:02:16,800 --> 00:02:18,480 Speaker 4: don't know the exact date, but I think that's part 54 00:02:18,520 --> 00:02:21,520 Speaker 4: of the reason why you've seen moral weakness in some 55 00:02:21,560 --> 00:02:24,440 Speaker 4: of the consumer discretion a space, the retail space. But 56 00:02:24,480 --> 00:02:27,520 Speaker 4: we also have to remember the large cap market in 57 00:02:27,560 --> 00:02:30,440 Speaker 4: particular is not driven by the low end consumer. 58 00:02:30,680 --> 00:02:33,160 Speaker 5: Well, and frankly, I mean, we've got Kevin Gordon coming 59 00:02:33,160 --> 00:02:35,320 Speaker 5: on later, and I love his comment in a note 60 00:02:35,360 --> 00:02:37,680 Speaker 5: where he said we're transitioning from a vibe session to 61 00:02:37,760 --> 00:02:39,880 Speaker 5: a vibe pression and how there seems to be this 62 00:02:39,960 --> 00:02:42,880 Speaker 5: increasingly negative view of the economy, but it has not 63 00:02:43,000 --> 00:02:44,680 Speaker 5: translated into what people actually do. 64 00:02:44,919 --> 00:02:47,000 Speaker 1: Retail therapy seems to be the solution to everything. 65 00:02:47,040 --> 00:02:49,239 Speaker 5: So at what point do you just ignore this and 66 00:02:49,280 --> 00:02:51,360 Speaker 5: take a look at what companies are saying, whether it's 67 00:02:51,360 --> 00:02:53,720 Speaker 5: the airlines, whether it's the retailers, especially on the high end, 68 00:02:53,720 --> 00:02:55,160 Speaker 5: consumers are still spending. 69 00:02:54,919 --> 00:02:56,840 Speaker 4: And that's right, and we're seeing it still leaving the 70 00:02:56,840 --> 00:02:59,120 Speaker 4: credit data that we follow also, so you're right. I mean, 71 00:02:59,160 --> 00:03:01,160 Speaker 4: if you look at the headline, so the consumer's sentiment, 72 00:03:01,240 --> 00:03:04,400 Speaker 4: we just had sentiment really just at really low levels. 73 00:03:04,400 --> 00:03:05,800 Speaker 4: But when you test that out from a stock market 74 00:03:05,840 --> 00:03:08,000 Speaker 4: perspective a year later, the market tends to be up 75 00:03:08,000 --> 00:03:10,720 Speaker 4: in a meaningful way. So I mean, I don't want 76 00:03:10,720 --> 00:03:13,960 Speaker 4: to dismiss it because it is a two tiered economy, 77 00:03:14,000 --> 00:03:17,280 Speaker 4: two tiered market, but a big pisture if you're investing 78 00:03:17,280 --> 00:03:19,200 Speaker 4: in the S and P five hundred and you're investing 79 00:03:19,200 --> 00:03:21,360 Speaker 4: in these tex stocks, and as I mentioned, even globally 80 00:03:21,400 --> 00:03:23,800 Speaker 4: we're seeing some good activity as well. So when that 81 00:03:23,880 --> 00:03:26,160 Speaker 4: turning point is it's hard to say. But in the 82 00:03:26,200 --> 00:03:27,920 Speaker 4: first quarter we will see a little bit of a 83 00:03:27,919 --> 00:03:29,600 Speaker 4: boost with some of the tax refunds. 84 00:03:29,600 --> 00:03:30,040 Speaker 3: We're going to. 85 00:03:29,960 --> 00:03:33,079 Speaker 4: See maybe hopefully more clarity on the terriff side, and 86 00:03:33,120 --> 00:03:35,040 Speaker 4: maybe some more incentives on the business side. So I 87 00:03:35,040 --> 00:03:36,480 Speaker 4: do think we'll see a little bit of an uptake, 88 00:03:36,560 --> 00:03:39,160 Speaker 4: maybe on the marginal people feel a little bit better. 89 00:03:39,320 --> 00:03:40,560 Speaker 1: Is it going to be inflationary? 90 00:03:40,640 --> 00:03:42,480 Speaker 5: And this is really what FED officials are grappling with, 91 00:03:42,520 --> 00:03:45,120 Speaker 5: and honestly, I don't envy them, given the fact that 92 00:03:45,160 --> 00:03:48,920 Speaker 5: they are grappling between potentially allowing inflation to become unmoored 93 00:03:49,040 --> 00:03:52,760 Speaker 5: or causing permanent scarring to the labor market. How much 94 00:03:52,800 --> 00:03:55,240 Speaker 5: can they really cut if you do get that boost 95 00:03:55,360 --> 00:03:57,080 Speaker 5: to consumption in the early part of next year. 96 00:03:57,120 --> 00:03:58,680 Speaker 3: Yeah, it's a good question. 97 00:03:58,720 --> 00:04:00,680 Speaker 4: It's a tricky situation for them as a lot of 98 00:04:00,720 --> 00:04:02,720 Speaker 4: these different cross currents. But I will say there are 99 00:04:02,720 --> 00:04:04,720 Speaker 4: maybe you know, a little bit of an uptick because 100 00:04:04,760 --> 00:04:06,920 Speaker 4: of the AI spending because of the terrorists. But on 101 00:04:06,960 --> 00:04:10,280 Speaker 4: the other side, we do have wages cooling somewhere. We 102 00:04:10,320 --> 00:04:12,839 Speaker 4: have oil prices in the sixties, and what we led 103 00:04:12,840 --> 00:04:15,960 Speaker 4: the program with was housing. Housing prices are softening as well, 104 00:04:15,960 --> 00:04:17,839 Speaker 4: So that doesn't seem to me like a runaway inflation 105 00:04:18,360 --> 00:04:20,719 Speaker 4: environment as a whole. And I would also say, you know, 106 00:04:20,760 --> 00:04:23,800 Speaker 4: we still think the Fed ultimately moves towards three percent 107 00:04:23,839 --> 00:04:25,440 Speaker 4: on the FED funds by the end of next year, 108 00:04:25,520 --> 00:04:27,320 Speaker 4: whether they do it in December or January, I think 109 00:04:27,320 --> 00:04:30,279 Speaker 4: people will kind of overfixiate on that. We also have 110 00:04:30,320 --> 00:04:32,240 Speaker 4: to remember that, you know, on the way up, the 111 00:04:32,440 --> 00:04:35,000 Speaker 4: economy was somewhat less interest rates sensitive, and it may 112 00:04:35,000 --> 00:04:37,080 Speaker 4: be a little bit less interest rate sensitive as they cut. 113 00:04:37,080 --> 00:04:38,840 Speaker 4: So I don't think that's the most important thing by 114 00:04:38,880 --> 00:04:40,000 Speaker 4: far by for the markets. 115 00:04:40,120 --> 00:04:43,120 Speaker 2: Do tax rebates change your outlook? Two thousand dollars checks? 116 00:04:43,720 --> 00:04:43,880 Speaker 3: You know? 117 00:04:44,080 --> 00:04:45,640 Speaker 4: I think what it does on the margin is it 118 00:04:45,680 --> 00:04:48,760 Speaker 4: lifts up maybe a slight uptick on GDP? 119 00:04:48,920 --> 00:04:49,960 Speaker 3: Is it a game change? 120 00:04:49,960 --> 00:04:50,160 Speaker 6: And know? 121 00:04:50,279 --> 00:04:52,040 Speaker 4: But I mean that's one of our main thesis as 122 00:04:52,040 --> 00:04:53,640 Speaker 4: we move into next year, is getting a little bit 123 00:04:53,640 --> 00:04:56,800 Speaker 4: more clarity and having a slight uptick in the overall economy. 124 00:04:56,800 --> 00:05:00,880 Speaker 4: And you know, those tax stimulus checks do help out 125 00:05:00,880 --> 00:05:01,400 Speaker 4: on the margins. 126 00:05:01,400 --> 00:05:03,040 Speaker 2: The focus of the White House, you can fill the shift. 127 00:05:03,360 --> 00:05:05,440 Speaker 2: It's all about a fullibility right now. The President said 128 00:05:05,480 --> 00:05:08,360 Speaker 2: it almost directly yesterday following the rear of putting into 129 00:05:08,360 --> 00:05:10,440 Speaker 2: the government shutdown. So when you look out to twenty 130 00:05:10,480 --> 00:05:13,800 Speaker 2: twenty six and you've got a very narrow concentrated equity 131 00:05:13,839 --> 00:05:16,680 Speaker 2: market and a consumer that's been struggling, and a president 132 00:05:16,720 --> 00:05:19,000 Speaker 2: determined to do something about it going into the midterms 133 00:05:19,240 --> 00:05:21,400 Speaker 2: next year, it's not going to be the trend for 134 00:05:21,480 --> 00:05:21,960 Speaker 2: next year. 135 00:05:22,320 --> 00:05:24,720 Speaker 4: Well, you know, a lot of the question right now 136 00:05:24,800 --> 00:05:26,000 Speaker 4: is do we move out of tech? 137 00:05:26,040 --> 00:05:27,880 Speaker 3: And we're still sticking with tech. 138 00:05:28,320 --> 00:05:30,920 Speaker 4: I'm waiting for confirmation on some of the things we 139 00:05:30,920 --> 00:05:33,760 Speaker 4: look at, relative price trends, relative earning trends, to go 140 00:05:33,800 --> 00:05:35,640 Speaker 4: into this broading trade. We have to remember we came 141 00:05:35,640 --> 00:05:37,320 Speaker 4: into this year and what was the big theme? It 142 00:05:37,400 --> 00:05:41,000 Speaker 4: was the broading theme hasn't worked out. In fact, part 143 00:05:41,000 --> 00:05:43,360 Speaker 4: of the even the movement over the last couple days 144 00:05:43,360 --> 00:05:45,920 Speaker 4: of rotation back there is because they've underperformed so much 145 00:05:45,960 --> 00:05:48,880 Speaker 4: so the one brand got stretched too much. So I 146 00:05:48,880 --> 00:05:51,279 Speaker 4: think there's a case to be made for the broadening 147 00:05:51,520 --> 00:05:54,880 Speaker 4: story again next year because of the uptick, because of 148 00:05:55,000 --> 00:05:58,760 Speaker 4: the fedgelable cutting rates, and we've had such outperformance by tech. 149 00:05:59,080 --> 00:06:01,160 Speaker 4: But I also look back at different cycles. I look 150 00:06:01,240 --> 00:06:04,800 Speaker 4: back at the nineties, I look back on the two thousands, 151 00:06:05,040 --> 00:06:07,680 Speaker 4: and the leaders of bull markets tend to lead to 152 00:06:07,760 --> 00:06:09,880 Speaker 4: the end. Doesn't mean there's not some you know, intimated 153 00:06:10,440 --> 00:06:13,520 Speaker 4: mean reversion periods, But Tech was the leader until most 154 00:06:13,520 --> 00:06:17,359 Speaker 4: of two thousand and Emerging markets were the leader into 155 00:06:17,680 --> 00:06:20,680 Speaker 4: two thousand and seven. So I expect, even though there's 156 00:06:20,720 --> 00:06:23,040 Speaker 4: these worries in these concerns, I think tech will ultimately 157 00:06:23,200 --> 00:06:23,719 Speaker 4: still lead. 158 00:06:23,760 --> 00:06:25,480 Speaker 3: If you believe you're in a bull market, I think. 159 00:06:25,400 --> 00:06:28,960 Speaker 4: Ultimately tech has to participate and likely lead, even if 160 00:06:28,960 --> 00:06:30,560 Speaker 4: there's some bounts of underperformance. 161 00:06:30,680 --> 00:06:33,120 Speaker 1: How much is this for tech heads? 162 00:06:33,120 --> 00:06:35,919 Speaker 5: I win tails you lose in the sense that either 163 00:06:36,160 --> 00:06:38,960 Speaker 5: they do really well and they continue to boom and 164 00:06:39,000 --> 00:06:40,760 Speaker 5: the fedce cutting rates because the rest of the world's 165 00:06:40,800 --> 00:06:42,600 Speaker 5: not doing so well, and so then they continue to 166 00:06:42,640 --> 00:06:44,680 Speaker 5: boom even more because there's more cash looking to go 167 00:06:44,720 --> 00:06:47,480 Speaker 5: to work, or you know, the whole world gets better 168 00:06:47,480 --> 00:06:50,480 Speaker 5: and adapts to some sort of AI paradigm and they 169 00:06:50,520 --> 00:06:53,159 Speaker 5: also benefit. So how much is that the reason why 170 00:06:53,560 --> 00:06:56,520 Speaker 5: it's sort of in some ways the riskier free bet 171 00:06:56,560 --> 00:06:58,320 Speaker 5: for a lot of people and their portfolios. 172 00:06:58,560 --> 00:07:00,960 Speaker 4: Well, I think what happens with all these macro cross 173 00:07:00,960 --> 00:07:03,599 Speaker 4: currents the news headlines from day to day. You see 174 00:07:03,600 --> 00:07:05,720 Speaker 4: these kind of short term rotations in other areas, and 175 00:07:05,720 --> 00:07:07,880 Speaker 4: then they when people feel uncomfortable where they go, they 176 00:07:07,880 --> 00:07:10,160 Speaker 4: go right back to tech. So, but you raise a 177 00:07:10,200 --> 00:07:12,559 Speaker 4: good point too. One of the main questions I'm getting 178 00:07:12,560 --> 00:07:14,600 Speaker 4: today is are we in a tech bubble? And the 179 00:07:14,640 --> 00:07:16,320 Speaker 4: other thing that keep in mind, going back with the FED, 180 00:07:16,400 --> 00:07:18,640 Speaker 4: is the FED was raising rates in the late nineties 181 00:07:18,640 --> 00:07:19,200 Speaker 4: two thousand. 182 00:07:19,200 --> 00:07:19,680 Speaker 3: We're not doing that. 183 00:07:19,760 --> 00:07:22,360 Speaker 4: We're still on a trajectory of actually moving lower. So 184 00:07:22,920 --> 00:07:25,160 Speaker 4: I think I'd like to see a boarding I like 185 00:07:25,200 --> 00:07:26,960 Speaker 4: to see, not a tree speed economy. I think most 186 00:07:26,960 --> 00:07:28,240 Speaker 4: of us would like to see that as well. But 187 00:07:28,280 --> 00:07:31,440 Speaker 4: I think you're right. I think if if things slowed down, 188 00:07:31,560 --> 00:07:34,800 Speaker 4: money moves back to tech, and if things if the 189 00:07:34,840 --> 00:07:37,240 Speaker 4: FED cuts rates, people still stick with tech because of 190 00:07:37,280 --> 00:07:39,360 Speaker 4: the finance inside in the secular growth. 191 00:07:39,600 --> 00:07:42,240 Speaker 5: If the FED is cutting in the face of inflation 192 00:07:42,320 --> 00:07:44,360 Speaker 5: that has remained above the two percent target for more 193 00:07:44,400 --> 00:07:46,560 Speaker 5: than five years, does that mean you should invest in 194 00:07:46,560 --> 00:07:48,600 Speaker 5: the rest of the world and not necessarily the US. 195 00:07:49,400 --> 00:07:52,360 Speaker 4: We're still team in USA. We've been Team USA for 196 00:07:52,440 --> 00:07:55,080 Speaker 4: a long time. I think you know we did last fall. 197 00:07:55,120 --> 00:07:58,680 Speaker 4: We increased our exposure to em we increase exposure to 198 00:07:59,080 --> 00:08:00,920 Speaker 4: national develop and I think a lot of times people 199 00:08:00,960 --> 00:08:02,600 Speaker 4: just think about, hey, it has to be either or, 200 00:08:02,840 --> 00:08:05,160 Speaker 4: and I say this both with a bias, and our 201 00:08:05,200 --> 00:08:07,040 Speaker 4: bias is still with the US. We still think that's 202 00:08:07,080 --> 00:08:10,040 Speaker 4: the innovation. What we also look at is when we 203 00:08:10,040 --> 00:08:12,920 Speaker 4: look at the last decade of international and the performance, 204 00:08:13,120 --> 00:08:15,880 Speaker 4: you can overlay that with earning trends, and the earner's 205 00:08:15,920 --> 00:08:18,080 Speaker 4: momentum for the US has been stronger that whole time. 206 00:08:18,120 --> 00:08:20,239 Speaker 4: So what we're looking forward to, really say it's time 207 00:08:20,280 --> 00:08:23,280 Speaker 4: to go even heavier into the international markets is to 208 00:08:23,320 --> 00:08:24,840 Speaker 4: see those earning trends move up. 209 00:08:24,880 --> 00:08:27,160 Speaker 3: We have seen better price action, valuations are cheap. 210 00:08:27,200 --> 00:08:31,320 Speaker 4: Sentiment is has been negative coming into this year, but 211 00:08:31,400 --> 00:08:34,559 Speaker 4: we still haven't seen the earnings. Now em emerging markets 212 00:08:34,720 --> 00:08:37,559 Speaker 4: is more of a tech play relative to say the EFI, 213 00:08:37,600 --> 00:08:40,439 Speaker 4: which is more of the kind of sickle financials, industrials 214 00:08:40,480 --> 00:08:41,240 Speaker 4: and things of that nature. 215 00:08:41,240 --> 00:08:42,960 Speaker 2: Okaith, can we just go through the tight set? What 216 00:08:43,000 --> 00:08:45,880 Speaker 2: were you expecting to see and how quickly were you 217 00:08:45,920 --> 00:08:46,760 Speaker 2: expecting to see it? 218 00:08:47,000 --> 00:08:49,720 Speaker 4: I don't know that I had expectations when it was 219 00:08:49,760 --> 00:08:52,600 Speaker 4: going to come through. It's listen, it's a cloudy period 220 00:08:52,960 --> 00:08:54,959 Speaker 4: from our head of economics. So I feel bad for 221 00:08:55,040 --> 00:08:56,400 Speaker 4: him every day, even though he had a little bit 222 00:08:56,400 --> 00:08:58,680 Speaker 4: of a vacation, and for me and for what we do. 223 00:08:58,840 --> 00:09:00,600 Speaker 3: I mean, I just go back to the profits. 224 00:09:00,640 --> 00:09:02,520 Speaker 4: I'm focused on what the companies are saying, which tends 225 00:09:02,520 --> 00:09:05,240 Speaker 4: to be more forward looking anyway. So and we also 226 00:09:05,280 --> 00:09:07,520 Speaker 4: have to remember, I'd rather have data. But we also 227 00:09:07,559 --> 00:09:10,040 Speaker 4: had jobs numbers earlier this year that were revised down 228 00:09:10,080 --> 00:09:13,520 Speaker 4: by nine hundred thousand, so we all want the data. 229 00:09:13,600 --> 00:09:14,680 Speaker 3: It's still the goal standard. 230 00:09:14,840 --> 00:09:16,480 Speaker 4: It makes it cloudy, but I think we still have 231 00:09:17,000 --> 00:09:20,160 Speaker 4: enough information from these private sources, along with what companies 232 00:09:20,160 --> 00:09:22,720 Speaker 4: are telling us today, to say that the economy is 233 00:09:22,720 --> 00:09:25,040 Speaker 4: still kind of muddling along. And then we also know 234 00:09:25,160 --> 00:09:27,080 Speaker 4: some of the factors that we talked about next year 235 00:09:27,360 --> 00:09:29,480 Speaker 4: why this should be potentially a little bit of of 236 00:09:29,559 --> 00:09:31,840 Speaker 4: an uptake in our review. And then you know, we've 237 00:09:31,840 --> 00:09:34,000 Speaker 4: talked a lot about the FED. Maybe this clouds their 238 00:09:34,080 --> 00:09:37,000 Speaker 4: decision as well. I don't think the FED is the 239 00:09:37,000 --> 00:09:40,280 Speaker 4: most important thing for this bull market to continue. I 240 00:09:40,280 --> 00:09:43,360 Speaker 4: think it's probably more important for the rotation trade that 241 00:09:43,400 --> 00:09:46,600 Speaker 4: the FED continues to cut rates and we move towards 242 00:09:46,640 --> 00:09:47,320 Speaker 4: that three percent. 243 00:09:47,920 --> 00:09:49,720 Speaker 3: On the tech side, it's not the main driver. 244 00:09:50,000 --> 00:09:51,880 Speaker 4: So you know, all in all, we'll get through this, 245 00:09:52,000 --> 00:09:54,839 Speaker 4: and you know, three or four months will be talking 246 00:09:54,880 --> 00:09:56,720 Speaker 4: about something else. Maybe well, we're talking about the midterm 247 00:09:56,760 --> 00:09:59,559 Speaker 4: elections by then, which will be coming as the main 248 00:09:59,600 --> 00:10:01,040 Speaker 4: headline in twenty twenty six. 249 00:10:01,120 --> 00:10:03,559 Speaker 5: Well, midterm elections are going to be determined by the economy, 250 00:10:03,600 --> 00:10:06,920 Speaker 5: and the economy has seemed increasingly divorced from corporate earnings, 251 00:10:06,920 --> 00:10:09,520 Speaker 5: which you've talked about at what point is that unsustainable? 252 00:10:10,480 --> 00:10:12,440 Speaker 4: Yeah, it's I mean, it's going back to what we 253 00:10:12,480 --> 00:10:15,840 Speaker 4: talked about earlier, you know, the you know, I think 254 00:10:16,080 --> 00:10:19,319 Speaker 4: something else we have to think about, too, is we focused. 255 00:10:18,920 --> 00:10:20,719 Speaker 3: A lot about job growth, but we still have. 256 00:10:20,760 --> 00:10:22,760 Speaker 4: Almost you know, somewhere around one hundred and sixty million 257 00:10:22,840 --> 00:10:24,960 Speaker 4: people work. And so I think what's also important, not 258 00:10:25,000 --> 00:10:28,640 Speaker 4: just the monthly jobs numbers, is wage growth staying above inflation. 259 00:10:28,800 --> 00:10:31,680 Speaker 4: And right now it is so as long as we 260 00:10:31,679 --> 00:10:34,439 Speaker 4: can continue that happening, and we have those folks, you 261 00:10:34,440 --> 00:10:36,160 Speaker 4: know that one hundred and sixty million people work in 262 00:10:36,640 --> 00:10:39,319 Speaker 4: the consumer can still move forward, maybe not at the pace, 263 00:10:39,400 --> 00:10:42,439 Speaker 4: but we still have this kind of you know, it's 264 00:10:42,559 --> 00:10:44,559 Speaker 4: if you don't have a job, it's difficult. Some of 265 00:10:44,600 --> 00:10:46,800 Speaker 4: the college kids we're seeing not getting a job, it's difficult. 266 00:10:46,920 --> 00:10:49,120 Speaker 4: So that I think that divergence is likely to persist, 267 00:10:49,200 --> 00:10:50,920 Speaker 4: especially as you throw on AI on top of that. 268 00:10:51,160 --> 00:10:53,440 Speaker 5: Just real quick here going forward, what's more important to 269 00:10:53,440 --> 00:10:55,160 Speaker 5: hatch against inflation or a slowdown? 270 00:10:55,920 --> 00:10:57,920 Speaker 3: I think a slowdown. I think a slow down. 271 00:10:58,000 --> 00:11:00,120 Speaker 4: I know our base case is for those reasons that 272 00:11:00,160 --> 00:11:01,319 Speaker 4: we is a little bit of an uptick, but the 273 00:11:01,400 --> 00:11:04,120 Speaker 4: labor market has been somewhat soft, and I mentioned already 274 00:11:04,360 --> 00:11:06,800 Speaker 4: we are seeing some of those other factors like housing, 275 00:11:06,880 --> 00:11:09,520 Speaker 4: oil prices are somewhere down, and even though wage growth 276 00:11:09,600 --> 00:11:12,679 Speaker 4: is above inflation, wage growth is slowing, so you know, 277 00:11:13,160 --> 00:11:15,200 Speaker 4: and that can change quickly. So I would say that 278 00:11:15,280 --> 00:11:17,840 Speaker 4: the hedge against would be the slower economy. And that's 279 00:11:17,840 --> 00:11:20,360 Speaker 4: why maybe you also, I mean you've seen a little 280 00:11:20,360 --> 00:11:23,120 Speaker 4: bit of rotation. Maybe it's more specific, but some healthcare. 281 00:11:23,520 --> 00:11:23,680 Speaker 1: You know. 282 00:11:23,679 --> 00:11:25,120 Speaker 4: What I'd be looking forward to to say that the 283 00:11:25,120 --> 00:11:27,559 Speaker 4: market's actually concerned about a slow down would be things 284 00:11:27,600 --> 00:11:29,520 Speaker 4: like consumer staple starting to do better. We're not seeing 285 00:11:29,520 --> 00:11:31,640 Speaker 4: that as of yet, but that's what we'll be watching 286 00:11:32,000 --> 00:11:32,920 Speaker 4: early into the new year. 287 00:11:33,840 --> 00:11:46,160 Speaker 2: Stay with US Multilomberg surveillance coming up after this. So 288 00:11:46,280 --> 00:11:48,960 Speaker 2: stock rally on pause following the end of the longest 289 00:11:48,960 --> 00:11:52,360 Speaker 2: government shutdown in history, Kevin Swab Kevin Gordon I was 290 00:11:52,440 --> 00:11:55,280 Speaker 2: Swap likely saying it's likely we'll have to wait until 291 00:11:55,280 --> 00:11:57,280 Speaker 2: the beginning at twenty six to get a clear read 292 00:11:57,559 --> 00:11:59,760 Speaker 2: on the health of the labor market, raising the risk 293 00:11:59,800 --> 00:12:03,120 Speaker 2: of a shocked to markets, especially if the Delight Jobs 294 00:12:03,120 --> 00:12:06,600 Speaker 2: report are released all at once. Kevin Gordon joins us. 295 00:12:06,600 --> 00:12:08,720 Speaker 2: Now for more, Kevin, good to see. Hello John Pharaoh, 296 00:12:08,800 --> 00:12:11,160 Speaker 2: I'll get that right. Thanks for catching on withous. Let's 297 00:12:11,160 --> 00:12:13,080 Speaker 2: talk about this market and the prospect of two thousand 298 00:12:13,080 --> 00:12:15,199 Speaker 2: dollars checks. Has that changed the outlook for you this 299 00:12:15,320 --> 00:12:17,640 Speaker 2: shift towards affordability. 300 00:12:17,760 --> 00:12:19,679 Speaker 7: Well, I think the prospect of the checks, I mean, 301 00:12:19,720 --> 00:12:21,960 Speaker 7: we'll see what the you know, how that actually nets 302 00:12:21,960 --> 00:12:24,800 Speaker 7: out if we learned anything from the past five years 303 00:12:24,840 --> 00:12:28,079 Speaker 7: of issuing out checks to Americans and directly giving them 304 00:12:28,080 --> 00:12:31,600 Speaker 7: money in several rounds. Yes, you could argue it contributes 305 00:12:31,640 --> 00:12:34,199 Speaker 7: to an inflation problem, but it also doesn't solve anything 306 00:12:34,200 --> 00:12:37,040 Speaker 7: on the sentiment or the confidence front. As you pointed 307 00:12:37,040 --> 00:12:39,600 Speaker 7: out earlier in the show, you know, alluding to this 308 00:12:39,760 --> 00:12:42,720 Speaker 7: vi depression that we've started to think about. You know, 309 00:12:42,840 --> 00:12:45,960 Speaker 7: cinemas only continued to get worse as inflation has remained 310 00:12:46,080 --> 00:12:48,640 Speaker 7: sticky and above the FEDCE target, and price levels have 311 00:12:48,800 --> 00:12:52,160 Speaker 7: been still so egregiously above where they were pre pandemic. 312 00:12:52,280 --> 00:12:54,679 Speaker 7: So I'm not so sure that it's necessarily going to 313 00:12:54,720 --> 00:12:56,680 Speaker 7: be an elixir for what ails a lot of the 314 00:12:56,720 --> 00:12:59,440 Speaker 7: economy from a sentiment standpoint, and then I think from 315 00:12:59,440 --> 00:13:00,640 Speaker 7: an inflation standpoint. 316 00:13:00,640 --> 00:13:02,840 Speaker 6: More importantly, I certainly don't. 317 00:13:02,679 --> 00:13:05,240 Speaker 7: Think it'll do anything to help bring inflation a little 318 00:13:05,240 --> 00:13:07,360 Speaker 7: bit lower, because even if you take out what was 319 00:13:07,400 --> 00:13:11,000 Speaker 7: a really strong disinflationary force in the September CPI, which 320 00:13:11,080 --> 00:13:13,800 Speaker 7: was shelter. I know there's a lot of controversy around 321 00:13:13,920 --> 00:13:17,439 Speaker 7: excluding certain components, but the core parts of inflation are 322 00:13:17,480 --> 00:13:20,640 Speaker 7: still relatively sticky. If you do core services X, housing 323 00:13:20,640 --> 00:13:23,280 Speaker 7: and CPI, you're still running above three percent on a 324 00:13:23,360 --> 00:13:24,280 Speaker 7: year over year basis. 325 00:13:24,400 --> 00:13:27,160 Speaker 6: That hasn't really bunched. You look at a year of a. 326 00:13:27,160 --> 00:13:30,080 Speaker 7: Chart of just general year over year change in CPI 327 00:13:30,760 --> 00:13:33,640 Speaker 7: that's hovering closer to three percent on average, not too so. 328 00:13:34,000 --> 00:13:35,760 Speaker 7: There is a little bit of a difference in the 329 00:13:35,800 --> 00:13:38,000 Speaker 7: inflation backdrop post pandemic, and we're sort of living in 330 00:13:38,040 --> 00:13:39,719 Speaker 7: and experiencing at real time every day. 331 00:13:39,760 --> 00:13:41,959 Speaker 2: The pass is this becomes a dated conversation because we 332 00:13:42,000 --> 00:13:44,440 Speaker 2: don't have updated data. Yeah, I might not get another 333 00:13:44,440 --> 00:13:47,079 Speaker 2: CPI report for quite a while. What's been the biggest 334 00:13:47,080 --> 00:13:49,280 Speaker 2: problem for you the absence of data or the data 335 00:13:49,320 --> 00:13:49,880 Speaker 2: we have seen. 336 00:13:50,520 --> 00:13:52,400 Speaker 7: I think it's been the absence, and I think it 337 00:13:52,400 --> 00:13:53,560 Speaker 7: will be the absence for a while. 338 00:13:53,559 --> 00:13:55,160 Speaker 6: You know, as you alluded to in the quote. 339 00:13:55,559 --> 00:13:58,720 Speaker 7: I'm getting sort of more convinced that it's going to 340 00:13:58,760 --> 00:14:01,520 Speaker 7: take until probably the end of January, maybe well into 341 00:14:01,880 --> 00:14:03,600 Speaker 7: to the end of the first quarter of twenty six 342 00:14:03,720 --> 00:14:05,440 Speaker 7: until we get a clear read at least on something 343 00:14:05,480 --> 00:14:08,280 Speaker 7: like the labor market, because we're looking at this data 344 00:14:08,360 --> 00:14:12,640 Speaker 7: hole in October hol e not whol e, where you're 345 00:14:13,040 --> 00:14:15,560 Speaker 7: likely going to miss. Even if you get some reports 346 00:14:15,559 --> 00:14:18,160 Speaker 7: like the non farm payrolls report, it's probably not going 347 00:14:18,240 --> 00:14:20,760 Speaker 7: to be clean. I mean, retroactively, you have to ask businesses, 348 00:14:20,840 --> 00:14:22,280 Speaker 7: you know, for the Establishment survey, what the. 349 00:14:22,280 --> 00:14:23,600 Speaker 6: Employment situation was like. 350 00:14:23,800 --> 00:14:25,800 Speaker 7: I think the likelihood you get the household survey is 351 00:14:25,840 --> 00:14:28,400 Speaker 7: pretty low, which that's not going to mean that the 352 00:14:28,400 --> 00:14:32,000 Speaker 7: payroll number is meaningless, but I think it will take 353 00:14:32,040 --> 00:14:34,720 Speaker 7: down a lot of the sort of you know, the 354 00:14:35,080 --> 00:14:36,800 Speaker 7: scale of it, or at least the importance of it, 355 00:14:36,840 --> 00:14:38,480 Speaker 7: because if you have the payroll number but you don't 356 00:14:38,480 --> 00:14:40,360 Speaker 7: have the unemployment rate, we don't really understand what the 357 00:14:40,360 --> 00:14:43,280 Speaker 7: supply situation is looking like. So because of that, and 358 00:14:43,280 --> 00:14:45,440 Speaker 7: because you're going to then be missing revisions, and you're 359 00:14:45,520 --> 00:14:48,240 Speaker 7: also past the reference period now for November. I mean, 360 00:14:48,240 --> 00:14:50,200 Speaker 7: there's a whole list and I could go on, but 361 00:14:50,280 --> 00:14:51,840 Speaker 7: I think all of that adding up gets you to 362 00:14:51,880 --> 00:14:53,840 Speaker 7: a point where into the first quarter of twenty six 363 00:14:53,920 --> 00:14:55,880 Speaker 7: you probably have maybe a little bit of a cleaner 364 00:14:55,880 --> 00:14:58,640 Speaker 7: read on labor. Plus you get the benchmark provisions towards 365 00:14:58,640 --> 00:15:00,280 Speaker 7: the beginning of next year. So that's going to also 366 00:15:00,320 --> 00:15:01,960 Speaker 7: be a pretty key, pretty key driver. 367 00:15:02,120 --> 00:15:04,600 Speaker 5: So let's talk about the vibe session turning into a 368 00:15:04,720 --> 00:15:07,800 Speaker 5: vibe pression. The idea of how much you have seen 369 00:15:07,840 --> 00:15:10,840 Speaker 5: sentiment data fall off a cliff. It has recently been 370 00:15:10,880 --> 00:15:13,400 Speaker 5: gut checked by the hard data coming from the government 371 00:15:13,720 --> 00:15:15,760 Speaker 5: that actually things are okay, and you're seeing that gut 372 00:15:15,840 --> 00:15:18,680 Speaker 5: check if there is one right now coming from the earnings. 373 00:15:19,160 --> 00:15:22,480 Speaker 5: Is this something that's sustainable, the sort of breakdown between 374 00:15:22,640 --> 00:15:25,040 Speaker 5: the vibes and how people feel and what actually is 375 00:15:25,040 --> 00:15:26,400 Speaker 5: going on in economic activity. 376 00:15:26,480 --> 00:15:28,280 Speaker 7: Well, it's sustainable in the sense and I'll give it, 377 00:15:28,320 --> 00:15:29,800 Speaker 7: you know, I'll give a hat tip for a vibe 378 00:15:29,800 --> 00:15:32,520 Speaker 7: session coin by my pelk Kyla Scanlon. So we're sort 379 00:15:32,520 --> 00:15:35,800 Speaker 7: of building on the framework that she established. But you know, 380 00:15:35,920 --> 00:15:37,800 Speaker 7: I think that it's sustainable in the sense that it's 381 00:15:37,840 --> 00:15:39,800 Speaker 7: become the norm, whether you like it or not. I mean, 382 00:15:39,880 --> 00:15:42,240 Speaker 7: just look at the math, look at the data. Post pandemic. 383 00:15:42,280 --> 00:15:44,520 Speaker 7: In the past five years, you've only continued to see 384 00:15:44,560 --> 00:15:45,440 Speaker 7: sentiment get worse. 385 00:15:45,800 --> 00:15:47,120 Speaker 6: I know you missed gets a ton of. 386 00:15:47,040 --> 00:15:49,280 Speaker 7: Flack because of maybe a little bit of a political 387 00:15:49,280 --> 00:15:50,800 Speaker 7: bias and how much is driven by that. 388 00:15:51,160 --> 00:15:53,120 Speaker 6: But the current conditions component of. 389 00:15:53,040 --> 00:15:55,120 Speaker 7: The you miss sentiment and nexis at an all time low, 390 00:15:55,360 --> 00:15:58,360 Speaker 7: meaning you have a base of consumers saying this is 391 00:15:58,560 --> 00:16:01,080 Speaker 7: the current environment is worse than the financial crisis. That's 392 00:16:01,080 --> 00:16:03,320 Speaker 7: worse than the nineteen eighties, it's worse than the late 393 00:16:03,400 --> 00:16:04,240 Speaker 7: nineteen seventies. 394 00:16:04,600 --> 00:16:06,440 Speaker 6: So I think it's sustainable. 395 00:16:05,840 --> 00:16:08,640 Speaker 7: In the sense that sentiment in this cycle, and I 396 00:16:08,640 --> 00:16:10,840 Speaker 7: think for at least the near to medium term is 397 00:16:10,880 --> 00:16:13,160 Speaker 7: not going to be an indicator and a forward looking 398 00:16:13,160 --> 00:16:16,080 Speaker 7: indicator for the trajectory of the economy. And I think 399 00:16:16,080 --> 00:16:19,200 Speaker 7: that's somewhat consistent with how the base of growth has 400 00:16:19,280 --> 00:16:22,320 Speaker 7: been shaped this year, where it's become narrower, it's become 401 00:16:22,320 --> 00:16:26,280 Speaker 7: increasingly driven by business investment. Clearly, as we've all talked 402 00:16:26,280 --> 00:16:29,400 Speaker 7: about every single day, you know, the AI capex portion 403 00:16:29,560 --> 00:16:31,120 Speaker 7: of that on the tech and the software side, the 404 00:16:31,120 --> 00:16:33,760 Speaker 7: hardware and the software side. So I think it is 405 00:16:33,840 --> 00:16:36,240 Speaker 7: consistent with what has happened in the economy and how 406 00:16:36,240 --> 00:16:38,920 Speaker 7: things have developed. But I just don't think it's going 407 00:16:39,000 --> 00:16:41,520 Speaker 7: to be that traditional leading indicator for the economy because 408 00:16:41,520 --> 00:16:42,120 Speaker 7: it hasn't been. 409 00:16:42,240 --> 00:16:44,680 Speaker 5: It's a leading indicator though, for politics, and there is 410 00:16:44,720 --> 00:16:47,040 Speaker 5: a feeling right now that that is going to come 411 00:16:47,080 --> 00:16:49,080 Speaker 5: with some proposals. And you were talking earlier about the 412 00:16:49,080 --> 00:16:51,040 Speaker 5: two thousand dollars checks that could come out, And I 413 00:16:51,120 --> 00:16:54,840 Speaker 5: just wonder whether the bond market is starting to price 414 00:16:54,920 --> 00:16:57,080 Speaker 5: in or when it will start to price in a 415 00:16:57,160 --> 00:17:02,520 Speaker 5: series of potential proposals. The jobstling could potentially be quite stimulative. 416 00:17:02,840 --> 00:17:05,199 Speaker 7: Yeah, well, I think from the bond market's perspective, you know, 417 00:17:05,200 --> 00:17:07,159 Speaker 7: when we came I sort of rewind back to a 418 00:17:07,240 --> 00:17:09,160 Speaker 7: year ago when we were all putting our outlooks together 419 00:17:09,200 --> 00:17:12,199 Speaker 7: for twenty twenty five, and collectively we were assessing, you know, 420 00:17:12,200 --> 00:17:14,840 Speaker 7: what is the policy risk well from Washington but also 421 00:17:14,840 --> 00:17:17,760 Speaker 7: on the monetary policy side, and you do have almost 422 00:17:17,760 --> 00:17:19,840 Speaker 7: an equal set of head winds the tailwinds for the 423 00:17:19,880 --> 00:17:22,080 Speaker 7: equity market but also the bond market. You think about 424 00:17:22,359 --> 00:17:25,359 Speaker 7: things that are more growth negative, like tariffs. I mean, 425 00:17:25,400 --> 00:17:27,159 Speaker 7: we do have elevated tariffs we're probably going to be 426 00:17:27,200 --> 00:17:29,959 Speaker 7: living in a high tariff world for the foreseeable future. 427 00:17:30,560 --> 00:17:33,080 Speaker 7: But you also have some form of fiscal stimulus coming 428 00:17:33,119 --> 00:17:35,919 Speaker 7: from the big beautiful Bill, but also potentially coming from 429 00:17:36,160 --> 00:17:39,760 Speaker 7: additional measures, whether it is checks, so in that sense, 430 00:17:39,800 --> 00:17:42,120 Speaker 7: and I think you know, you pointing out the sort 431 00:17:42,160 --> 00:17:44,159 Speaker 7: of the little move down that we've seen in the 432 00:17:44,200 --> 00:17:46,880 Speaker 7: tenure over the past year, but if you zoom out 433 00:17:46,880 --> 00:17:48,639 Speaker 7: over the past several years, it's kind of been in 434 00:17:48,680 --> 00:17:50,920 Speaker 7: this stuck in this range, and that makes a lot 435 00:17:50,960 --> 00:17:53,119 Speaker 7: of sense to us because of these competing forces that 436 00:17:53,200 --> 00:17:53,520 Speaker 7: you have. 437 00:17:53,800 --> 00:17:54,960 Speaker 6: So I don't see a whole. 438 00:17:54,720 --> 00:17:57,800 Speaker 7: Lot of that changing, especially because the business investment environment 439 00:17:57,880 --> 00:18:00,640 Speaker 7: is still so fertile and it's so strong right now, 440 00:18:00,920 --> 00:18:02,399 Speaker 7: and you're expected to get a little bit of a 441 00:18:02,440 --> 00:18:04,120 Speaker 7: bounce back in consumption with you know. 442 00:18:04,040 --> 00:18:05,320 Speaker 6: When we get third quarter GDP. 443 00:18:05,640 --> 00:18:07,359 Speaker 7: Of course, fourth quarter and then into first quarter of 444 00:18:07,400 --> 00:18:09,480 Speaker 7: twenty six is going to be distorted by the shutdown. 445 00:18:09,760 --> 00:18:12,119 Speaker 7: But there's still no indication because of the stock of 446 00:18:12,160 --> 00:18:14,440 Speaker 7: the labor is still so high right now, there's still 447 00:18:14,480 --> 00:18:17,479 Speaker 7: no indication that you're seeing this massive draw down in spending. 448 00:18:17,480 --> 00:18:20,480 Speaker 7: And we've had some alternative data that have under underpinned 449 00:18:20,480 --> 00:18:22,480 Speaker 7: that and emphasized that that have shown that, you know, 450 00:18:22,520 --> 00:18:25,240 Speaker 7: retail sales haven't fallen off a cliff. The weekly Economic 451 00:18:25,320 --> 00:18:28,000 Speaker 7: index from the Dallas FED is still pretty stable, so 452 00:18:28,280 --> 00:18:30,080 Speaker 7: we've been able to see that the consumer is still 453 00:18:30,119 --> 00:18:30,800 Speaker 7: broadly resilient. 454 00:18:30,800 --> 00:18:32,560 Speaker 2: Can we just finish on the setup for twenty six 455 00:18:32,760 --> 00:18:34,919 Speaker 2: in market? So twelve months ago a lot of people 456 00:18:34,960 --> 00:18:37,879 Speaker 2: bowled up on by America. When we went to Damos, 457 00:18:37,880 --> 00:18:41,800 Speaker 2: Switzerland last year, it was ridiculous, Yeah, how long everyone 458 00:18:42,000 --> 00:18:44,359 Speaker 2: was one thing and that was the United States. What 459 00:18:44,440 --> 00:18:48,159 Speaker 2: happened an out of consensus rally in Europe lasted for 460 00:18:48,320 --> 00:18:50,000 Speaker 2: the first half of the year at least, but it 461 00:18:50,040 --> 00:18:51,800 Speaker 2: was massive. How do you think it was set up 462 00:18:52,160 --> 00:18:53,840 Speaker 2: with that in mind for twenty six. 463 00:18:53,760 --> 00:18:55,680 Speaker 7: I think that, you know, to the extent you get 464 00:18:55,720 --> 00:18:58,280 Speaker 7: a little bit of a reversal in some of the forces, 465 00:18:58,320 --> 00:19:00,400 Speaker 7: like the falling dollar in the first half of this year. 466 00:19:00,400 --> 00:19:03,119 Speaker 7: That was almost to the date a one half twenty 467 00:19:03,200 --> 00:19:05,760 Speaker 7: twenty five story. The dollar is stabilized and it's actually 468 00:19:05,840 --> 00:19:07,560 Speaker 7: last I checked, I think, the best performing out of 469 00:19:07,560 --> 00:19:09,320 Speaker 7: the G ten so far in the second half. 470 00:19:09,200 --> 00:19:09,600 Speaker 6: Of the year. 471 00:19:09,800 --> 00:19:12,359 Speaker 7: So even if that stays relatively stable, or you get 472 00:19:12,400 --> 00:19:14,480 Speaker 7: a bit of a pickup because you have price or 473 00:19:14,520 --> 00:19:16,359 Speaker 7: you have rate cuts that are priced out. 474 00:19:16,280 --> 00:19:16,879 Speaker 6: From the market. 475 00:19:16,880 --> 00:19:19,120 Speaker 7: In terms of the FED, I think that can maybe 476 00:19:19,160 --> 00:19:21,520 Speaker 7: work against some of the you know, the x US trade, 477 00:19:21,560 --> 00:19:24,439 Speaker 7: particularly in Europe, but you know, the setup for the US. 478 00:19:24,760 --> 00:19:26,679 Speaker 7: What I think has become really important to watch and 479 00:19:26,720 --> 00:19:28,720 Speaker 7: this is this has sort of manifested over the past 480 00:19:28,960 --> 00:19:31,760 Speaker 7: couple of weeks and importantly this week so far, where 481 00:19:32,000 --> 00:19:33,879 Speaker 7: the breadth picture under the surface for the S and 482 00:19:33,920 --> 00:19:36,120 Speaker 7: P five hundred has actually starting to improve. So there's 483 00:19:36,119 --> 00:19:38,040 Speaker 7: been a little bit of closing of the gap between 484 00:19:38,280 --> 00:19:40,280 Speaker 7: you know, the equal weighted index and then the cap 485 00:19:40,320 --> 00:19:43,880 Speaker 7: weighted index, where even though you're seeing some digestion over 486 00:19:43,920 --> 00:19:45,960 Speaker 7: the past couple of weeks, there has been a little 487 00:19:46,000 --> 00:19:47,560 Speaker 7: bit of a catchup from the average stock, which is 488 00:19:47,640 --> 00:19:50,679 Speaker 7: really important because by the end of October you're at 489 00:19:50,680 --> 00:19:52,720 Speaker 7: twenty six percent of members in the index that were 490 00:19:52,720 --> 00:19:55,360 Speaker 7: outperforming the index on a rolling three month basis. That's 491 00:19:55,400 --> 00:19:58,440 Speaker 7: incredibly low relative to history. So anytime you go through 492 00:19:58,440 --> 00:20:01,240 Speaker 7: that sort of washout down the CA spectrum and outside 493 00:20:01,240 --> 00:20:03,760 Speaker 7: of the top ten, you really need to see that 494 00:20:04,520 --> 00:20:06,760 Speaker 7: gap close in favor of the average stock, the so 495 00:20:06,840 --> 00:20:09,359 Speaker 7: called average stock, and so far that's happening, so I 496 00:20:09,359 --> 00:20:12,160 Speaker 7: think it's a relatively healthy sign. But what needs to happen, 497 00:20:12,160 --> 00:20:14,840 Speaker 7: I think in the next four to five weeks is 498 00:20:14,880 --> 00:20:16,560 Speaker 7: a pickup in what I think of as sort of 499 00:20:16,560 --> 00:20:18,440 Speaker 7: the Holy Grail metric for bread, which is the share 500 00:20:18,480 --> 00:20:20,960 Speaker 7: of companies that are above their two hundred day moving average. 501 00:20:21,119 --> 00:20:23,000 Speaker 7: That's come back up to sixty percent. So I think 502 00:20:23,000 --> 00:20:25,080 Speaker 7: if you continue to see that climb as the index 503 00:20:25,240 --> 00:20:27,760 Speaker 7: health improves, then I think that has a you know, 504 00:20:27,760 --> 00:20:28,240 Speaker 7: it gives. 505 00:20:28,080 --> 00:20:29,879 Speaker 6: You a relatively solid set of for twenty. 506 00:20:29,640 --> 00:20:34,000 Speaker 2: Six Stay with us more Bloomberg surveillance coming up after this. 507 00:20:42,920 --> 00:20:45,920 Speaker 2: Bonio's inching car This morning. As trying to look ahead 508 00:20:45,960 --> 00:20:49,119 Speaker 2: to the Central Banks December meeting, Lisa holmb of stroudis writing, 509 00:20:49,400 --> 00:20:52,760 Speaker 2: we continue to believe that persistent labor market selfness and 510 00:20:52,880 --> 00:20:56,000 Speaker 2: mounting pressure on lower income households will keep the FMC 511 00:20:56,640 --> 00:20:59,199 Speaker 2: on track for December. Raika and Lisa John just now 512 00:20:59,240 --> 00:21:01,800 Speaker 2: for more Lisa and more. Is that becoming a close 513 00:21:01,840 --> 00:21:02,120 Speaker 2: to cool? 514 00:21:02,880 --> 00:21:03,159 Speaker 1: It is? 515 00:21:03,200 --> 00:21:04,600 Speaker 8: And I actually think the Fed is doing a pretty 516 00:21:04,640 --> 00:21:07,240 Speaker 8: good job of keeping that optionality right. Powell came back 517 00:21:07,280 --> 00:21:11,080 Speaker 8: out after the press conference saying it's not a done deal. 518 00:21:11,160 --> 00:21:14,240 Speaker 8: Don't think it is. But at the end of the day, 519 00:21:14,320 --> 00:21:17,560 Speaker 8: our view is that the data we have seen, particularly 520 00:21:17,560 --> 00:21:20,479 Speaker 8: some of the layoff data, has deteriorated, and so they 521 00:21:20,520 --> 00:21:23,440 Speaker 8: probably will prioritize, at least for this meeting the labor 522 00:21:23,480 --> 00:21:25,440 Speaker 8: market over the inflation side of the equator. 523 00:21:25,720 --> 00:21:28,199 Speaker 2: We taken this meeting by meting just twenty five at 524 00:21:28,200 --> 00:21:29,520 Speaker 2: a time and work out where we land. 525 00:21:29,680 --> 00:21:31,399 Speaker 1: I think we are and I think we should be. 526 00:21:31,600 --> 00:21:32,239 Speaker 1: That's fair, right. 527 00:21:32,240 --> 00:21:35,400 Speaker 8: The economy is, it's not bad, I mean growth wise. 528 00:21:35,400 --> 00:21:37,040 Speaker 8: I actually think next year is going to be a 529 00:21:37,160 --> 00:21:39,479 Speaker 8: kind of a weird year where growth can actually be okay, 530 00:21:39,800 --> 00:21:42,280 Speaker 8: but the labor market probably continues to soften a little bit, 531 00:21:43,040 --> 00:21:45,359 Speaker 8: possibly because of the reasons that growth is okay, the 532 00:21:45,400 --> 00:21:47,840 Speaker 8: AI spend some of these numbers that are coming out capex. 533 00:21:47,880 --> 00:21:52,119 Speaker 8: It's possibly in contrast to the labor market. But the 534 00:21:52,119 --> 00:21:54,080 Speaker 8: FED is going to have to figure out which one 535 00:21:54,119 --> 00:21:57,120 Speaker 8: what things do they prioritize in this and you know, December, 536 00:21:57,160 --> 00:21:59,280 Speaker 8: I think they probably lean towards the labor market. 537 00:21:59,280 --> 00:22:00,880 Speaker 1: Next year becomes a little bit more of a question. 538 00:22:01,000 --> 00:22:03,040 Speaker 5: Let's say the FED does cut an additional twenty five 539 00:22:03,080 --> 00:22:05,720 Speaker 5: basis points next month, and let's say they signal they 540 00:22:05,760 --> 00:22:07,760 Speaker 5: are open to doing more next year. 541 00:22:08,320 --> 00:22:09,600 Speaker 1: What are your clients. 542 00:22:09,240 --> 00:22:11,040 Speaker 5: Going to do with some of their money market funds. 543 00:22:11,119 --> 00:22:13,760 Speaker 5: Is that enough to kind of push them out into say, 544 00:22:13,960 --> 00:22:17,719 Speaker 5: longer duration or even into fifty year alphabet bonds. 545 00:22:18,440 --> 00:22:22,000 Speaker 8: Well, let's hold on the alphabet a second. But I 546 00:22:22,119 --> 00:22:23,840 Speaker 8: think that I think that's the right call. Right, There's 547 00:22:23,880 --> 00:22:25,840 Speaker 8: been a tremendous amount of money parked in money market. 548 00:22:25,920 --> 00:22:28,280 Speaker 8: This has been a great call. I think some of 549 00:22:28,280 --> 00:22:30,280 Speaker 8: that is going to find its way into longer duration 550 00:22:30,359 --> 00:22:33,240 Speaker 8: as we continue to see yields fall or you know, 551 00:22:33,280 --> 00:22:35,000 Speaker 8: we have seen it, and I think we're already starting 552 00:22:35,040 --> 00:22:36,280 Speaker 8: to see some of that money shift. 553 00:22:36,359 --> 00:22:37,880 Speaker 1: I think there's probably more to come. 554 00:22:38,040 --> 00:22:40,480 Speaker 8: I mean, unfortunately, generally retail tends to be a little 555 00:22:40,480 --> 00:22:42,119 Speaker 8: bit late to that, so that we may get the 556 00:22:42,160 --> 00:22:44,200 Speaker 8: money in as we're reaching the bottom of the FED 557 00:22:44,200 --> 00:22:47,480 Speaker 8: cutting cycle. But I do think that probably will be happening. 558 00:22:47,560 --> 00:22:49,760 Speaker 1: So let's talk about the fifty year alphabet debt. 559 00:22:49,800 --> 00:22:52,000 Speaker 5: Not necessarily whether or not you bought it or anything 560 00:22:52,040 --> 00:22:54,720 Speaker 5: like that, but I am curious how much you are 561 00:22:54,800 --> 00:22:58,440 Speaker 5: seeing fund managers pushed into greater risk in a way, 562 00:22:58,680 --> 00:23:00,920 Speaker 5: they're looking for the same kind of income they're looking 563 00:23:00,920 --> 00:23:01,800 Speaker 5: for outperformance. 564 00:23:01,880 --> 00:23:03,159 Speaker 1: AI is the hot trade? 565 00:23:03,560 --> 00:23:06,600 Speaker 5: How much do people almost feel forced to absorb this 566 00:23:06,680 --> 00:23:09,040 Speaker 5: incredible glut of debt issue in so okay? 567 00:23:09,080 --> 00:23:12,000 Speaker 8: So there's a lot of questions in that question. I 568 00:23:12,040 --> 00:23:14,680 Speaker 8: think one of them is the market is shifting quite 569 00:23:14,760 --> 00:23:16,880 Speaker 8: dramatically in terms of tech and what that means to. 570 00:23:16,840 --> 00:23:17,520 Speaker 1: The bond markets. 571 00:23:17,600 --> 00:23:21,000 Speaker 8: Right, some of these issuers are now going are forecasted 572 00:23:21,040 --> 00:23:23,199 Speaker 8: to become the largest issuers in the corporate index in 573 00:23:23,200 --> 00:23:26,119 Speaker 8: the next few years, kind of surpassing you know that 574 00:23:26,280 --> 00:23:29,040 Speaker 8: some of the potentially surpassing some of the verizons and 575 00:23:29,080 --> 00:23:30,760 Speaker 8: the AT and ts, the larger non. 576 00:23:31,040 --> 00:23:33,600 Speaker 1: Bank issuers, and so that's a really. 577 00:23:33,359 --> 00:23:36,439 Speaker 8: Structural and fundamental shift that I think investors need to 578 00:23:36,440 --> 00:23:37,520 Speaker 8: get their heads around. 579 00:23:37,600 --> 00:23:38,200 Speaker 1: What does it mean. 580 00:23:38,240 --> 00:23:41,159 Speaker 8: You know, Meta's issued massive amounts of debt just in 581 00:23:41,160 --> 00:23:44,920 Speaker 8: the last six weeks. Their balance sheet and the structure 582 00:23:44,920 --> 00:23:46,679 Speaker 8: of the company in terms of how they fund is 583 00:23:46,760 --> 00:23:49,200 Speaker 8: changing dramatically. So I think there's a big question as 584 00:23:49,200 --> 00:23:51,920 Speaker 8: to what does tech look like in the corporate index 585 00:23:52,720 --> 00:23:54,520 Speaker 8: in a year's time versus. 586 00:23:54,200 --> 00:23:55,680 Speaker 1: What it was maybe six months ago. 587 00:23:56,440 --> 00:23:58,679 Speaker 8: I think investors are looking at that, but you know, 588 00:23:58,760 --> 00:24:00,919 Speaker 8: there are other opportunities out there that aren't I wouldn't 589 00:24:00,920 --> 00:24:02,359 Speaker 8: say aren't as crazy risky. 590 00:24:02,400 --> 00:24:02,960 Speaker 1: You know, look at. 591 00:24:02,840 --> 00:24:05,320 Speaker 8: Taxi that municipal bonds. I think maybe last time I 592 00:24:05,359 --> 00:24:06,880 Speaker 8: was on the show, we might have talked about them. 593 00:24:06,960 --> 00:24:09,159 Speaker 8: They underperformed treasuries at one point this year six and 594 00:24:09,160 --> 00:24:10,240 Speaker 8: a half percentage points. 595 00:24:10,480 --> 00:24:12,520 Speaker 1: This is not a crazy risk trade. Are you saying 596 00:24:12,520 --> 00:24:13,720 Speaker 1: that the other is crazy risky. 597 00:24:14,200 --> 00:24:18,159 Speaker 8: I'm saying that you can buy local government debt at 598 00:24:18,640 --> 00:24:21,960 Speaker 8: pretty reasonable yields compared to treasuries and actually have some 599 00:24:22,080 --> 00:24:25,240 Speaker 8: alpha generation potential there because they have underperformed this year. 600 00:24:26,680 --> 00:24:28,360 Speaker 1: You know, Alphabet Google. 601 00:24:28,080 --> 00:24:30,600 Speaker 8: Didn't exist fifty years ago, so I'm just putting that 602 00:24:30,640 --> 00:24:32,080 Speaker 8: out there. I'm not saying it's not going to exist 603 00:24:32,080 --> 00:24:34,239 Speaker 8: in fifty years time, but there are questions about that 604 00:24:34,280 --> 00:24:35,480 Speaker 8: and their funding mechan. 605 00:24:35,440 --> 00:24:37,880 Speaker 2: You keep aluting to it slowly, and we'll keep coming 606 00:24:37,920 --> 00:24:40,000 Speaker 2: back to it. Are you worried about code for credit? 607 00:24:40,960 --> 00:24:43,080 Speaker 8: Spreads are tight, and I think that there is probably 608 00:24:43,080 --> 00:24:45,480 Speaker 8: a repricing that's going on in the tech sector, and 609 00:24:45,520 --> 00:24:47,760 Speaker 8: I think those curves need to steep in. There are 610 00:24:47,800 --> 00:24:52,440 Speaker 8: some interesting issuers that are coming today. Like possibly today actually, 611 00:24:54,160 --> 00:24:56,119 Speaker 8: but I don't think we can paint them all with 612 00:24:56,160 --> 00:24:57,040 Speaker 8: the same broad brush. 613 00:24:57,240 --> 00:24:58,920 Speaker 2: As they issue more, does it make it a higher 614 00:24:58,960 --> 00:25:00,800 Speaker 2: quality indexterraal level quality index. 615 00:25:01,720 --> 00:25:03,879 Speaker 8: So we were just doing some work on this yesterday 616 00:25:04,280 --> 00:25:06,360 Speaker 8: and I'll credit Morgan Stanley. They're the ones who came 617 00:25:06,440 --> 00:25:08,320 Speaker 8: up with the stat They said they think that the 618 00:25:08,359 --> 00:25:11,080 Speaker 8: top the big four hyperscalars can probably issue seven hundred 619 00:25:11,119 --> 00:25:15,320 Speaker 8: billion without impacting their readings. So you know, I have 620 00:25:15,480 --> 00:25:17,280 Speaker 8: I don't have better insight than them. These guys have 621 00:25:17,320 --> 00:25:19,640 Speaker 8: been looking at this very closely. I have of what period, 622 00:25:20,640 --> 00:25:22,040 Speaker 8: I don't know what that if that was a year's 623 00:25:22,040 --> 00:25:24,399 Speaker 8: a couple of seven with they don't think that is 624 00:25:24,520 --> 00:25:27,280 Speaker 8: what the issuance will be. They were just saying that's 625 00:25:27,320 --> 00:25:27,920 Speaker 8: what they think they. 626 00:25:27,880 --> 00:25:30,640 Speaker 2: Were Ultimately, that's a green light for them to issue to. 627 00:25:30,600 --> 00:25:32,800 Speaker 8: Borrow and by the way, the cost of equity versus 628 00:25:32,880 --> 00:25:34,320 Speaker 8: cost of debt, they might as well be funding in 629 00:25:34,320 --> 00:25:36,919 Speaker 8: the debt markets. So I think there's a lot of 630 00:25:36,920 --> 00:25:38,359 Speaker 8: issuance to come. There's a lot of a lot of 631 00:25:38,400 --> 00:25:39,320 Speaker 8: data centers that we built. 632 00:25:39,320 --> 00:25:43,800 Speaker 2: Guys stay with us. More Bloomberg surveillance coming up after 633 00:25:43,880 --> 00:25:56,320 Speaker 2: this Bloomberg Economics estimating the shutdown was subtract one point 634 00:25:56,359 --> 00:25:59,639 Speaker 2: three percentage points from fourth quarter GDP. The feder Reserve 635 00:25:59,680 --> 00:26:01,880 Speaker 2: now how going to shake off the data fog ahead 636 00:26:01,920 --> 00:26:04,919 Speaker 2: of their December meeting. Christina camp Many of Invesco writing, 637 00:26:04,920 --> 00:26:07,680 Speaker 2: we expect clarcy on the calendar the US data flow 638 00:26:07,720 --> 00:26:10,159 Speaker 2: within the few days coming out of a shutdown, but 639 00:26:10,240 --> 00:26:13,040 Speaker 2: expect data to be noisy at best, with the potential 640 00:26:13,040 --> 00:26:16,159 Speaker 2: for market blas to discount data extremes. Christina joins US 641 00:26:16,200 --> 00:26:19,000 Speaker 2: Now for more. Christina, Good morning, Mornie. Thanks May now 642 00:26:19,119 --> 00:26:22,040 Speaker 2: about payrolls being released in it and not just CPI, 643 00:26:22,160 --> 00:26:23,160 Speaker 2: what's your base case? 644 00:26:23,760 --> 00:26:25,800 Speaker 9: Look, I don't know if we get the data or not, 645 00:26:26,520 --> 00:26:28,280 Speaker 9: but I think either way, we know that the data 646 00:26:28,359 --> 00:26:30,400 Speaker 9: is going to be really noisy, so we finally will 647 00:26:30,440 --> 00:26:33,040 Speaker 9: start getting data flow. But I think we have more 648 00:26:33,119 --> 00:26:37,520 Speaker 9: murky water coming probably into your end, and there's a 649 00:26:37,520 --> 00:26:40,720 Speaker 9: lot of questions of do you get both payroll reports 650 00:26:40,760 --> 00:26:43,600 Speaker 9: on the same day. And I think the extremes exactly 651 00:26:43,640 --> 00:26:46,440 Speaker 9: like we said, are going to be discounted. And I 652 00:26:46,480 --> 00:26:48,440 Speaker 9: think we have to go back to what the story 653 00:26:48,440 --> 00:26:51,040 Speaker 9: has been all year that you've had really weak sentiment 654 00:26:51,119 --> 00:26:55,159 Speaker 9: data that keep kept getting re anchored by decent or 655 00:26:55,240 --> 00:26:59,040 Speaker 9: hard to your one data. And then the breakdown came 656 00:26:59,080 --> 00:27:00,960 Speaker 9: in the summer when you got the revisions to the 657 00:27:01,000 --> 00:27:03,600 Speaker 9: labor market data and weakness, and now we've had no 658 00:27:03,720 --> 00:27:06,800 Speaker 9: real data. So it's just been this very weak sentiment data. 659 00:27:07,400 --> 00:27:10,120 Speaker 9: So where do we go from here? Do we have 660 00:27:10,520 --> 00:27:13,400 Speaker 9: the hard data re anchor? And I think I think 661 00:27:13,440 --> 00:27:16,080 Speaker 9: that's like a really important path forward. And I think 662 00:27:16,119 --> 00:27:18,800 Speaker 9: you look at the consumer too. Even though sentiment data 663 00:27:18,840 --> 00:27:21,560 Speaker 9: has been so weak, the consumer spending numbers and the 664 00:27:21,560 --> 00:27:24,000 Speaker 9: credit card data numbers have still been robust. So you 665 00:27:24,040 --> 00:27:26,399 Speaker 9: still have this bifurcation of like, well, which is it? 666 00:27:26,400 --> 00:27:28,000 Speaker 9: You don't feel good, but you're still spending. 667 00:27:28,119 --> 00:27:30,000 Speaker 2: He rise upon it at in the summer, the start 668 00:27:30,000 --> 00:27:32,480 Speaker 2: of August at Your Life, Job's report changed the conversation. 669 00:27:33,000 --> 00:27:34,600 Speaker 2: Coming out of the summer, we caught up with you, 670 00:27:34,960 --> 00:27:37,080 Speaker 2: and consensus start to develop into the idea that the 671 00:27:37,080 --> 00:27:39,399 Speaker 2: Federal Reserve was going to start an easy cycle. They 672 00:27:39,440 --> 00:27:41,639 Speaker 2: went twenty five, they went twenty five. Is that now 673 00:27:41,680 --> 00:27:44,359 Speaker 2: developing into a prolonged pause at the Federal Reserve? 674 00:27:45,160 --> 00:27:49,359 Speaker 9: So Powell clearly came back and pushed back aggressively on 675 00:27:49,400 --> 00:27:52,399 Speaker 9: the markets pricing at the October press conference, and I 676 00:27:52,440 --> 00:27:56,000 Speaker 9: appreciate wanting to have some kind of flexibility and not 677 00:27:56,040 --> 00:27:58,240 Speaker 9: be priced over one hundred percent for December, like that's 678 00:27:58,240 --> 00:27:59,160 Speaker 9: reasonable from the FED. 679 00:27:59,520 --> 00:28:01,080 Speaker 1: For me, I have a harder. 680 00:28:00,800 --> 00:28:04,200 Speaker 9: Time with is even the pushbacks at the October meeting, 681 00:28:04,280 --> 00:28:06,560 Speaker 9: and you've started to hear more noise and grumbling around 682 00:28:06,600 --> 00:28:08,679 Speaker 9: the FED, and I think probably a noisier FED is 683 00:28:08,720 --> 00:28:11,080 Speaker 9: here to stay, and you're gonna hear like a wider 684 00:28:11,200 --> 00:28:11,960 Speaker 9: range of voices. 685 00:28:12,480 --> 00:28:15,240 Speaker 1: But for me, it's hard to say you supported. 686 00:28:14,840 --> 00:28:19,360 Speaker 9: One ease in September and you're going to dissent in October. 687 00:28:20,240 --> 00:28:23,840 Speaker 9: We're talking about monetary policy that has long legs and 688 00:28:24,520 --> 00:28:27,960 Speaker 9: is a blunt instrument, So easing twenty five being okay 689 00:28:27,960 --> 00:28:30,800 Speaker 9: with twenty five but not fifty feels like a challenging. 690 00:28:30,359 --> 00:28:30,800 Speaker 1: One for me. 691 00:28:31,160 --> 00:28:32,959 Speaker 9: So we've always kind of been in the camp of 692 00:28:33,280 --> 00:28:36,320 Speaker 9: you deliver seventy five to one hundred similar to last year, 693 00:28:36,320 --> 00:28:37,760 Speaker 9: and then you can sit on your hands and say, 694 00:28:38,080 --> 00:28:41,479 Speaker 9: let's see how this actually feeds through the economy. So 695 00:28:41,560 --> 00:28:44,600 Speaker 9: I still our base case is still that they can 696 00:28:44,640 --> 00:28:46,240 Speaker 9: go in December. 697 00:28:46,000 --> 00:28:47,920 Speaker 2: Even when the kind of city Fed. 698 00:28:48,600 --> 00:28:52,280 Speaker 9: We we did not, But there's so many moving parts, 699 00:28:52,280 --> 00:28:55,040 Speaker 9: and I think the realities they'll probably still be flying 700 00:28:55,080 --> 00:28:57,480 Speaker 9: blind data wise. And when you're flying blind, I don't 701 00:28:57,520 --> 00:29:01,200 Speaker 9: think that means Cowell talked about on the brakes or pausing. 702 00:29:01,240 --> 00:29:03,520 Speaker 9: I don't think that means you like avert course and 703 00:29:03,640 --> 00:29:05,280 Speaker 9: change change the direction. 704 00:29:05,480 --> 00:29:06,560 Speaker 1: I think a lot of people agree with you. 705 00:29:06,600 --> 00:29:08,440 Speaker 5: I mean, right now the pricing and FED Fund's futures 706 00:29:08,560 --> 00:29:11,000 Speaker 5: is more than fifty percent for that December rate. Could 707 00:29:11,040 --> 00:29:13,440 Speaker 5: I just wonder why we're not seeing any kind of 708 00:29:13,480 --> 00:29:15,560 Speaker 5: steepening in the yield curve given the fact that probably 709 00:29:15,640 --> 00:29:18,240 Speaker 5: early next year we are going to get some stimulus checks, 710 00:29:18,240 --> 00:29:20,640 Speaker 5: We probably are going to get some fiscal efforts coming 711 00:29:20,840 --> 00:29:21,600 Speaker 5: from Washington. 712 00:29:22,120 --> 00:29:22,960 Speaker 1: So look, I think. 713 00:29:22,800 --> 00:29:24,920 Speaker 9: We've been in the camp to have a seper yeald 714 00:29:24,960 --> 00:29:26,880 Speaker 9: curve for much of the year, and I think the 715 00:29:26,920 --> 00:29:29,440 Speaker 9: frustrating part we've gone in bits and bounts of like 716 00:29:29,680 --> 00:29:31,120 Speaker 9: we've steep in, we've flattened it back. 717 00:29:31,400 --> 00:29:32,000 Speaker 2: Has been the. 718 00:29:31,920 --> 00:29:34,720 Speaker 9: Long end for US, and you think about all of 719 00:29:34,760 --> 00:29:38,120 Speaker 9: the fiscal dynamics in the US, and obviously the US 720 00:29:38,240 --> 00:29:42,240 Speaker 9: is the US, so it has that benefit in markets 721 00:29:42,560 --> 00:29:45,320 Speaker 9: and it is the most robust deepest market, so it 722 00:29:45,360 --> 00:29:49,040 Speaker 9: has that benefit. But we're at the low end of yields, 723 00:29:49,080 --> 00:29:52,240 Speaker 9: intens and bonds, and I don't know that we're discounting 724 00:29:52,480 --> 00:29:57,400 Speaker 9: or like fairly pricing in the tax policy risks. You're 725 00:29:57,440 --> 00:30:01,840 Speaker 9: going to have stimulus next year, So do we need 726 00:30:01,880 --> 00:30:05,520 Speaker 9: to like even if the FED eases, do long end 727 00:30:05,600 --> 00:30:06,600 Speaker 9: rates need to be lower? 728 00:30:06,640 --> 00:30:07,240 Speaker 1: I don't think so. 729 00:30:07,400 --> 00:30:09,680 Speaker 9: Because of where we are, are we pricing and inflation risk. 730 00:30:09,680 --> 00:30:10,920 Speaker 9: Inflation's kind of been sticky. 731 00:30:11,640 --> 00:30:13,680 Speaker 5: There's one argument that if you have a FED that's 732 00:30:13,760 --> 00:30:16,960 Speaker 5: cutting rates, people have gotten accustomed to getting income on 733 00:30:17,000 --> 00:30:19,080 Speaker 5: their cash are going to look for other places to 734 00:30:19,080 --> 00:30:21,120 Speaker 5: get their income, and they're not necessarily going to go 735 00:30:21,120 --> 00:30:23,440 Speaker 5: straight into equities. They're going to go its duration, and 736 00:30:23,480 --> 00:30:25,080 Speaker 5: so they're going to lock in those yields, which will 737 00:30:25,120 --> 00:30:28,000 Speaker 5: keep a lid on how high yields can go regardless 738 00:30:28,080 --> 00:30:31,640 Speaker 5: of the backdrop of the deficit and inflation and all 739 00:30:31,640 --> 00:30:32,560 Speaker 5: of these other concerns. 740 00:30:32,560 --> 00:30:33,760 Speaker 1: What's your take on that argument. 741 00:30:34,360 --> 00:30:37,160 Speaker 9: I think I think the argument about all in yields, 742 00:30:37,400 --> 00:30:40,480 Speaker 9: certainly for credit and front end high quality paper, I 743 00:30:40,480 --> 00:30:43,200 Speaker 9: think that's a real argument and it exists out there. 744 00:30:43,280 --> 00:30:45,920 Speaker 9: Even though as a rates person It's a frustrating argument 745 00:30:45,960 --> 00:30:48,280 Speaker 9: because you say, like why not Barbell and be in 746 00:30:48,320 --> 00:30:50,600 Speaker 9: the front end and you in treasuries or in rate 747 00:30:50,640 --> 00:30:53,840 Speaker 9: product and then afturf. But I think that it's a 748 00:30:53,880 --> 00:30:56,000 Speaker 9: different dynamic for thirty years, and I think that that 749 00:30:56,160 --> 00:30:59,760 Speaker 9: thirty year point globally, that's steepening in all of the pressures. 750 00:30:59,760 --> 00:31:02,640 Speaker 9: There is a global phenomenon like look at what's going 751 00:31:02,680 --> 00:31:06,560 Speaker 9: on in thirty year JGBS and under the new government, 752 00:31:07,320 --> 00:31:11,960 Speaker 9: this kind of combination of reflationary policy and a much 753 00:31:12,000 --> 00:31:14,760 Speaker 9: weaker yen and much it's like you're pushing on all 754 00:31:14,800 --> 00:31:16,840 Speaker 9: of the limits and something's going to break. And I 755 00:31:16,880 --> 00:31:20,480 Speaker 9: think we've learned this year that all of these markets 756 00:31:20,520 --> 00:31:24,960 Speaker 9: are interconnected and what goes with one will affect others. 757 00:31:25,000 --> 00:31:26,960 Speaker 2: So Tanya Bonio, it has been a bit of a 758 00:31:27,000 --> 00:31:29,160 Speaker 2: pain tride this year. Tries this morning at four point 759 00:31:29,240 --> 00:31:32,320 Speaker 2: zero nine percent ended last year, last training day of 760 00:31:32,360 --> 00:31:36,400 Speaker 2: the year, four fifty seven. That Bonio's lower, not high 761 00:31:36,480 --> 00:31:37,160 Speaker 2: on the year so far. 762 00:31:37,320 --> 00:31:39,440 Speaker 5: You know what we haven't mentioned yet today twenty five 763 00:31:39,480 --> 00:31:41,880 Speaker 5: billion dollars of thirty or notes coming out at one 764 00:31:41,920 --> 00:31:44,920 Speaker 5: pm an auction today. If thirty year notes six months 765 00:31:44,920 --> 00:31:46,000 Speaker 5: ago that would have been exciting. 766 00:31:46,160 --> 00:31:47,640 Speaker 1: Right now people are like, yeah, there's. 767 00:31:47,440 --> 00:31:49,920 Speaker 2: Plenty of suggesting it's not exciting. Gety, Well, I think. 768 00:31:49,760 --> 00:31:51,640 Speaker 5: It's still exciting, but I think the other people are 769 00:31:51,720 --> 00:31:53,480 Speaker 5: less excited about it. So I'm not going to beat 770 00:31:53,480 --> 00:31:55,760 Speaker 5: the drum as much because you know, I don't feel 771 00:31:55,760 --> 00:31:56,680 Speaker 5: like getting hateail this show. 772 00:31:56,800 --> 00:31:57,880 Speaker 2: We care, we should care? 773 00:31:57,960 --> 00:32:00,040 Speaker 5: Okay, Well, I think people should care because ultimately this 774 00:32:00,120 --> 00:32:01,800 Speaker 5: is a testament to how much people are actually looking 775 00:32:01,800 --> 00:32:04,360 Speaker 5: at the global dynamic as well as the sort of 776 00:32:04,400 --> 00:32:07,560 Speaker 5: potential buyers versus the inflation picture, which could potentially surprise them. 777 00:32:07,560 --> 00:32:09,160 Speaker 2: A lot of supply coming into credit as well, the 778 00:32:09,200 --> 00:32:09,800 Speaker 2: same look. 779 00:32:09,640 --> 00:32:11,280 Speaker 9: At the corporate supply, and a lot of it has 780 00:32:11,320 --> 00:32:14,640 Speaker 9: been all this AI related very long dated issuance which 781 00:32:14,680 --> 00:32:16,960 Speaker 9: has been absorbed with ease. And like we talk about 782 00:32:16,960 --> 00:32:19,200 Speaker 9: the credit market, I mean, credit spreads are very tight, 783 00:32:19,520 --> 00:32:21,960 Speaker 9: so you have to sit there and say, like, what 784 00:32:22,040 --> 00:32:23,240 Speaker 9: are the risks out there? 785 00:32:24,360 --> 00:32:27,920 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 786 00:32:27,920 --> 00:32:31,000 Speaker 2: in markets, economics, an gio politics. You can watch the 787 00:32:31,040 --> 00:32:34,040 Speaker 2: show live on Bloomberg TV weekday mornings from six am 788 00:32:34,160 --> 00:32:37,360 Speaker 2: to nine am Eastern. Subscribe to the podcast on Apple 789 00:32:37,600 --> 00:32:40,440 Speaker 2: Spotify or anywhere else you listen, and as always, on 790 00:32:40,480 --> 00:32:42,960 Speaker 2: the Bloomberg terminal and the Bloomberg Business app.