WEBVTT - Bloomberg Surveillance TV: May 9, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.639 Terminal and the Bloomberg Business app. Eric Friedman of us 0:00:37.720 --> 0:00:40.800 Mancasset Management right in this we used equity and commodity 0:00:40.800 --> 0:00:43.640 market weakness in April to add to risk assets and 0:00:43.760 --> 0:00:47.479 sell bonds, leaving us overweight domestic equities and real assets 0:00:47.479 --> 0:00:50.800 and underweight sixth income. Eric joins us now for more. 0:00:50.960 --> 0:00:51.080 Eric. 0:00:51.159 --> 0:00:53.159 Great to see you, sir. In your words, you've been 0:00:53.159 --> 0:00:55.360 training up a storm. Can you walk us through what 0:00:55.400 --> 0:00:56.640 you've been doing and why. 0:00:57.720 --> 0:01:00.000 Yeah, we've been active, jarthan I think it's been an 0:01:00.040 --> 0:01:03.240 environment where we've been using price weakness to really bolster 0:01:03.320 --> 0:01:05.800 our thesis, if you will, that we think corporate earnings 0:01:05.800 --> 0:01:09.120 will deliver this year we also want to be protected 0:01:09.160 --> 0:01:12.600 against that we think maybe an incipient inflation environment. So 0:01:13.280 --> 0:01:15.600 you know, we've looked at equal weight S and P 0:01:15.840 --> 0:01:18.120 is our more favorite choice right now, just with a 0:01:18.200 --> 0:01:19.920 viewpoint that we want to stay in large cap we 0:01:19.959 --> 0:01:22.319 want to stay domestic, but we also want to be 0:01:22.400 --> 0:01:24.920 more spread out, if you will, from a factor standpoint, 0:01:24.959 --> 0:01:27.160 so we think EQO WEID S and P is a 0:01:27.160 --> 0:01:30.440 good way to express that view. Also think that inflation 0:01:30.600 --> 0:01:32.240 is going to be hanging around. In fact, it could 0:01:32.360 --> 0:01:35.840 reaccelerate as we get deeper into this year due to 0:01:35.880 --> 0:01:39.720 both the catalog costs if you will, shelter costs, but 0:01:39.880 --> 0:01:43.720 also just the considerations around comparable So we think that 0:01:43.760 --> 0:01:45.680 those are two spots. We're now looking for a shock 0:01:45.720 --> 0:01:47.840 in awe if you will, owe inflation, but we do 0:01:47.920 --> 0:01:50.840 think the gradual incremental increase is a risk that we 0:01:50.880 --> 0:01:53.120 want to make sure we have protection on in portfolios. 0:01:53.200 --> 0:01:57.120 Your favorite sector is tech, energy, financials, midcaps. I'm putting 0:01:57.120 --> 0:02:00.520 this all together, Eric, this screen strong nominal GDP. What's 0:02:00.560 --> 0:02:01.920 your base case for this economy. 0:02:03.080 --> 0:02:04.880 Yeah, we think the economy is still going to be 0:02:04.960 --> 0:02:07.600 really in the back of both a consumer which is 0:02:07.640 --> 0:02:10.400 starting to incrementally slow, but it's still in good shape Jonathan, 0:02:10.880 --> 0:02:14.240 and also think the corporate capex cycle remains quite robust. 0:02:14.320 --> 0:02:16.680 That's something that we've seen a lot through this earning season. 0:02:17.120 --> 0:02:19.639 The themes that you've seen in terms of spend remain, AI, 0:02:19.880 --> 0:02:23.080 remain cyber, remain big data. So those are things that 0:02:23.120 --> 0:02:26.160 we think are more durable. To your point on nominal GDP, 0:02:26.880 --> 0:02:29.880 we are starting to see some participation from across the pond, 0:02:29.919 --> 0:02:32.119 which is a good thing in terms of the consumer 0:02:32.160 --> 0:02:33.600 really hanging in their financial is. 0:02:33.520 --> 0:02:36.760 Also being in relatively good shape. So those are all 0:02:36.840 --> 0:02:37.240 things that. 0:02:37.200 --> 0:02:41.160 We think still leave us more with an overweight position bias, 0:02:41.200 --> 0:02:43.720 if you will, but also a flexible mindset. I think 0:02:43.720 --> 0:02:45.680 this is an environment Jonathan, where if you don't have 0:02:45.760 --> 0:02:49.200 tight stops around your views, there's a level of hubris 0:02:49.280 --> 0:02:51.200 that we prefer not to have in this environment. So 0:02:51.240 --> 0:02:54.440 we think again more of a constructive bias, but also 0:02:54.520 --> 0:02:57.639 making sure that we're not risking too much in what's 0:02:57.639 --> 0:02:58.960 going to be very dynamic back. 0:02:58.760 --> 0:02:59.480 Half of this year. 0:03:00.080 --> 0:03:03.240 Perhaps part of that hubrius, Eric is also having protection 0:03:03.480 --> 0:03:05.640 for when things go wrong, for when your viewpoint doesn't 0:03:05.639 --> 0:03:08.400 play out, and for an economy that we're still unsure of. 0:03:08.720 --> 0:03:10.919 But when you look at things like the VIX of 0:03:10.960 --> 0:03:13.160 the VIX, there's nothing there. There's no one who is 0:03:13.200 --> 0:03:16.160 willing to go out and buy frankly, these cheap hedges. Eric, 0:03:16.240 --> 0:03:17.639 So what does work in this environment? 0:03:18.520 --> 0:03:21.400 Yeah, Danny I worked alongside a Seti Ratchri who developed 0:03:21.400 --> 0:03:24.720 a VIX many many years ago, and it's something that 0:03:24.800 --> 0:03:27.919 I think is a great observation. Just because the vall 0:03:28.040 --> 0:03:30.080 or the volley of ball has been very, very limited. 0:03:30.160 --> 0:03:32.600 So we think during the following makes sense. Number one 0:03:32.680 --> 0:03:35.760 is that we're underweight fixed synechemist Jonathan mentioned, but we 0:03:35.840 --> 0:03:39.280 do own some what we consider a longer duration exposure. 0:03:39.280 --> 0:03:42.080 In the event that we're wrong. That's something that again 0:03:42.160 --> 0:03:44.160 we think makes sense. In the event that there is 0:03:44.800 --> 0:03:49.120 a significant surprise with either the FED or a deflationary pickup, 0:03:49.200 --> 0:03:51.520 which again we are not forecasting as our base case, 0:03:51.880 --> 0:03:53.880 we think that makes sense. We also think again that 0:03:53.920 --> 0:03:56.800 commodity is exposure, which again is not energy related in 0:03:56.880 --> 0:04:00.160 terms of energy equities, but direct commodity exposure again and 0:04:00.160 --> 0:04:02.400 that broadening out of inflation risk that you're seeing in 0:04:02.440 --> 0:04:05.360 everything from wheat to coffee to cocoa. Those are things 0:04:05.400 --> 0:04:07.200 that we want to make sure that we have in portfolio. 0:04:07.280 --> 0:04:11.160 So again having a view, having a tight stop around 0:04:11.160 --> 0:04:13.680 those views, we think that's going to serve investors well 0:04:13.680 --> 0:04:14.360 in this environment. 0:04:14.480 --> 0:04:16.560 Well, Eric, you also said one of your views equal 0:04:16.560 --> 0:04:18.520 weighted S and P this is a market we're over 0:04:18.560 --> 0:04:21.800 the past decade. If you had said to someone valuations 0:04:21.800 --> 0:04:23.919 are too high, you shouldn't go, perhaps to a market 0:04:23.920 --> 0:04:26.720 weighted index, you would have been wrong because the expensive 0:04:26.720 --> 0:04:29.520 companies could keep getting more expensive. John mentioned this. You 0:04:29.520 --> 0:04:32.400 look at something like an ARM earnings that is getting punished, 0:04:32.440 --> 0:04:35.000 and Eric, I wonder how much of that is down 0:04:35.040 --> 0:04:38.720 to expensiveness, something like ARM twenty seven time sales more 0:04:38.760 --> 0:04:41.680 expensive than Nvidia. Is this a market that cares once 0:04:41.720 --> 0:04:42.920 again about valuations. 0:04:43.839 --> 0:04:46.240 Yeah, Danny, I think that's a really important observation. We 0:04:46.279 --> 0:04:48.279 think it absolutely is. In fact, one of the reasons 0:04:48.360 --> 0:04:51.440 why we went more equal weight is because that value factor. 0:04:51.480 --> 0:04:54.360 Again not that we always invest in factors, if you will, 0:04:54.760 --> 0:04:57.320 but because of our desire to want to stay large cap, 0:04:57.640 --> 0:05:00.279 we do think there's a risk of refinancing with small apps, 0:05:00.279 --> 0:05:02.520 as well as the improfitable nature of about a third 0:05:02.560 --> 0:05:05.919 of that index. Even though it's certainly lagged. We'd actually 0:05:05.960 --> 0:05:08.599 prefer to be in a higher quality lagging index like 0:05:08.640 --> 0:05:09.240 equo weight. 0:05:09.200 --> 0:05:09.480 S and P. 0:05:09.720 --> 0:05:13.120 So you are seeing that stand and delivered type of 0:05:13.120 --> 0:05:15.520 market FROME companies right now. If you do not either 0:05:15.560 --> 0:05:18.839 have strong guidance or a good reason why you missed, 0:05:19.200 --> 0:05:21.720 this is a market which is quite punishing. 0:05:21.839 --> 0:05:23.960 So we think that there's a level of. 0:05:24.000 --> 0:05:26.040 Margin of safety if you will an equal weight that's 0:05:26.040 --> 0:05:29.040 certainly not the cheapest we've ever bought, but a space 0:05:29.080 --> 0:05:32.320 that we think is going to be well represented in 0:05:32.360 --> 0:05:34.760 a decent earning as climate for the next couple quarters. 0:05:34.839 --> 0:05:36.520 Well it or gives you the value trade does well 0:05:36.520 --> 0:05:39.080 in a rate cutting cycle, or at least when we're 0:05:39.080 --> 0:05:41.760 in that trajectory getting to that trajectory. So how much 0:05:41.760 --> 0:05:44.960 of that is dependent on the FED actually delivering cuts? 0:05:45.960 --> 0:05:48.000 Yeah, you know, we think that if there isn't one 0:05:48.080 --> 0:05:49.839 or at least I think it's been a great phrase 0:05:49.880 --> 0:05:52.680 that you all used this morning, which is the dubvish pause, 0:05:52.760 --> 0:05:55.840 if you will, if there isn't more of that dubbish 0:05:55.880 --> 0:05:59.920 pause type of language, or ultimately we think one cut 0:06:00.120 --> 0:06:02.960 and at least a signal for a bias towards more 0:06:03.400 --> 0:06:05.520 this is a market which is a bit more vulnerable, but. 0:06:05.440 --> 0:06:07.240 Again for us, it's not so much. When do the 0:06:07.279 --> 0:06:08.280 rate cuts start. 0:06:08.520 --> 0:06:10.160 We do think the market's starting to pay a lot 0:06:10.160 --> 0:06:12.600 more attention to the terminal value. And if you look 0:06:12.600 --> 0:06:15.800 at an expectations out through twenty twenty five, twenty twenty six, 0:06:16.640 --> 0:06:18.520 again for someone who's nobod who's having for dinner tonight, 0:06:18.560 --> 0:06:20.640 it's hard to look out that far. But this is 0:06:20.640 --> 0:06:23.719 an environment where you know the terminal rate, if you will, 0:06:23.839 --> 0:06:25.120 is becoming more important. 0:06:25.160 --> 0:06:28.320 So some cuts this year with a signal. 0:06:27.960 --> 0:06:30.440 And a bias for more than twenty twenty five are important, 0:06:30.880 --> 0:06:31.600 not necessary. 0:06:31.720 --> 0:06:33.640 We think the terminal rate is much more important. 0:06:33.960 --> 0:06:36.440 So again you know that two and three quarters the 0:06:36.480 --> 0:06:38.240 three in a terminal rate side we think would be 0:06:38.360 --> 0:06:40.800 a good place to anchor on. Higher than that would 0:06:40.800 --> 0:06:41.760 be an issue for this market. 0:06:41.880 --> 0:06:44.159 Yeah, never mind twenty five. I'm starting this guy's beyond 0:06:44.160 --> 0:06:47.040 next week CPI retail sales. Eric, it's going to hear 0:06:47.080 --> 0:06:49.960 from you, Eric Friedman, the of US Bank Asset Management 0:07:00.080 --> 0:07:02.719 wait to the next big data point. Market momentum stalling 0:07:02.960 --> 0:07:06.240 as investors look ahead to next week's CPI print. Jpmulgan's 0:07:06.320 --> 0:07:09.159 David Libt's saying this for investors. So long as the 0:07:09.160 --> 0:07:12.440 Fed remains biased to cut rates at some stage, we 0:07:12.560 --> 0:07:16.680 think risk assets will remain supported. David joins us Now 0:07:16.680 --> 0:07:19.120 for more. David goomonnits Yere, How is that the biason? 0:07:19.160 --> 0:07:21.360 Did it change last week in any way, shape or form. 0:07:21.560 --> 0:07:24.040 So it's funny because when we think about and when 0:07:24.040 --> 0:07:25.760 we talk about what happened last week, you know, I 0:07:25.760 --> 0:07:27.880 would describe the market as almost spastic. 0:07:27.960 --> 0:07:28.120 Right. 0:07:28.160 --> 0:07:30.600 We started with a very hot ec I print and 0:07:30.600 --> 0:07:32.760 that everybody was pricing out cuts. The Fed's not going 0:07:32.760 --> 0:07:35.000 to be able to go this year. We ended with 0:07:35.040 --> 0:07:37.880 a non farm payroll report which was effectively goldilocks. So 0:07:38.120 --> 0:07:40.000 there was something for everybody last week, and you could 0:07:40.000 --> 0:07:42.040 see that in the way that the market was moving. 0:07:42.640 --> 0:07:45.200 I think the most important thing was what Pale said 0:07:45.520 --> 0:07:47.640 during the press conference and when he laid out the 0:07:47.640 --> 0:07:50.920 potential scenarios for interest rates this year. He didn't really 0:07:50.920 --> 0:07:53.560 talk about hikes. He talked about staying on hold. He 0:07:53.600 --> 0:07:56.280 talked about easing policy. And we've actually done some work 0:07:56.320 --> 0:07:59.000 and looked at whether it's the stock of cuts that 0:07:59.040 --> 0:08:01.119 the market is expecting or more about the flow. 0:08:01.440 --> 0:08:02.360 And as long as. 0:08:02.200 --> 0:08:04.560 The market is continuing to price and cuts over the 0:08:04.600 --> 0:08:06.960 next twelve months. We think that that's going to keep 0:08:07.520 --> 0:08:09.760 long term rates in a range and likely leave equity 0:08:09.800 --> 0:08:10.600 is fairly well supported. 0:08:10.600 --> 0:08:13.200 So let's stay some scenario. Have analysis. Christian mammani with 0:08:13.280 --> 0:08:16.800 San Yosi just yesterday and he was saying this two Well, 0:08:16.840 --> 0:08:18.680 it's this one way the economy's great in the fed 0:08:18.720 --> 0:08:21.280 con cup and it's basically one way the economy starts 0:08:21.280 --> 0:08:23.000 to sell f and in the fedcam. Is there a 0:08:23.000 --> 0:08:24.280 better outcome from malkets? 0:08:24.600 --> 0:08:26.680 You know, I don't think there is. I think that 0:08:26.760 --> 0:08:29.440 the latter may be slightly better for the market. The 0:08:29.480 --> 0:08:31.880 market is clearly getting a little bit twitchy about this 0:08:32.040 --> 0:08:34.959 very robust pace of nominal growth. And the issue is 0:08:35.000 --> 0:08:37.560 you're getting the earnings coming through, but you're capped on 0:08:37.679 --> 0:08:40.840 multiples given the you know, subsequent outlook for rates, and 0:08:40.880 --> 0:08:43.120 so I actually think a little bit of softening in 0:08:43.200 --> 0:08:46.199 economic activity, maybe getting the Fed to acknowledge that easier 0:08:46.280 --> 0:08:49.000 policy really is on the horizon. That could be the 0:08:49.040 --> 0:08:51.560 ideal scenario, you know very much, going back to a 0:08:51.600 --> 0:08:53.560 world that feels like the one we were in for 0:08:53.600 --> 0:08:56.400 the better part of the expansion post GFC, and you. 0:08:56.320 --> 0:08:58.400 Can feel the market's desired to get back to that. 0:08:58.440 --> 0:09:00.840 We keep referencing back to that. But I wonder in 0:09:00.880 --> 0:09:02.959 what you were talking about about Powell laying out all 0:09:02.960 --> 0:09:05.720 these scenarios where very well could have said that would 0:09:05.760 --> 0:09:07.480 lead us to hike, he says that would lead us 0:09:07.520 --> 0:09:08.120 to not cut. 0:09:08.480 --> 0:09:10.520 Is not the power put I think to. 0:09:10.480 --> 0:09:11.200 An extent it is. 0:09:11.240 --> 0:09:14.280 And I also think it's important to recognize what the 0:09:14.360 --> 0:09:16.920 issue is that they're dealing with. Right so, the Fed 0:09:16.960 --> 0:09:19.920 has this dual mandate for full employment and price stability. 0:09:20.360 --> 0:09:23.040 They don't really need to be worried about the employment situation, 0:09:23.120 --> 0:09:24.840 at least given the data that we've seen, and so 0:09:25.200 --> 0:09:28.559 inflation remains public enemy number one. And what I think 0:09:28.559 --> 0:09:30.800 would lead the Fed to become more hawkish is if 0:09:30.840 --> 0:09:34.079 we saw that reacceleration in inflation, which in our view 0:09:34.080 --> 0:09:36.240 would be directly tied to a labor market that heats 0:09:36.280 --> 0:09:38.320 right back up. And so if we see non farm 0:09:38.360 --> 0:09:40.640 payroll prints go back to three hundred thousand, that could 0:09:40.640 --> 0:09:42.559 well give us a bit of pause. But it feels 0:09:42.600 --> 0:09:44.760 like the overall direction of the labor market and the 0:09:44.800 --> 0:09:47.760 wage data is supportive of some easing later on. 0:09:47.800 --> 0:09:49.760 This year, and then we have a quiet week. We 0:09:49.840 --> 0:09:52.360 get some more of that data next week. But here's 0:09:52.400 --> 0:09:54.000 the thing is, it seems like we're in a bit 0:09:54.000 --> 0:09:56.040 of a no man's land during that data because earning 0:09:56.080 --> 0:09:58.000 season will be over, we'll get we won't have all 0:09:58.040 --> 0:10:00.760 those cues for corporations. Where far our ways out now 0:10:00.760 --> 0:10:02.840 from the next FED decision. So what does it mean 0:10:03.160 --> 0:10:05.280 for each of these data points when we're kind of 0:10:05.280 --> 0:10:06.240 in the middle of nowhere. 0:10:06.440 --> 0:10:08.439 Well, it's interesting because to your point, it's really the 0:10:08.520 --> 0:10:11.400 level one data, right, the CPI numbers, the employment numbers 0:10:11.440 --> 0:10:15.120 that tend to move rates and subsequently equities in particular. 0:10:15.120 --> 0:10:16.800 You know, I actually think that it's not the worst 0:10:16.840 --> 0:10:18.880 thing in the world. We have a somewhat quiet week, 0:10:19.040 --> 0:10:21.720 the market can digest what it learned last week. I mean, 0:10:21.760 --> 0:10:23.320 we got a lot of data last week in the 0:10:23.400 --> 0:10:25.960 US around the world. The market can process that, and 0:10:25.960 --> 0:10:28.600 the market can listen to what FED speakers have been saying. Right, 0:10:28.640 --> 0:10:31.400 we're seeing, you know, relative balance between those that are 0:10:31.440 --> 0:10:34.000 continuing to talk about easing later on this year and 0:10:34.040 --> 0:10:35.920 those that may be a little bit more hawkish, like 0:10:36.000 --> 0:10:39.400 the mister from the Man from Minnesota and his blog yesterday, 0:10:39.400 --> 0:10:40.920 and so you know, when we think about what the 0:10:41.000 --> 0:10:42.439 market is going to do this week, it's going to 0:10:42.520 --> 0:10:45.040 digest that data. And frankly, you know, the outlook for 0:10:45.080 --> 0:10:48.360 the economy looks pretty good. Two Q growth is tracking nicely. 0:10:48.840 --> 0:10:50.559 We may see a bit of a deceleration in the 0:10:50.559 --> 0:10:52.199 second half of the year. But again back to where 0:10:52.240 --> 0:10:54.400 we started the conversation, I'm not sure the market would 0:10:54.400 --> 0:10:54.960 dislike that. 0:10:54.880 --> 0:10:56.400 But the bar is higher. I'm going to need to talk 0:10:56.440 --> 0:10:59.680 about that data relative to expectations. So let's take the 0:10:59.720 --> 0:11:03.520 City Surprise Index. Looking at US economic data incoming relative 0:11:03.559 --> 0:11:06.760 to what we were expecting. It is no stiffed over 0:11:06.800 --> 0:11:08.959 the last month. It's turned negative in the last week. 0:11:09.040 --> 0:11:10.760 Do you think there are better opportunities abroad? Do you 0:11:10.760 --> 0:11:12.679 think we've reset the bar low enough abroad that we're 0:11:12.720 --> 0:11:15.480 starting to be expectations at the same time they're starting 0:11:15.520 --> 0:11:17.080 to deliver rank cuts. 0:11:17.440 --> 0:11:20.360 So the international story is an interesting one. The thing 0:11:20.400 --> 0:11:22.520 I will say about the US economy before we move 0:11:22.559 --> 0:11:24.120 on to the rest of the world is we were 0:11:24.120 --> 0:11:26.679 thinking about the various kind of pillars of growth as 0:11:26.720 --> 0:11:29.640 being you know, assets or liabilities or neutral. There's a 0:11:29.679 --> 0:11:32.360 lot in the neutral bucket today, but that does skew 0:11:32.400 --> 0:11:35.480 a bit more toward the liability side than the asset side, 0:11:35.480 --> 0:11:37.440 and I think that that's supportive of slower growth in 0:11:37.440 --> 0:11:39.640 the US during the back half of the year. Now, 0:11:39.640 --> 0:11:41.320 the counterpoint to that is the rest of the world 0:11:41.440 --> 0:11:43.040 is picking up. Right if you look at kind of 0:11:43.080 --> 0:11:45.440 the edge of the world being Southeast Asia, what's happening 0:11:45.440 --> 0:11:49.600 with semiconductor activity and overall technology exports. Things have picked 0:11:49.640 --> 0:11:52.640 up quite nicely. We're seeing some green shoots finally begin 0:11:52.720 --> 0:11:54.920 to emerge out of Europe, and that makes us constructive 0:11:54.960 --> 0:11:58.240 on a pickup in the overall global manufacturing in global 0:11:58.240 --> 0:12:00.200 goods cycle. And you know, frankly, what we need to 0:12:00.240 --> 0:12:03.200 see is the European consumer come back. Because if the 0:12:03.200 --> 0:12:06.280 European consumer comes back and that source of demand re emerges, 0:12:06.480 --> 0:12:09.319 we'll see the inventory cycle pickup, we'll see that manufacturing 0:12:09.360 --> 0:12:12.320 activity reaccelerate, and we'll see Europe emerge from a relatively 0:12:12.320 --> 0:12:13.880 soft period of economic growth. 0:12:13.920 --> 0:12:16.280 What is it about the phrase Europe and grain shades. 0:12:16.360 --> 0:12:19.200 I feel like you Saype grain shades for like ten years, 0:12:19.240 --> 0:12:20.600 same story exactly. 0:12:20.679 --> 0:12:23.120 I think it's definitely become convention. But I think that 0:12:23.160 --> 0:12:26.280 the reality here is that you've seen an extended period 0:12:26.280 --> 0:12:29.760 here eighteen to twenty four months where manufacturing activity globally 0:12:29.840 --> 0:12:32.160 has been soft. You're not only seeing things pick up 0:12:32.360 --> 0:12:34.120 in Asia, you're seeing things pick up in Europe. You're 0:12:34.120 --> 0:12:36.440 even seeing things pick up in the US barring that 0:12:36.520 --> 0:12:38.400 most recent ism manufacturing print. 0:12:38.600 --> 0:12:41.200 Okay, well, once we get the cuts coming out of Europe, 0:12:41.760 --> 0:12:45.440 what happens not to the landing, but after the landing. 0:12:45.480 --> 0:12:46.839 I know you're seeing green shoots, but. 0:12:46.840 --> 0:12:48.959 Is it enough to get some sort of growth coming 0:12:49.000 --> 0:12:49.959 back into Europe. 0:12:50.120 --> 0:12:53.079 So I do think that we can get growth going 0:12:53.120 --> 0:12:55.439 in Europe again. And I think, you know, one of 0:12:54.960 --> 0:12:57.719 the bits that we've been really focused on as of 0:12:57.800 --> 0:13:01.120 late is the response to the pandemic. Right, So, in 0:13:01.160 --> 0:13:03.839 the US, you had, you know, money dropping from helicopters. 0:13:03.880 --> 0:13:05.880 People got laid off, but they got a stimulus check 0:13:05.920 --> 0:13:09.080 in the mail that created too much money chasing too 0:13:09.080 --> 0:13:11.800 few goods. Europe had a different approach, right, They furloughed 0:13:11.800 --> 0:13:13.480 their workers, they put them on a percentage of their 0:13:13.520 --> 0:13:16.000 overall salary. And I think that that led the consumer 0:13:16.040 --> 0:13:18.920 to just retrench a little bit further. And so as 0:13:18.960 --> 0:13:21.600 we see consumer confidence begin to pick up, and as 0:13:21.600 --> 0:13:24.040 we see signs that the labor market is remaining healthy, 0:13:24.200 --> 0:13:26.960 that does make us more constructive on opportunities in Europe 0:13:27.000 --> 0:13:29.280 than we have been up until this point. The one 0:13:29.280 --> 0:13:30.839 thing I will say is that the folks who like 0:13:30.920 --> 0:13:32.599 to point to well, you know, you can invest in 0:13:32.720 --> 0:13:35.920 semiconductor producers in Europe and technology in Europe it's as 0:13:35.920 --> 0:13:37.920 expensive as tech in the US. Right, So that's a 0:13:37.920 --> 0:13:40.719 completely different conversation. This is more about picking up the 0:13:41.000 --> 0:13:44.000 cyclical trade and jumping on board as things begin to accelerate. 0:13:44.040 --> 0:13:46.760 It is so hard to remove the American bias and 0:13:46.840 --> 0:13:49.559 go overweight. Europe is now that time then. 0:13:49.679 --> 0:13:52.600 So it's a good question. The thing that's really plagued 0:13:52.679 --> 0:13:54.760 that trade for the better part of the past decade 0:13:54.800 --> 0:13:56.960 plus has been the strength of the dollar. And so 0:13:57.080 --> 0:13:59.720 I think that the way to weigh this and to 0:13:59.720 --> 0:14:03.400 think about this is if the ECB is easing and 0:14:03.440 --> 0:14:05.960 the FED needs to stay on hold, what happens to 0:14:06.000 --> 0:14:08.319 the euro? Right, Because if we can get that euro's 0:14:08.400 --> 0:14:10.960 strength and then maybe the FED easing as well, that's 0:14:11.000 --> 0:14:13.840 going to be an additional tailwind for US based investors 0:14:13.840 --> 0:14:16.200 in European markets. If we've a FED that keeps rates 0:14:16.200 --> 0:14:18.480 where they are in an ECB that starts easing, I 0:14:18.480 --> 0:14:20.760 think that even if you see a pickup in local 0:14:20.760 --> 0:14:23.920 market activity and local currency returns, the dollar may well 0:14:23.920 --> 0:14:24.720 work against you at. 0:14:24.680 --> 0:14:27.280 Wait so scare those two former European growth is better 0:14:27.400 --> 0:14:29.240 go into not just the expensive tech. But at the 0:14:29.280 --> 0:14:31.600 same time, by all accounts, the FED is not going 0:14:31.640 --> 0:14:34.080 to cut as soon as the ECB dollar remains strong, 0:14:34.680 --> 0:14:35.400 which wins out. 0:14:35.600 --> 0:14:37.960 So I think if the FED is able to ease, 0:14:37.960 --> 0:14:39.560 and our views that we will get one to two 0:14:39.600 --> 0:14:41.680 cuts before the end of the year, you will see 0:14:41.720 --> 0:14:43.480 some of that euro strength begin to come through, and 0:14:43.520 --> 0:14:46.160 you will be able to participate in a recovery across 0:14:46.160 --> 0:14:46.520 the bond. 0:14:46.520 --> 0:14:48.080 And we've got lots of talk back. You're going to 0:14:48.120 --> 0:14:50.600 be sticking with us stifle if it's that FJP Molkan 0:14:50.720 --> 0:14:51.480 asset management. 0:15:01.680 --> 0:15:04.320 John outlined some of these thoughts that you have going 0:15:04.320 --> 0:15:07.560 into next year, this perfect storm, the debt ceiling, the 0:15:07.600 --> 0:15:10.760 perennial spending fights that happened in Washington, and also this expiration, 0:15:10.840 --> 0:15:13.680 the Trump error tax cuts. Whether it's Biden or Trump, 0:15:13.760 --> 0:15:15.720 how should the next president be thinking about all of 0:15:15.720 --> 0:15:16.720 this morning? 0:15:16.800 --> 0:15:21.080 And Marie and so you have to recognize what's been 0:15:21.120 --> 0:15:24.800 going on politically in DC, which is not making decisions, 0:15:24.920 --> 0:15:27.880 not really sorting out what to do about spending, about debt, 0:15:28.160 --> 0:15:31.280 about taxes, and so that's all pushed into twenty five, 0:15:31.600 --> 0:15:35.120 and that has an impact on businesses they wait to see. 0:15:35.240 --> 0:15:39.080 So the uncertainty, I think is what's prevailing within the economy. 0:15:39.280 --> 0:15:41.520 I don't want to invest if there's going to be 0:15:41.560 --> 0:15:44.200 a big tax increase, but I can't see what they're 0:15:44.240 --> 0:15:47.040 going to do to avoid it, and so that's the 0:15:47.720 --> 0:15:49.120 time clock that's going on. 0:15:49.200 --> 0:15:49.440 Now. 0:15:49.600 --> 0:15:51.760 I'd like to talk about taxes because Ed Mills was 0:15:51.760 --> 0:15:53.960 on from Raymond James earlier this morning and he made 0:15:54.000 --> 0:15:56.000 a great point, which is the fact that yesterday we 0:15:56.080 --> 0:15:58.800 heard from the House Ways and Means Committee Chair Jason 0:15:58.840 --> 0:16:01.680 Smith coming out and saying there's actually some Republicans who 0:16:01.720 --> 0:16:04.440 want to see a higher corporate tax rate. Trump brought 0:16:04.440 --> 0:16:06.680 it down to twenty one percent from thirty five. Biden 0:16:06.720 --> 0:16:07.600 has pitched twenty eight. 0:16:07.880 --> 0:16:08.880 Senator Joe Manchin has. 0:16:08.800 --> 0:16:11.120 Said maybe twenty five is something we can all agree on. 0:16:11.440 --> 0:16:15.160 Where do you see Republicans and Democrats potentially having this 0:16:15.240 --> 0:16:17.240 equilibrium when it comes to the corporate tax rate. 0:16:17.920 --> 0:16:20.240 It's a bit of a fight in the election itself. 0:16:20.280 --> 0:16:22.360 You've got a choice of do you want the economy 0:16:22.440 --> 0:16:25.360 to grow stronger and do you think tax rates matter? 0:16:25.800 --> 0:16:28.480 I think they really do in terms of the growth rate. 0:16:28.680 --> 0:16:32.560 If you raise the taxes, there's less investment going on 0:16:32.760 --> 0:16:35.400 in the corporate sector. We're already seeing it in the 0:16:35.400 --> 0:16:38.560 small business sector, just very hard for them to make 0:16:38.600 --> 0:16:42.200 the new investments needed to pull down or to improve 0:16:42.280 --> 0:16:46.720 the supply chain. So we're seeing this persistent inflation and stagflation. 0:16:47.200 --> 0:16:49.840 So what do you make of Republicans though, coming out 0:16:49.840 --> 0:16:51.160 and saying that it should be higher. 0:16:51.680 --> 0:16:54.840 You know, all through the party, unity is not as 0:16:55.000 --> 0:16:58.640 much in the Republican Party, So they've got to sort 0:16:58.680 --> 0:17:02.000 out what is the message of Republicans that you want 0:17:02.120 --> 0:17:04.720 Washington to be bigger. You know, it'd be fun for 0:17:04.800 --> 0:17:08.040 a lot of politicians in Washington to have a big 0:17:08.080 --> 0:17:11.320 debate over which taxes to raise. That pulls in a 0:17:11.359 --> 0:17:15.240 lot of political contributions. But what we should be looking 0:17:15.280 --> 0:17:18.960 at is which taxes affect growth the most, and you 0:17:19.040 --> 0:17:21.239 want to hold those down so that you can have 0:17:21.320 --> 0:17:25.600 more jobs, more people back to work. After COVID, a 0:17:25.600 --> 0:17:28.080 lot of people are just staying out of the economy 0:17:28.160 --> 0:17:30.560 because it's not strong enough to bring them into the 0:17:30.640 --> 0:17:31.320 labor force. 0:17:31.480 --> 0:17:35.240