WEBVTT - Bloomberg Surveillance TV: May 2, 2024 0:00:02.440 --> 0:00:06.760 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 0:00:22.440 --> 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 --> 0:00:37.600 Terminal and the Bloomberg Business app. Savera joins us now, SAVERA, 0:00:37.680 --> 0:00:40.800 good morning to you. Which one is this? Stagflation? Hard landing, 0:00:40.840 --> 0:00:41.880 no landing? Where are we going? 0:00:42.320 --> 0:00:45.720 I think we're going to a soft landing with a 0:00:45.840 --> 0:00:48.880 reasonable market environment, maybe better. 0:00:48.640 --> 0:00:52.000 Growth ahead than what we're used to. Higher rates, a 0:00:52.040 --> 0:00:54.360 little bit of higher inflation. But look where we are 0:00:54.360 --> 0:00:54.920 on inflation. 0:00:55.120 --> 0:00:57.080 These are the levels that we all used to write 0:00:57.080 --> 0:01:00.960 about as the Goldilocks levels. Right, We're not at nine, 0:01:01.000 --> 0:01:03.040 we're not at zero, We're around. 0:01:02.840 --> 0:01:05.320 Three or four. Those are healthy levels for equities. 0:01:05.360 --> 0:01:07.840 It doesn't sound late cycle when you speak where are 0:01:08.000 --> 0:01:08.760 we in this cycle? 0:01:08.920 --> 0:01:09.480 Who knows? 0:01:09.520 --> 0:01:13.119 I mean I think this cycle is very asynchronous, if 0:01:13.160 --> 0:01:16.200 you will. So it's you know, there's some areas that 0:01:16.240 --> 0:01:18.679 are booming. We're still kind of coming off of COVID, 0:01:18.760 --> 0:01:22.360 So we've got services demand maybe slowing or tapering off, 0:01:22.400 --> 0:01:24.280 goods demand potentially picking up. 0:01:24.560 --> 0:01:25.959 We've got still tight employment. 0:01:26.160 --> 0:01:28.640 But then there's also a couple of structural factors that 0:01:28.720 --> 0:01:29.200 I think. 0:01:29.000 --> 0:01:31.600 Are skewing the cycle call. 0:01:31.920 --> 0:01:36.160 So we have a very tight employment market, and one 0:01:36.200 --> 0:01:39.399 of the reasons for that is demographics, which we're you know, 0:01:39.400 --> 0:01:42.360 we're in an aging demographic scenario. And then on top 0:01:42.400 --> 0:01:45.000 of that, we had a huge number of early retirees 0:01:45.080 --> 0:01:48.560 during COVID. Unless we loose an immigration, I think that 0:01:48.600 --> 0:01:51.279 we're going to remain in this very tight labor market. 0:01:51.360 --> 0:01:54.440 So that's the other factor. And you know, we've talked 0:01:54.440 --> 0:01:56.440 about this. I think the consumer is in a very 0:01:56.480 --> 0:01:59.760 different balance sheet set up than in prior cycles, where 0:02:00.120 --> 0:02:03.480 you know, long term fixed rate mortgages eighty five percent, 0:02:03.800 --> 0:02:07.320 very different from prior cycles. You've got baby boomers sitting 0:02:07.320 --> 0:02:08.600 on wads of cash. 0:02:08.639 --> 0:02:10.919 So I just think that. 0:02:11.280 --> 0:02:15.920 This cycle you can't just map on the typical you know, oh, 0:02:15.960 --> 0:02:18.320 the FED is tightening, it's. 0:02:18.680 --> 0:02:20.919 You know, or late cycle. Now the FED is stopped 0:02:20.960 --> 0:02:23.480 and they're going to start cutting. We're early. It's a 0:02:23.560 --> 0:02:26.560 different a different type of market. You use the G word. 0:02:26.960 --> 0:02:28.560 Sorry, I apologize to fans. 0:02:28.560 --> 0:02:30.560 It's been a long way goldilocks. And we hear this 0:02:30.639 --> 0:02:32.880 from Max Kettner's too, and this really raises a question, 0:02:33.000 --> 0:02:35.600 or can we have goldilocks with five percent FED funds rates? 0:02:35.840 --> 0:02:37.119 Is this actually just a new rate? 0:02:37.440 --> 0:02:38.680 Is it not actually restrictive? 0:02:38.760 --> 0:02:40.640 And is it something that can actually even allow a 0:02:40.680 --> 0:02:43.919 broadening out and a rally even without any rate cuts 0:02:43.919 --> 0:02:44.320 this year? 0:02:44.480 --> 0:02:44.960 I think so. 0:02:45.200 --> 0:02:47.160 I mean, I think there's a very high probability that 0:02:47.200 --> 0:02:49.920 the FED remains on hold. Our economists have talked about 0:02:49.960 --> 0:02:52.359 this as well, So we expect to cut in December. 0:02:52.440 --> 0:02:53.320 Maybe no cuts. 0:02:54.120 --> 0:02:58.080 Look, I think five percent is a manageable number, especially 0:02:58.120 --> 0:03:01.800 if you have corporations that have locked in fixed straight 0:03:02.200 --> 0:03:05.280 you know, long term debt you've got And this is 0:03:05.320 --> 0:03:08.359 the S and P, not necessarily small caps or other regions. 0:03:08.720 --> 0:03:11.200 But I think that the SMP has actually prepared for 0:03:11.240 --> 0:03:14.520 this moment. Now you've got big tech companies, the go 0:03:14.520 --> 0:03:18.720 go growth stocks initiating dividends. Right, We've got an environment 0:03:18.720 --> 0:03:22.519 where the market is adapting to higher interest rates, shortening 0:03:22.560 --> 0:03:25.639 their duration, giving us more cash. I think this is 0:03:25.680 --> 0:03:28.640 actually a kind of a reasonable setup for equities here. 0:03:28.800 --> 0:03:31.200 I don't want to be cynical. There is this concern 0:03:31.480 --> 0:03:34.120 with people focusing on large caps that can handle this. 0:03:34.600 --> 0:03:37.440 The people shrug off the highest delinquency rates. Going back 0:03:37.600 --> 0:03:40.960 many years, this idea that if a number of people 0:03:41.040 --> 0:03:44.400 just get blown out, fine, it's okay, you know, we 0:03:44.440 --> 0:03:46.920 can just go into luxury, we'll go into big tech, 0:03:46.960 --> 0:03:48.760 we'll go into the areas that'll do fine, and we'll 0:03:48.800 --> 0:03:51.560 be fine, even if other segments are getting kind of blown. 0:03:51.520 --> 0:03:54.280 Right, right, How long can that go on? I think 0:03:54.360 --> 0:03:56.040 that is a key risk. 0:03:56.120 --> 0:03:59.200 And I mean we've seen that income gap widen for 0:03:59.280 --> 0:04:02.960 decades now, right. I think what's happening now is actually 0:04:03.040 --> 0:04:07.360 potentially better for the middle to lower income customer if 0:04:07.640 --> 0:04:11.120 you're in certain sectors. So look at manufacturing in the US. 0:04:11.160 --> 0:04:14.360 There's still a very tight labor force. Real wage growth 0:04:14.400 --> 0:04:17.400 is positive. Where you're seeing a lot of the layoffs 0:04:17.480 --> 0:04:22.120 is more in white collar, you know, not necessarily Middle America, 0:04:22.240 --> 0:04:25.200 where you're seeing still very strong signs of this restoring 0:04:25.320 --> 0:04:29.200 boom that has a long tail, right. I mean, you 0:04:29.240 --> 0:04:32.200 can't build a factory in a year. It's going this 0:04:32.200 --> 0:04:35.479 This restoring theme is a very long term theme that 0:04:35.560 --> 0:04:38.640 I think has legs over the next several years. And 0:04:39.080 --> 0:04:41.960 that's where the job tightness is, that's where the real 0:04:42.000 --> 0:04:43.680 wage growth is really positive. 0:04:44.040 --> 0:04:46.160 And I think those are areas. 0:04:45.800 --> 0:04:48.440 That are, you know, different from where we've seen benefits 0:04:48.440 --> 0:04:51.040 in the past. So that's one way to stave it off. 0:04:51.040 --> 0:04:53.080 And then you know, I think higher oil prices are 0:04:53.080 --> 0:04:56.240 also a concern if you think about geopolitical risks. But 0:04:56.920 --> 0:04:59.120 where we are today is I think the US is 0:04:59.120 --> 0:05:02.239 in a better position because we are now a net 0:05:02.360 --> 0:05:05.359 exporter rather than an importer, so we've got a little 0:05:05.360 --> 0:05:08.039 bit more wiggle rim around oil than we did in 0:05:08.120 --> 0:05:09.000 prior cycles. 0:05:09.279 --> 0:05:10.719 But you're right, it's a concern. 0:05:10.800 --> 0:05:12.599 Well when it comes to these low age workers saying 0:05:12.600 --> 0:05:14.720 people they're getting jobs in manufacturing. But I go back 0:05:14.760 --> 0:05:17.960 to what Diane Swanks said yesterday to Jonathan, Lisa and Tom. 0:05:18.160 --> 0:05:20.680 These individuals move from the shadows of the economy into 0:05:20.680 --> 0:05:23.520 the sun. Maybe that's the labor market that's getting a 0:05:23.560 --> 0:05:25.599 better job, but then they get hit by inflation. They 0:05:25.640 --> 0:05:28.400 get burned by inflation. Right, So how does the FED 0:05:28.480 --> 0:05:30.800 think of these individuals when it comes to higher inflation, 0:05:30.960 --> 0:05:32.960 because we know they have no appetite. 0:05:32.400 --> 0:05:34.279 For a hike, right, right, right, right. 0:05:34.360 --> 0:05:36.400 So I think that where we are now is an 0:05:36.480 --> 0:05:38.960 environment where we really do need to see some of 0:05:38.960 --> 0:05:43.440 these inflationary forces subside, and we're I think there's a 0:05:43.520 --> 0:05:46.479 couple of things going on that could actually continue to 0:05:47.360 --> 0:05:48.839 create a ceiling on inflation. 0:05:49.279 --> 0:05:49.960 So think about it. 0:05:50.000 --> 0:05:54.000 There's still demographics and demographics, We've got aging population, less 0:05:54.040 --> 0:05:57.480 demand for stuff. That's that's another that's sort of a 0:05:58.360 --> 0:06:04.520 disinflationary pressure. You've also got disruption from AI tech automation, 0:06:04.920 --> 0:06:09.000 so that's a continued disinflationary pressure. I don't see inflation 0:06:09.200 --> 0:06:13.359 going to the seventies levels that's really untenable for your 0:06:13.680 --> 0:06:18.000 average consumer. I think there's enough of a secular disinflationary 0:06:18.240 --> 0:06:20.919 force at play that we've all been talking about, you know, 0:06:20.960 --> 0:06:24.239 for the last twenty years that can can actually stave 0:06:24.320 --> 0:06:28.960 off a really aggressive level of inflation. And then on 0:06:28.960 --> 0:06:31.039 top of that, I think the energy independence of the 0:06:31.120 --> 0:06:34.440 US is a really important factor because you know, that's 0:06:34.480 --> 0:06:37.520 a benefit to the US that most other developed. 0:06:37.120 --> 0:06:40.040 Economies don't have. And I think that's something we should 0:06:40.040 --> 0:06:40.520 be happy about. 0:06:40.600 --> 0:06:42.360 Let's finish on something you've been focused on for quite 0:06:42.360 --> 0:06:45.080 a while allan to call Amy value, and it's industrial 0:06:45.120 --> 0:06:48.000 staff to capital. I remember you outlining this, I think 0:06:48.000 --> 0:06:49.919 maybe twelve months ago. Still a big thing for you 0:06:49.960 --> 0:06:50.400 and a team. 0:06:50.560 --> 0:06:53.279 Yes, and it's worked for maybe two months out of 0:06:53.320 --> 0:06:54.440 the last twelve. 0:06:55.160 --> 0:06:57.560 But you know, I think where we are now against 0:06:57.600 --> 0:06:59.800 throwing much Just for the record, I was genuinely interested 0:06:59.839 --> 0:07:01.640 in that faces well. 0:07:01.360 --> 0:07:04.000 You know again, I think we're in an environment where 0:07:04.360 --> 0:07:07.839 the broadening of the market is still a theme we 0:07:07.920 --> 0:07:10.480 talk about, and it's started to happen in the last 0:07:10.480 --> 0:07:11.320 couple of months. 0:07:12.680 --> 0:07:14.800 Look who's going to benefit from all. 0:07:14.720 --> 0:07:18.200 These chips and this AI and you know automation. It's 0:07:18.240 --> 0:07:21.440 old economy companies that get more labor light. And I 0:07:21.480 --> 0:07:23.840 think that's the benefit that we could see over the 0:07:23.880 --> 0:07:25.760 next you know, twelve to twenty four to. 0:07:25.960 --> 0:07:26.840 You a few years. 0:07:27.640 --> 0:07:30.480 I think the areas are you know, industries like ours, 0:07:30.520 --> 0:07:33.840 the banks, right, I mean banks are very labor intensive. 0:07:34.240 --> 0:07:35.880 Now there is this tool that. 0:07:35.800 --> 0:07:40.120 We can use to replace people with bots and processes. 0:07:39.480 --> 0:07:39.960 Et cetera. 0:07:40.360 --> 0:07:44.320 So I think, you know, it's it's a potential streamlining 0:07:44.400 --> 0:07:47.720 or cost cutting story self help for a lot of 0:07:47.720 --> 0:07:51.320 these old economy services sectors that haven't really addressed their 0:07:51.400 --> 0:07:53.480 labor intensity for for quite a while. 0:07:54.120 --> 0:08:05.520 This was it's going to s. 0:08:04.960 --> 0:08:08.480 Andrew Honposo. City office is one. We maintain our base 0:08:08.520 --> 0:08:10.960 case from one hundred basis points of counts in twenty four, 0:08:11.200 --> 0:08:14.600 substantially more than priced by interest rate markets. Andrew's with 0:08:14.720 --> 0:08:17.520 us around the table, Andrew Hallo, let's go straight to it. 0:08:17.560 --> 0:08:20.440 Four cuts in twenty four. This is not consensus. Where 0:08:20.440 --> 0:08:21.200 does it come from? 0:08:21.280 --> 0:08:22.680 Well, the Fed's going to cut this year. 0:08:22.720 --> 0:08:25.800 I think that was very clear from CHERA Powell yesterday 0:08:25.800 --> 0:08:28.040 that at least the next move is a cut, and 0:08:28.080 --> 0:08:30.560 the way that they get there is because the inflation 0:08:30.640 --> 0:08:31.080 data is. 0:08:31.000 --> 0:08:33.080 Going to give them the opportunity. I don't think it's. 0:08:32.960 --> 0:08:34.640 Going to two percent, but it's going to be slow 0:08:34.760 --> 0:08:37.040 enough that it lets them cut. And then the labor 0:08:37.040 --> 0:08:39.360 market is going to weaken. And we heard that from 0:08:39.400 --> 0:08:42.520 Chaerir Powell, this idea that we're seeing that the trend 0:08:42.600 --> 0:08:44.199 is really towards a weaker labor market. 0:08:44.240 --> 0:08:46.360 Here, I think this is your signature cool for this year. 0:08:46.520 --> 0:08:49.280 It's the weakness that you're anticipating in the labor market. 0:08:49.360 --> 0:08:51.200 Do you see it now? Where's it coming from? 0:08:51.480 --> 0:08:54.160 This is really important because what we heard from Chair 0:08:54.240 --> 0:08:57.679 Powell is with the two mandates, the dual mandates and 0:08:57.800 --> 0:09:00.920 better balance than their words, has come down. It's not 0:09:00.960 --> 0:09:03.440 a two percent, but it's come down. They're looking at 0:09:03.520 --> 0:09:06.840 employment now. And when you look at employment, Chirpewell highlighted 0:09:06.880 --> 0:09:08.679 some of these things. You look at the conference board, 0:09:09.000 --> 0:09:11.480 do people see jobs plentiful or do people see jobs 0:09:11.480 --> 0:09:12.120 hard to get? 0:09:12.400 --> 0:09:14.600 They're seeing jobs as harder to get. You ask people, 0:09:14.640 --> 0:09:16.679 are you more worried about keeping your job? They are 0:09:16.679 --> 0:09:17.120 more worried. 0:09:17.160 --> 0:09:19.280 We see that in the New York Fed survey, and 0:09:19.320 --> 0:09:21.679 then you go to the NFIB Small Business Survey. It's 0:09:21.679 --> 0:09:23.120 going to come out to day at one pm. Let's 0:09:23.120 --> 0:09:25.680 see where it is. But you're seeing small businesses that 0:09:25.720 --> 0:09:27.720 are saying they're not excited about hiring. 0:09:27.760 --> 0:09:30.360 So all of these indicators are going in one direction. 0:09:30.720 --> 0:09:33.600 At the same time, we've been seeing signs of cracks 0:09:33.679 --> 0:09:37.040 for a really long time. People expected things to weaken. 0:09:36.840 --> 0:09:39.160 Substantially earlier this year. They haven't. 0:09:39.360 --> 0:09:41.720 Late last year they didn't. So at what point do 0:09:41.720 --> 0:09:43.600 you have conviction. This time is different. 0:09:43.920 --> 0:09:46.319 So I think a lot of those calls were maybe 0:09:46.440 --> 0:09:49.319 not wrong, but just very premature. And the cycle has 0:09:49.400 --> 0:09:52.199 just extended a lot longer than many people thought. And 0:09:52.280 --> 0:09:54.320 what we were going through in the labor market was 0:09:54.360 --> 0:09:57.160 a kind of normalization. We had job openings that were 0:09:57.160 --> 0:10:00.959 extremely elevated, We had just incredible will need to hire 0:10:01.080 --> 0:10:03.960 people and restaff and we've really worked through a lot 0:10:03.960 --> 0:10:04.200 of that. 0:10:04.240 --> 0:10:06.600 Now when we look at these trends, take the quit rate. 0:10:06.480 --> 0:10:10.839 And yesterday's Jolts report, that's a decade low, and what 0:10:10.880 --> 0:10:14.720 that's telling us is that this isn't just normalization. 0:10:14.120 --> 0:10:14.640 At this point. 0:10:14.720 --> 0:10:17.280 This is people that at least in the last ten years, 0:10:17.280 --> 0:10:20.080 people have not been this worried about holding onto a job, 0:10:20.160 --> 0:10:20.760 which really. 0:10:20.600 --> 0:10:23.559 Raises an interesting question about tomorrow's non farm payrolls report. 0:10:23.679 --> 0:10:26.160 We're talking about how how high numbers will be and 0:10:26.200 --> 0:10:28.520 how high numbers have been, and it really is one 0:10:28.520 --> 0:10:30.720 of the reasons why people say this is a robust 0:10:30.800 --> 0:10:34.600 labor market. Are you saying that those numbers inaccurately represent 0:10:34.760 --> 0:10:38.000 the true labor market and are distorted by immigration, by 0:10:38.040 --> 0:10:39.880 other types of features that. 0:10:39.960 --> 0:10:42.520 Really might mask a real level. 0:10:42.280 --> 0:10:44.920 Of weakness that could catch us to as sooner than 0:10:45.000 --> 0:10:45.760 many people think. 0:10:46.040 --> 0:10:46.679 I think that's right. 0:10:46.720 --> 0:10:48.240 And one of the great things about being a US 0:10:48.240 --> 0:10:51.080 economist is we have an incredible range of data to 0:10:51.160 --> 0:10:54.040 draw on, especially with something like the labor market. So 0:10:54.320 --> 0:10:58.400 the biggest focus is usually right that establishment survey, non 0:10:58.440 --> 0:11:01.320 farm payrolls, those have been strong. If you look at 0:11:01.360 --> 0:11:05.439 almost any other labor market indicator, they range from slightly 0:11:05.480 --> 0:11:07.840 weaker to that than that to a lot weaker than that. 0:11:08.120 --> 0:11:10.800 Take the household survey. That's where the unemployment rate comes from. 0:11:10.840 --> 0:11:13.320 The unemployment rate has been moving up because employment in 0:11:13.360 --> 0:11:17.240 the household survey has been softer. Take the Business Employment 0:11:17.320 --> 0:11:19.640 Dynamics survey. Now this is something most people don't watch. 0:11:19.679 --> 0:11:22.079 It comes out very, very lagged. The numbers just came 0:11:22.120 --> 0:11:26.319 out from Q three. Nine million firms that are accounted 0:11:26.320 --> 0:11:28.720 for in this This is really the official data on 0:11:28.960 --> 0:11:30.360 what firms we're doing in Q three. 0:11:30.480 --> 0:11:32.640 If you look at that data, we lost jobs in 0:11:32.679 --> 0:11:35.319 the third quarter. I'm not saying that actually happen. 0:11:35.120 --> 0:11:37.160 But you look at all these different data points, you 0:11:37.240 --> 0:11:39.080 kind of PLoP them all together and try to figure 0:11:39.080 --> 0:11:39.920 out where the trend is. 0:11:40.080 --> 0:11:42.000 That trend is towards a weaker job market. 0:11:42.080 --> 0:11:43.760 Let's take a look at the heart landing versus solft 0:11:43.840 --> 0:11:45.560 landing shop. We'll do that together. I'll do it in 0:11:45.559 --> 0:11:47.640 the air for you. It's been a long night, okay, 0:11:48.080 --> 0:11:51.200 So soft landing here, all right? Heart landing over here, 0:11:51.320 --> 0:11:54.800 self landing and macular disinflation, big supply side recovery, et cetera, 0:11:54.840 --> 0:11:57.920 et cetera. Sounds like you're somewhere over here. Is that fair? 0:11:58.040 --> 0:11:59.679 You're looking for something close to a heart land in 0:11:59.679 --> 0:11:59.960 this year? 0:12:00.240 --> 0:12:00.640 That's fair? 0:12:00.679 --> 0:12:03.240 And I think that markets have actually moved away from 0:12:03.320 --> 0:12:05.840 this soft landing idea. It's pretty clear from the inflation 0:12:05.920 --> 0:12:09.880 data that we're not getting the soft landing. If activity 0:12:09.920 --> 0:12:11.680 holds up, then maybe we're going to have more of 0:12:11.720 --> 0:12:14.960 an issue with inflation. The reason I think that the 0:12:14.960 --> 0:12:17.080 Fed's going to see enough to cut is because that's right, 0:12:17.080 --> 0:12:19.360 We're more towards that hard landing end of the spectrum. 0:12:19.440 --> 0:12:21.439 So when you look at market pricing, and this has 0:12:21.480 --> 0:12:23.960 echoes of a conversation we had with Gershen distant found 0:12:23.960 --> 0:12:26.120 of a lince Burn steam in the last week. Do 0:12:26.160 --> 0:12:28.480 you see the pricing of say one rate cut this 0:12:28.600 --> 0:12:30.840 year as just a weighted average of a whole range 0:12:30.840 --> 0:12:33.199 of possibilities and maybe not the most likely outcome. 0:12:33.480 --> 0:12:35.440 That's right, markets are always going to average over all 0:12:35.440 --> 0:12:37.920 the possibilities. And you heard Chair Powell, it was kind 0:12:37.920 --> 0:12:41.640 of this multiverse of possible Fed outcomes. Yesterday they could 0:12:41.720 --> 0:12:44.480 not cut at all. They could be cutting. I think 0:12:44.520 --> 0:12:48.160 what's important is a symmetry of the Fed's reaction function. 0:12:48.520 --> 0:12:52.360 You don't need both softer inflation and a weaker labor market. 0:12:52.480 --> 0:12:54.640 You just need one or the other, and that's why 0:12:54.640 --> 0:12:55.240 they're going to cut. 0:12:55.360 --> 0:12:57.120 It's fascinating to me that you said we're not getting 0:12:57.160 --> 0:12:59.560 a soft landing. You expect one hundred basis points of 0:12:59.600 --> 0:13:02.640 federal cuts. Is that basically you saying that you think 0:13:02.679 --> 0:13:05.199 the damage will be done enough that even one hundred 0:13:05.240 --> 0:13:07.440 basis points of rate cuts won't be able to give 0:13:07.800 --> 0:13:10.880 that sort of surge of stimulus into the economy soon 0:13:11.000 --> 0:13:13.040 enough to stave off a real downturn. 0:13:13.320 --> 0:13:16.160 This is what happens in almost every monetary policy cycle, 0:13:16.200 --> 0:13:18.120 and I don't think that there's good reason to think 0:13:18.160 --> 0:13:20.679 that this cycle is going to be different. We have 0:13:21.080 --> 0:13:25.160 inflation that's run higher than expected, still higher than expected 0:13:25.200 --> 0:13:28.040 even in the first quarter, that has kept policy rates 0:13:28.120 --> 0:13:28.880 higher for longer. 0:13:28.920 --> 0:13:31.160 We're in the higher for longer stage of the policy cycle. 0:13:31.360 --> 0:13:33.760 The next stage of the policy cycle is a weakening 0:13:33.760 --> 0:13:36.800 of the labor market. Once it starts gradually weakening, it 0:13:36.800 --> 0:13:39.320 then weakens more sharply. I think that's exactly what's playing 0:13:39.360 --> 0:13:39.760 out now. 0:13:39.800 --> 0:13:42.760 Just quickly. How united is that commits see on the FMC. 0:13:43.480 --> 0:13:45.320 I think there are a lot of different views around 0:13:45.360 --> 0:13:47.800 the table right now, and I think Powell is probably 0:13:47.840 --> 0:13:50.680 something of a master in terms of somehow bringing things 0:13:50.760 --> 0:13:52.800 enough together to do that press conference. 0:13:52.440 --> 0:14:04.880 Yesterday Andrew Houn host Stephan I'm wonderful to catch up 0:14:04.880 --> 0:14:07.200 with you, sir. The stock is just about positive in 0:14:07.240 --> 0:14:08.959 the pre market. Can you talk to me about how 0:14:09.000 --> 0:14:13.079 you're balancing cost cutting with investing in innovation given what's 0:14:13.080 --> 0:14:13.800 in the pipeline. 0:14:14.840 --> 0:14:17.280 Sure, well, good morning, Thank you for having me so 0:14:17.520 --> 0:14:20.720 very pleased with a quote. We basically try to focus 0:14:20.960 --> 0:14:23.440 on how do we drive sales, how do we drive 0:14:23.600 --> 0:14:26.520 R and D, how do we prioritize opportunities, which is why, 0:14:26.560 --> 0:14:29.640 for example, we announced that we are stopping the partnership 0:14:29.720 --> 0:14:32.720 with Metagenomy in research engine editing. 0:14:33.200 --> 0:14:33.760 Same thing if you. 0:14:33.720 --> 0:14:37.120 Look at the portfolio we're looking very carefully at all investments. 0:14:37.600 --> 0:14:41.600 And a good thing about those vaccines like respiratory vaccines 0:14:41.720 --> 0:14:44.480 is your only pay the fase free study. What So 0:14:44.480 --> 0:14:46.840 if you think about COVID, we still have sales from COVID, 0:14:47.280 --> 0:14:49.480 but the investment in the idea of COVID has come 0:14:49.560 --> 0:14:52.240 down a lot. As you said ours, we we are 0:14:52.280 --> 0:14:55.560 antipating a launch this spring, but we're not going to 0:14:55.600 --> 0:14:57.720 do another phase three four URSV. So you can still 0:14:57.960 --> 0:15:00.200 basically have a lot of new studies going on on 0:15:01.600 --> 0:15:04.000 reusing the capital you used to put in the other 0:15:04.080 --> 0:15:06.920 products before. And then if you look at oncology, as 0:15:06.920 --> 0:15:09.400 you know, when a fifty to fifty profit shared with Merk, 0:15:09.880 --> 0:15:12.000 so merk is paying half of a face free study. 0:15:12.040 --> 0:15:14.120 So that's how we're managing. When we're seeing a lot 0:15:14.160 --> 0:15:17.720 in technology. You might have seen last week an announcement 0:15:17.840 --> 0:15:20.360 with open Ai. We have actually more than seven or 0:15:20.560 --> 0:15:23.120 fifty gpt is going and that is helping us a 0:15:23.120 --> 0:15:26.520 lot scale the company across not only science, but striving 0:15:26.560 --> 0:15:30.800 a lot of productivity in manufacturing, in commercial illegal So 0:15:30.800 --> 0:15:31.920 that's kind of how we're doing it. 0:15:32.160 --> 0:15:34.080 So Stephan, let's talk about something that our colleagues here 0:15:34.080 --> 0:15:37.440 at Bloomberg are extremely focused on and that's your RSV show, 0:15:37.880 --> 0:15:40.320 which according to our colleagues, some data is showing that 0:15:40.360 --> 0:15:42.760 maybe it doesn't last as long as others in the market. 0:15:42.960 --> 0:15:44.520 What we all want to know here at Bloomberger is 0:15:44.520 --> 0:15:47.440 whether that raises questions about the promise of your technology 0:15:47.440 --> 0:15:50.080 in treating other diseases. How would you answer that? 0:15:51.400 --> 0:15:53.040 So we first said that if you look at the 0:15:53.120 --> 0:15:56.440 data the duration of the over vaccines, they are very similar. 0:15:56.720 --> 0:15:59.720 So I don't think it is scientifically correct to say 0:15:59.720 --> 0:16:02.160 that one of a vaccine doesn't last as long as 0:16:02.200 --> 0:16:05.600 the ones of a tool that are improved. And our 0:16:05.960 --> 0:16:08.960 look at the data. This will be debated at the 0:16:08.960 --> 0:16:13.040 CDC meeting at the end of drewn that for recommendations. 0:16:13.760 --> 0:16:16.160 So this doesn't worry me. If you look at duration, 0:16:16.840 --> 0:16:20.920 the duration of vaccination is induced by T cell. If 0:16:20.920 --> 0:16:24.160 you look at cancer product, the only reason it works 0:16:24.640 --> 0:16:27.960 is T cells, not antibodies. Antibodies don't have a rowing cancer. 0:16:28.000 --> 0:16:31.880 It's about T cells going and attacking your cancer. If 0:16:31.960 --> 0:16:35.240 a vaccine technology don't have good T cell response, the 0:16:35.320 --> 0:16:37.280 cancer product will not look as good as it is. 0:16:37.600 --> 0:16:39.760 So I'm not worried at all about duration. 0:16:40.480 --> 0:16:43.120 Pretty much every time we speak Stepan, I ask you basically, 0:16:43.160 --> 0:16:44.840 have we couraged cancer yet? So I'm glad that you 0:16:44.880 --> 0:16:46.600 went there because that's been sort of one of the 0:16:46.640 --> 0:16:48.280 big questions and I hope for a lot of the 0:16:49.480 --> 0:16:53.480 mRNA vaccines. You have this melanoma vaccine in the works. 0:16:53.800 --> 0:16:54.960 What more do you have to do. 0:16:54.920 --> 0:16:57.480 To get it sort of set up for the approval 0:16:57.480 --> 0:17:00.400 process to apply for that? And are you using artificial 0:17:00.440 --> 0:17:02.040 intelligence to extracite. 0:17:01.560 --> 0:17:03.560 That great question? 0:17:03.840 --> 0:17:07.920 So if you look at cancer treatment in melanoma, we've 0:17:07.960 --> 0:17:11.320 said that we need to achieve three things to be 0:17:11.359 --> 0:17:15.600 able to talk to regulator about accelerated approval. So the 0:17:15.640 --> 0:17:17.960 face to day ties data we shared on the show 0:17:18.320 --> 0:17:22.480 several times, we see duration. If you remember in December 0:17:22.480 --> 0:17:25.239 we had a three year survival, it was better than 0:17:25.240 --> 0:17:27.960 the two year survival. So the difference between people on 0:17:28.040 --> 0:17:31.760 all treatment and people that are just getting cathedral is 0:17:31.800 --> 0:17:35.600 getting wider. So there's a very strong evidence that the 0:17:35.680 --> 0:17:39.160 drug is working. So that's number one. Number two is 0:17:39.320 --> 0:17:43.400 we need a phase free study to be substantially enrolled, 0:17:43.680 --> 0:17:46.879 and so we are working very actively. Face free study 0:17:46.960 --> 0:17:50.679 started two months earlier than planned last summer and so 0:17:50.720 --> 0:17:54.040 when we are substantially enrolled, we will meet that criteria 0:17:54.760 --> 0:17:56.920 and it could be later this year. And the third 0:17:56.920 --> 0:17:59.399 one is a plant, because of course we need to 0:17:59.480 --> 0:18:03.199 file in the restrection does all the information about the 0:18:03.200 --> 0:18:07.679 manufacturing process BFD, and the day you file is allowed 0:18:07.680 --> 0:18:10.480 to go of course audit your plant. That plant is 0:18:10.520 --> 0:18:12.160 being built. I had the chance to go there two 0:18:12.160 --> 0:18:15.520 weeks ago. The team is working NonStop, scheduling literally by 0:18:15.560 --> 0:18:17.960 the days, a bit like we did during COVID during 0:18:18.000 --> 0:18:22.840 the pandemic, and so I ancipate that potentially sometime next year. 0:18:22.960 --> 0:18:26.080 You know, the if a regulator was willing to look 0:18:26.119 --> 0:18:29.520 at the acceleted approval file, we should have this product 0:18:29.520 --> 0:18:31.600