WEBVTT - Bloomberg Surveillance TV: April 24, 2024 0:00:02.440 --> 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 --> 0:00:37.080 Terminal and the Bloomberg Business app. Black Rocks Kate Moore 0:00:37.120 --> 0:00:40.320 saying this, after a healthy pullback inequities over the last 0:00:40.320 --> 0:00:43.479 few weeks, the pressure on earnings and constructive guidance is 0:00:43.520 --> 0:00:46.640 particularly high. The biggest right tail risk for twenty twenty 0:00:46.680 --> 0:00:50.880 four is that earnings come in much stronger than current forecast. 0:00:50.960 --> 0:00:52.120 Kate is with us around the table. 0:00:52.200 --> 0:00:53.680 Kate, good mornch Good morning. 0:00:53.720 --> 0:00:55.160 It's been too long. It's great to see you in 0:00:55.160 --> 0:00:57.360 person here in New York. Let's talk about that upside 0:00:57.360 --> 0:01:00.000 potential on the big tech names over the next week. 0:01:00.000 --> 0:01:00.840 Ac count great is it? 0:01:01.600 --> 0:01:01.720 So? 0:01:01.920 --> 0:01:04.000 I think the big thing to watch here is not 0:01:04.040 --> 0:01:06.560 what happened in the first quarter. I mean, we want 0:01:06.560 --> 0:01:09.320 to see some monetization on AI, We want to see 0:01:09.360 --> 0:01:12.320 constructive guidance on AI. But I really think it's going 0:01:12.360 --> 0:01:13.920 to be the tone for a management. You guys were 0:01:13.920 --> 0:01:16.000 talking about Tesla a moment ago, and I think this 0:01:16.080 --> 0:01:19.120 was the critical thing turning the stock price there is 0:01:19.160 --> 0:01:21.720 that it sounds like there's a plan, and I think 0:01:21.760 --> 0:01:23.720 there's been a lot of good news priced into a 0:01:23.760 --> 0:01:25.800 lot of the big tech companies. But this is a 0:01:25.880 --> 0:01:27.520 chance to really kind of show me what does the 0:01:27.520 --> 0:01:29.640 rest of twenty twenty four look like, how are we 0:01:29.680 --> 0:01:32.800 thinking about AI spending, what does customer demands look like? 0:01:33.160 --> 0:01:34.280 And then we can go from there. 0:01:34.319 --> 0:01:36.200 Do you say we need a c sweet therapy session 0:01:36.360 --> 0:01:37.560 on anix cos Yeah, we. 0:01:37.520 --> 0:01:40.319 Need to see a constructive happy face from all of 0:01:40.360 --> 0:01:41.000 these leaders. 0:01:41.240 --> 0:01:42.520 By the way, a funny bit. 0:01:43.160 --> 0:01:45.840 We've talked about this before, but we always want to 0:01:45.840 --> 0:01:48.720 listen to CEOs and say they're kind of the strategists, 0:01:48.720 --> 0:01:51.320 are the ones thinking big picture. But it's also really 0:01:51.360 --> 0:01:53.920 really important to listen to the CFOs who tend to 0:01:53.960 --> 0:01:56.800 get really down into the dirt. And so I'm going 0:01:56.800 --> 0:01:59.040 to be listening to both for both the strategy as 0:01:59.040 --> 0:02:01.040 well as the hard data well happy talk. 0:02:00.920 --> 0:02:03.480 Work for the likes of Meta or even Alphabet. 0:02:03.520 --> 0:02:05.800 Given how much the shares have gained so far this year, 0:02:06.320 --> 0:02:08.640 I think we've taken some pressure off of those stocks 0:02:08.639 --> 0:02:11.079 in recent weeks, as you know, some prices have come down, 0:02:11.120 --> 0:02:12.880 and we've seen kind of growth in general as a 0:02:12.919 --> 0:02:15.640 factor fade a little bit since the end of the 0:02:15.680 --> 0:02:19.440 first quarter. That said, they really do need to deliver. 0:02:19.720 --> 0:02:21.839 I think these are well owned names. They are well 0:02:21.919 --> 0:02:22.480 loved names. 0:02:22.520 --> 0:02:24.800 They are names that are expected to really lead the market, 0:02:25.120 --> 0:02:27.480 not just through twenty twenty twenty four, but through the rest. 0:02:27.240 --> 0:02:27.960 Of this cycle. 0:02:28.400 --> 0:02:31.520 So I think it's possible for them to get people excited, 0:02:31.600 --> 0:02:34.400 but we recognize that they're well held, well owned going 0:02:34.480 --> 0:02:35.120 into reporting. 0:02:35.440 --> 0:02:38.040 Moving outside of big tech, your idea here is a 0:02:38.040 --> 0:02:40.920 really fascinating one that the biggest risk is upside risk, 0:02:40.960 --> 0:02:43.560 right that we actually get better than expected earnings data 0:02:43.600 --> 0:02:46.480 and that could fuel a rally among a lot of 0:02:46.480 --> 0:02:49.320 pessimism still out there. Why do you think that's the 0:02:49.320 --> 0:02:51.760 biggest upside risk at a time where it seems like 0:02:52.160 --> 0:02:53.960 there's still a lot of bullish sentiment right now. 0:02:54.360 --> 0:02:56.240 So I think it's about the mechanics of how we 0:02:56.280 --> 0:02:58.560 get to the bottom line that really matter here, and 0:02:58.639 --> 0:03:01.519 in this case, I want everyone to have some confidence 0:03:01.560 --> 0:03:04.760 in US companies doing the right thing, continuing to manage 0:03:04.800 --> 0:03:08.160 their cost continuing to manage their labor force, thinking really 0:03:08.520 --> 0:03:10.919 long and hard about where they're putting their dollars in 0:03:10.960 --> 0:03:13.960 each businesses, so that they can really deliver on earnings 0:03:14.240 --> 0:03:17.040 even an environment where revenue growth is just okay. And 0:03:17.040 --> 0:03:18.680 I think we've heard that from some of the companies 0:03:18.680 --> 0:03:21.399 that have reported so far. It's really the bottom line 0:03:21.400 --> 0:03:23.760 I want to see companies deliver on. And we saw 0:03:23.960 --> 0:03:28.040 actually since the earnings recession ended that this focus on 0:03:28.120 --> 0:03:31.560 cost control and this focus on delivering earnings has been 0:03:31.600 --> 0:03:32.200 front and center. 0:03:32.360 --> 0:03:35.480 This doesn't speak of some sort of screaming hot economy though. 0:03:35.760 --> 0:03:37.840 Yeah, I don't think we want a screaming hot economy 0:03:37.840 --> 0:03:40.720 for a variety of different reasons. We want a solid economy, 0:03:40.840 --> 0:03:44.280 we want solid demand, we want rates and to be stable, 0:03:44.280 --> 0:03:46.720 and we want certainty or a light least lack of 0:03:46.840 --> 0:03:50.200 uncertainty when it comes to policy. I think that's an 0:03:50.280 --> 0:03:53.920 environment that corporates are looking to kind of capitalize on 0:03:54.040 --> 0:03:55.840 and that they do well on and one thing we're 0:03:55.840 --> 0:03:57.720 not mentioning here is the election year, and of course 0:03:57.760 --> 0:04:00.360 the uncertainty around the election outcome and what that might 0:04:00.360 --> 0:04:03.200 mean for policy is weighing on companies a little bit. 0:04:03.440 --> 0:04:05.480 So if we have stability in these other areas and 0:04:05.560 --> 0:04:09.200 growth and demand and policy rates are relatively stable, I 0:04:09.240 --> 0:04:11.240 think that gives them some confidence to continue to do 0:04:11.280 --> 0:04:13.360 these cost cutting and really managing their margins. 0:04:13.400 --> 0:04:16.159 How are CEOs thinking about the election? Imagine on these 0:04:16.240 --> 0:04:18.280 earnings call they get asked about it, and we have 0:04:18.320 --> 0:04:21.440 to really walk a very fine line, be very careful. 0:04:21.720 --> 0:04:25.719 Yeah, I mean, I think that they're being deliberately evasive 0:04:26.120 --> 0:04:28.359 because they don't really know what to expect. And we 0:04:28.440 --> 0:04:31.520 know that there's a huge amount of different policy outcomes 0:04:31.640 --> 0:04:35.279 for both administrations depending on who wins in November, because 0:04:35.279 --> 0:04:37.680 a lot is going to depend on Congress. So they 0:04:37.680 --> 0:04:39.599 don't want to bank too much one way or another 0:04:40.000 --> 0:04:43.880 on support or on challenges. They're just trying to kind 0:04:43.880 --> 0:04:45.479 of manage over the next few quarters. 0:04:45.520 --> 0:04:47.280 But given the fact that we do know who these 0:04:47.279 --> 0:04:51.360 two individuals are, Yeah, they're basically two incumbents up against 0:04:51.400 --> 0:04:54.120 each other. Does that help executives plan for the future. 0:04:54.720 --> 0:04:57.360 I think we understand big picture some of the main 0:04:57.520 --> 0:05:01.279 tenets of each of these policy programs. That said, it's 0:05:01.360 --> 0:05:03.200 really hard to say what the details are going to be, 0:05:03.200 --> 0:05:05.320 what the timing of any changes might be. And I'm 0:05:05.360 --> 0:05:07.479 going to go back to this Congress point again. There's 0:05:07.480 --> 0:05:10.159 a limitation to how much an executive can get done, 0:05:10.320 --> 0:05:13.039 a chief executive in this case, without. 0:05:12.760 --> 0:05:13.919 Support from Congress. 0:05:14.040 --> 0:05:16.400 So I'm going to be watching, frankly, the Senate and 0:05:16.440 --> 0:05:19.400 House races very closely going into the fall. 0:05:19.200 --> 0:05:20.479 Which is the reason why a lot of people are 0:05:20.480 --> 0:05:23.320 looking for some sort of split in terms of Republican 0:05:23.480 --> 0:05:26.400 and Democrat on the different sides of the government. I 0:05:26.400 --> 0:05:28.120 am curious about what you said, which is at least 0:05:28.120 --> 0:05:29.200 stable rates. 0:05:29.480 --> 0:05:30.640 Which raises this question. 0:05:30.920 --> 0:05:33.880 If the Fed holds rates at this level, is that 0:05:33.960 --> 0:05:36.839 fine as long as there isn't any volatility, that that's 0:05:36.880 --> 0:05:40.039 going to be enough to potentially fuel a pretty significant 0:05:40.080 --> 0:05:40.960 rally in equities. 0:05:41.400 --> 0:05:45.000 I think stability and certainty are things that equity markets love, 0:05:45.320 --> 0:05:47.200 right and when it comes to rates, would be nice 0:05:47.200 --> 0:05:49.200 if we saw some raycots, sure, but we also know 0:05:49.279 --> 0:05:52.760 that eighty percent of US large cap debt is long 0:05:52.839 --> 0:05:53.479 term fixed. 0:05:53.520 --> 0:05:55.320 We don't really have to worry about this. 0:05:55.200 --> 0:05:57.119 In twenty twenty four or even the beginning of twenty 0:05:57.160 --> 0:05:59.839 twenty five. Well, we do want to kind of, you know, 0:05:59.880 --> 0:06:03.120 be able to incorporate is you expectations for the next 0:06:03.120 --> 0:06:06.800 couple quarters and if we're constantly adjusting and it's will 0:06:06.839 --> 0:06:09.240 the FED be cutting or will they not? I think 0:06:09.240 --> 0:06:12.120 that holds back some decisions that corporate leaders need to 0:06:12.120 --> 0:06:15.279 make which would be supportive for growth. So stability is 0:06:15.360 --> 0:06:17.720 better than any outcome, I would. 0:06:17.480 --> 0:06:19.560 Say, Well, to Enry's point, it's hard to talk about 0:06:19.600 --> 0:06:21.440 stability at a time where we can't really come up 0:06:21.440 --> 0:06:23.600 with any clear narrative. When we're talking about the potential 0:06:23.600 --> 0:06:26.000 for tariffs and we're talking about geopolitical risk. I mean, 0:06:26.279 --> 0:06:29.080 how much does that sort of give you some pause 0:06:29.160 --> 0:06:31.360 in terms of the degree of bullishness and where you're 0:06:31.400 --> 0:06:33.640 looking to hedge just on the margins. 0:06:33.760 --> 0:06:35.680 Well, I think the thing I'm watching in regards to 0:06:35.760 --> 0:06:39.000 that uncertainty, the geopolitical uncertainty, and perhaps the policy the 0:06:39.040 --> 0:06:42.400 government policy uncertainty is what happens to capital expenditure, and 0:06:42.440 --> 0:06:46.600 particularly if companies just go through with regular maintenance necessary 0:06:46.640 --> 0:06:50.680 capex and hold off on real expansionary Capex until they 0:06:50.680 --> 0:06:52.800 get through the US election, But of course we know 0:06:52.839 --> 0:06:55.000 it's not just the US election. They're elections all over 0:06:55.040 --> 0:06:57.960 the world of this year, and frankly, you know, US 0:06:58.080 --> 0:07:01.960 companies are mostly or many of the large cab ones 0:07:02.240 --> 0:07:05.840 are geographically dispersed, right, So they have big businesses in 0:07:05.920 --> 0:07:08.599 many different regions, so policies in each of those regions 0:07:08.640 --> 0:07:11.080 will affect their decisions. So I'm kind of waiting to 0:07:11.080 --> 0:07:13.480 see how do they talk about capital expenditure. Are they 0:07:13.520 --> 0:07:16.720 waiting to get more clarity on the political side, or 0:07:16.760 --> 0:07:19.680 do they see such a long term secular tailwind to 0:07:19.720 --> 0:07:22.360 whatever this project is that they're willing to spend despite 0:07:22.400 --> 0:07:23.560 the uncertainty. 0:07:23.440 --> 0:07:27.600 Or international companies better hedged or worse hedged right now, 0:07:27.840 --> 0:07:30.880 given the fact that they do face different political regimes 0:07:31.200 --> 0:07:34.239 and frankly different economic realities, well, it's. 0:07:34.160 --> 0:07:38.640 Very very challenging to manage a global multinational corporation. Regulations here, 0:07:38.760 --> 0:07:42.320 political change, there, change in demand, consumer behavior. 0:07:42.640 --> 0:07:43.600 So I get all of that. 0:07:43.760 --> 0:07:47.920 I like the geographic diversity though of these multinationals. I 0:07:47.960 --> 0:07:49.960 think that's going to really lend strength to them through 0:07:50.040 --> 0:07:52.680 multiple parts of the business cycle and through all these elections. 0:07:52.760 --> 0:07:54.559 You like Japan. Can we finish on Japan? 0:07:54.720 --> 0:07:55.160 We can? 0:07:55.480 --> 0:07:58.120 Does the effects market matter? Sort of preoccupied with the 0:07:58.160 --> 0:08:00.440 prospect of breaking through one point fifty five, which with 0:08:00.880 --> 0:08:02.880 about that far away from doing Does that matter? 0:08:03.640 --> 0:08:06.280 I mean it matters, But I think there's more on 0:08:06.320 --> 0:08:09.040 the ground that we like about the Japanese. 0:08:08.760 --> 0:08:10.760 Most so we hear can you come for the details? 0:08:10.840 --> 0:08:12.280 Yeah, I mean I think that we're seeing a change 0:08:12.280 --> 0:08:13.560 in consumption. I think, for the. 0:08:13.520 --> 0:08:15.920 First time in a very long time, over ten years, 0:08:16.080 --> 0:08:19.160 a real shift, and how corporates are being forced to 0:08:20.120 --> 0:08:23.040 behave which is much more shareholder friendly, you know what. 0:08:23.160 --> 0:08:26.640 I like to see more Japanese individual investors buy into 0:08:26.640 --> 0:08:27.080 the market. 0:08:27.160 --> 0:08:28.880 Absolutely, we don't want this just to. 0:08:28.800 --> 0:08:32.320 Be a market that's participated in by international investors. But 0:08:32.440 --> 0:08:34.800 I think both the macro side and some of the 0:08:34.840 --> 0:08:37.079 structural bits in the market are quite supportive. 0:08:37.520 --> 0:08:39.520 The currency could be supportive as well, but. 0:08:39.480 --> 0:08:42.040 I don't want to base my thesis on that because frankly, 0:08:42.400 --> 0:08:44.840 I don't have a great track record on FX trading. 0:08:45.120 --> 0:08:47.240 Yeah, FX is difficult, but what I hear from you 0:08:47.360 --> 0:08:48.959 is this is not just some sort of short term 0:08:49.000 --> 0:08:51.880 tactical trade. This is fundamental that's longer term. 0:08:51.920 --> 0:08:54.680 We believe it's fundamental, and so we're buying really high 0:08:54.760 --> 0:08:57.960 quality companies that benefit both from things like you know, 0:08:58.000 --> 0:09:01.360 the the macro demand global So this is where geographic 0:09:01.360 --> 0:09:04.280 diversity really helps, as well as companies that are going 0:09:04.360 --> 0:09:06.559 to kind of come up in the market as they 0:09:06.559 --> 0:09:07.920 make these big corporate changes. 0:09:07.960 --> 0:09:19.600 Okay, this was awesome on the dates of this morning, 0:09:19.640 --> 0:09:21.800 the dates of tomorrow and going into the FED next week, 0:09:21.800 --> 0:09:23.600 and please to say that with us is Tiffany Wildeck 0:09:23.760 --> 0:09:26.120 of Pimco. Tiffany, wonderful to catch up with you again. 0:09:26.280 --> 0:09:28.040 Just had a bit of economic datesa this morning. Going 0:09:28.040 --> 0:09:30.680 get into GDP tomorrow. What are you expecting from the 0:09:30.679 --> 0:09:32.720 first quarter and how do you think everything we've seen 0:09:32.760 --> 0:09:34.800 in the first quarter of this year will shape the 0:09:34.840 --> 0:09:36.000 conversation next week. 0:09:38.080 --> 0:09:40.719 Yeah, so we're looking for a pretty strong report. I 0:09:40.760 --> 0:09:43.040 think the Bloomberg consensus, as you mentioned, is two and 0:09:43.080 --> 0:09:45.439 a half, but our lene as well is on the 0:09:45.480 --> 0:09:47.520 higher side of that. And I think the more important 0:09:47.559 --> 0:09:49.520 thing that we'll be focused on, you know, is just 0:09:49.600 --> 0:09:52.760 the core measure of GDP final domestic demand growth which 0:09:52.800 --> 0:09:53.719 economists call it. 0:09:54.080 --> 0:09:55.439 That's going to be incredibly strong. 0:09:55.520 --> 0:10:00.280 That strips out the volatyle trade in inventories categories, and 0:10:00.320 --> 0:10:02.160 that looks like that's going to be above three, you know. 0:10:02.200 --> 0:10:05.000 And the thing that we've been really highlighting and focusing 0:10:05.000 --> 0:10:06.600 in is that will be the third quarter in a 0:10:06.679 --> 0:10:10.319 row that we've gotten core GDP growth of above three, 0:10:10.679 --> 0:10:14.000 and that's something that we haven't seen since twenty fourteen, 0:10:14.200 --> 0:10:17.400 absent the pandemic related rebounds. So all of this is 0:10:17.400 --> 0:10:19.920 to say is that GDP in the United States is 0:10:19.960 --> 0:10:25.040 incredibly strong, and that strength has continued after twenty twenty three. 0:10:25.080 --> 0:10:28.240 We've seen strong momentum going into twenty twenty four. All 0:10:28.240 --> 0:10:32.040 of that suggests that inflationary pressures in the economy, you know, 0:10:32.080 --> 0:10:34.520 we're running, we're running at a hot economy here, and 0:10:34.520 --> 0:10:38.000 it's not really consistent with inflationary pressures further moderating. 0:10:38.120 --> 0:10:39.600 Do you think that we'll shape the language and the 0:10:39.600 --> 0:10:42.360 statement next Wednesday when we open that up at two 0:10:42.360 --> 0:10:44.200 pm Eastern time, It's that going to look any different? 0:10:45.800 --> 0:10:46.040 Yeah? 0:10:46.120 --> 0:10:47.960 I mean, I certainly I think you could see some 0:10:48.040 --> 0:10:50.280 changes to the statement, But I think what markets will 0:10:50.320 --> 0:10:52.400 be more focused on is what Powell says in the 0:10:52.440 --> 0:10:55.960 press conference and his you know, in the past. At 0:10:56.040 --> 0:11:01.600 least Powell has made reference to the SEP projections prior 0:11:01.760 --> 0:11:05.240 SEP projections at a non SUP meeting and given us 0:11:05.280 --> 0:11:07.400 some hints on how he thinks they could change. And 0:11:07.400 --> 0:11:10.439 we think that's potentially what he could do now set 0:11:10.480 --> 0:11:13.400 the stage for more revisions to the SEP that we're 0:11:13.400 --> 0:11:15.240 going to get in June, you know, say that the 0:11:15.280 --> 0:11:18.319 inflation forecasts are likely going to have to be revised up, 0:11:18.640 --> 0:11:19.719 and then as a result of. 0:11:19.679 --> 0:11:21.000 That sort of hint at the. 0:11:20.880 --> 0:11:23.760 Fact that you could take out maybe one or even 0:11:23.800 --> 0:11:27.000 two cuts in the forecast for twenty twenty four. 0:11:27.320 --> 0:11:29.000 Tiffany, I hate to do this. 0:11:29.280 --> 0:11:32.199 I feel kind of a little bit dirty doing this, but. 0:11:32.400 --> 0:11:34.800 Is this a pivot to the pivot that we got 0:11:34.800 --> 0:11:35.439 in December? 0:11:37.920 --> 0:11:40.160 Well, it does seem like in some sense the pivot 0:11:40.240 --> 0:11:43.640 party from December is over, you know, and I think 0:11:43.640 --> 0:11:46.199 that'says a result of the inflation prints that we've seen, 0:11:46.920 --> 0:11:49.560 you know, and again, just the economy is just incredibly strong, 0:11:49.640 --> 0:11:52.000 you know. We have argued you know that, you know, 0:11:52.040 --> 0:11:55.080 the so called last mile on the inflation in the 0:11:55.080 --> 0:11:57.800 inflation race is going to be the toughest, you know, 0:11:57.800 --> 0:12:00.360 and that's just because we have a strong economy, labor 0:12:00.400 --> 0:12:03.120 markets are tight, and that and that just is likely 0:12:03.160 --> 0:12:05.719 to result in inflation hanging above their target. And really 0:12:05.800 --> 0:12:08.520 the question is is, you know, are they okay with that? 0:12:08.920 --> 0:12:11.640 And it seems like, you know, there is some threshold 0:12:12.280 --> 0:12:14.840 maybe we think it's three percent where they won't be 0:12:14.920 --> 0:12:17.439 okay with that, but you know, above three it's okay. 0:12:18.080 --> 0:12:20.040 But again, you know, it's it's a bit you know, 0:12:20.120 --> 0:12:21.760 monetary policy is a bit of an art and a 0:12:21.840 --> 0:12:24.600 science here, so you know, I think the art is 0:12:24.640 --> 0:12:26.560 that you know, they don't really need to be cutting, 0:12:26.559 --> 0:12:29.120 they shouldn't be in a rush, and so really it's 0:12:29.160 --> 0:12:31.520 up to them to choose when they start to do it. 0:12:31.600 --> 0:12:33.559 You said, the pivot party is over, and when people 0:12:33.559 --> 0:12:36.240 were talking about the pivot party, it was including. 0:12:36.040 --> 0:12:37.800 A real rally in risk assets. 0:12:37.840 --> 0:12:40.760 So I wonder, okay, pivot party is over, the earnings 0:12:40.760 --> 0:12:43.319 party just getting started. Is this basically an economy that 0:12:43.400 --> 0:12:45.720 can handle where we're at right now? And that's basically 0:12:45.760 --> 0:12:47.840 what we're hearing from a lot of people around this table. 0:12:49.600 --> 0:12:51.920 Yeah, I mean it's certainly if you not only obviously, 0:12:51.960 --> 0:12:54.440 if you the equity market. We look at equity risk 0:12:54.520 --> 0:12:56.520 premiums and even though you've seen some weakness in the 0:12:56.520 --> 0:13:00.840 equity market, you know, the additional yield over treasuries, earning 0:13:00.920 --> 0:13:03.160 ziel that you get over treasuries is still looking okay. 0:13:03.840 --> 0:13:07.000 There are still looking rather narrow in the equity market. 0:13:07.520 --> 0:13:11.720 So from evaluation perspective, you know, equities you know, still look. 0:13:11.720 --> 0:13:12.480 Somewhat rich here. 0:13:13.160 --> 0:13:14.640 But but nevertheless, I would just say, if we look 0:13:14.679 --> 0:13:17.079 at the GDP data, the data that I focus on more, 0:13:17.800 --> 0:13:21.679 we're seeing a reacceleration in cyclical sectors of the economy, 0:13:21.760 --> 0:13:26.480 that is, residential investment, you know, even in cap backs 0:13:26.520 --> 0:13:30.280 and things like that. Corporate profits, Nippu corporate profits have 0:13:30.280 --> 0:13:33.280 have reaccelerated as well. And this is at these high 0:13:33.360 --> 0:13:35.720 level of interest rates. So it does seem like the 0:13:35.760 --> 0:13:38.320 peak effects of the monetary policy drags, you know, they 0:13:38.360 --> 0:13:41.560 are increasingly behind us. And that suggests that, yeah, maybe 0:13:41.559 --> 0:13:45.280 the economy can withstand rates at these higher levels. 0:13:45.000 --> 0:13:48.840 Which raises this question how much do financial conditions frankly, 0:13:49.160 --> 0:13:52.600 how rich stocks are, how well bid credit markets are, 0:13:52.840 --> 0:13:56.200 how much does that influence how long inflation can be 0:13:56.280 --> 0:13:57.960 persistently above the FEDS target. 0:13:59.600 --> 0:14:02.000 Yeah, I think I think overall, you know, the federal 0:14:02.040 --> 0:14:05.360 reserve where monetary policy works through not only the policy rate, 0:14:05.400 --> 0:14:08.040 but but a broader context of financial. 0:14:07.640 --> 0:14:08.800 Conditions, you know. 0:14:09.000 --> 0:14:11.760 And the point that we've been making lately is that 0:14:11.920 --> 0:14:15.000 you need financial conditions to tighten here in order to 0:14:15.040 --> 0:14:17.560 cool the economy down. And the question is how does 0:14:17.600 --> 0:14:20.920 the FED engineer that. Now, partly they can engineer that 0:14:20.960 --> 0:14:23.240 through just staying on hold. The bond market is still 0:14:23.280 --> 0:14:26.440 pricing in cuts, So the longer they push that out 0:14:26.480 --> 0:14:29.000 stay on hold, you know, that should sort of mechanically 0:14:29.040 --> 0:14:31.920 tighten financial conditions. And I think that's what the FED 0:14:32.000 --> 0:14:34.440 will try to do and just see if that's enough, 0:14:34.600 --> 0:14:36.920 you know, and maybe rates on hold longer will get 0:14:36.920 --> 0:14:39.720 them that financial conditions tightening that they need in order 0:14:39.720 --> 0:14:41.960 to cool things down a bit here, you know. But 0:14:42.200 --> 0:14:43.800 of course if not, then they'll have to find other 0:14:43.840 --> 0:14:45.800 ways to try to tighten a little bit more. 0:14:46.080 --> 0:14:47.840 I know we're all focused on inflation this week, but 0:14:47.840 --> 0:14:49.600 I want to ask you about the jobs market because 0:14:49.600 --> 0:14:52.280 in your note you talk about elevated immigration boosting boats 0:14:52.280 --> 0:14:55.400 supply and demand. What happens if we still don't have 0:14:55.480 --> 0:14:58.000 those same levels of immigration, Whether or not it's executive 0:14:58.080 --> 0:15:00.600 order that Henrietta Trace says to be coming out of 0:15:00.600 --> 0:15:04.200 the Biden administration or a whole new paradigm next year, 0:15:04.240 --> 0:15:06.600 if we get an entire different administration. 0:15:08.320 --> 0:15:11.960 Yeah, so that will result in growth slowing for sure, 0:15:12.760 --> 0:15:16.800 because you know, because immigration boosts both supply and demand, 0:15:17.240 --> 0:15:21.040 the effects on inflation are are more nuanced, we would argue, 0:15:21.200 --> 0:15:23.880 and they're they're less clear. So you know, what we 0:15:23.920 --> 0:15:27.880 could see is if you have immigration that is falling 0:15:27.920 --> 0:15:30.880 without a lot of asylum seekers cross you know, across 0:15:30.880 --> 0:15:34.240 our borders over the last couple of years, we estimate 0:15:34.320 --> 0:15:38.160 that that's contributed around point five fifty basis points to 0:15:38.240 --> 0:15:41.160 Hunter basis points to GDP growth. So if you don't 0:15:41.200 --> 0:15:45.040 get that, we will absolutely see growth slowing. But in 0:15:45.120 --> 0:15:48.000 terms of the inflationary effects, you know, that's certainly less clear. 0:15:48.400 --> 0:15:50.240 You know, now there are folks that are in the 0:15:50.280 --> 0:15:54.040 economy now, they have workers permits, they're waiting for their 0:15:54.080 --> 0:15:56.720 asylum hearings. You know, I guess if there's policies to 0:15:56.760 --> 0:15:59.120 try to you know, make them wait in Mexico or 0:15:59.320 --> 0:16:01.920 other places like that, you know that that growth drag 0:16:01.960 --> 0:16:04.560 will be even more you know, but it'll just we'll 0:16:04.600 --> 0:16:05.840 just have to see how that plays out. 0:16:05.960 --> 0:16:07.800 It's infinity. As we were talking and we're talking about 0:16:07.880 --> 0:16:10.520 US strength, how pronounced there is, how much longer it 0:16:10.560 --> 0:16:12.600 could last. I was just thinking of your sycl care 0:16:12.600 --> 0:16:15.120 outlook that you helped lead and readies through that note, 0:16:15.200 --> 0:16:17.600 the amount of divergence that we can expect. What about 0:16:17.600 --> 0:16:20.240 everybody else? What is the growth back drop going to 0:16:20.320 --> 0:16:22.600 look like the US versus the rest of the world. 0:16:24.760 --> 0:16:27.760 Yeah, well, well, ultimately, you know, we we still think that, 0:16:27.880 --> 0:16:31.880 you know, there is some durability in this US exceptionalism story. 0:16:32.400 --> 0:16:34.840 You know that started in twenty twenty three, you know, 0:16:34.840 --> 0:16:38.080 and really the factors that we believe contributed to that 0:16:38.720 --> 0:16:41.960 was just the fact that the US government fiscal stimulus 0:16:42.000 --> 0:16:44.040 during the pandemic was much larger than it was in 0:16:44.080 --> 0:16:46.480 other developed markets. We've also seen you know what I 0:16:46.520 --> 0:16:49.920 call less mean reversion in our federal government fiscal deficits. 0:16:49.960 --> 0:16:52.640 Since then, they've been kind of structurally hanging around six 0:16:52.720 --> 0:16:56.040 to seven percent. Everybody else has managed to get, you know, 0:16:56.120 --> 0:16:58.880 more fiscal retrenchment. The other thing for the United States 0:16:58.920 --> 0:17:02.440 is that we've seen less passed through of monetary policy, 0:17:02.880 --> 0:17:05.280 you know, via the interest rates that people actually pay. 0:17:05.440 --> 0:17:08.119 We have a large stock of mortgages that are you know, 0:17:08.200 --> 0:17:12.640 low duration, low interest pay, long duration, low interest paying. 0:17:12.720 --> 0:17:15.119 That's just not you know, the consumer is not feeling 0:17:15.160 --> 0:17:17.840 really the effects of higher mortgage rates in the United States. 0:17:17.920 --> 0:17:18.760 They are elsewhere. 0:17:19.320 --> 0:17:21.639 So we think these things can can continue, you know, 0:17:21.680 --> 0:17:24.080 at least through our cyclical horizon. You know. I think 0:17:24.240 --> 0:17:28.360 structurally the US economy is also just delivering better productivity 0:17:28.400 --> 0:17:31.240 growth than some of our peers, and I think that 0:17:31.359 --> 0:17:34.640 can certainly continue, you know, versus Europe, for example, where 0:17:34.640 --> 0:17:37.600 they've had you know, a pretty big energy shock that's 0:17:37.600 --> 0:17:40.439 made them somewhat less competitive. Obviously, you know, weakness in 0:17:40.560 --> 0:17:43.760 China's also had a bigger impact on Europe. You know. 0:17:43.760 --> 0:17:45.960 But all of these things in our minds can you know, 0:17:46.000 --> 0:17:49.399 can contribute to this US exceptionalism story, and eventually, you know, 0:17:49.440 --> 0:17:51.920 that's also going to create divergence and monetary policy. 0:17:51.960 --> 0:17:52.240 We think. 0:17:52.480 --> 0:17:54.879 Tiffinitely enjoyed this and enjoyed the not as well. Tiffany 0:17:54.920 --> 0:18:07.720 Wolding there of Pincott to trace a Veder Parmas joined 0:18:07.760 --> 0:18:09.960 us now to break this down head before we race 0:18:10.000 --> 0:18:11.720 off into the detail. I just want to sit on 0:18:11.760 --> 0:18:14.119 this just for a moment. We've talked so much about 0:18:14.119 --> 0:18:16.800 the division down in Washington. Only a few months ago, 0:18:16.920 --> 0:18:19.800 some people thought the prospect of this happening was almost unthinkable. 0:18:20.119 --> 0:18:23.119 Just how united did Washington become on this issue in 0:18:23.160 --> 0:18:23.960