WEBVTT - Bloomberg Surveillance TV: September 13, 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 --> 0:00:18.439 with Lisa Bromwitz and am Marie Hordern. Join us each 0:00:18.520 --> 0:00:21.400 day for insight from the best in markets, economics, and 0:00:21.440 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.800 --> 0:00:27.440 are live on Bloomberg Television weekday mornings from six to 0:00:27.520 --> 0:00:31.040 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.520 --> 0:00:37.159 Bloomberg Terminal and the Bloomberg Business App. Max Ketner of 0:00:37.360 --> 0:00:39.720 HSBC writing, we don't think it's time to pull the 0:00:39.760 --> 0:00:42.680 plug on risk. We therefore add to US equities as 0:00:42.800 --> 0:00:47.080 Q three warnings, or rather earnings expectations. Also don't look 0:00:47.159 --> 0:00:49.440 challenging to be. Max joins us now for more Max 0:00:49.479 --> 0:00:49.920 Good Mornings. 0:00:49.960 --> 0:00:51.040 You, sir, good morning. 0:00:51.120 --> 0:00:52.720 That's the equity call. I want to get to the 0:00:52.760 --> 0:00:54.400 credit call. There was a shift on high yeal FEME 0:00:54.440 --> 0:00:57.000 in the last week. You move that overweight from max 0:00:57.040 --> 0:00:58.480 overweight to where are we now? 0:00:58.600 --> 0:01:01.720 Slight overweight? Slight overweight from exciting to boring. 0:01:01.840 --> 0:01:03.600 So what's that shift about? Let's start there. 0:01:03.920 --> 0:01:06.720 I think look, when we look at high yield, it's 0:01:06.720 --> 0:01:09.280 not like it's bearish, So certainly in your high yeld 0:01:09.280 --> 0:01:11.760 things look still pretty okay. Valiation wise, it looks a 0:01:11.760 --> 0:01:14.520 bit more attractive. I think in you as high yeld 0:01:14.560 --> 0:01:17.680 there's partly a story around valiations. You know you have 0:01:17.720 --> 0:01:20.400 high yield spreads around three twenty. There's not an awful 0:01:20.440 --> 0:01:22.240 lot to go anymore. There's not an awful lot of 0:01:22.280 --> 0:01:24.480 spread tightening that you can still see. So at some 0:01:24.560 --> 0:01:27.120 point it gets around pure carry it and then you 0:01:27.200 --> 0:01:29.720 sort of okay, is that still the best place where 0:01:29.720 --> 0:01:32.400 I get the carry? Or is other places better such 0:01:32.440 --> 0:01:35.000 as EUM local debt for example, where perhaps you know 0:01:35.080 --> 0:01:36.000 you get higher carry. 0:01:36.000 --> 0:01:37.760 It's a bit sure, it's sort of equal. 0:01:38.000 --> 0:01:41.560 Similarly short duration, and it looks a little bit more 0:01:41.560 --> 0:01:45.000 attractive now given how much has been priced in since April, 0:01:45.040 --> 0:01:47.680 they're similar to the fair and I guess you know, 0:01:48.040 --> 0:01:50.080 when we look at it from a total return perspective 0:01:50.120 --> 0:01:51.880 as well. In high yields, if you get now these 0:01:51.880 --> 0:01:53.800 sort of ten eleven cuts priced and by the end 0:01:53.800 --> 0:01:56.080 of this year, if you get just a few priced 0:01:56.080 --> 0:01:59.480 out right, let's say compare high yield to equities, then 0:01:59.800 --> 0:02:01.520 if if you're a long equities, now, if you're long 0:02:01.600 --> 0:02:03.280 the S and P, do you care whether they cu't 0:02:03.320 --> 0:02:05.440 ten eleven times by the end of the year or 0:02:05.680 --> 0:02:08.120 they can't seven eight times by the end of next year. 0:02:08.240 --> 0:02:11.600 Not really right, That's not really the big tail risk anymore. 0:02:11.639 --> 0:02:14.639 The big tail risk, particularly in April or in September 0:02:14.680 --> 0:02:17.480 October last year, was they're not going to cut at all, 0:02:17.639 --> 0:02:19.920 or they may even have to hike. The tail risk 0:02:19.960 --> 0:02:22.560 now is well, maybe I'll do only four or five, 0:02:22.680 --> 0:02:25.360 but they will be cutting. So for equities it doesn't matter. 0:02:25.400 --> 0:02:27.720 For high yel that matters because obviously the front end 0:02:27.760 --> 0:02:28.480 of the curve goes up. 0:02:28.520 --> 0:02:30.320 Well, doesn't it matter for em as well? Can we 0:02:30.360 --> 0:02:31.760 get into EM a little bit more? What are the 0:02:31.760 --> 0:02:34.079 assumptions you're making on rates on the US STARLA to 0:02:34.120 --> 0:02:34.640 make that cool? 0:02:34.840 --> 0:02:35.040 Yeah? 0:02:35.080 --> 0:02:37.920 I do think however that in EM again, valiations are 0:02:37.960 --> 0:02:40.079 a little bit more enticing if you look at EMD 0:02:40.240 --> 0:02:42.520 spreads in particular, you know, year today, so there's sort 0:02:42.520 --> 0:02:45.840 of flattage. Of course, there's been some index composition changes 0:02:45.840 --> 0:02:48.880 as well, yes, of course, but from a valiation perspective, 0:02:48.960 --> 0:02:51.720 certainly there's a bit more juice left compared to you 0:02:51.800 --> 0:02:54.799 as high yields. So we're really at the stage now 0:02:54.880 --> 0:02:57.760 where it's not really bearers about high yield and much 0:02:57.800 --> 0:02:59.919 more bullish on the other stuff. It's a bit like, okay, 0:03:00.320 --> 0:03:03.760 you're really harvesting that carry. Where's the carry best across 0:03:03.800 --> 0:03:05.000 all the epic classes? 0:03:05.040 --> 0:03:07.400 How much is this just a revival of the fomo trade? 0:03:07.520 --> 0:03:10.040 Essentially look for the biggest return and go, And that's 0:03:10.120 --> 0:03:12.079 essentially because the FED is cutting rates and so. 0:03:12.360 --> 0:03:14.359 Yeah, yeah, pretty much. 0:03:14.360 --> 0:03:16.799 I think it's it's sort of the you know, we 0:03:16.800 --> 0:03:18.520 were saying in twenty I think it was twenty twenty 0:03:18.520 --> 0:03:21.040 one that it's all pretty much a yolo world, right, 0:03:21.080 --> 0:03:23.600 and it was sort of the return to Yola. You 0:03:23.639 --> 0:03:25.840 could argue that's sort of what we're seeing, for example 0:03:26.080 --> 0:03:28.359 this week. But let's be honest, we could also sit 0:03:28.560 --> 0:03:30.160 maybe by the end the next week, we could sit 0:03:30.200 --> 0:03:32.919 here and you guys talk about one and a half trillion. 0:03:32.600 --> 0:03:33.560 Being wiped out again. 0:03:33.720 --> 0:03:36.200 Like if we had had this chat last Friday, we 0:03:36.240 --> 0:03:38.320 wouldn't be that upbeat. No, we would all be like, 0:03:38.360 --> 0:03:40.800 oh my god, is this recession? And you know, are 0:03:40.800 --> 0:03:43.280 we closer to the end now and the start of 0:03:43.280 --> 0:03:46.040 a bear market, and what is commodities trying. 0:03:45.840 --> 0:03:47.640 To tell us and all this sort of stuff, And 0:03:47.680 --> 0:03:50.720 now we sit there and we're like, yolo, yeah, everything's great. 0:03:51.000 --> 0:03:53.000 So you know, this is how much it shifts within 0:03:53.080 --> 0:03:54.160 a week, if we're honest. 0:03:54.200 --> 0:03:56.000 We were having a conversation to start the show about 0:03:56.000 --> 0:03:58.360 twenty five versus fifty basis points, and I wonder how 0:03:58.440 --> 0:03:59.800 much you were rolling your eyes and how much you 0:03:59.880 --> 0:04:02.440 are actually saying this is going to matter to the market. 0:04:02.520 --> 0:04:03.480 You want me to roll my own. 0:04:04.080 --> 0:04:04.560 I don't. 0:04:06.720 --> 0:04:09.160 Happy you're viewing who actually can go seeing on his weekend, 0:04:09.240 --> 0:04:11.800 But I am curious about whether you are seeing a 0:04:11.880 --> 0:04:14.120 market that is likely to sell off in response to 0:04:14.160 --> 0:04:16.760 a fifty basis point rate cut or respond with that 0:04:16.839 --> 0:04:18.080 cheer and you're low. 0:04:18.320 --> 0:04:19.520 Yeah, so it depends. 0:04:19.640 --> 0:04:21.440 I think they would have had the chance in the 0:04:21.480 --> 0:04:24.440 last few weeks to say, look, we're so comfortable with 0:04:24.480 --> 0:04:27.880 this disinflation picture. If they had had look we're so 0:04:28.000 --> 0:04:31.040 comfortable with this disinflation picture. Look what has happened since 0:04:31.080 --> 0:04:33.560 April this year. We've had super core down, We've had 0:04:33.600 --> 0:04:37.040 all these you know, all these components down. So because 0:04:37.040 --> 0:04:40.360 of this inflation, we could cunt higher, right, we could 0:04:40.360 --> 0:04:43.160 cut more, we could start more aggressive. The problem now 0:04:43.320 --> 0:04:46.000 is that, of course, particularly with Jackson Hole you said, oh, 0:04:46.040 --> 0:04:48.839 we're attentive to growth risks more than inflation. So the 0:04:48.880 --> 0:04:51.520 problem is if you start with fifty now, particularly with 0:04:51.600 --> 0:04:53.320 what John was saying in terms of the data, the 0:04:53.320 --> 0:04:55.200 totality of the data, you. 0:04:55.160 --> 0:04:57.720 Know, sorry, not making fun of course, of course, now, 0:04:57.800 --> 0:04:59.960 of course it's not more language anyway, while we play, 0:05:00.120 --> 0:05:00.640 we me for that. 0:05:00.640 --> 0:05:01.440 That's chairman Belle. 0:05:04.520 --> 0:05:06.479 So if we look at that, then the last couple 0:05:06.520 --> 0:05:08.320 of weeks actually has been really good. Look at look 0:05:08.360 --> 0:05:11.080 at weekly same store retail sales data. It's been picking 0:05:11.120 --> 0:05:12.359 up from four and a half to six and. 0:05:12.360 --> 0:05:12.960 A half percent. 0:05:13.320 --> 0:05:15.640 Now when we look at jobless claims, you look at 0:05:15.880 --> 0:05:18.880 weekly consumer confidence data, you look at you know, some of. 0:05:18.800 --> 0:05:21.200 The electricity output. Look at the Dallas Fed's. 0:05:20.960 --> 0:05:24.400 Weekly Economic index, look at the GDP now from Atlanta Fed. 0:05:24.400 --> 0:05:26.440 We're talking two and a half percent. So it just 0:05:26.520 --> 0:05:29.919 doesn't warrant it currently. So the risk is if you 0:05:29.960 --> 0:05:30.520 go fifty. 0:05:30.640 --> 0:05:34.000 First, the market wall say what do you know that 0:05:34.080 --> 0:05:34.520 I don't? 0:05:34.600 --> 0:05:35.480 What am I missing? 0:05:36.160 --> 0:05:37.880 And that's I think that's what the market will take 0:05:37.880 --> 0:05:39.800 a bit of, like, oh, God, this, I don't like this. 0:05:40.080 --> 0:05:40.839 I really don't like that. 0:05:40.920 --> 0:05:43.279 Can't the chairman just clean that up in his press conference? 0:05:44.440 --> 0:05:47.279 I think he could, But I think particularly with Jackson Hall, 0:05:47.360 --> 0:05:49.920 they've sort of missed the boat. And it was particularly 0:05:49.920 --> 0:05:52.120 also with Jackson Hole that they could have said, Look, 0:05:52.240 --> 0:05:55.400 it's it's really because of inflation. It's really because of 0:05:55.440 --> 0:05:56.400 the disinflation that. 0:05:56.360 --> 0:05:57.520 We're so comfortable with. 0:05:58.000 --> 0:06:00.880 That is why we could be cutting much more aggressively 0:06:00.920 --> 0:06:03.000 from the start, right, That's why we could sort of 0:06:03.160 --> 0:06:04.960 rush out of the gates and be like, we can 0:06:05.000 --> 0:06:07.440 cut fifty. Yeah, growth has been a bit of wobbly, 0:06:07.480 --> 0:06:10.320 but we're really comfortable with this still. It's just because 0:06:10.320 --> 0:06:12.360 of disinflation, and they sort of missed the boat on that. 0:06:12.480 --> 0:06:14.960 Since you're visiting US from abroad, I have to ask 0:06:15.000 --> 0:06:17.800 about the US election. How concerned you about the risks 0:06:17.800 --> 0:06:18.919 that are tied to November? 0:06:19.440 --> 0:06:21.039 Yeah, look, not an awful lot. 0:06:21.120 --> 0:06:23.760 But because when we look, for example, at twenty twenty five, 0:06:23.880 --> 0:06:26.599 I think people talk a lot about the US election, 0:06:26.680 --> 0:06:30.040 I'm not sure how much people have positions on. Certainly 0:06:30.080 --> 0:06:34.080 when you look at our tactic glance allocation convictions, they 0:06:34.080 --> 0:06:36.800 are really not particularly tied to the US election, because 0:06:37.080 --> 0:06:39.559 I think what we're missing looking a bit into twenty 0:06:39.640 --> 0:06:43.600 twenty five as well, there is the debt ceiling issue looming, 0:06:43.640 --> 0:06:45.880 for example. So but the Treasury has made it clear 0:06:45.920 --> 0:06:48.000 that we want to have these seven hundred billions stocked 0:06:48.040 --> 0:06:50.520 up in the Treasury General account in order to be 0:06:50.560 --> 0:06:53.160 able to pay that down, which could be at least 0:06:53.200 --> 0:06:57.159 perceived by the market, again but as temporary stimulus, you know, 0:06:57.240 --> 0:06:58.960 similar to what we had in Q two last year, 0:06:59.000 --> 0:07:00.000 which is actually pretty good. 0:07:00.120 --> 0:07:01.400 Now, that's independent of the election. 0:07:01.680 --> 0:07:03.560 We know that in twenty twenty five, of course, there's 0:07:03.600 --> 0:07:07.160 a couple of those tax cuts from twenty seventeen expiring. 0:07:07.320 --> 0:07:09.880 Again that's independent of the election. We're going to have 0:07:09.920 --> 0:07:12.440 to deal with that. There is some sort of fiscal 0:07:12.480 --> 0:07:15.880 cliff awaiting us perhaps second half of next year, when 0:07:15.880 --> 0:07:18.800 the negotiations start. There is going to be something looming 0:07:19.000 --> 0:07:20.720 that's independent of the elections. 0:07:20.960 --> 0:07:23.560 Any evidence from your conversations that the Europeans are willing 0:07:23.560 --> 0:07:25.520 to de risk from US as sets ahead of all 0:07:25.520 --> 0:07:26.880 of that. Are they concerned about it? 0:07:27.040 --> 0:07:28.720 No, not at all, not at all, not at all. 0:07:28.760 --> 0:07:32.240 I think if anything we've seen in the last particularly 0:07:32.360 --> 0:07:33.440 let's call it five months. 0:07:33.480 --> 0:07:34.520 We've seen the opposite. 0:07:34.640 --> 0:07:36.720 I think we've had this sort of long Europe trade 0:07:37.080 --> 0:07:41.160 into April, call it April May long europeerhaps long Japan, 0:07:41.200 --> 0:07:45.280 a bit of diversifying. Oh is the XUS performance is 0:07:45.320 --> 0:07:47.840 that really now kicking off? And in fair is when 0:07:47.880 --> 0:07:49.960 we look at all the activity data, when we look 0:07:49.960 --> 0:07:53.040 at the high frequency data, it's really strong. Still in 0:07:53.080 --> 0:07:54.760 the US, we're talking about the fiscal picture of the 0:07:54.760 --> 0:07:57.600 fiscal support, it's really strong in the s Look at 0:07:57.600 --> 0:08:00.560 what drag he was saying this week around come on, 0:08:00.600 --> 0:08:03.480 we've got to be with supporting more, right, We've got 0:08:03.520 --> 0:08:06.080 to be supporting more. And where it's happening is here. 0:08:06.280 --> 0:08:08.600 It's in the US. So if anything, you know, then 0:08:08.640 --> 0:08:10.360 you've got this, uh, you have the. 0:08:10.360 --> 0:08:11.680 French elections of cars. 0:08:11.720 --> 0:08:14.040 So there was these sort of concerns around that as well, 0:08:14.120 --> 0:08:16.160 whether the unwarranted or warranted, don't care. 0:08:16.280 --> 0:08:18.800 But all of that really led a little bit more 0:08:18.800 --> 0:08:20.640 of the inflo picture back into the US. 0:08:20.640 --> 0:08:22.360 Max, It's good to see you here in New York, 0:08:22.360 --> 0:08:25.320 Thank you, sir. Going to catch up Mass Canada of HSBC. 0:08:35.040 --> 0:08:38.000 That's where Bank for America's Business Owner report showing cautious 0:08:38.040 --> 0:08:41.600 optimism from small and mid sized businesses as the FED 0:08:41.640 --> 0:08:44.360 prepares to cut interest rates. Sharon Miller of Bank for 0:08:44.360 --> 0:08:47.040 America writing rate cuts will reduce the cost of debt 0:08:47.120 --> 0:08:50.720 servicing on floating rate credit facilities. This easing of the 0:08:50.760 --> 0:08:54.960 expense environment may create cash flow capacity for expansion or 0:08:55.000 --> 0:08:58.200 investment opportunities. We're lucky this morning that Sharon gets to 0:08:58.240 --> 0:09:00.880 join us on this program. Sharon, Welcome to this program. 0:09:00.920 --> 0:09:02.520 I just want to start with this one. The amount 0:09:02.520 --> 0:09:05.320 of insight that you and the team have across one 0:09:05.360 --> 0:09:08.679 in every three small businesses in America. We're worried about 0:09:08.679 --> 0:09:12.200 stress starting to build, weakness starting to materialize. What are 0:09:12.200 --> 0:09:14.840 you seeing in the businesses that you cover at the moment. 0:09:15.800 --> 0:09:19.320 Well, you're right. We cover three point four million small 0:09:19.360 --> 0:09:22.160 and mid sized businesses in the US and we are 0:09:22.160 --> 0:09:25.040 the number one lender to small business across the US, 0:09:25.040 --> 0:09:26.920 and so we do have a lot of insight into 0:09:26.960 --> 0:09:30.440 what's happening. In our most recent survey that we did 0:09:30.480 --> 0:09:34.440 with business owners in the spring, we found cautious optimism 0:09:34.960 --> 0:09:38.240 from our clients and so they do expect their revenues 0:09:38.280 --> 0:09:41.520 to increase over the next twelve months. And we know 0:09:41.679 --> 0:09:45.600 that that debt servicing, as you said in the opening here, 0:09:46.000 --> 0:09:50.200 will be reduced because we do expect that rates will 0:09:50.200 --> 0:09:52.320 be cut as wese our economists do you here at 0:09:52.320 --> 0:09:55.600 Bank of America twenty five bass point in the next 0:09:55.880 --> 0:09:57.280 five said meetings. 0:09:57.440 --> 0:09:59.920 So Shanny, you saying they've got the confidence the expansion 0:10:00.040 --> 0:10:02.640 linds of reading that just waiting for small reductions for 0:10:02.760 --> 0:10:06.720 the Federal Reserve over the next few cooltzas. 0:10:05.760 --> 0:10:09.199 They are, and we still see demand in the marketplace now, 0:10:09.280 --> 0:10:12.640 So I'm not saying that they're rating entirely. There is 0:10:12.920 --> 0:10:15.880 good growth in the across the small and mid sized 0:10:15.960 --> 0:10:19.600 company sectors, but they are watching that and certainly as 0:10:19.640 --> 0:10:23.560 we see rates come down, that will improve their cash 0:10:23.600 --> 0:10:25.920 grow and certainly consumer demand. 0:10:26.440 --> 0:10:28.160 Sharon I got to say, I was reading this report 0:10:28.160 --> 0:10:29.440 and I was shocked to the recent. 0:10:29.240 --> 0:10:30.240 Report that you put out. 0:10:30.440 --> 0:10:33.360 I was kind of shocked that actually we saw such 0:10:33.440 --> 0:10:37.560 sanguine sentiment that people were expecting to continue to hire, 0:10:37.640 --> 0:10:40.680 that they were continuing to expand they had positive outlook 0:10:40.760 --> 0:10:44.160 for their businesses. How do you reconcile that with some 0:10:44.240 --> 0:10:46.520 of the rhetoric that we hear every single day. This 0:10:46.559 --> 0:10:49.560 is an economy that's on the raisor edge of turning negative. 0:10:51.040 --> 0:10:52.440 You know, I think with small and. 0:10:52.480 --> 0:10:53.360 Mid sized companies. 0:10:53.400 --> 0:10:56.199 So we've bank clients in the business banking space from 0:10:56.320 --> 0:10:59.120 startup to fifty million in revenues. 0:10:59.000 --> 0:11:00.360 And so when you have a. 0:11:00.320 --> 0:11:04.760 Smaller company, you're certainly more nimble, You're able to really 0:11:05.360 --> 0:11:08.960 think about your business, your growth, and you can pivot easily. 0:11:09.559 --> 0:11:13.520 Bigger corporations may have more of a hard time doing that, 0:11:13.679 --> 0:11:16.920 and so that is a competitive advantage of small to 0:11:16.960 --> 0:11:19.920 mid size companies and we see that come through in 0:11:19.960 --> 0:11:22.920 the data and just in our conversations that we're having 0:11:23.000 --> 0:11:25.200 every day across the death from these clients. 0:11:25.480 --> 0:11:28.040 What I thought also was striking was in the market, 0:11:28.040 --> 0:11:30.920 it seems like inflation is no longer a significant concern. 0:11:31.280 --> 0:11:33.880 We heard just a couple of days ago from Mike 0:11:33.920 --> 0:11:37.960 Wilson over at Morgan Stanley that's dead. Essentially, Inflation is 0:11:38.000 --> 0:11:40.600 no longer an issue when it comes to what you're 0:11:40.600 --> 0:11:43.559 seeing in bonds. Nonetheless, sixty eight percent of small business 0:11:43.600 --> 0:11:46.680 owners so they've raised their prices over the past twelve months, 0:11:46.679 --> 0:11:49.320 and on average they've raised prices by twelve percent. They're 0:11:49.320 --> 0:11:52.319 talking about inflation as a more pressing concern than many 0:11:52.360 --> 0:11:53.800 other things that we talk about every day. 0:11:54.520 --> 0:11:54.920 How do you. 0:11:54.960 --> 0:11:57.319 Understand whether this is really a small business issue or 0:11:57.360 --> 0:12:00.280 whether maybe we're not giving enough credence to just much 0:12:00.280 --> 0:12:02.160 ongoing inflationary pressure there actually is. 0:12:03.440 --> 0:12:06.640 Well, there is ongoing and inflationary pressure. It is a 0:12:06.640 --> 0:12:09.560 sticky issue, and so we continue to hear that that 0:12:09.679 --> 0:12:13.160 is the number one concern of small and mid sized companies. 0:12:13.200 --> 0:12:17.319 And so you have seen price increases brought along because 0:12:17.360 --> 0:12:19.800 of all the pressure they are. So I do see 0:12:19.840 --> 0:12:22.480 it as a concern. We hear it from our business owners, 0:12:22.880 --> 0:12:26.640 and we do feel that as we go forward and 0:12:26.760 --> 0:12:29.640 the cycle begins to ease a bit, that it's going 0:12:29.720 --> 0:12:30.840 to take some pressure off. 0:12:31.320 --> 0:12:35.520 Sharon, given that pricing pressure, how difficult is it for 0:12:35.600 --> 0:12:38.200 these small companies to keep up with the bigger players? 0:12:39.960 --> 0:12:43.360 Well, I think that you know, there is some difficulty 0:12:43.440 --> 0:12:45.520 in keeping up with the bigger players, but I would 0:12:45.559 --> 0:12:48.280 say that you know, they also have a competitive advantage. 0:12:48.360 --> 0:12:51.959 And so you know, as supply chains have improved, and 0:12:52.080 --> 0:12:56.400 as businesses have expanded, and certainly they've gone more online, 0:12:56.480 --> 0:13:01.319 gone more digital, they have more UACh and scale than 0:13:01.360 --> 0:13:04.000 they might have had before the pandemic, and so what 0:13:04.040 --> 0:13:08.080 we are seeing are expansion plans from small and missized 0:13:08.120 --> 0:13:11.959 companies and they are competing and certainly, you know, they 0:13:12.000 --> 0:13:15.920 benefit from the downstream impact as well from larger corporations. 0:13:16.160 --> 0:13:18.440 We're talking about inflation, We're talking about the fact that 0:13:18.440 --> 0:13:21.480 they're preparing for these rate cuts. When you talk to clients, 0:13:21.480 --> 0:13:24.040 what is their number one concern right now in this economy? 0:13:25.360 --> 0:13:28.720 Their number one concern is inflation, and then right next 0:13:28.720 --> 0:13:31.680 to that is hiring and making sure that they have 0:13:31.840 --> 0:13:35.520 the right skilled labor, the right employees to go into 0:13:35.559 --> 0:13:38.680 their business to work. And so those are the concerns 0:13:38.679 --> 0:13:40.760 that we hear every day. We were also in an 0:13:40.800 --> 0:13:43.559 election year, so you do hear that as well, but 0:13:43.600 --> 0:13:46.360 we hear that with every election cycle. We've been doing 0:13:46.400 --> 0:13:49.440 this report for the last ten years, and so in 0:13:49.520 --> 0:13:53.079 each election cycle, we'd see, you know, concerns once the 0:13:53.160 --> 0:13:56.800 election is over, no matter who wins, no matter what party, 0:13:57.200 --> 0:14:00.240 that there's certainty and so people can move forward. So 0:14:00.320 --> 0:14:03.600 that's what we're hearing discycle as well. And you know, 0:14:03.640 --> 0:14:07.400 I anticipate after November there'll be certainty and people will 0:14:07.440 --> 0:14:08.600 continue with their plans. 0:14:08.880 --> 0:14:10.520 Sharon talk to us a little bit about how things 0:14:10.559 --> 0:14:12.840 have changed since March of last year, given all the 0:14:12.840 --> 0:14:15.079 banking stress in this country and some of the banking 0:14:15.120 --> 0:14:17.320 failures as well. How some of your clients have changed 0:14:17.320 --> 0:14:19.120 the way they do business with you. Where they've managed 0:14:19.160 --> 0:14:21.480 to attract a lot more small businesses over the last 0:14:21.520 --> 0:14:23.600 twelve months, worried about where they place that cash, and 0:14:23.600 --> 0:14:26.360 they want to put it with a bigger institution like 0:14:26.400 --> 0:14:27.040 Banks of America. 0:14:27.080 --> 0:14:30.640 Sharon, how much has changed, Well, I mean, I think, listen, 0:14:30.680 --> 0:14:33.480 we are the number one small business bank in the US, 0:14:33.760 --> 0:14:36.680 and we're very proud of that. We have been for 0:14:36.760 --> 0:14:40.240 the last four years plus, and so you know, we 0:14:40.320 --> 0:14:43.320 continue to stand on our clients and good times and 0:14:43.440 --> 0:14:47.000 bad and certainly you know we every day we work 0:14:47.120 --> 0:14:50.120 to attract new clients and to retain the clients we 0:14:50.240 --> 0:14:53.360 have because this is our mission. This is where communities 0:14:53.520 --> 0:14:55.840 meet business, and that is what we do at Bank 0:14:55.920 --> 0:14:57.880 of America. So we want to be sure that we 0:14:57.920 --> 0:15:01.320 are there for our clients. We have capabilities they need, 0:15:01.640 --> 0:15:06.440 whether it's to transact internationally, to be able to have 0:15:06.960 --> 0:15:10.880 expansion in their business, to get a loan, to provide 0:15:11.040 --> 0:15:13.000 payments for merchants. 0:15:13.320 --> 0:15:14.120 So all of. 0:15:14.040 --> 0:15:16.840 Those different areas we are able to help our clients, 0:15:16.840 --> 0:15:18.600 and so we want to make sure that we're there 0:15:18.640 --> 0:15:21.920 for them, whether it be our online tools and capabilities 0:15:22.160 --> 0:15:24.440 to manage their PASK flows. So we're investing in the 0:15:24.520 --> 0:15:27.440 business based on what we hear from clients and what 0:15:27.480 --> 0:15:28.040 they need. 0:15:28.160 --> 0:15:29.720 Well, we were thankful that you managed to make some 0:15:29.760 --> 0:15:31.480 time for us this morning, and we appreciate it. Sharon, 0:15:31.520 --> 0:15:34.200 thanks for joining the program. Thank you, Sharon Miller. That 0:15:34.320 --> 0:15:47.400 thanks America. Over the next week, a busy slate ahead 0:15:47.440 --> 0:15:50.240 with retail salves and a FED decision next week. Tiffany 0:15:50.240 --> 0:15:53.520 Wilding of PIMCO saying, we're heading back to pre pandemic conditions. 0:15:53.560 --> 0:15:55.720 Develop market economies now look more like they did in 0:15:55.720 --> 0:15:58.560 twenty nineteen than are any time since the pandemic. In 0:15:58.560 --> 0:16:01.600 that context, we think the more question is this, why 0:16:01.640 --> 0:16:04.720 are interest rates still well above where they were in 0:16:04.800 --> 0:16:08.200 twenty nineteen? Tiffany joins us now for more So, Tiffany, 0:16:08.200 --> 0:16:09.800 you've got to give us the answer. What did that 0:16:09.800 --> 0:16:12.120 conversation sound like a pincoke this past week? 0:16:13.760 --> 0:16:16.040 Well, I think the bottom line for US is certainly 0:16:16.400 --> 0:16:18.800 interest rates are coming down. The Federal Reserve, I think 0:16:18.800 --> 0:16:20.960 has also been very clear about that. Pale when he 0:16:21.080 --> 0:16:24.320 spoke at Jackson Hole, I think acknowledged the fact that 0:16:24.400 --> 0:16:28.440 monetary policy now probably doesn't reflect the underlying conditions in 0:16:28.480 --> 0:16:31.640 the US economy. And if you look at the labor markets, 0:16:31.640 --> 0:16:33.880 we don't think that the US economy is in recession, 0:16:33.920 --> 0:16:37.040 but nevertheless, the recent loosening in labor markets just suggests 0:16:37.040 --> 0:16:40.920 that there is some possibility for overshooting on that side. 0:16:40.920 --> 0:16:42.800 And in that kind of vein. 0:16:42.760 --> 0:16:45.760 You know, the Federal Reserve should be focused on moving 0:16:45.880 --> 0:16:48.760 policy rates back to neutral, and I think the question 0:16:48.800 --> 0:16:50.840 at this point is is just how quickly they get there. 0:16:50.840 --> 0:16:54.160 We think they probably will revise down their own estimates 0:16:54.160 --> 0:16:56.120 for the rate path in September. 0:16:56.320 --> 0:16:57.040 We're looking for a. 0:16:56.960 --> 0:16:58.840 Twenty five basis point rate cut, but for them to 0:16:58.880 --> 0:17:00.880 really signal they're going to do sequence. 0:17:00.560 --> 0:17:03.000 Of cuts here, Tiffany tell us why you think neutral 0:17:03.080 --> 0:17:05.480 is if they revise the path down, what is the 0:17:05.520 --> 0:17:06.040 path two? 0:17:08.080 --> 0:17:09.680 Yeah, I mean I think that's a great question. 0:17:10.000 --> 0:17:12.639 So the Phtal Reserve still believes it's between two and 0:17:12.640 --> 0:17:15.359 a half and three on a nominal basis, you know, 0:17:15.400 --> 0:17:19.320 And I think ultimately that's why they will get there, you. 0:17:19.240 --> 0:17:21.040 Know, with not overnight. 0:17:21.080 --> 0:17:23.040 They're not going to move the policy rate there overnight 0:17:23.080 --> 0:17:25.440 because they're not exactly sure where it is. And when 0:17:25.440 --> 0:17:28.360 you're not sure, you want to just go slowly. Now 0:17:28.400 --> 0:17:31.520 how slowly, I guess is the question. It's about balancing risks. 0:17:31.800 --> 0:17:34.240 You obviously don't want to take the economy into recession 0:17:34.280 --> 0:17:34.960 because your. 0:17:35.320 --> 0:17:36.520 Policy is too tight. 0:17:37.040 --> 0:17:40.000 We think a reasonable kind of baseline for them is 0:17:40.000 --> 0:17:42.639 to kind of write down a median rate path of 0:17:42.720 --> 0:17:44.199 kind of three and a half percent by the end 0:17:44.200 --> 0:17:45.800 of twenty twenty five, could even be a little bit 0:17:45.840 --> 0:17:48.480 lower than that, you know, And so that's the kind 0:17:48.480 --> 0:17:51.160 of pace every meeting, type of pace over the next 0:17:51.160 --> 0:17:54.719 several meetings to see how the economy responds, and then 0:17:54.760 --> 0:17:58.399 they can they can reassess and make a further decision 0:17:58.440 --> 0:17:58.800 from there. 0:17:59.040 --> 0:18:01.159 Tiffany, we've been talking a lot about twenty five basis 0:18:01.160 --> 0:18:03.840