1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and a Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:37,159 Speaker 2: Bloomberg Terminal and the Bloomberg Business app. In stately of 10 00:00:37,200 --> 00:00:39,720 Speaker 2: JP Morgan assen management rights, we believe the Fed will 11 00:00:39,720 --> 00:00:42,320 Speaker 2: be able to respond with more aggressive rate cuts if 12 00:00:42,320 --> 00:00:46,640 Speaker 2: the labor market falters, even with inflation still above target. 13 00:00:46,720 --> 00:00:48,879 Speaker 2: In joins us now for more in Welcome to New York. 14 00:00:48,880 --> 00:00:49,519 Speaker 2: It's going to see you. 15 00:00:49,520 --> 00:00:50,120 Speaker 3: Thanks having much. 16 00:00:50,159 --> 00:00:52,239 Speaker 2: I think you've now the most important point for financial 17 00:00:52,280 --> 00:00:55,480 Speaker 2: markets right now. Are they constrained? Can they respond if 18 00:00:55,480 --> 00:00:57,920 Speaker 2: the labor market data weekends over the next several months? 19 00:00:57,920 --> 00:00:59,480 Speaker 2: What gives you the confidence that they can? 20 00:01:00,000 --> 00:01:01,200 Speaker 4: I think if you take a take a step back 21 00:01:01,200 --> 00:01:03,920 Speaker 4: and think what happened back in twenty eighteen. The response 22 00:01:04,240 --> 00:01:06,640 Speaker 4: was that they waited a little bit, and they probably 23 00:01:06,640 --> 00:01:08,520 Speaker 4: waited a bit a little bit too long, but ultimately 24 00:01:08,560 --> 00:01:11,800 Speaker 4: they then reacted and during Power was absolutely right. That 25 00:01:11,920 --> 00:01:15,920 Speaker 4: was a period where inflation was transitory, where it didn't 26 00:01:15,920 --> 00:01:17,679 Speaker 4: have a huge impact, and actually it was a growth 27 00:01:17,880 --> 00:01:20,000 Speaker 4: and the laid market that was more critical to them. 28 00:01:20,000 --> 00:01:21,800 Speaker 4: And I think that will be the case this time. 29 00:01:21,880 --> 00:01:23,520 Speaker 4: And I look at it from the way if you 30 00:01:23,520 --> 00:01:26,240 Speaker 4: think about what they did yesterday, growth forecast revised down 31 00:01:26,280 --> 00:01:29,600 Speaker 4: both years, inflation forecasts revised up one year next year, 32 00:01:29,640 --> 00:01:31,720 Speaker 4: they don't actually see much of an impact. So I 33 00:01:31,760 --> 00:01:33,520 Speaker 4: do think they're going to look through it, and if 34 00:01:33,520 --> 00:01:35,680 Speaker 4: they start to see really weak payrolls, that's when they're 35 00:01:35,680 --> 00:01:36,520 Speaker 4: going to react. 36 00:01:36,840 --> 00:01:37,960 Speaker 5: I'm with Stuart Kaiser. 37 00:01:38,040 --> 00:01:41,440 Speaker 6: I found yesterday deeply confusing and deeply contradictory, because on 38 00:01:41,440 --> 00:01:44,360 Speaker 6: one hand they were talking about how they're downgrading growth 39 00:01:44,440 --> 00:01:45,680 Speaker 6: and they're going to look through inflation. 40 00:01:45,760 --> 00:01:48,080 Speaker 5: On the other hand, he seemed to Vetcher J. 41 00:01:48,200 --> 00:01:50,440 Speaker 6: Powell seemed to dismiss some of the soft data that 42 00:01:50,560 --> 00:01:54,760 Speaker 6: indicates weakening, which suggests that they'll be late. How much 43 00:01:54,840 --> 00:01:57,320 Speaker 6: do you have confidence that they could adjust that stance? 44 00:01:57,680 --> 00:01:59,680 Speaker 5: Should some of the SAFT data. 45 00:01:59,440 --> 00:02:02,640 Speaker 6: Start maybe being a little bit more consistent or bleeding 46 00:02:02,640 --> 00:02:05,000 Speaker 6: into on the margin certain hard data points. 47 00:02:05,400 --> 00:02:06,960 Speaker 4: I think the weather way I looked at it was 48 00:02:07,000 --> 00:02:09,240 Speaker 4: that they I saw this as a FED chair who 49 00:02:09,240 --> 00:02:12,160 Speaker 4: actually is concerned about the economy the way like reading 50 00:02:12,200 --> 00:02:13,920 Speaker 4: between the lines. I thought, they've concerned about a bit 51 00:02:13,960 --> 00:02:16,560 Speaker 4: of weakness going on, but they haven't got the evidence 52 00:02:17,000 --> 00:02:19,720 Speaker 4: yet on the hard data to react to it. And 53 00:02:19,760 --> 00:02:21,919 Speaker 4: I think what actually is quite clear is they just 54 00:02:21,960 --> 00:02:23,839 Speaker 4: don't know, and none of us actually know exactly what's 55 00:02:23,880 --> 00:02:26,359 Speaker 4: going to happen. They're in a really tough spot at 56 00:02:26,440 --> 00:02:28,760 Speaker 4: the moment. And you think back to twenty twenty three, 57 00:02:28,800 --> 00:02:31,400 Speaker 4: we had the headfake of the soft data there showing 58 00:02:31,400 --> 00:02:33,400 Speaker 4: signs of weaknesses. It never never fed through, So they're 59 00:02:33,400 --> 00:02:35,520 Speaker 4: probably a bit mindful of that. But ultimately, if you 60 00:02:35,560 --> 00:02:37,400 Speaker 4: do start to see how data roll over, and it 61 00:02:37,440 --> 00:02:39,600 Speaker 4: does typically take a few months, I do think they're 62 00:02:39,600 --> 00:02:40,880 Speaker 4: going to react. So it's probably going to be more 63 00:02:40,960 --> 00:02:43,000 Speaker 4: later later this year that will be happening. 64 00:02:43,040 --> 00:02:45,440 Speaker 6: I understand why the front end of the yield curve rallied. 65 00:02:45,440 --> 00:02:47,600 Speaker 6: I understand where people started to believe that maybe this 66 00:02:47,639 --> 00:02:50,799 Speaker 6: FED would respond to weakness in the economy. Why did 67 00:02:50,800 --> 00:02:52,760 Speaker 6: that triggle into the long end of the yield curve? 68 00:02:52,800 --> 00:02:54,920 Speaker 6: Why did people buy the idea that not only is 69 00:02:54,919 --> 00:02:57,880 Speaker 6: this transitory, but the entire international story that we've been 70 00:02:57,880 --> 00:03:01,720 Speaker 6: talking about of a relevering in Germany and in China 71 00:03:02,240 --> 00:03:05,480 Speaker 6: wouldn't suddenly be relevant anymore because the Fed's cutting rates. 72 00:03:05,520 --> 00:03:08,480 Speaker 6: Why is that sort of the logical conclusion, right? 73 00:03:08,560 --> 00:03:10,080 Speaker 4: But I think humane it pretty clear he was they 74 00:03:10,080 --> 00:03:12,079 Speaker 4: were going to focus on the growth aspect of thing. 75 00:03:12,080 --> 00:03:14,960 Speaker 4: He sort of dismissed all the questions around inflation. And 76 00:03:15,000 --> 00:03:17,639 Speaker 4: if they were concerned around inflation, maybe that's the back 77 00:03:17,760 --> 00:03:19,720 Speaker 4: end gets you know, it has to move a little 78 00:03:19,760 --> 00:03:21,320 Speaker 4: bit higher. But if he's going to look through all 79 00:03:21,360 --> 00:03:23,680 Speaker 4: of that and then you've got the asymmetry where he 80 00:03:23,720 --> 00:03:26,560 Speaker 4: talked about we're either on hold or we're cutting, that 81 00:03:26,600 --> 00:03:28,960 Speaker 4: probably gives confidence to the bond market. 82 00:03:29,000 --> 00:03:31,120 Speaker 6: So this is basically the market believe in him. This 83 00:03:31,160 --> 00:03:33,600 Speaker 6: is the market getting back on team transitory. The market 84 00:03:33,639 --> 00:03:35,600 Speaker 6: is getting back in the trans team transitory band. 85 00:03:35,640 --> 00:03:36,360 Speaker 5: Is that what you're saying? 86 00:03:36,440 --> 00:03:38,040 Speaker 4: And I think that's right because that's what happened in 87 00:03:38,120 --> 00:03:41,480 Speaker 4: twenty eighteen. The last time we did transittory was the pandemic, 88 00:03:41,560 --> 00:03:43,400 Speaker 4: and yes, that was wrong, But if you think about 89 00:03:43,400 --> 00:03:45,760 Speaker 4: what the pandemic, the difference there is we had positive growth, 90 00:03:46,080 --> 00:03:48,800 Speaker 4: and that and positive inflation. If you're having an environment 91 00:03:48,840 --> 00:03:51,640 Speaker 4: of negative growth or a slowing in growth, then the 92 00:03:51,680 --> 00:03:53,680 Speaker 4: inflation we should be looking through that, particularly it's a 93 00:03:53,720 --> 00:03:56,720 Speaker 4: one hit from taris and particularly we start seeing weakness 94 00:03:56,760 --> 00:03:58,960 Speaker 4: in the late market, because that ultimately will bring inflation down. 95 00:03:59,080 --> 00:04:02,560 Speaker 7: Howell referred to the teriff yesterday as being tariff inflation 96 00:04:02,760 --> 00:04:05,440 Speaker 7: different from regular inflation. How do you decipher from between 97 00:04:05,480 --> 00:04:05,800 Speaker 7: the two. 98 00:04:06,400 --> 00:04:07,960 Speaker 4: I think it's difficult, and I think he actually said 99 00:04:08,040 --> 00:04:10,280 Speaker 4: it's going to be difficult for us to exactly calculate 100 00:04:10,320 --> 00:04:13,040 Speaker 4: what is tariff and what is what is just regular. 101 00:04:13,120 --> 00:04:15,520 Speaker 4: And the problem and the slight nuance that we've got 102 00:04:15,520 --> 00:04:18,480 Speaker 4: relative to twenty eighteen. We obviously went into twenty eighteen 103 00:04:18,520 --> 00:04:21,400 Speaker 4: and inflation was below target. It's not at the moment. 104 00:04:21,440 --> 00:04:23,480 Speaker 4: So again that's something they just have to be mindful 105 00:04:23,520 --> 00:04:26,240 Speaker 4: of over over the coming months as they think about 106 00:04:26,240 --> 00:04:28,359 Speaker 4: what they're going to be doing, because inflation was just 107 00:04:28,360 --> 00:04:29,880 Speaker 4: at a worse place to start with. 108 00:04:30,160 --> 00:04:32,039 Speaker 2: Just to pick up on Lisa's line of questioning, let's 109 00:04:32,040 --> 00:04:34,400 Speaker 2: sit on the markets a little bit more perfectly intuitive, 110 00:04:34,400 --> 00:04:36,279 Speaker 2: FED cuts rates, see a rally at the front end, 111 00:04:36,360 --> 00:04:38,440 Speaker 2: got that you're stru up. That's what happened yesterday. How 112 00:04:38,560 --> 00:04:40,800 Speaker 2: me understand what happens to risk if the FED is 113 00:04:40,839 --> 00:04:43,280 Speaker 2: cut in because growth is deteriorating but inflation is still 114 00:04:43,279 --> 00:04:46,480 Speaker 2: above target. How does high your credit trade in that world? 115 00:04:46,839 --> 00:04:49,839 Speaker 4: Soros? Obviously it's widening a little bit because of the grossience. 116 00:04:49,839 --> 00:04:52,200 Speaker 4: I think it depends how deeply we think these growth 117 00:04:52,279 --> 00:04:54,640 Speaker 4: impacts are going to be. And again that goes back 118 00:04:54,640 --> 00:04:56,839 Speaker 4: to the problem that we've got that your impower's got 119 00:04:56,880 --> 00:04:58,520 Speaker 4: is we just don't know. We don't know what's going 120 00:04:58,560 --> 00:05:00,440 Speaker 4: to happen exactly on April the second, We don't know 121 00:05:00,440 --> 00:05:01,960 Speaker 4: how long this is all going on for. It's a 122 00:05:02,080 --> 00:05:04,760 Speaker 4: very difficult argument. I think what we can say though, 123 00:05:04,800 --> 00:05:08,039 Speaker 4: is going into this, corporates were in really good position, 124 00:05:08,320 --> 00:05:11,120 Speaker 4: very healthy. Fundamentally looks very sad, and I think that's 125 00:05:11,120 --> 00:05:14,280 Speaker 4: what you have to step back and think about. And yes, 126 00:05:14,320 --> 00:05:17,160 Speaker 4: if you see a real deterioration in growth, of course 127 00:05:17,160 --> 00:05:19,200 Speaker 4: we're going to see some widening credit spreads. But I 128 00:05:19,240 --> 00:05:20,960 Speaker 4: still think there's this all in yield argument that we've 129 00:05:20,960 --> 00:05:23,480 Speaker 4: talked about a lot people like seven and a half percent. 130 00:05:23,520 --> 00:05:24,520 Speaker 4: There's no question about that. 131 00:05:24,800 --> 00:05:27,080 Speaker 2: So that throughout the end of last year as well 132 00:05:27,080 --> 00:05:29,160 Speaker 2: coming into twenty twenty five. Let's just finish on this 133 00:05:29,240 --> 00:05:31,680 Speaker 2: economic data later this morning, Hey thirty easton time we 134 00:05:31,720 --> 00:05:34,680 Speaker 2: get us jobless claims. This feeling yesterday that the Federal 135 00:05:34,720 --> 00:05:38,960 Speaker 2: Reserve and Shairman power reduce the importance of the soft data. 136 00:05:39,040 --> 00:05:41,360 Speaker 2: I wouldn't say dismissed it, but we've said repeatedly through 137 00:05:41,360 --> 00:05:43,760 Speaker 2: this hour, perhaps downplayed it. How important is the hard 138 00:05:43,839 --> 00:05:45,640 Speaker 2: data going to be? Do we put additional weight on 139 00:05:45,720 --> 00:05:48,480 Speaker 2: things like jobless claims? How do we trade on that information? 140 00:05:48,560 --> 00:05:50,160 Speaker 4: I think the hard data is really important, and I 141 00:05:50,200 --> 00:05:52,520 Speaker 4: think actually the jobs market is probably the thing we 142 00:05:52,600 --> 00:05:54,480 Speaker 4: really need to need to focus on, because if you 143 00:05:54,560 --> 00:05:56,440 Speaker 4: do start to see weakness there, it's going to filter 144 00:05:56,520 --> 00:05:58,480 Speaker 4: through to the rest of the economy. So hard data, 145 00:05:58,600 --> 00:05:59,880 Speaker 4: jobs market, that's what we really need to. 146 00:06:00,440 --> 00:06:02,359 Speaker 2: Mord hard data. A little bit later this morning, in 147 00:06:02,400 --> 00:06:14,760 Speaker 2: steady of JP Morgane and thank you, sir, My Pile 148 00:06:14,800 --> 00:06:17,360 Speaker 2: of black Rock writing well, negative stock bond correlation has 149 00:06:17,400 --> 00:06:20,040 Speaker 2: re emerged. We do not believe it will persist with 150 00:06:20,200 --> 00:06:23,720 Speaker 2: sticky inflation, tariffs and significant US fiscal deficits. The FED 151 00:06:23,760 --> 00:06:27,480 Speaker 2: faces challenges, and term premium will come under pressure. Mike 152 00:06:27,560 --> 00:06:30,000 Speaker 2: joins us now. He's also the former economic advisor to 153 00:06:30,000 --> 00:06:32,279 Speaker 2: President Joe Biden. It's going to see him Mike as always. 154 00:06:32,600 --> 00:06:34,279 Speaker 2: Should we start there? How does it feel? So it 155 00:06:34,279 --> 00:06:36,560 Speaker 2: feel good? If he's shaking the Washington d C off, 156 00:06:36,680 --> 00:06:37,640 Speaker 2: Do you feel better about it? 157 00:06:37,720 --> 00:06:40,279 Speaker 8: Got using my step. Happy to be back in New 158 00:06:40,360 --> 00:06:41,600 Speaker 8: York and happy to do you with you. 159 00:06:41,760 --> 00:06:43,279 Speaker 2: We can get into the markets in just a moment. 160 00:06:43,360 --> 00:06:45,960 Speaker 2: I'd love your assessment of where the economy is and 161 00:06:46,000 --> 00:06:48,600 Speaker 2: how these policy changes might influence where the economy goes 162 00:06:48,839 --> 00:06:49,800 Speaker 2: in the coming quarters. 163 00:06:50,240 --> 00:06:52,159 Speaker 8: Yeah, I mean, certainly. I think we're in the midst 164 00:06:52,160 --> 00:06:57,200 Speaker 8: of a pretty significant set of shocks. So obviously trade 165 00:06:57,240 --> 00:07:01,000 Speaker 8: policy uncertainly, both the magnitude of it and the uncertainty 166 00:07:01,000 --> 00:07:05,440 Speaker 8: around it. Certainly, I think some some slowdowns more broadly 167 00:07:06,000 --> 00:07:06,599 Speaker 8: in the data. 168 00:07:06,960 --> 00:07:07,120 Speaker 2: You know. 169 00:07:07,160 --> 00:07:09,960 Speaker 8: The flip side is, you know, the United States is 170 00:07:10,000 --> 00:07:12,800 Speaker 8: a very dynamic, very resilient economy, and I think what 171 00:07:12,840 --> 00:07:15,320 Speaker 8: you heard from the Fed yesterday is while these shocks 172 00:07:15,360 --> 00:07:18,160 Speaker 8: are significant, while growth is likely to come down, wall 173 00:07:18,200 --> 00:07:20,440 Speaker 8: of inflation in the short term is elite is likely to 174 00:07:20,480 --> 00:07:22,960 Speaker 8: move higher. You know, still there's a kind of underlying 175 00:07:22,960 --> 00:07:25,440 Speaker 8: strength there that's going to see growth through. 176 00:07:25,600 --> 00:07:27,640 Speaker 5: When it comes to tariff you know all the players. 177 00:07:28,000 --> 00:07:30,080 Speaker 7: Obviously you weren't not in the Trump administration, but you 178 00:07:30,120 --> 00:07:32,520 Speaker 7: know who they're dealing with on the other side. Do 179 00:07:32,560 --> 00:07:36,400 Speaker 7: you think we get to a place where it's methodical reciprocity. 180 00:07:36,880 --> 00:07:40,760 Speaker 8: So I think what we've seen from other countries is 181 00:07:41,200 --> 00:07:44,800 Speaker 8: you know a likelihood that you know, this negotiation is 182 00:07:44,840 --> 00:07:47,520 Speaker 8: going to play out in the backdrop of not just 183 00:07:48,600 --> 00:07:51,760 Speaker 8: not just tarif announcements from the United States, but threats 184 00:07:51,760 --> 00:07:54,280 Speaker 8: of retaliation from others, And I think that, you know, 185 00:07:54,400 --> 00:07:56,240 Speaker 8: I think one of the big questions as we roll 186 00:07:56,280 --> 00:07:58,200 Speaker 8: the clock forward over the next three, four, five, six 187 00:07:58,280 --> 00:08:01,240 Speaker 8: months is you know, not just where do US tariff 188 00:08:01,320 --> 00:08:04,240 Speaker 8: levels end up, but where do other countries end up 189 00:08:04,240 --> 00:08:06,560 Speaker 8: with their tariff levels? You know, to the extent that 190 00:08:06,840 --> 00:08:09,960 Speaker 8: you know, deals are possible, negotiations can reach some kind 191 00:08:09,960 --> 00:08:13,560 Speaker 8: of resolution that ends up with tariffs perhaps lower than 192 00:08:13,600 --> 00:08:16,680 Speaker 8: what gets announced in April. Second on both sides, I 193 00:08:16,680 --> 00:08:19,800 Speaker 8: think that's going to be ultimately a world that's healthier 194 00:08:19,840 --> 00:08:23,400 Speaker 8: for growth and inflation. Globally. I also think at a minimum, 195 00:08:23,560 --> 00:08:25,320 Speaker 8: you know, as we roll the clock forward, we're going 196 00:08:25,360 --> 00:08:27,720 Speaker 8: to get more certainty and that's going to take some 197 00:08:27,760 --> 00:08:31,920 Speaker 8: of that uncertainty discount off of economic forecast as well 198 00:08:31,920 --> 00:08:32,440 Speaker 8: as markets. 199 00:08:32,480 --> 00:08:36,560 Speaker 7: But if there's this reciprocal tariffs and then there's the 200 00:08:36,800 --> 00:08:39,360 Speaker 7: hit back, the tit for tet, do you think there's 201 00:08:39,360 --> 00:08:41,840 Speaker 7: a chance you can tip the United States into a recession? 202 00:08:42,000 --> 00:08:44,040 Speaker 7: Powell said, it's moved up, but it's off the table 203 00:08:44,080 --> 00:08:44,480 Speaker 7: for now. 204 00:08:45,000 --> 00:08:45,200 Speaker 3: Yeah. 205 00:08:45,280 --> 00:08:47,920 Speaker 8: Like I said, I would just echo, you know, share Palel. 206 00:08:48,000 --> 00:08:50,680 Speaker 8: The shocks that we've seen are significant. We're going to 207 00:08:50,720 --> 00:08:53,760 Speaker 8: see significant shocks. That's going to lower growth, that's going 208 00:08:53,800 --> 00:08:55,680 Speaker 8: to mean, at least in the short term, higher inflation. 209 00:08:56,200 --> 00:08:59,480 Speaker 8: But you know that the underlying momentum, the underlying dynamos, 210 00:08:59,520 --> 00:09:02,800 Speaker 8: and the lying strength of the US economy is you know, 211 00:09:02,960 --> 00:09:07,040 Speaker 8: quite significant, and that's hard to you know, turn around. 212 00:09:07,280 --> 00:09:08,760 Speaker 5: You might agree with the Fed on that front. 213 00:09:08,960 --> 00:09:11,320 Speaker 6: I get the sense you're not exactly joining the band 214 00:09:11,360 --> 00:09:12,280 Speaker 6: yet of transitory. 215 00:09:12,400 --> 00:09:14,520 Speaker 5: You're kind of on the sideline saying. 216 00:09:14,280 --> 00:09:16,560 Speaker 6: I'm not sure that that's actually the case. And you 217 00:09:16,600 --> 00:09:18,880 Speaker 6: made a point about you're not totally buying the long 218 00:09:19,000 --> 00:09:20,880 Speaker 6: end rally that we're seeing in treasuries. 219 00:09:21,120 --> 00:09:22,400 Speaker 5: Can you talk a little bit about. 220 00:09:22,240 --> 00:09:24,440 Speaker 6: What you're seeing that makes you disagree with the fees 221 00:09:24,480 --> 00:09:27,240 Speaker 6: assessment that we can resurrect this word transitory. 222 00:09:28,320 --> 00:09:31,280 Speaker 8: Yeah, so I think that you know that when you 223 00:09:31,360 --> 00:09:33,840 Speaker 8: look at the long end of the US curve. I mean, yes, 224 00:09:33,920 --> 00:09:36,000 Speaker 8: we've seen a rally over the past couple of weeks 225 00:09:36,000 --> 00:09:38,840 Speaker 8: as these growth scares have worked their way into the market. 226 00:09:39,120 --> 00:09:42,439 Speaker 8: But looking out over the medium term, you know, inflation 227 00:09:42,640 --> 00:09:45,000 Speaker 8: does look somewhat stickier, and obviously we're going to have 228 00:09:45,040 --> 00:09:46,800 Speaker 8: a shock on that. In the short term, I think 229 00:09:46,840 --> 00:09:51,079 Speaker 8: fiscal deficits are likely to be persistently high, and you know, 230 00:09:51,160 --> 00:09:53,480 Speaker 8: when you face a backdrop like that, I think you 231 00:09:53,559 --> 00:09:56,959 Speaker 8: do see pressure on term premium built up, particularly from 232 00:09:57,000 --> 00:09:59,480 Speaker 8: the starting point we're at today, and that means that 233 00:09:59,600 --> 00:10:02,839 Speaker 8: bonds are going to be less strong as diversifiers kind 234 00:10:02,840 --> 00:10:04,559 Speaker 8: of rolling ahead as they have in the last two 235 00:10:04,600 --> 00:10:06,520 Speaker 8: or three weeks, and as they were, you know during 236 00:10:06,559 --> 00:10:09,000 Speaker 8: the twenty tens. You know, that means that investors are 237 00:10:09,000 --> 00:10:11,560 Speaker 8: going to have to seek diversification in other places, whether 238 00:10:11,640 --> 00:10:15,160 Speaker 8: that's managing fixed income in different ways or seeking uncorrelated 239 00:10:15,200 --> 00:10:17,480 Speaker 8: sources of return that can provide that diversification. 240 00:10:17,559 --> 00:10:19,800 Speaker 2: Where do they find those uncorrelated sources of return? And 241 00:10:19,840 --> 00:10:22,280 Speaker 2: I'm so pleased you've brought up this topic because I've 242 00:10:22,280 --> 00:10:24,240 Speaker 2: lost count of how many times you've asked this question 243 00:10:24,679 --> 00:10:26,440 Speaker 2: over the last few weeks or so, haven't we We've 244 00:10:26,480 --> 00:10:29,079 Speaker 2: gone back and forth on this. Are we seeing reduction 245 00:10:29,120 --> 00:10:32,400 Speaker 2: and risk mitigation characteristics or treasuries over the last few weeks. 246 00:10:32,440 --> 00:10:34,360 Speaker 2: I think slowly you've started to see some evidence of 247 00:10:34,360 --> 00:10:35,200 Speaker 2: that gold. 248 00:10:35,520 --> 00:10:37,800 Speaker 5: I keep thinking gold, Are you just going to gold? 249 00:10:37,800 --> 00:10:39,920 Speaker 6: And is that the reason why you see it keeping 250 00:10:39,920 --> 00:10:40,560 Speaker 6: on rallying? 251 00:10:41,360 --> 00:10:43,640 Speaker 8: Yeah? I mean I think that exactly to your point, John, 252 00:10:43,800 --> 00:10:46,079 Speaker 8: I mean, obviously, at the beginning stages of the pullback, 253 00:10:46,120 --> 00:10:49,320 Speaker 8: you saw really strong reactions from the treasury market. That's 254 00:10:49,360 --> 00:10:52,120 Speaker 8: diminished as we've gotten kind of deeper into this period 255 00:10:52,160 --> 00:10:54,880 Speaker 8: of volatility. I think that's a harbinger of what's to common. 256 00:10:54,920 --> 00:10:57,160 Speaker 8: I mean, black rock, you know, one of the things 257 00:10:57,160 --> 00:10:59,480 Speaker 8: that we would say is you should, you know, seek 258 00:10:59,520 --> 00:11:03,840 Speaker 8: diversification from things like stable long term cash flows that 259 00:11:03,880 --> 00:11:06,560 Speaker 8: are less growth sensitive, that are more inflation sensitive, places 260 00:11:06,600 --> 00:11:08,800 Speaker 8: like infrastructure. You know, the thing that we really look 261 00:11:08,840 --> 00:11:12,600 Speaker 8: at are things like you know, our quantitative multi strategy 262 00:11:12,600 --> 00:11:14,720 Speaker 8: hedge fund, you know, built on the back of forty 263 00:11:14,800 --> 00:11:17,400 Speaker 8: years of innovation and leadership. You know, they've come through 264 00:11:17,440 --> 00:11:20,400 Speaker 8: this period generating solid alpha. And what it proves is 265 00:11:20,800 --> 00:11:23,439 Speaker 8: or show proves out is you know, having a range 266 00:11:23,440 --> 00:11:26,720 Speaker 8: of different strategies arranged different ways of generating alpha. And 267 00:11:26,760 --> 00:11:29,400 Speaker 8: in this environment in particular, what's worked is, you know, 268 00:11:29,440 --> 00:11:33,080 Speaker 8: strategies that are primed in market reversal period, strategies to 269 00:11:33,120 --> 00:11:36,280 Speaker 8: provide liquidity to segments of the market across asset classes, 270 00:11:36,480 --> 00:11:39,199 Speaker 8: that can generate alpha even in the face of market dislocation. 271 00:11:39,320 --> 00:11:40,640 Speaker 8: And that's what investors are looking for. 272 00:11:40,720 --> 00:11:42,280 Speaker 5: John, I I'm nearly as sexy as gold. 273 00:11:42,760 --> 00:11:46,360 Speaker 6: Multi asset diversification, city cash flow, you know, things to. 274 00:11:46,440 --> 00:11:49,600 Speaker 2: Sell here much just go bust. So exactly, private markets 275 00:11:49,640 --> 00:11:53,000 Speaker 2: instructure all of those companies. I'm not frond shite to 276 00:11:53,000 --> 00:11:54,719 Speaker 2: how to respect for the position. The answer used to 277 00:11:54,760 --> 00:11:57,640 Speaker 2: be booms, used to be German bombs, and obviously that's 278 00:11:57,679 --> 00:11:59,760 Speaker 2: not the answer anymore. How have things changed in Europe 279 00:11:59,760 --> 00:12:00,640 Speaker 2: from you perspective? 280 00:12:01,080 --> 00:12:02,960 Speaker 8: Yeah, so, I think it's it's actually a really interesting 281 00:12:03,000 --> 00:12:07,400 Speaker 8: moment in Europe. You know, I think the debate within 282 00:12:07,440 --> 00:12:09,679 Speaker 8: the firm. Is is this a trade or is this 283 00:12:09,760 --> 00:12:14,559 Speaker 8: a more durable investment? You know. On one hand, obviously 284 00:12:14,720 --> 00:12:17,040 Speaker 8: Europe Germany has stepped forward with the set of fiscal 285 00:12:17,040 --> 00:12:19,439 Speaker 8: policy changes that you know, as far back as when 286 00:12:19,440 --> 00:12:22,199 Speaker 8: I was in the Obama administration we were calling for. 287 00:12:22,480 --> 00:12:26,120 Speaker 8: That is really tremendous to see, you know. But I 288 00:12:26,120 --> 00:12:29,480 Speaker 8: think that among the bell weathers that we're looking for 289 00:12:29,640 --> 00:12:31,840 Speaker 8: is is this going to be coupled by changes in 290 00:12:31,880 --> 00:12:34,839 Speaker 8: the regulatory environment. You know. The Drogy Report talked a 291 00:12:34,840 --> 00:12:37,839 Speaker 8: lot about the degree to which Europe remains uncompetitive in 292 00:12:37,880 --> 00:12:41,080 Speaker 8: the technology sector, the types of spaces that really drive 293 00:12:41,120 --> 00:12:44,160 Speaker 8: innovation and growth. You know, if we see a turning 294 00:12:44,200 --> 00:12:47,200 Speaker 8: of the page there, that might be, you know, a 295 00:12:47,240 --> 00:12:50,080 Speaker 8: precursor for a much more durable European trade of the 296 00:12:50,120 --> 00:12:52,560 Speaker 8: long term and take it from just a three months 297 00:12:52,600 --> 00:12:54,880 Speaker 8: six month trade to something much more long lasting. 298 00:12:54,920 --> 00:12:56,880 Speaker 2: I'm sitting here smiling. I've done you a while. It's 299 00:12:56,960 --> 00:12:58,960 Speaker 2: nice to hear you talk about markets again. It's been 300 00:12:59,000 --> 00:13:00,840 Speaker 2: too long. It's nice to have you back in the seat. 301 00:13:00,920 --> 00:13:03,120 Speaker 2: I want to finish where we started. How are we 302 00:13:03,160 --> 00:13:06,160 Speaker 2: going to make sure that talented individuals keep going down 303 00:13:06,160 --> 00:13:08,880 Speaker 2: to Washington, d C. To do the kind of work 304 00:13:09,360 --> 00:13:12,800 Speaker 2: that you did, the Deleep Singh did, the Wallyadimo did. 305 00:13:12,840 --> 00:13:14,480 Speaker 2: How are we going to make sure that continues? 306 00:13:15,720 --> 00:13:19,720 Speaker 8: So, you know, I think when I look across you know, 307 00:13:20,240 --> 00:13:22,400 Speaker 8: a number of friends that I've had who've served not 308 00:13:22,520 --> 00:13:25,560 Speaker 8: just in you know, Democratic administrations, but Republican ones. I 309 00:13:25,559 --> 00:13:27,839 Speaker 8: think the folks like, you know, just amusement. She was 310 00:13:27,840 --> 00:13:29,679 Speaker 8: the number two with the Treasury Department and the first 311 00:13:29,720 --> 00:13:32,640 Speaker 8: Trump administration. I look into this one and see, you know, 312 00:13:32,720 --> 00:13:37,200 Speaker 8: really thoughtful, qualified people as well in important pockets of 313 00:13:37,240 --> 00:13:40,200 Speaker 8: that administration. You know, I think that the call to 314 00:13:40,240 --> 00:13:42,199 Speaker 8: service is a strong one, and the call to deliver 315 00:13:42,280 --> 00:13:44,120 Speaker 8: for the country is a strong one, and I expect 316 00:13:44,120 --> 00:13:46,559 Speaker 8: that we're going to continue to see that across administrations 317 00:13:46,600 --> 00:13:47,240 Speaker 8: and both parties. 318 00:13:47,320 --> 00:13:49,040 Speaker 2: I hope that remains the case. Mike is good to 319 00:13:49,040 --> 00:14:01,080 Speaker 2: see my power there of black clop Let's stick with 320 00:14:01,160 --> 00:14:04,200 Speaker 2: retail investors looking ahead to Nike earnings for another read 321 00:14:04,240 --> 00:14:07,600 Speaker 2: on the state of the US consumer, Brookroach of Goma Sex, writing, 322 00:14:07,880 --> 00:14:11,240 Speaker 2: we believe it is still early in Nike's turnaround journey, 323 00:14:11,360 --> 00:14:14,360 Speaker 2: and we have yet to see material signs of brand 324 00:14:14,400 --> 00:14:17,600 Speaker 2: heat environment improvement. She has a buy rating on the 325 00:14:17,600 --> 00:14:20,880 Speaker 2: stock with a ninety dollars price target. Broke Johnsys Now 326 00:14:20,880 --> 00:14:23,200 Speaker 2: for more, Brook, welcome to the program. Let's get into it. 327 00:14:23,200 --> 00:14:25,000 Speaker 2: What are you looking for later on today? 328 00:14:25,920 --> 00:14:28,120 Speaker 3: Good morning, and thank you for having me today. 329 00:14:29,080 --> 00:14:32,440 Speaker 1: We believe that all eyes are on Nike's earnings result 330 00:14:32,480 --> 00:14:34,280 Speaker 1: this afternoon, and as we look. 331 00:14:34,200 --> 00:14:36,960 Speaker 3: To the report, we do believe. 332 00:14:36,680 --> 00:14:40,520 Speaker 1: That focus is centered on signs that the brand turnaround 333 00:14:40,640 --> 00:14:45,200 Speaker 1: is working. New CEO mister Elliott Hill outlines several strategic 334 00:14:45,240 --> 00:14:48,360 Speaker 1: actions taken to improve the brand over the course of 335 00:14:48,400 --> 00:14:51,080 Speaker 1: the past couple of quarters, and we believe that you're 336 00:14:51,120 --> 00:14:53,960 Speaker 1: starting to see signs that those actions are taking root. 337 00:14:54,280 --> 00:14:57,320 Speaker 1: We have seen some refreshers in marketing, We've seen some 338 00:14:57,440 --> 00:15:00,720 Speaker 1: changes in promotional activity, and we've seen some that they're 339 00:15:00,760 --> 00:15:04,120 Speaker 1: looking to reduce discounting on Nike dot Com. As a result, 340 00:15:04,240 --> 00:15:07,360 Speaker 1: all eyes are on any signs that fiscal twenty six 341 00:15:07,480 --> 00:15:10,480 Speaker 1: may be able to return to growth and what the 342 00:15:10,520 --> 00:15:14,920 Speaker 1: impacts of recent changes might have on sales growth and earnings. 343 00:15:15,040 --> 00:15:16,720 Speaker 6: What's the growth market, Brook, Is it going to be 344 00:15:16,720 --> 00:15:17,480 Speaker 6: the United States? 345 00:15:17,520 --> 00:15:19,160 Speaker 5: Is it going to be overseas? At a time where 346 00:15:19,200 --> 00:15:19,440 Speaker 5: there's a. 347 00:15:19,400 --> 00:15:22,000 Speaker 6: Real question about that will be trying to rehitch its 348 00:15:22,000 --> 00:15:23,040 Speaker 6: wagon to the NFL. 349 00:15:24,480 --> 00:15:26,800 Speaker 1: I think one of the big questions is whether or 350 00:15:26,840 --> 00:15:30,040 Speaker 1: not they will be able to return the North America 351 00:15:30,080 --> 00:15:32,560 Speaker 1: market to growth. We believe that the reset in North 352 00:15:32,560 --> 00:15:36,240 Speaker 1: America is very important. We are seeing signs of improved marketing, 353 00:15:36,240 --> 00:15:39,360 Speaker 1: we are seeing signs of improved innovation, and we are 354 00:15:39,400 --> 00:15:42,080 Speaker 1: seeing some signs that the North America consumer is engaging 355 00:15:42,320 --> 00:15:46,720 Speaker 1: with that improved marketing and innovation. Generally in our sector, 356 00:15:47,000 --> 00:15:50,360 Speaker 1: when markets begin to improve in North America for retail brands, 357 00:15:50,560 --> 00:15:53,240 Speaker 1: we start to see signs that that brand heat can 358 00:15:53,400 --> 00:15:57,040 Speaker 1: translate internationally. So we believe investor focus will be very 359 00:15:57,040 --> 00:15:58,240 Speaker 1: centered on North America. 360 00:15:58,360 --> 00:16:02,720 Speaker 6: The big counter argument is on holdings is the potential 361 00:16:03,120 --> 00:16:05,200 Speaker 6: increase in Hokah's is the fact that in all the 362 00:16:05,280 --> 00:16:07,480 Speaker 6: running groups that we all see in the morning in 363 00:16:07,520 --> 00:16:12,560 Speaker 6: Central Park, there isn't necessarily a huge domination of Nike shoes. Instead, 364 00:16:12,680 --> 00:16:15,080 Speaker 6: they're a whole host of other brands. At what point 365 00:16:15,120 --> 00:16:18,200 Speaker 6: does that become a real problem because there are these 366 00:16:18,200 --> 00:16:20,640 Speaker 6: competitors and they're scrappy and they're getting in. 367 00:16:22,000 --> 00:16:24,440 Speaker 1: We are seeing a lot of signs that Nike is 368 00:16:24,600 --> 00:16:28,640 Speaker 1: refocusing on innovation across each of their core sport categories. 369 00:16:29,000 --> 00:16:31,880 Speaker 1: The new CEO is focused on returning the brand to 370 00:16:32,040 --> 00:16:35,200 Speaker 1: focus on sport and to engage with those core running 371 00:16:35,200 --> 00:16:38,240 Speaker 1: communities and those core sport communities. As a result, we've 372 00:16:38,240 --> 00:16:41,600 Speaker 1: seen better innovation with more new product. We've seen the 373 00:16:41,680 --> 00:16:45,840 Speaker 1: launch of the Pegasus Premium and the Boomuro eighteen, and 374 00:16:45,880 --> 00:16:50,320 Speaker 1: the company is refocusing on engaging with those local communities 375 00:16:50,600 --> 00:16:53,280 Speaker 1: and with specialty retail running. So we believe that they 376 00:16:53,320 --> 00:16:56,400 Speaker 1: are starting to make the steps that are necessary to 377 00:16:56,520 --> 00:17:01,920 Speaker 1: return to competitive market share positioning in each those core categories. 378 00:17:01,680 --> 00:17:03,200 Speaker 5: Even if they have a better product. 379 00:17:03,280 --> 00:17:06,239 Speaker 7: What's to say people are buying Dick's sporting goods, they 380 00:17:06,280 --> 00:17:08,320 Speaker 7: expect a sales slow down at the same time that 381 00:17:08,640 --> 00:17:11,960 Speaker 7: surveys continue to say that consumers are worried about the 382 00:17:12,080 --> 00:17:16,000 Speaker 7: uncertainty that's coming from policy in Washington and the tariffs. 383 00:17:17,359 --> 00:17:20,600 Speaker 1: Overall, we have seen signs of some consumer slow down 384 00:17:20,640 --> 00:17:23,720 Speaker 1: and macro choppiness over the course at the last few weeks. 385 00:17:23,960 --> 00:17:26,600 Speaker 1: At first, there was some focus on the potential that 386 00:17:26,640 --> 00:17:29,000 Speaker 1: this was a function of weather, but overall we have 387 00:17:29,160 --> 00:17:32,680 Speaker 1: seen some more comments about slowing overall. I think as 388 00:17:32,720 --> 00:17:36,000 Speaker 1: we look at Nike's turnaround story. Investors are much more 389 00:17:36,040 --> 00:17:39,240 Speaker 1: focused on what will happen in fiscal twenty six, which 390 00:17:39,280 --> 00:17:42,520 Speaker 1: will be beginning in June of this year, and what 391 00:17:42,640 --> 00:17:45,920 Speaker 1: Nike can do on a relative competitive positioning to improve 392 00:17:45,960 --> 00:17:48,560 Speaker 1: the brand heat so that they can gain back that 393 00:17:48,600 --> 00:17:51,440 Speaker 1: market share regardless of the macro backdrop. 394 00:17:51,680 --> 00:17:54,359 Speaker 7: So basically what you're saying is twenty twenty five is 395 00:17:54,400 --> 00:17:57,359 Speaker 7: going to be really a period of transition for Nike 396 00:17:57,720 --> 00:17:59,960 Speaker 7: to them potentially nail it in twenty twenty six. 397 00:18:01,440 --> 00:18:04,360 Speaker 1: We believe that the company will be returning to growth 398 00:18:04,680 --> 00:18:07,399 Speaker 1: in the back half of their fiscal twenty six and 399 00:18:07,440 --> 00:18:09,880 Speaker 1: that many of the actions that have already been outlined 400 00:18:09,920 --> 00:18:14,359 Speaker 1: by management are going to drive lower sales and lower 401 00:18:14,400 --> 00:18:17,600 Speaker 1: margins in the first half of twenty of fiscal twenty 402 00:18:17,640 --> 00:18:18,119 Speaker 1: six and. 403 00:18:19,720 --> 00:18:21,080 Speaker 3: Thus calendar twenty five. 404 00:18:21,320 --> 00:18:23,480 Speaker 2: There's a challenge still to come. Brooke, appreciate your time 405 00:18:23,480 --> 00:18:25,680 Speaker 2: to break this down for us. As always, Brookroach there 406 00:18:25,880 --> 00:18:38,200 Speaker 2: of gone at Sachs on Nike, Louke Tilly of Wilmington 407 00:18:38,280 --> 00:18:40,480 Speaker 2: Trust Wang in on that decision right in the following 408 00:18:40,640 --> 00:18:43,359 Speaker 2: We continue to think the labor market and inflation data 409 00:18:43,400 --> 00:18:45,639 Speaker 2: would justify a rate cut of the main meeting, but 410 00:18:45,720 --> 00:18:49,560 Speaker 2: given Fedschair Jaypow's response, we are moving our first expected 411 00:18:49,600 --> 00:18:52,880 Speaker 2: cut to the June meeting. Luke joins us now for more, 412 00:18:53,080 --> 00:18:55,159 Speaker 2: Lok welcome to the program. I want to build on 413 00:18:55,160 --> 00:18:57,840 Speaker 2: what we heard just yesterday from Chairman Power with you 414 00:18:57,920 --> 00:18:59,920 Speaker 2: in just a moment. I want to start with the forecast. 415 00:19:00,240 --> 00:19:02,760 Speaker 2: What was your initial reaction to the adjustment in the 416 00:19:02,800 --> 00:19:05,240 Speaker 2: SEP that we saw relative to December. 417 00:19:06,280 --> 00:19:08,800 Speaker 9: Yeah, well, the big change obviously is to the GDP 418 00:19:09,000 --> 00:19:11,760 Speaker 9: forecast and that coming down, and I think that incorporates 419 00:19:12,520 --> 00:19:15,119 Speaker 9: what we had been expecting, is that the strength of 420 00:19:15,160 --> 00:19:17,639 Speaker 9: the consumer at the end of last year was not 421 00:19:17,920 --> 00:19:21,879 Speaker 9: really strength in the sense that the consumer keep powering 422 00:19:21,880 --> 00:19:25,520 Speaker 9: the economy ahead. What we saw was really strong spending 423 00:19:25,520 --> 00:19:29,000 Speaker 9: on durable goods in November and December that was coming 424 00:19:29,000 --> 00:19:32,840 Speaker 9: a lot from replacement purchases from the storms, and then 425 00:19:32,880 --> 00:19:35,399 Speaker 9: also people getting ahead of tariffs. So there's a lot 426 00:19:35,440 --> 00:19:37,120 Speaker 9: of people at the end of last year that thought 427 00:19:37,160 --> 00:19:39,359 Speaker 9: the economy was just up, up, and a way, you know, 428 00:19:39,400 --> 00:19:41,320 Speaker 9: in this sort of almost like a no landing scenario 429 00:19:41,359 --> 00:19:44,120 Speaker 9: that was going to generate inflation. And of course we've 430 00:19:44,160 --> 00:19:47,639 Speaker 9: seen consumer spending come back down in January, retail sales 431 00:19:47,640 --> 00:19:50,560 Speaker 9: down in January and February, and really the more accurate 432 00:19:50,640 --> 00:19:53,760 Speaker 9: picture is a consumer that is, you know, it's doing okay, 433 00:19:53,760 --> 00:19:57,000 Speaker 9: it's pretty solid, but it's going to accelerate. And that's 434 00:19:57,000 --> 00:19:59,439 Speaker 9: why I would expect GDP to come down. We've had 435 00:19:59,480 --> 00:20:02,240 Speaker 9: a one point eight percent forecast for twenty twenty five 436 00:20:02,280 --> 00:20:04,640 Speaker 9: for a while, so the Fed now is very close 437 00:20:04,680 --> 00:20:05,920 Speaker 9: to that with their one point seven. 438 00:20:06,160 --> 00:20:09,399 Speaker 2: So growth comes down, inflation goes up, and it's that 439 00:20:09,440 --> 00:20:12,240 Speaker 2: piece of it that's interesting. So from a market perspective 440 00:20:12,280 --> 00:20:14,040 Speaker 2: for investors right now, they want to know if this 441 00:20:14,080 --> 00:20:18,960 Speaker 2: Feder reserve is in a position to respond to deteriorating data. 442 00:20:19,000 --> 00:20:21,760 Speaker 2: If we do get that weaker economic data, are the 443 00:20:21,840 --> 00:20:24,760 Speaker 2: constraints somehow by higher inflation prints? What would you say 444 00:20:24,760 --> 00:20:25,360 Speaker 2: to invest us. 445 00:20:25,320 --> 00:20:28,720 Speaker 9: This morning, Well, we've had the same story for a 446 00:20:28,760 --> 00:20:31,280 Speaker 9: while now, and it's that the consumer was not strong 447 00:20:31,359 --> 00:20:34,360 Speaker 9: enough to keep pushing inflation higher. Nor was the consumer 448 00:20:34,440 --> 00:20:38,240 Speaker 9: strong enough to take on increased prices of imports and 449 00:20:38,320 --> 00:20:42,080 Speaker 9: drive inflation higher. We thought that basically, if you raise 450 00:20:42,200 --> 00:20:45,080 Speaker 9: the prices on imports, that they would start spending less 451 00:20:45,160 --> 00:20:48,360 Speaker 9: on domestic services like going to the movies or haircuts 452 00:20:48,400 --> 00:20:50,720 Speaker 9: or restaurants or anything like that. So we really didn't 453 00:20:50,800 --> 00:20:53,960 Speaker 9: perceive that there was an inflation problem. We've been messaging 454 00:20:54,000 --> 00:20:56,960 Speaker 9: that for quite some time now. I think the FED, 455 00:20:58,560 --> 00:21:01,560 Speaker 9: in a good way, was talking very differently about tariff's 456 00:21:01,600 --> 00:21:06,240 Speaker 9: yesterday than seven weeks before, acknowledging that the increase, you know, 457 00:21:06,280 --> 00:21:09,240 Speaker 9: a tariff increases the price of a good, but that's 458 00:21:09,359 --> 00:21:13,520 Speaker 9: not necessarily inflation. It's only inflation if consumers can handle 459 00:21:13,560 --> 00:21:15,400 Speaker 9: it and they're ready willing and able to keep paying 460 00:21:15,400 --> 00:21:19,640 Speaker 9: those higher prices and keep spending elsewhere. And that's sort 461 00:21:19,680 --> 00:21:21,200 Speaker 9: of what it sounded like at the end of January, 462 00:21:21,240 --> 00:21:24,440 Speaker 9: the previous FOMC meeting. But of course the messaging yesterday's 463 00:21:24,440 --> 00:21:27,960 Speaker 9: you've pointed out earlier in the program very different. Basically 464 00:21:28,080 --> 00:21:31,120 Speaker 9: a step level, one time increase in prices of those 465 00:21:31,160 --> 00:21:33,960 Speaker 9: imported goods, but we wouldn't expect it to generate inflation 466 00:21:34,000 --> 00:21:34,600 Speaker 9: that would go on. 467 00:21:34,840 --> 00:21:37,080 Speaker 6: Okay, So Luke, it seems like you're actually on board 468 00:21:37,119 --> 00:21:39,680 Speaker 6: with that, And yet you think that the FED took 469 00:21:39,920 --> 00:21:43,479 Speaker 6: may off the table in terms of cutting rates in 470 00:21:43,520 --> 00:21:45,960 Speaker 6: part because they are looking at the hard data. Do 471 00:21:46,000 --> 00:21:48,040 Speaker 6: you think that actually this increases a chance they're going 472 00:21:48,040 --> 00:21:49,840 Speaker 6: to be behind the curve if you do think that 473 00:21:49,920 --> 00:21:52,840 Speaker 6: the soft data is indicating a much faster pace of 474 00:21:52,880 --> 00:21:55,040 Speaker 6: deceleration economically. 475 00:21:55,400 --> 00:21:57,760 Speaker 9: It feels a little bit like last year. I think 476 00:21:57,800 --> 00:21:59,960 Speaker 9: we were probably the last people to take July or 477 00:22:00,040 --> 00:22:01,679 Speaker 9: off the table last year and say, well, they're not 478 00:22:01,720 --> 00:22:04,199 Speaker 9: even really leaving the door open, and then when they 479 00:22:04,200 --> 00:22:06,520 Speaker 9: got to September, of course they cut by fifty basis 480 00:22:06,520 --> 00:22:08,800 Speaker 9: points and they had to play some catch up. I 481 00:22:08,840 --> 00:22:11,520 Speaker 9: think yesterday it was in response to a direct question 482 00:22:11,680 --> 00:22:15,080 Speaker 9: about May, and Chair Pal said, we're not in a rush, 483 00:22:15,080 --> 00:22:16,720 Speaker 9: you know, And so that's about as clear as a 484 00:22:16,760 --> 00:22:18,760 Speaker 9: FED chair is ever going to get about. We're not 485 00:22:18,800 --> 00:22:21,120 Speaker 9: going to cut rates at the next meeting. So that's 486 00:22:21,119 --> 00:22:24,080 Speaker 9: why we have to push our first cut out one 487 00:22:24,160 --> 00:22:27,280 Speaker 9: more meeting. I also don't think it's hugely important. The 488 00:22:27,359 --> 00:22:29,600 Speaker 9: economy is not going to hinge on twenty five basis 489 00:22:29,640 --> 00:22:32,760 Speaker 9: points over the course of seven weeks. But as I said, 490 00:22:32,760 --> 00:22:34,520 Speaker 9: and as you read in the quote at the beginning, 491 00:22:34,560 --> 00:22:37,199 Speaker 9: I do think that the economic data will justify a 492 00:22:37,280 --> 00:22:40,320 Speaker 9: cut by May. We're going to keep seeing slower job growth, 493 00:22:40,320 --> 00:22:42,720 Speaker 9: We're going to see slower consumer spending. I think the 494 00:22:42,720 --> 00:22:46,199 Speaker 9: inflation data will keep slowing down, so it'll justify that. 495 00:22:46,280 --> 00:22:48,400 Speaker 9: But that'll be fine as long as they're talking about 496 00:22:48,400 --> 00:22:51,320 Speaker 9: it at the main meeting. That should the ease financial conditions. 497 00:22:51,359 --> 00:22:53,399 Speaker 6: We have this near term data, and John was talking 498 00:22:53,400 --> 00:22:55,840 Speaker 6: about the delta earnings and the call about how much 499 00:22:55,920 --> 00:22:58,080 Speaker 6: demand has been dropping off. We've heard that same thing 500 00:22:58,160 --> 00:23:03,160 Speaker 6: from other companies that to consumers and raises this question 501 00:23:03,280 --> 00:23:05,840 Speaker 6: how far behind is the hard data. We don't see 502 00:23:05,840 --> 00:23:07,879 Speaker 6: it in the jobless claims, we don't see it in 503 00:23:07,920 --> 00:23:09,640 Speaker 6: a lot of other data points that have been coming 504 00:23:09,680 --> 00:23:12,600 Speaker 6: out from the government. At what point do you expect 505 00:23:12,680 --> 00:23:14,679 Speaker 6: to start seeing this in the data or can you 506 00:23:14,760 --> 00:23:18,320 Speaker 6: dismiss this as watch what they do, not what they say, 507 00:23:18,359 --> 00:23:20,040 Speaker 6: and those two things can be very different. 508 00:23:20,920 --> 00:23:23,520 Speaker 9: Yeah, I'm definitely a fan of watch what they do 509 00:23:23,600 --> 00:23:25,840 Speaker 9: and not what they say. And I don't really think 510 00:23:25,840 --> 00:23:29,120 Speaker 9: we're looking for a deterioration in the hard data signaling 511 00:23:29,119 --> 00:23:31,199 Speaker 9: recession or anything like that. If you just look at 512 00:23:31,320 --> 00:23:33,800 Speaker 9: year over year retail sales, year over year consumer spending, 513 00:23:33,840 --> 00:23:36,439 Speaker 9: it's at pretty mundane normal levels that we had in 514 00:23:36,480 --> 00:23:39,680 Speaker 9: twenty eighteen twenty nineteen, when inflation was not a problem, 515 00:23:40,119 --> 00:23:42,480 Speaker 9: and I think that that hard data speaks directly to 516 00:23:42,640 --> 00:23:45,440 Speaker 9: that the labor market's going to be a lot more interesting. 517 00:23:45,480 --> 00:23:48,000 Speaker 9: You know, we think that the job openings are going 518 00:23:48,040 --> 00:23:51,720 Speaker 9: to continue to decline and jobs are going to slow down. 519 00:23:52,000 --> 00:23:54,480 Speaker 9: One of the interesting things here is that because of 520 00:23:54,520 --> 00:23:57,600 Speaker 9: the uncertainty of the tariffs, we do expect firms to 521 00:23:57,640 --> 00:24:00,679 Speaker 9: maybe hold off on hiring, and that dynamic, it wouldn't 522 00:24:00,680 --> 00:24:04,359 Speaker 9: actually show them cutting their open positions, just sort of 523 00:24:04,440 --> 00:24:06,760 Speaker 9: you know, hey, you know, hr, let's wait a little 524 00:24:06,760 --> 00:24:08,320 Speaker 9: bit and see how these things turn off and not 525 00:24:08,359 --> 00:24:11,720 Speaker 9: pull the trigger on actually hiring somebody. And that's where 526 00:24:11,760 --> 00:24:13,800 Speaker 9: you would see it come through. So it's not going 527 00:24:13,840 --> 00:24:15,840 Speaker 9: to show up in the jolt stata right away. But 528 00:24:16,000 --> 00:24:18,240 Speaker 9: one thing that we have seen, even though the job 529 00:24:18,280 --> 00:24:21,240 Speaker 9: growth is okay, you're not seeing unemployment claims, we're seeing 530 00:24:21,280 --> 00:24:23,600 Speaker 9: shorter work weeks. It's two months in a row now 531 00:24:23,640 --> 00:24:26,800 Speaker 9: that the average work week is really low. And when 532 00:24:26,800 --> 00:24:30,200 Speaker 9: you combine that with slowing job growth and slowing wage 533 00:24:30,200 --> 00:24:32,880 Speaker 9: growth and you look at just total wages paid, that's 534 00:24:32,880 --> 00:24:36,320 Speaker 9: at the slowest growth rate that it's been since the pandemic. 535 00:24:36,600 --> 00:24:38,480 Speaker 9: So it's really starting to slow down. But it's like 536 00:24:38,520 --> 00:24:43,240 Speaker 9: seeping in kind of, kind of sneakily, because it's just 537 00:24:43,280 --> 00:24:45,800 Speaker 9: basically lower wages being pointed out. You've got reduced overtime 538 00:24:45,840 --> 00:24:48,040 Speaker 9: hours in that reduced work week, So in some ways 539 00:24:48,040 --> 00:24:50,000 Speaker 9: it is coming through in the hard data. It's not 540 00:24:50,080 --> 00:24:52,920 Speaker 9: pointing to recession, but it is a slow down and 541 00:24:52,960 --> 00:24:54,880 Speaker 9: I don't think generates any inflation pressure. 542 00:24:55,000 --> 00:24:57,520 Speaker 7: Look, you have a recession probability of thirty five percent 543 00:24:57,560 --> 00:24:59,520 Speaker 7: and GDP of one point eight percent. What I find 544 00:24:59,560 --> 00:25:01,880 Speaker 7: so interesting about your call is it it's the call 545 00:25:01,920 --> 00:25:05,160 Speaker 7: you had around the time of the election next year. Meanwhile, 546 00:25:05,200 --> 00:25:08,760 Speaker 7: everyone has really revised what they're thinking about growth and 547 00:25:08,840 --> 00:25:12,680 Speaker 7: also potential recession because of the tariff story. What did 548 00:25:12,720 --> 00:25:14,760 Speaker 7: you see in November that people are starting to catch 549 00:25:14,800 --> 00:25:15,440 Speaker 7: up now. 550 00:25:16,680 --> 00:25:19,880 Speaker 9: Slowing labor There is slowing labor demand all of last year. 551 00:25:19,920 --> 00:25:22,760 Speaker 9: It's going to slow down the hiring. We're looking at 552 00:25:22,880 --> 00:25:25,520 Speaker 9: job growth that is coming in around one point fifty 553 00:25:25,560 --> 00:25:29,359 Speaker 9: and you've also had a significant contribution from government jobs 554 00:25:29,440 --> 00:25:32,080 Speaker 9: last year. So when you look at private payroll growth, 555 00:25:32,160 --> 00:25:34,879 Speaker 9: it was slowing down already through the second half of 556 00:25:34,960 --> 00:25:38,080 Speaker 9: last year. There were some strong consumer spending numbers, but 557 00:25:38,359 --> 00:25:40,119 Speaker 9: like I said, a few minutes ago. I think that 558 00:25:40,160 --> 00:25:42,240 Speaker 9: those are a little bit of a head fake. And 559 00:25:42,320 --> 00:25:44,399 Speaker 9: if you just if you think about what's going to 560 00:25:44,480 --> 00:25:47,359 Speaker 9: end up driving consumer spending, it's not savings. There's not 561 00:25:47,400 --> 00:25:49,240 Speaker 9: many savings left. It's going to be job growth and 562 00:25:49,320 --> 00:25:52,000 Speaker 9: wage growth. And when those things are slowing down, you're 563 00:25:52,000 --> 00:25:53,800 Speaker 9: going to have a slower economy. It's going to call 564 00:25:53,880 --> 00:25:56,600 Speaker 9: fall down below two percent this year. That's how you 565 00:25:56,680 --> 00:25:59,520 Speaker 9: don't end up with any inflation pressure. So I will 566 00:25:59,520 --> 00:26:01,080 Speaker 9: say next year at the end of the year. It 567 00:26:01,119 --> 00:26:03,760 Speaker 9: was incredibly hard to read through some of the impacts. 568 00:26:03,760 --> 00:26:07,359 Speaker 9: There are multiple hurricane events, storm events, the election, people 569 00:26:07,359 --> 00:26:09,479 Speaker 9: getting ahead of tariffs, so you really have to be 570 00:26:09,480 --> 00:26:12,080 Speaker 9: looking at longer term trends and not hinging on anywhere 571 00:26:12,160 --> 00:26:15,600 Speaker 9: one particular data point. But this is that slowing is 572 00:26:15,680 --> 00:26:17,960 Speaker 9: what we've been seeing for quite some time, and Mary. 573 00:26:18,000 --> 00:26:19,560 Speaker 2: A lot of people are catching up with you. Look 574 00:26:19,600 --> 00:26:23,239 Speaker 2: appreciate it, Luke Telly there of Wilmington Trusts. This is 575 00:26:23,320 --> 00:26:27,639 Speaker 2: the Bloomberg Savants podcast, bringing you the best in markets, economics, 576 00:26:27,680 --> 00:26:30,119 Speaker 2: an gio politics. You can watch the show live on 577 00:26:30,160 --> 00:26:33,800 Speaker 2: Bloomberg TV weekday mornings from six am to nine am Eastern. 578 00:26:34,119 --> 00:26:37,480 Speaker 2: Subscribe to the podcast on Apple, Spotify or anywhere else 579 00:26:37,520 --> 00:26:40,159 Speaker 2: you listen, and as always, on the Bloomberg Terminal and 580 00:26:40,200 --> 00:26:41,400 Speaker 2: the Bloomberg Business app.