WEBVTT - Pfizer's Robust Vaccine Data Comes With Caveats: Nisen 0:00:01.400 --> 0:00:04.120 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 0:00:04.120 --> 0:00:06.240 with my co host of Bonnie Quinn. Every business day 0:00:06.240 --> 0:00:10.360 we bring you interviews from CEOs, market pros, and Bloomberg experts, 0:00:10.400 --> 0:00:13.560 along with essential market moving news kind of Bloomberg Markets 0:00:13.600 --> 0:00:17.000 Podcast on Apple podcast or wherever you listen to podcasts, 0:00:17.000 --> 0:00:21.040 and on Bloomberg dot com. So we have a lot 0:00:21.320 --> 0:00:24.560 of coronavirus news today. Most of it is positive. Well 0:00:24.880 --> 0:00:26.639 maybe I shouldn't say most of it, but some of 0:00:26.680 --> 0:00:29.240 it is positive. Let's say the vaccine being developed by 0:00:29.280 --> 0:00:33.479 Fiser and Bioontech is preventing more than of symptomatic infections 0:00:33.520 --> 0:00:36.040 in a study of tens of thousands of volunteers. We 0:00:36.120 --> 0:00:39.360 also know Maderna is getting closer. However, on the other 0:00:39.440 --> 0:00:41.320 side of things, we know that more than a hundred 0:00:41.400 --> 0:00:47.599 thousand US citizens will be diagnosed today, and we just 0:00:47.680 --> 0:00:49.559 have Mayor Bill de Blasio in New York saying New 0:00:49.640 --> 0:00:52.600 York City is coming dangerously close to a second wave 0:00:53.040 --> 0:00:56.120 with an all rate now that is above two. Let's 0:00:56.120 --> 0:00:58.280 bring in Max Nisson, who can synthesize all this for 0:00:58.360 --> 0:01:00.560 us and tell us exactly where we are here. Farm 0:01:00.600 --> 0:01:05.000 analyst for Bloomberg Intelligence and Bloomberg News. Max talks us 0:01:05.040 --> 0:01:08.720 about this vaccine. The market is is rallying big on it. 0:01:08.800 --> 0:01:13.679 Is it enough to save us? Uh? Not on its own? 0:01:14.080 --> 0:01:17.320 So this is what i'd call really good news that 0:01:17.319 --> 0:01:22.040 that needs a lot of context, so that that result, UM, 0:01:22.200 --> 0:01:25.320 he's a really strong indication that this is going to 0:01:25.400 --> 0:01:29.040 be an effective vaccine. UM could fade over time as 0:01:29.080 --> 0:01:30.880 you get more data to be a little bit lower, 0:01:30.959 --> 0:01:34.039 but it really does suggest that this is something that 0:01:34.120 --> 0:01:38.120 that's going to work and and be useful. The caveat 0:01:38.200 --> 0:01:41.360 is that it's not going to be immediately available, and 0:01:41.440 --> 0:01:45.520 it's not going to be broadly available for a longer time. UM. 0:01:45.880 --> 0:01:49.760 I think the company's guided to fifty million doses worldwide 0:01:50.000 --> 0:01:52.600 by the end of the year. That's enough for only 0:01:52.640 --> 0:01:55.960 twenty five million people. Manufacturing is going to ramp up 0:01:56.000 --> 0:01:58.520 over time, but you know, it takes time, and you 0:01:58.560 --> 0:02:02.480 will still need other seems to be successful likely in 0:02:02.640 --> 0:02:07.639 order to get a significant part of the population. Does um, 0:02:07.960 --> 0:02:09.880 you know, with any sort of any sort of reasonable 0:02:10.240 --> 0:02:12.760 time frame. And the other thing to keep in mind 0:02:12.880 --> 0:02:15.520 is that it's not going to be ready, particularly in 0:02:15.560 --> 0:02:18.920 sufficient quantities to do anything about the current sort of 0:02:19.040 --> 0:02:22.760 rampant outbreaks that's going to take um, you know, your 0:02:22.800 --> 0:02:26.920 more traditional type of public health action, UM and then 0:02:27.080 --> 0:02:32.360 preferably with some urgency given the really disturbing rate of 0:02:32.400 --> 0:02:35.760 growth that you're seeing lately. So Max, that rate of 0:02:35.760 --> 0:02:38.240 growth that we are seeing, you know, as you speak 0:02:38.280 --> 0:02:41.320 to the experts, is that something that's within the bounds 0:02:41.320 --> 0:02:43.640 of expectations given what we know about the virus and 0:02:43.720 --> 0:02:47.640 colder temperatures and people not being outdoors as much. UM, 0:02:47.960 --> 0:02:52.519 Or is this even a higher rate? I I wouldn't 0:02:53.000 --> 0:02:56.440 really blame this on the seasonal effect, although you know, 0:02:56.480 --> 0:02:58.680 I may be a little biased by effect them in 0:02:58.680 --> 0:03:01.280 New York and it's beautiful right now, but UM, you 0:03:01.320 --> 0:03:04.760 know that we haven't really hit the the sort of 0:03:04.880 --> 0:03:08.160 worst period for that. The growth that's coming right now 0:03:08.880 --> 0:03:11.520 is the fact that there just hasn't been in many 0:03:11.680 --> 0:03:14.640 parts of the country. UM. You know, a robust or 0:03:14.680 --> 0:03:21.080 sufficient response to rapidly growing cases. The seasonal effect is 0:03:21.120 --> 0:03:23.680 something that's going to take what's happening now and make 0:03:23.720 --> 0:03:26.480 it worse. It's not the cause of how bad things 0:03:26.520 --> 0:03:29.320 are right now. We're exponential, aren't we, Max. I mean, 0:03:29.600 --> 0:03:32.040 we're above two for an ol rage in New York 0:03:32.080 --> 0:03:36.880 City alone, but we're above one and all all states. Yeah, 0:03:36.960 --> 0:03:42.800 it's it's incredibly concerning. Um. I you know, I with 0:03:42.960 --> 0:03:46.000 there's some hope you can point to in the fact that, um, 0:03:46.000 --> 0:03:49.560 the Biden administration, you know, a panel of really well 0:03:49.640 --> 0:03:52.520 regarded experts, But you do also have to keep in 0:03:52.560 --> 0:03:56.880 mind that you won't actually take power until late January. UM, 0:03:57.080 --> 0:04:00.360 so we do have the status quo on a national level. 0:04:00.760 --> 0:04:04.080 You just have to hope that the the States will 0:04:04.120 --> 0:04:07.520 finally sort of react and in the way that you should, 0:04:07.680 --> 0:04:09.960 because you know, if if you leave things the way 0:04:10.000 --> 0:04:13.280 they are, you're just going to see continued growth. Max. 0:04:13.320 --> 0:04:15.360 What do we know about in the second wave here 0:04:15.480 --> 0:04:19.240 the hospitalization rate number one and number two, the fatality rates, 0:04:19.320 --> 0:04:23.520 or any reason to believe that those rates won't mirror 0:04:23.560 --> 0:04:27.400 what we saw in the first wave? Uh, there there 0:04:27.520 --> 0:04:29.599 is some reason. Yes, So there there are a bunch 0:04:29.680 --> 0:04:32.920 of the number of things that are different now. UM, 0:04:32.960 --> 0:04:34.800 you know, it's a different situation. The wars in the 0:04:34.800 --> 0:04:38.520 spring you had sort of completely uncontained, spread a lot 0:04:38.520 --> 0:04:42.159 of it into really vulnerable populations. Now, even though you 0:04:42.160 --> 0:04:45.880 know obviously containment is failing, still efforts to protect those 0:04:45.920 --> 0:04:50.360 that are more vulnerable, better treatments, better, better know how 0:04:50.400 --> 0:04:53.120 about managing the virus. But the thing that you do 0:04:53.200 --> 0:04:55.320 have to keep in mind is, you know, a reduction 0:04:55.520 --> 0:04:59.520 in the hospitalization rate or death rate UM. All of 0:04:59.560 --> 0:05:02.320 that would have eventually breaks down in the face of 0:05:02.720 --> 0:05:06.160 large enough numbers UM. You start to get hospitals that 0:05:06.200 --> 0:05:10.440 get overwhelmed, you start to get enough community transmission that 0:05:10.560 --> 0:05:13.240 all of those efforts to protect the more more vulnerable 0:05:13.240 --> 0:05:16.960 population begin to break down. So it's not something that 0:05:17.000 --> 0:05:19.880 you can take for granted. It's something that is an 0:05:19.960 --> 0:05:23.680 advantage if you you manage a relatively good degree of 0:05:24.000 --> 0:05:27.200 containment and caution, but one you know, it's it's a 0:05:27.240 --> 0:05:30.800 benefit that you can lose. Max tell us a little 0:05:30.800 --> 0:05:34.760 bit more about this Fiser vaccine. So it's preventing of 0:05:34.920 --> 0:05:39.800 COVID cases in a study. Why is that good? You know, 0:05:39.880 --> 0:05:42.960 relative to other types of vaccines. Shouldn't have been more 0:05:43.000 --> 0:05:46.720 like and how many people are we really talking about here? 0:05:48.080 --> 0:05:53.200 So is actually excellent, especially for a vaccine that has 0:05:53.240 --> 0:05:56.680 been developed so rapidly. So what it's preventing in this 0:05:56.800 --> 0:06:00.520 case is the thing that they're measuring is mild symptomatic 0:06:00.640 --> 0:06:04.240 confirmed cases of COVID, and the number that they're looking 0:06:04.279 --> 0:06:08.119 at is is ninety four confirmed cases so far, less 0:06:08.120 --> 0:06:11.320 than ten people in that group UM that got the 0:06:11.720 --> 0:06:13.760 fact of the virus um that that got, that had 0:06:13.760 --> 0:06:17.120 a confirmed case in the trial, or or had been vaccinated. 0:06:17.480 --> 0:06:20.320 That's a rate of efficacy that that's comparable to you know, 0:06:20.400 --> 0:06:23.919 really effective vaccines, much better than you know, your annual 0:06:23.920 --> 0:06:26.719 flu vaccine, which you know can hover around the fifty 0:06:26.760 --> 0:06:29.479 percent range, and better than the f d a's bar 0:06:29.800 --> 0:06:34.360 for approval, which was only efficacy. So there are a 0:06:34.360 --> 0:06:36.840 lot of unknown still, you don't know how well the 0:06:36.920 --> 0:06:40.240 vaccine works at preventing severe disease UM, whether it can 0:06:40.240 --> 0:06:45.440 actually prevent asymptomatic infection or transmission. But the protection rates 0:06:45.480 --> 0:06:48.560 suggest that it really is active. It does have some 0:06:48.600 --> 0:06:51.680 degree of protection um and a better one than what 0:06:51.800 --> 0:06:54.919 many people were actually hoping for. So um a good 0:06:55.000 --> 0:06:58.120 and meaningful results. Though that we do still need more 0:06:58.120 --> 0:07:01.200 and more context and information a max. About thirty seconds 0:07:01.240 --> 0:07:04.640 or so. There's still other entities out there working towards 0:07:04.640 --> 0:07:07.560 a vaccine. Is the expectation that you know, as we 0:07:07.600 --> 0:07:11.600 get into one will have two, three, maybe four vaccines 0:07:11.600 --> 0:07:13.920 in the marketplace at the same time, and it'll simply 0:07:14.000 --> 0:07:16.480 be a choice or that doctors will forge out which 0:07:16.520 --> 0:07:20.600 is the best for which population. Um. That's the hope, though, 0:07:20.640 --> 0:07:24.240 I do think that only Madurana's vaccine is likely to 0:07:24.640 --> 0:07:27.920 provide data really soon, and there's some concern that having 0:07:28.000 --> 0:07:31.239 another option or a good data may slow trial enrollment. 0:07:31.400 --> 0:07:33.920 I very much hope that doesn't happen, because we really 0:07:33.960 --> 0:07:41.200 need multiple vaccines given the manufacturing and supply constraints on visors. Max, 0:07:41.240 --> 0:07:43.840 thank you so much. We appreciate it as always a 0:07:43.920 --> 0:07:47.040 very very important day here as we move towards a vaccine. 0:07:47.080 --> 0:07:50.960 Max Neeson, Bloomberg Opinion, Biotech and healthcare columnists. You can 0:07:51.000 --> 0:07:53.120 read all of max work and the work of our 0:07:53.160 --> 0:07:56.960 other opinion columnists at Bloomberg dot com, slash Opinion or 0:07:57.040 --> 0:07:59.680 by typing O P I N go on the terminal. 0:08:00.160 --> 0:08:02.800 It's interesting, Vonny, it's you know, I guess as Max 0:08:02.880 --> 0:08:04.560 was suggesting the hope that you know, you get multiple 0:08:04.640 --> 0:08:07.080 vaccines out there in the market, because this thing has 0:08:07.160 --> 0:08:11.560 to scale just on an incredible level. Yes, absolutely, and 0:08:11.720 --> 0:08:13.280 you know, obviously we know that it will be done 0:08:13.280 --> 0:08:15.400 in layers. But then what about the rest of the world, 0:08:15.440 --> 0:08:18.080 you know, and then how close to other countries come 0:08:18.120 --> 0:08:20.360 to getting a vaccine and how does it all get distributed. 0:08:20.720 --> 0:08:22.800 It's it's going to be a fascinating matrix to watch. 0:08:25.040 --> 0:08:27.920 Right now, the KBW Bank Index is eleven and a 0:08:27.960 --> 0:08:30.880 half percent. Now, Zion's Bank Corps, M and T America 0:08:31.000 --> 0:08:34.440 they're all leading the charge, up around twenty apiece. But 0:08:34.600 --> 0:08:37.280 the majors like City Group, Bank of America, JP, Morgan, 0:08:37.320 --> 0:08:39.600 they're all up nine and ten percent. Let's bring in 0:08:39.640 --> 0:08:42.560 somebody who knows a lot about US banks, the goliath 0:08:42.800 --> 0:08:45.800 of the global capital markets, as he calls them. Mike 0:08:45.840 --> 0:08:50.440 Mayo is senior analyst at Wells Fargo Securities. Mike, I 0:08:50.440 --> 0:08:53.000 can understand why banks might be up because the entire 0:08:53.080 --> 0:08:55.840 market is up, But what else is behind this extra 0:08:55.880 --> 0:09:00.360 exuberant trade for the banks. Well, I'd say this is 0:09:00.400 --> 0:09:03.120 not only a good day for banks, a great day 0:09:03.160 --> 0:09:06.080 for banks relative to the market's the best performance for 0:09:06.120 --> 0:09:10.120 bank stock and over six months if this holds, and 0:09:10.160 --> 0:09:14.160 so number one, you have the hope for a COVID vaccine. 0:09:14.640 --> 0:09:17.800 And what we say is that bank stocks have among 0:09:17.840 --> 0:09:21.560 the highest COVID stock data so as COVID got worse, 0:09:21.640 --> 0:09:24.760 bank stocks went down. If there's a vaccine, banks to 0:09:24.960 --> 0:09:28.120 get much better. And the concern there is because of 0:09:28.200 --> 0:09:33.600 the exposure banks have in lending to corporations and individuals. Uh. 0:09:33.720 --> 0:09:36.920 The second factor happening today is this an enormous move 0:09:37.400 --> 0:09:40.800 in the treasury market with the steepening yield curve, So 0:09:40.960 --> 0:09:46.560 banks like Bank of America certainly benefit from that steepening um. 0:09:46.720 --> 0:09:51.120 And then third, I'd say the idea of a Abiden 0:09:51.240 --> 0:09:56.439 presidency with the divided government means that it's the absence 0:09:56.520 --> 0:10:02.840 of a potential more harsher regulat regime than what's mostly 0:10:02.880 --> 0:10:06.440 currently in place. So, Mike, let's talk about that steepening 0:10:06.480 --> 0:10:08.840 Yeel curve that you were talking about here, and it 0:10:08.880 --> 0:10:11.400 goes to the obviously in the net interest margin that 0:10:11.480 --> 0:10:14.360 these banks can earn on their deposits. Give us a 0:10:14.400 --> 0:10:17.160 sense of kind of where we are today in terms 0:10:17.200 --> 0:10:20.040 of that part of their business. And does it have 0:10:20.440 --> 0:10:23.080 you know, how much more do we need improvement steepening 0:10:23.120 --> 0:10:25.040 in the Yeel curve for to make a meaningful difference 0:10:25.040 --> 0:10:29.760 for these companies. Well, we estimate that the banking industry 0:10:29.840 --> 0:10:33.920 will have a piece dividend once the war on COVID 0:10:34.160 --> 0:10:38.400 is one of about a hundred billion dollars, and that 0:10:38.520 --> 0:10:41.520 does not even assume much change and interest rate. So 0:10:41.559 --> 0:10:44.880 if interest rates improved, that number would go a lot higher. 0:10:45.240 --> 0:10:48.480 I think what's interesting is one of the biggest implicit 0:10:48.600 --> 0:10:52.559 taxes on the banking industry in history has been this 0:10:52.600 --> 0:10:56.080 period of lower interest rate. The federalies are balance sheet 0:10:56.120 --> 0:11:00.800 has ballooned this year from four trillion the seven billion dollars, 0:11:00.840 --> 0:11:04.719 and that's kept rates lower for longer. Uh and the 0:11:04.880 --> 0:11:09.000 cost to banks has been fifty billion dollars annually. If 0:11:09.000 --> 0:11:12.160 you compare year every year so to an extent that 0:11:12.160 --> 0:11:16.720 that reverses some bit, then you could have expectations going 0:11:16.840 --> 0:11:20.319 higher across the bank group. That's impacts on this every bank, 0:11:20.720 --> 0:11:24.240 especially some more of the smaller banks, but the larger 0:11:24.280 --> 0:11:27.640 Golias banks which we've we've been favoring for a while, 0:11:27.800 --> 0:11:32.120 like j Jake Morigan Bank America. Mike does this assume 0:11:32.240 --> 0:11:35.040 that once we have a coronavirus vaccine that works and 0:11:35.080 --> 0:11:38.640 that is getting widely distributed, and once cases are going 0:11:38.679 --> 0:11:41.839 down and blattening and so on, that suddenly everything will 0:11:41.880 --> 0:11:44.000 be okay for the banks that you know, those those 0:11:44.000 --> 0:11:46.440 on the brink of bankruptcy suddenly won't go bankrupt, that 0:11:46.440 --> 0:11:49.520 those loans will get repaid, and so on. You know, 0:11:49.520 --> 0:11:53.720 what I find amazing is just how much recency bias 0:11:53.800 --> 0:11:56.920 there is to the global financial crisis from over a 0:11:57.000 --> 0:11:59.920 decade ago, and this idea that banks are in the 0:12:00.080 --> 0:12:03.000 rink of bankruptcy and they're going to fail, or even 0:12:03.000 --> 0:12:05.400 that they'll have to issue more equity. Now that might 0:12:05.440 --> 0:12:07.440 be the case for some smaller banks. No, no no, I 0:12:07.480 --> 0:12:10.160 meant those companies that banks are lending to that are 0:12:10.160 --> 0:12:14.040 on the verge of bankruptcy. Oh well, look, these are 0:12:14.120 --> 0:12:17.480 still sobering times, make no mistake about it. I mean, 0:12:17.520 --> 0:12:20.760 so from the banking industry standpoint, the banks have already 0:12:20.800 --> 0:12:24.320 reserved for the problem loans they expect over the next 0:12:24.360 --> 0:12:27.840 couple of years. And the peak and these problems probably 0:12:27.840 --> 0:12:31.200 doesn't happen until the second half and next year. So 0:12:31.280 --> 0:12:36.000 you're still going to have bankruptcies individuals, corporations. These are 0:12:36.000 --> 0:12:40.040 still hard times. You know, even with the vaccine, I 0:12:40.040 --> 0:12:43.000 would not expect banks to start saying, well, you know, 0:12:43.160 --> 0:12:45.800 credit is just fine as far as all these loans. 0:12:45.840 --> 0:12:50.240 It just helps ease the pressure and the risk of 0:12:50.320 --> 0:12:53.320 a tail risk scenario, you know, in terms of a 0:12:54.040 --> 0:12:56.280 you know, we have different shape recoveries. Maybe it's not 0:12:56.360 --> 0:12:59.560 a V shape recovery, which is the best case, but 0:12:59.640 --> 0:13:02.520 maybe softs are not in an L shape either or 0:13:02.920 --> 0:13:05.840 what people say like a Nike swoosh. Maybe it's more 0:13:05.960 --> 0:13:10.120 like a you that doesn't last as long as otherwise expected. 0:13:10.640 --> 0:13:13.520 So bank, Mike, where how well are the banks reserved 0:13:13.600 --> 0:13:15.560 right now? I know they're pretty aggressive in the early 0:13:15.600 --> 0:13:19.480 part of are how are they positioned in your perspective? 0:13:20.480 --> 0:13:23.760 You know what's amazing recent comments from the largest banks 0:13:23.800 --> 0:13:27.160 say they are reserved. They don't need to build any 0:13:27.200 --> 0:13:30.560 more reserves than what they did the first part of 0:13:30.559 --> 0:13:32.360 this year. What they did the first part of this year, 0:13:32.400 --> 0:13:35.400 and this is due to an accounting change that encouraged this. 0:13:35.920 --> 0:13:38.920 They said, reserved for all the problems you think you'll 0:13:38.920 --> 0:13:42.160 have from now into infinity for the loans. So they 0:13:42.160 --> 0:13:45.960 took more reserves at the start of re recession at 0:13:46.040 --> 0:13:49.440 any time in banking history. So as a result, banks 0:13:49.440 --> 0:13:52.719 are in better shape to whether the storm um the 0:13:52.800 --> 0:13:56.240 losses that are to come um than any time before. 0:13:56.360 --> 0:13:59.319 So that means that you know, they front loaded the 0:13:59.360 --> 0:14:03.560 pain and now when the losses come, Uh, it doesn't 0:14:03.640 --> 0:14:06.719 hurt the earnings like otherwise would. Real quick, Mic, we're 0:14:06.720 --> 0:14:08.679 out of time. But who will the banks be looking 0:14:08.679 --> 0:14:12.400 to Joe Biden to pick for some of those important 0:14:12.640 --> 0:14:17.640 Treasury and you know, Labor secretary and so on positions. Well, 0:14:17.679 --> 0:14:21.040 I think what they can do, what they will do 0:14:21.160 --> 0:14:24.760 is they look for somebody that has the part of 0:14:24.920 --> 0:14:28.040 Main Street and the head of Wall Street. And what 0:14:28.160 --> 0:14:31.200 that means is, um, you really have to look after 0:14:31.280 --> 0:14:35.720 the transparency and consumers and make sure they're getting a 0:14:35.720 --> 0:14:38.480 fair deal while at the same time being savvy enough 0:14:38.520 --> 0:14:43.480 to recognize that, you know, good good politics is good economics. Hey, Mike, 0:14:43.480 --> 0:14:45.880 thanks so much for joining us. We appreciate it. As always, 0:14:45.960 --> 0:14:49.560 Mike Mayo, senior banking analyst at Wells Fargo Security, is 0:14:49.600 --> 0:14:54.720 giving his thoughts into banks they are rallying today. This 0:14:55.280 --> 0:14:58.640 is Bloomberg Markets with Ball Sweeney and Bunny Quinn on 0:14:58.720 --> 0:15:03.240 Bloomberg Radio. Well with the election for the most part 0:15:03.320 --> 0:15:05.520 in our rear view year rear of view mirror, it's 0:15:05.520 --> 0:15:07.760 a great time to check in with Michael Jasas. He's 0:15:07.760 --> 0:15:11.680 a chief US public policy and municipal strategist for Mortgage 0:15:11.680 --> 0:15:15.120 Stanley Michael, thanks so much for joining us here. So 0:15:15.480 --> 0:15:18.200 all right, we've got the presidential election, and with the 0:15:18.200 --> 0:15:22.320 exception of Georgia, the Senate and Congress kind of all 0:15:22.520 --> 0:15:25.440 mapped out here. What did you take away from this 0:15:25.640 --> 0:15:31.360 latest election cycle? Yeah, I think you sort framed it right. 0:15:31.440 --> 0:15:33.960 There's a couple of loose ends here with regard to 0:15:34.320 --> 0:15:36.880 send a control and that's where Georgia comes in. But 0:15:36.920 --> 0:15:38.720 if you take a step back, you know, we went 0:15:38.720 --> 0:15:42.120 into election day and consider a very wide variety of 0:15:42.160 --> 0:15:46.040 possible policy outcomes, because you have to consider a very 0:15:46.040 --> 0:15:51.360 wide variety of election outcomes, including a much uh sort 0:15:51.400 --> 0:15:55.080 of much more substantial uh Senate control outcome for the 0:15:55.120 --> 0:15:59.000 Democrats um, as well as obviously a potential we've in 0:15:59.080 --> 0:16:01.680 the other direction for the Republicans. But I now what 0:16:01.720 --> 0:16:03.920 you're looking at is basically either going to get fifty 0:16:04.000 --> 0:16:06.320 seats in the Senate for the Democrats or they're gonna 0:16:06.400 --> 0:16:10.600 fall short. Uh. And most of the policy concerns that 0:16:10.800 --> 0:16:13.120 a lot of investors told us in our survey were 0:16:14.240 --> 0:16:18.120 animating their behavior become you know, less variables and more 0:16:18.240 --> 0:16:23.120 fixed things like tech regulation, potential for taxes to go up. 0:16:23.160 --> 0:16:25.640 I think there's still some potential for some tax increases 0:16:25.640 --> 0:16:28.920 in the fifty scenario, but probably are less of versus 0:16:28.960 --> 0:16:31.280 what a lot of investors were expressing concern on. And 0:16:31.320 --> 0:16:33.840 so it's not that we don't need to pay attention 0:16:33.880 --> 0:16:36.760 to this January fifth runoff. We we there's probably actually 0:16:36.800 --> 0:16:40.840 a big difference for the path for COVID relief stimulus, 0:16:40.840 --> 0:16:43.440 but a lot of the kind of medium term policy 0:16:44.280 --> 0:16:48.000 concerns that investors had the possibilities have been narrowed down substantially, 0:16:48.040 --> 0:16:51.360 and so politics in general is becoming a little more 0:16:51.440 --> 0:16:53.160 like a constant than a variable, at least in the 0:16:53.240 --> 0:16:57.040 very short term. What does it mean for your projection 0:16:57.160 --> 0:17:03.120 for economics and metals? So here because the right way 0:17:03.160 --> 0:17:06.359 to frame it, uh, if the Democrats were to take 0:17:06.680 --> 0:17:09.080 control of the Senate, even with that very slim fifty 0:17:09.119 --> 0:17:12.000 fifty majority that they've had for a long time, the 0:17:12.080 --> 0:17:15.600 motive to spend a lot on COVID release stimulus was 0:17:15.640 --> 0:17:19.240 evidenced by the Heroes Act being above three trillion dollars um. 0:17:19.480 --> 0:17:21.879 If they got fifty seats in the Senate, they'd obviously 0:17:21.920 --> 0:17:24.760 have the opportunity to execute on that. So I think 0:17:24.920 --> 0:17:27.720 the way you would frame that is, the half to 0:17:27.800 --> 0:17:32.480 stimulus would be fairly wide and not filled with too 0:17:32.520 --> 0:17:34.960 much drama, and you would probably get a pretty big package. 0:17:35.520 --> 0:17:38.919 Um in a divided government outcome right where the Republicans 0:17:39.000 --> 0:17:42.080 keep the Senate, it's not that you could never get stimulus, 0:17:42.080 --> 0:17:44.480 but that it would probably be smaller and the path 0:17:44.560 --> 0:17:47.520 to get there would be less. Certain Republicans haven't necessarily 0:17:47.600 --> 0:17:51.119 sent and the Senate changed their view about the idea 0:17:51.200 --> 0:17:55.880 that they're still concerned about spending driven deficits and are 0:17:55.920 --> 0:17:58.920 not convinced that the economy needs more stimulus. And so 0:17:59.520 --> 0:18:02.520 it might be that you need a demonstration from weaker 0:18:02.520 --> 0:18:06.080 economic data, we can market weaker market data to move 0:18:06.119 --> 0:18:09.240 them off of that position. So the difference is a 0:18:09.320 --> 0:18:12.639 democratic Uh, Democrats getting fifty seats gets you a kind 0:18:12.680 --> 0:18:16.720 of proactive and easy stimulus. Republicans keeping the Senate probably 0:18:16.720 --> 0:18:22.080 a bumpy, kind of windy path to ultimately a smaller stimulus. So, Michael, 0:18:22.080 --> 0:18:24.600 we're starting to see the COVID cases, uh, you know, 0:18:24.680 --> 0:18:27.679 really go the wrong way here. How does that impact 0:18:27.720 --> 0:18:30.520 kind of your outlook for what kind of public policy 0:18:30.560 --> 0:18:33.320 we may see out of a Biden administration in terms 0:18:33.320 --> 0:18:36.639 of maybe you know, locking down the country for some 0:18:36.680 --> 0:18:40.360 period of time and any potential economic fallout. Yeah. I mean, 0:18:40.359 --> 0:18:43.640 what's interesting here is that, you know, the Biden team 0:18:43.680 --> 0:18:47.440 doesn't take power until January twentieth, and there's a lot 0:18:47.600 --> 0:18:51.240 that happens between now in January twenties, and obviously, you know, 0:18:51.359 --> 0:18:54.000 the news breaking this morning about vaccine is sort of 0:18:54.040 --> 0:18:58.439 puts that completely on display. And so what you know, 0:18:58.480 --> 0:19:03.879 what our biotech team, led by Matthew Harrison um I 0:19:04.040 --> 0:19:07.240 believe is that once you get to January twenties, you 0:19:07.280 --> 0:19:12.080 will have effectively banked a lot of positive information on vaccination. 0:19:12.800 --> 0:19:15.959 UM that the sort of the modeling of the virus 0:19:15.960 --> 0:19:19.040 trajectory would suggest that you could be in kind of 0:19:19.160 --> 0:19:22.000 more of a plateau territory at that point. So by 0:19:22.040 --> 0:19:25.080 the time the Biden team kind of comes to UM 0:19:25.440 --> 0:19:30.280 take executive authority. UM that the question of whether or 0:19:30.280 --> 0:19:32.560 not they would try and pursue a kind of more 0:19:33.280 --> 0:19:36.119 sort of return to March April style lockdown could be 0:19:36.160 --> 0:19:37.760 kind of a moot one, because you'd have all this 0:19:38.119 --> 0:19:41.639 positive new information behind you, and at the same time, 0:19:41.760 --> 0:19:45.480 if you are getting a pretty negative trajectory on COVID 0:19:45.600 --> 0:19:48.520 and you've had some weaker economic data coincident with that, 0:19:48.920 --> 0:19:52.359 it's far less likely that you would sort of face 0:19:52.440 --> 0:19:55.840 a difficult scenario of, you know, the Biden team considering 0:19:56.680 --> 0:19:59.440 returning to March April style restrictions at the same time 0:19:59.440 --> 0:20:02.520 they didn't have of a relief package or a stimulus package. 0:20:02.520 --> 0:20:05.120 It would be very difficult for those two negative things 0:20:05.160 --> 0:20:08.159 to co exist at the same time. So, you know, 0:20:08.400 --> 0:20:11.359 so long story, sure, I think that it's we should 0:20:11.400 --> 0:20:14.199 be asking these questions, but there doesn't seem to be 0:20:14.200 --> 0:20:16.359 a lot of paths to that kind of very negative 0:20:16.480 --> 0:20:20.240 policy outcome where we end up in both heavily restricted 0:20:20.280 --> 0:20:24.840 economy and one without stimulus. Michael, we're almost at a time, 0:20:24.880 --> 0:20:28.240 but the tenure yield is at nine basis points. Now, 0:20:28.359 --> 0:20:30.240 who are very close to that one percent mark? Do 0:20:30.320 --> 0:20:34.640 we get above it? And what sense us there? Uh? Yeah, 0:20:34.640 --> 0:20:37.719 I mean, I know, certainly the view of our interest 0:20:37.800 --> 0:20:40.760 rates team is that you should still be short on 0:20:40.840 --> 0:20:44.920 duration here and expect a higher bias and yields going forward. 0:20:45.720 --> 0:20:50.440 Uh And at this point, because we haven't or sort 0:20:50.440 --> 0:20:54.719 of we kept open the pathway to a bigger stimulus package. 0:20:54.720 --> 0:20:57.000 As we talked about, the Democrats get those fifty seats. 0:20:57.640 --> 0:21:00.520 It's it's meaningful that the difference between in an easy 0:21:00.560 --> 0:21:03.240 path to a couple of trillion dollars of stimulus and 0:21:03.280 --> 0:21:05.560 bumpy paths or something smaller, it suggests that you have 0:21:05.640 --> 0:21:08.240 to price in some degree on the probability way the 0:21:08.280 --> 0:21:11.920 basis of a lot more treasury supply. So um H 0:21:12.000 --> 0:21:15.439 think the market sort of behaving very rationally around that. Michael, 0:21:15.440 --> 0:21:17.840 looking forward to another conversation with you where we can 0:21:18.080 --> 0:21:20.120 talk a little bit more about the individual states and 0:21:20.119 --> 0:21:23.119 and newnees and so on. Michael Jesus is chief you 0:21:23.200 --> 0:21:26.760 as public policy and municipal strategist at Morgan Stanley, and 0:21:26.920 --> 0:21:30.439 we sank him redhead. Ben Carson has now been tested 0:21:30.480 --> 0:21:36.919 positive for coronavirus well, and indeed we are continuing to 0:21:37.040 --> 0:21:40.000 watch this market. With a ten year yield at ninety 0:21:40.080 --> 0:21:42.760 five plus basis points is quite a change just from 0:21:42.840 --> 0:21:45.880 last week alone. And obviously we have equities doing their 0:21:45.920 --> 0:21:48.080 thing as well, but let's concentrate on fixed income now 0:21:48.119 --> 0:21:50.560 and bringing Thomas McLaughlin ahead of America's fixed income at 0:21:50.640 --> 0:21:54.320 UBS Global Wealth Management. So Tom, we you know, we 0:21:54.400 --> 0:21:57.760 had treasuries rallying last week and suddenly now they're they're 0:21:57.800 --> 0:22:00.720 they're dropping like a stone with a tenure yield bass 0:22:00.760 --> 0:22:04.800 points and going higher. How much more room is there 0:22:04.880 --> 0:22:09.280 in this self? Well, you know, Vonnie, this morning, uh 0:22:09.320 --> 0:22:11.639 if and this morning has proven anything, it's proven the 0:22:11.680 --> 0:22:13.840 fact that it's all about COVID and the prospects of 0:22:13.840 --> 0:22:17.440 the vaccine. We've kind of left the election behind us. 0:22:17.800 --> 0:22:20.040 We've been added for about eighteen months, but the election 0:22:20.080 --> 0:22:22.560 looks like it's been decided, and now we're all looking 0:22:22.600 --> 0:22:26.040 forward to the prospects of vaccine. And what you're seeing 0:22:26.080 --> 0:22:28.960 in the equity market rally, what you're seeing effectively in 0:22:28.960 --> 0:22:32.680 the yells jumping is the optimism that's uh, that's taking 0:22:32.680 --> 0:22:35.560 over the market this morning. And so Tom, let's put 0:22:35.640 --> 0:22:39.040 a coda, if if we will on the election here, Well, 0:22:39.280 --> 0:22:42.840 was ebs out saying to its clients, given that it 0:22:42.840 --> 0:22:44.880 looks like president elected, that Joe Biden will in fact 0:22:44.920 --> 0:22:47.119 be in the White House, a little bit of uncertainty 0:22:47.200 --> 0:22:50.720 as it relates to the Senate and what's the UBS message. Yeah, 0:22:50.720 --> 0:22:52.800 so it's gonna be a little more constrained the ability 0:22:52.800 --> 0:22:55.960