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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom keene Jailey.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Let's

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Speaker 1: begin the conversation on Bloomberg Surveillance with Michael Shall, market

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Speaker 1: Field Acid Management CEO and portfolio manager. Michael fantastic to

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Speaker 1: catch up with you, sir. We'll start with a simple one,

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Speaker 1: How on earth do you navigate the next twenty four

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Speaker 1: hours for this market? I think with no great certainty.

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Speaker 1: You know, we don't know who's going to win the election.

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Speaker 1: I think that that it looks likely but Biden will win,

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Speaker 1: not clear that the Democrats will take the Senate. And

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Speaker 1: what's even less clear is what the markets immediate reaction

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Speaker 1: will be. So you know, I'm still at the mindset

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Speaker 1: there are certain things that seem to be happening globally.

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Speaker 1: Is a cyclical rebound in endurable goods um led by

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Speaker 1: the US and Asia, and I think that will continue

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Speaker 1: whoever wins the White House and pretty much everything else.

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Speaker 1: I think you simply have to say you don't know,

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Speaker 1: and deal with not knowing. That's where I wanted to go, Michael.

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Speaker 1: I wanted to get a from you know, the domestic politics.

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Speaker 1: We'll do that with some other good guests here this morning. Michael,

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Speaker 1: I'm fascinated by what you think about e M in

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Speaker 1: what seems to be ain't not a surge, but just

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Speaker 1: a resiliency and up to e M why is that occurring? Well,

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Speaker 1: it's two stories. One is index composition. The the Emerging

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Speaker 1: Market Index is now absolutely dominated by Asia, you know,

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Speaker 1: particularly South Korea, Taiwan, China and obviously Chinese listed in

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Speaker 1: Hong Kong UM. And you know, those countries are very

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Speaker 1: the least affected large economies by COVID directly, so you

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Speaker 1: have stable domestic demand. Um. They also feed in you know,

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Speaker 1: Healy into technology and heavy industrial activity, and and that

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Speaker 1: remains the strongest part of the of the domestic of

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Speaker 1: the domestic US economy. So you know, for various reasons

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Speaker 1: this time around, e M is is something of a

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Speaker 1: haven and the underlying currencies are strong. I heard your

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Speaker 1: comments on the dollar. You know, I would say the

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Speaker 1: dollar is less weak at ninety four rather than stronger

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Speaker 1: ninety four. But the currencies which have really been strong

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Speaker 1: this year have been the Asian currencies. Um. And you know,

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Speaker 1: you put all of that together, E M is A

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Speaker 1: is a relatively safe place to be right now, Michael,

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Speaker 1: what's more important for your investment thesis right now? The

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Speaker 1: US election or the path of the virus? You know,

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Speaker 1: I would save the latter, and I would say the

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Speaker 1: impact of the latter on demand for doable goods. Um.

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Speaker 1: You know, because that has been as I say that

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Speaker 1: the big plus of the last few months has been

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Speaker 1: the resilience and in fact, lappily the acceleration of spending

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Speaker 1: on doable goods in the face of a violence which

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Speaker 1: has has has not been under control, certainly in the

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Speaker 1: United States. Michael. What do you see in the high

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Speaker 1: frequency data at the moment and do you think that

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Speaker 1: should drive risk assets in the United States? You know,

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Speaker 1: I think it's less important than it was. I mean,

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Speaker 1: the high frequency data told us in the springtime that

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Speaker 1: the people were starting to you know, engage in you know,

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Speaker 1: engage in commerce again. Um. You know, I think, you know,

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Speaker 1: I don't think it's as important today. You know that

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Speaker 1: there's the fluctuations that you see in something like restaurant usage. Um,

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Speaker 1: you know, I think that that you know, I think

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Speaker 1: that you have the point, but you do need a

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Speaker 1: leap of faith to invest at this point in time.

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Speaker 1: I think you're entitled to say that the virus is

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Speaker 1: not going to be conquered the foreseeable future, and the

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Speaker 1: European economy is going to turn turtle and you're going

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Speaker 1: to go super defensive. Yeah, I think that would be

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Speaker 1: a mistake, or you're entitled to save. But we've come

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Speaker 1: this far, and we've seen patterns of spending emerged from

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Speaker 1: the virus that look to be resilient and look to

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Speaker 1: be fairly long lasting. And you know, a narrow portfolio

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Speaker 1: that focuses on on on the positive. I hate to

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Speaker 1: say the positives to the virus, um you probably makes

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Speaker 1: sense going forward. I want to bring up a d

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Speaker 1: x Y, folks. This is a really important series. This

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Speaker 1: is basically Pacific RIM currencies, Asia currencies, UH less Japan

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Speaker 1: is well on the chart. I hope we get it up.

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Speaker 1: Here goes back to UH the beginning of UH the

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Speaker 1: year and I I look Michael Scholl at a d

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Speaker 1: x Y. That's not the right chart, Folks, will get

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Speaker 1: it for you. Here in a bit, but it's basically

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Speaker 1: been a moonshot within that. What's the specificity in the

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Speaker 1: Pacific room there? It is up we go off of

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Speaker 1: the March low for those of you on radio, it's

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Speaker 1: a moonshot from March straight up. On the Asian currency.

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Speaker 1: Good morning, Michael Purvis, Michael Scholl. What is the specificity

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Speaker 1: on the Pacific rim? I want to get granuel here?

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Speaker 1: Do you buy big gap, do you buy consumer? What

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Speaker 1: do you buy um? You know? You know, I think

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Speaker 1: index level, career, Taiwan both, you know, both quite interesting.

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Speaker 1: And you know, I've always felt that the shares, for

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Speaker 1: all of their faults, and they have many, many faults,

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Speaker 1: are the only sort of true true diversifier of portfolios.

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Speaker 1: Be a market does whatever it wants to do and

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Speaker 1: doesn't pay a great deal of attention to the rest

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Speaker 1: of you know, to the rest of the world. But

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Speaker 1: I think high quality Korean and career and and and

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Speaker 1: and Taiwan. You know, do make sense right now. Michael

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Speaker 1: Shaw of Michael Field ASID Management. Michael, great to catch up,

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Speaker 1: Thank you very much. Part of the charm of Diana

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Speaker 1: Amoa of JP Morgan is not only a UBS her

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Speaker 1: early work on trading desk where she enjoyed the bid

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Speaker 1: walking away, but as a manager of fixed income portfolio,

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Speaker 1: she's a bit aware that if yield goes up, price

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Speaker 1: goes down. We're thrilled to Diana could join us here

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Speaker 1: this morning on the benchmark tenure Diana, I see since

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Speaker 1: early August the price is declined three percent. That's a

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Speaker 1: lot of coupon. How far are we from real price

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Speaker 1: decline in the barn market. Well, it really depends on

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Speaker 1: what we get from these elections, UM, and then how

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Speaker 1: things play out following that. In terms of US policy, UM,

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Speaker 1: we have a range UM, so we had a range

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Speaker 1: of point five to one percent on the tenure um

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Speaker 1: over this quarter into year end, looking at various scenarios,

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Speaker 1: various election outcomes. So we think that the most aggressive

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Speaker 1: end UM, so that would be a blue wave of outcome. UM.

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Speaker 1: Initially we could get up to one percent, but to

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Speaker 1: move significantly higher than that given the headwinds that we're

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Speaker 1: facing with COVID cases rising globally, and you know, as

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Speaker 1: you were discussing with Europe shutting down, UM, I think

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Speaker 1: that's going to be really tough, Janna. When volativity is

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Speaker 1: elevated cross asset and correlations, traditional correlations start to break down.

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Speaker 1: How much forced the risking takes place well in the

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Speaker 1: in the in the heart of the moment, I think

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Speaker 1: it depends on what kind of portfolios people have constructed

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Speaker 1: and what expectations are UM. So it passed political shocks

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Speaker 1: where we've had outcomes the one pricing by market. You

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Speaker 1: certainly did see a significant amount of risking because markets

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Speaker 1: were caught out either because polls were pointing to a

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Speaker 1: different outcome than what materialized. I'd say in this particular instance,

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Speaker 1: what we're seeing actually is quite the opposite, where the

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Speaker 1: polls seem to be consistently pointing to UM a specific outcome,

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Speaker 1: but markets are reluctant price it. Maybe because of the

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Speaker 1: experiences of twenty sixteen UM and bread fit, so I

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Speaker 1: would expect in this instance UM the amount of the

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Speaker 1: risking would be significantly less than what we've seen in

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Speaker 1: the past. Well, Diana, to build on which I was

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Speaker 1: talking about Handing Kravis of KKR last week said I've

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Speaker 1: been investing for over fifty years. I don't remember a

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Speaker 1: time when I've seen such volatility as we see today.

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Speaker 1: There seems to be ablieve that because as rates are

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Speaker 1: so low, so close to the zero lower bound, that

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Speaker 1: there is no haven and that people are are going

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Speaker 1: to go to the same exit if there is some

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Speaker 1: sort of event that transpires. Is that a sense that

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Speaker 1: you have that basically the only head right now is

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Speaker 1: having extra cash to be able to respond to something. Well,

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Speaker 1: extra cash is definitely something that markets already seem to hold.

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Speaker 1: When you look at the m m F, a function

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Speaker 1: of Bloomberg which we mentioned in the past, um a

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Speaker 1: lot of cash went into money market funds that went

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Speaker 1: from about three point six trillion four point eight at

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Speaker 1: the peak. It's still at four point three trillion, So

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Speaker 1: there is a significant amount of cash already sitting in

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Speaker 1: the sidelines. I'd say the frustration for investors who look

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Speaker 1: at traditional sixty fourty portfolios is that treasuries haven't actually

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Speaker 1: been acting as a hedge in this latest bout um

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Speaker 1: of weakness. If you try and understand the logic behind it,

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Speaker 1: it makes sense. You know, aggressive fisical um is one

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Speaker 1: thing that would actually need repricing of cars in the

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Speaker 1: back end of the US as the as the Treasury

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Speaker 1: comes to find that in the market. But a failure

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Speaker 1: of that to materialize with impact equities. What investors need

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Speaker 1: to think of is think of what else could act

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Speaker 1: as balanting portfolios. UM. So I'm unfortunate that I started

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Speaker 1: my career in a margin market. So it's I can

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Speaker 1: think of several things in em that could work as

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Speaker 1: potential hedges on a downside scenario. UM. Looking at the

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Speaker 1: option space in e M currencies could make sense into

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Speaker 1: an event such as these as that has actually been

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Speaker 1: working reasonably well UM in certain pairs. So it's not

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Speaker 1: that it's impossible to construct portfolios, it's just that investors

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Speaker 1: need to think beyond traditional hedges. Danna. We needed that

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Speaker 1: downside protection. Last week in Europe, that's for sure. Some

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Speaker 1: headlines coming from Chancellor Mircle speaking at a news conference

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Speaker 1: in Berlin saying the following Facing a difficult winter with

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Speaker 1: an aggressive virus, sites are tripling of COVID nineteen patients

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Speaker 1: and intensive care and tom. This has been the story

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Speaker 1: across Europe, not just in German but in the northwest

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Speaker 1: of this country as well. Overwhelming the health care system

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Speaker 1: was the concern back in spring, and unfortunately in Europe

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Speaker 1: it's the concern all over again. Well, John, I'm called

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Speaker 1: by this by outside my walk up in Manhattan to

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Speaker 1: see the tents go up as they did in February

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Speaker 1: Merchant April just outside Mount Sono. But to meet John.

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Speaker 1: It is about hospitalization. I sided South Dakota, today's Sioux

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Speaker 1: Falls with some serious hospitalization issues. What's it like for

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Speaker 1: NHS and the United Kingdom? Difficult? The future hard and

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Speaker 1: that's why the Prime ministers reacted the way it did

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Speaker 1: over the weekend. It was very localized Tom, as I say,

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Speaker 1: in the northwest of the country and cities like Liverpool,

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Speaker 1: and they were hoping that they have this multi tiered

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Speaker 1: system to deal with different regions. Now the forecast coming

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Speaker 1: from the advisors to the Prime Minister to suggesting that

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Speaker 1: that could be something that doesn't just overwhelm a single region,

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Speaker 1: but overwhelms the country. This is about making sure by

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Speaker 1: the time we get to Christmas is not a whole

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Speaker 1: lot worse. The problem this minister has, Tom is that

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Speaker 1: he was recommended by his advisers months ago, back in September,

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Speaker 1: to have a two week circuit breaker, a two week

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Speaker 1: lockdown to prevent us from getting to where we are now.

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Speaker 1: He chose not to, and here we are the problem

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Speaker 1: that many people in this country have is that if

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Speaker 1: we're going to do another lockdown, what's the objective. What's

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Speaker 1: the objective. Is it to get back to where we

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Speaker 1: were before and actually try this track and trace system

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Speaker 1: again and open up more effectively, or we're just doing

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Speaker 1: this in the hope that we have a vaccine announcement

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Speaker 1: tom in the next thirty five days. And I'm not

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Speaker 1: gonna truils hear, but I'm going to point out the

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Speaker 1: fact that these headlines from Germany are coming from a

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Speaker 1: quantum chemist, and there seems to be a little bit

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Speaker 1: of a different difference in the tone john from the

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Speaker 1: quantum chemist versus a gentleman from ford In and maybe Wharton,

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Speaker 1: and then also Prime Minister Johnson as a journalist. I mean,

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Speaker 1: there's a different tone to a Merkele virus headline, very

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Speaker 1: much so. But Merkele and Promister Johnson going in the

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Speaker 1: same direction at the moment. Dana of Japing Morgan Investment Management,

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Speaker 1: Diana than Key our team today and tomorrow, we'll try

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Speaker 1: to give you as sophisticated to coverage as we can

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Speaker 1: from people with authority. Brian classes On a Carlton in Minnesota.

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Speaker 1: He has a cottage industry going in the United Kingdom

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Speaker 1: of looking at the decline of democracy or throw the

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Speaker 1: doctor class could join us this morning from u c L. Brian,

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Speaker 1: you have been hugely visible and hugely articulate on the

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Speaker 1: decline of democracy. Let's begin with the US. Can we

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Speaker 1: staunch that and resurrect democracy tomorrow? I think we can

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Speaker 1: begin to UM. I think that there has been a

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Speaker 1: sustained attack on democratic institutions in the United States, and

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Speaker 1: I think despite you know, being a nonpartisan expert, this

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Speaker 1: has been from one side, predominantly right. So you have

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Speaker 1: rhetoric coming out of the president attacking the press, um,

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Speaker 1: you know, trying to scapegoat minority communities, and also most

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Speaker 1: re stently around the election saying things like, you know,

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Speaker 1: we can't trust the votes, even though there's evidence that

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Speaker 1: we can encouraging supporters to vote twice, etcetera. So it's

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Speaker 1: a long term rebuild that we're going to write because yes, well,

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Speaker 1: I don't mean to interrupt, because because the time, Brian,

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Speaker 1: I've got to get to this. It's too important, and

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Speaker 1: you are one of the great experts on this. You

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Speaker 1: are a fabric of the north uh northern part of

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Speaker 1: our Midwest. Where would we go back to William Jennings,

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Speaker 1: Bryan Huey Long, whatever name the other names, and of

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Speaker 1: course President Trump, this is populism at hand. Do you

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Speaker 1: see populism extending it reach across America? Or as you

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Speaker 1: say it, with clear and direct messaging, can it be

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Speaker 1: staunched like it was with Huey Long of Louisiana and

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Speaker 1: what it was like it was with Jennings Bryan Well.

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Speaker 1: I think reality has a way of catching up with populism.

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Speaker 1: And I think what happens is often populous, often big

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Speaker 1: slogans and few solutions. And what's happened recently is that

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Speaker 1: the coronavirus has been reality, the economy has been reality

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Speaker 1: for President Trump, and so I think there is a

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Speaker 1: turn back towards people who actually understand things right, that

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Speaker 1: actually understand how economies operate and how public health can

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Speaker 1: be best served. And that's why you know Dr Fauci,

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Speaker 1: for example, is the most widely trusted figure in the

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Speaker 1: United States political system at the moment, because people are

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Speaker 1: turning back to experts. So I think there is a

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Speaker 1: pendulum shift that's happening in the United States. There are

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Speaker 1: boards over the windows in midtown Manhattan and across the

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Speaker 1: cities in the United States. This is unusual the day

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Speaker 1: before an election. There is a feeling of eerieness before

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Speaker 1: the storm. And my eleven year old son said to

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Speaker 1: me last night, are we gonna be okay? Is it

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Speaker 1: going to be violent? Is the sense of violence overstated here?

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Speaker 1: Or do you get the sense, uh that the unrest

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Speaker 1: just in general has that ability of potentially percolating. I

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Speaker 1: I am very worried. I'm more worried than I've been

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Speaker 1: about any election, certainly in my lifetime. And I think

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Speaker 1: the reason for that is because there's not really an

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Speaker 1: exit ramp for either side here. The stakes are so

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Speaker 1: high that when we wake up on Wednesday, or potentially

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Speaker 1: much further along, if we don't know the results quickly,

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Speaker 1: you know around half the country is going to find

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Speaker 1: this to be an existential threat because the hyperpolarization has

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Speaker 1: taken such root in this kind in the United States.

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Speaker 1: And I think that's something where you know, this is

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Speaker 1: a longer term project. It's not going to get fixed

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Speaker 1: no matter what the result is on Tuesday. And I

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Speaker 1: am very worried about the prospect of if there is

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Speaker 1: a contested election, especially widespread unrest. Brian speculating what happens

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Speaker 1: Wednesday morning. Can we talk about what has happened and

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Speaker 1: tell me whether attacking the process actually damages the process

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Speaker 1: given the record turn out that we've seen so far

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Speaker 1: and early voting. Yeah, so I think there has been

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Speaker 1: a like a really good response here to voter suppression

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Speaker 1: in the sense that you know, in Texas there are

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Speaker 1: more people voting now and have already voted than in

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Speaker 1: the entirety of But that being said, you know, there's

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Speaker 1: also some really worrying signs. We had a foiled plot

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Speaker 1: to kidnap the governor of Michigan. We've had murders at

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Speaker 1: various protests. We also have the president directly endorsing an

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Speaker 1: attempt to push a campaign bus from the Biden campaign

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Speaker 1: off the road in Texas. So, you know, temperatures are

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Speaker 1: very high, and I think that with Trump telegraphing that

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Speaker 1: he might declare victory before all the votes are counted,

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Speaker 1: the risks are high. You know, in in economics term

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Speaker 1: we talk about tail risk. I think there's a very

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Speaker 1: large tail risk here where it's it's still improbable that

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Speaker 1: there's gonna be widespread unrest and violence. But it's such

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Speaker 1: a damaging prospect that we have to take it very

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Speaker 1: very seriously and do everything we can to stop it.

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Speaker 1: Bran asked this in a really delicate way, and it's

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Speaker 1: not allowed question. Why do you think those stores are

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Speaker 1: boarded up? Who do they think is going to attack

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Speaker 1: them come election morning, come Wednesday. Well, I think there's

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Speaker 1: going to be uh, you know, the potential for violence

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Speaker 1: no matter what the result is. To be honest, Um,

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Speaker 1: I think that there is a series of communities that

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Speaker 1: feel extremely invested in this result. And I think that

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Speaker 1: you know, when you have a situation in which those

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Speaker 1: fans have been flamed from people in power for a

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Speaker 1: very long time. Um, the polarization is just at boiling point.

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Speaker 1: It's really at boiling point. And so I think, you know,

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Speaker 1: regardless of what happens, it's not just about who wins

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Speaker 1: and who loses. It's also the rhetoric that I think

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Speaker 1: is extremely damaging from President Trump saying that we shouldn't

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Speaker 1: trust the result right months of saying the election is

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Speaker 1: rigged despite evidence to the contrary. And so I think

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Speaker 1: that only heightens tensions. And I think regardless of what

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Speaker 1: the result is, there is a significant risk of unrest

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Speaker 1: in American cities. Brant Class appreciate the time this monic.

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Speaker 1: Thank you, said University College London Professor Daniel in the

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Speaker 1: b MP Perry about his chief US economists and had

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Speaker 1: a macro strategy there and far more importantly, he's one

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Speaker 1: of our best best thinkers of the set of outcomes forward.

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Speaker 1: He has made real clear that we have a chance

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Speaker 1: to be in the uncharted, the uncharted territory of many

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Speaker 1: different outcomes, Daniel, in which is the uncharted territory you're

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Speaker 1: most focused on right now? Well, there are are a

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Speaker 1: lot of potential terra incognita places that we can go

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Speaker 1: in this very unprecedented election. Uh, it's clear that we

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Speaker 1: have seen a fairly uh norm breaking president. But what

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Speaker 1: I'm most worried about is come January, there's still no

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Speaker 1: clear picture as to who the president of the United

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Speaker 1: States is. Uh, and both Joe Biden and Trump show

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Speaker 1: up claiming that they are the legitimate president. Well, within

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Speaker 1: that outcome, which I'm gonna call suitably gloomy, So it's

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Speaker 1: January and we really don't know where we are. Certainly

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Speaker 1: there's some form of tension and contested as well. What

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Speaker 1: does that do to the economy. Is there a run

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Speaker 1: ray to this economy right now where it can sustain

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Speaker 1: that political shock? That is the trillion dollar question. Um.

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Speaker 1: I think Tom, that the implications of something like that

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Speaker 1: are just so unfathomably profound that it's hard not to

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Speaker 1: believe that that's going to have a pretty dramatic effect

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Speaker 1: upon markets and the economy. So I really hope that

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Speaker 1: we don't get there, um, And I think we do

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Speaker 1: have a lot of ways that we can avoid the

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Speaker 1: slope toward a constitutional crisis. But if we get there,

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Speaker 1: we'll just have to wait and see. What's your view

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Speaker 1: on how the market is pricing a lot of this,

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Speaker 1: This narrative is all over the place. It's like a

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Speaker 1: pendulum from one extreme to the other. A few months back,

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Speaker 1: it was a worry about a contested election. A few

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Speaker 1: months forward it is the blue wave and pricing that in,

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Speaker 1: and then all over again a week going into the election,

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Speaker 1: we start talking about contested again. Dan, where's that coming from? Yeah,

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Speaker 1: I think it's because the sticks are just so high,

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Speaker 1: and Um, the outcomes are just so extreme on on

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Speaker 1: either direction, um, When really what we're seeing here is

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Speaker 1: just a shift in the polls of you know, a

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Speaker 1: couple of points here, a couple of points there. I mean,

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Speaker 1: what really is striking about this selection is actually just

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Speaker 1: how stable it has been. Joe Biden has always led

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Speaker 1: to Donald Trump by anywhere from nine from from six

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Speaker 1: to to ten points. I mean, that's those aren't insignificant numbers,

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Speaker 1: but compared to the pretty wild swings that we saw

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Speaker 1: in sixteen, it's actually, Um, the main feature of this

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Speaker 1: election is stability. And yet um, people modern markets extrapolate

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Speaker 1: from the race tightening a bit to the race widening

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Speaker 1: of bit and and they say this is either going

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Speaker 1: to be a DEM sweep or or a contested, close,

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Speaker 1: messy election. And by the way, Um, the fact that

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Speaker 1: the election is going to be contested, um, is different

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Speaker 1: from the election actually being close, messy and chaotic. It's

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Speaker 1: almost certain that President Trump is going to contest the results.

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Speaker 1: He may contest the results even if he is won,

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Speaker 1: as he does as he had done in Steen. Um.

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Speaker 1: But the real question is this is going to be

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Speaker 1: close enough that there's a legitimate case to be made

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Speaker 1: that are recounting or one of these election lawsuits can

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Speaker 1: actually swing the difference. Well, Dan, you now did. Though,

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Speaker 1: let's just sit on the markets for a moment. We're

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Speaker 1: extrapolating out yesterday's price action. Whatever yesterday or last week's

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Speaker 1: price action actually was that pendulum swinging some aggressively despite

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Speaker 1: the fact polls have been really, really stable DWN. That

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Speaker 1: just screams to me that no one has a clue

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Speaker 1: what's going on. So Wednesday morning, even if we do

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Speaker 1: get a result and we know what that result is,

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Speaker 1: we're just gonna extrapolate out last hour's price action without

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Speaker 1: really thinking about what any of the stuff means over

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Speaker 1: the medium term. Well, no, I think that come election day,

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Speaker 1: or rather the morning afterward, UM, there is a set

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Speaker 1: of scenarios where we can know pretty for sure who

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Speaker 1: who the winner is, UM and UM is Therefore there

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Speaker 1: there are some certain scenarios where I think markets can

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Speaker 1: become pretty confident that Joe Biden is the winner. UM.

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Speaker 1: I do think if Donald Trump is the winner, we

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Speaker 1: may have to take longer for some of the key

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Speaker 1: Midwest states to to come in. UM. I think markets,

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Speaker 1: you know, hate a vacuum, and therefore knowing for sure

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Speaker 1: what the results are would help UM. But yeah, there

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Speaker 1: is still on this looming interregnum period between November and January,

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Speaker 1: where if if it does look like Joe Biden has

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Speaker 1: won the election, then we have a lame duck president, who,

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Speaker 1: as we said earlier, um, is pretty norm breaking. Will

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Speaker 1: again have to wait and see what a lame duck

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Speaker 1: Trump administration would look like. Dan, There's so much uncertainty

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Speaker 1: not only about the election, but also how markets will

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Speaker 1: respond to any particular election outcome for people who are

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Speaker 1: looking for some sort of ballast, for something to hang

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Speaker 1: on to, some certainty, is following the virus numbers really

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Speaker 1: the most important thing for them right now? Um. I

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Speaker 1: do think that the recent market reaction is probably a

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Speaker 1: function not just of the election, but also worries about

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Speaker 1: the third wave UM in in the US. UM. But yeah,

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Speaker 1: I mean at the same time, Uh, it does look

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Speaker 1: like the fatality rate of this wave, as tragic as

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Speaker 1: it is, is better than in the first and second wave.

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Speaker 1: So there's a lot of moving parts here. Um. Again,

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Speaker 1: I think markets are desperately trying to look for something

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Speaker 1: to hold on to construct a narrative when the simple

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Speaker 1: answer is that all we can do is really wait,

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Speaker 1: where is the biggest asymmetry of risks that you see

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Speaker 1: right now the asymmetry of risk. UM. I think actually

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Speaker 1: the biggest asymmetry is that the virus can mutate in

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Speaker 1: another way that's less benign. UM. I know that the

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Speaker 1: you know, the general science of epidemiology is such that

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Speaker 1: viruses don't actually want to kill their hosts. They want

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Speaker 1: to keep their host alives so that I can continue

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Speaker 1: to replicate, which is the whole purpose of being. But

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Speaker 1: we should remember that in the nine eighteen Spanish influenza,

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Speaker 1: we had three massive waves, and it was actually the

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Speaker 1: second wave which was more dangerous and fatal than the

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Speaker 1: first wave. UM. I wouldn't rule out that the virus

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Speaker 1: can mutate again in a very dangerous way. UM. That

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Speaker 1: makes so what we had seen earlier only a foreshadowing

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Speaker 1: of us to come. Daniel and I want to go

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Speaker 1: back to pure market economics. What's our g d P

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Speaker 1: this quarter and into the first quarter of next year. Yeah, So,

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Speaker 1: of course we had a very impressive looking Q three

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Speaker 1: at an annualized streight point one percent, but it's important

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Speaker 1: not to uh read too much into that. We're still

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Speaker 1: roughly three or four percent below pre crisis levels. And

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Speaker 1: now comes the hard part. Um, much of the growth

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Speaker 1: in you three is a mechanical reversal of the lockdown

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Speaker 1: related contractions that we have seen in Q one and

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Speaker 1: Q two. Now as the economy faces UM this third

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Speaker 1: wave in in the Mountain States and the Midwest, UM

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Speaker 1: as we still await UM whether a vaccine will be UH,

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Speaker 1: whether an effective vaccine will be ready UM and and

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Speaker 1: widely distributed now I think comes and finally, UH, Congress

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Speaker 1: is currently stalled in providing the fiscal support that you know,

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Speaker 1: the vast majority of economists think is is necessary. Right now,

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Speaker 1: we are in this UH, we are in the doldrums,

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Speaker 1: were in the stalling out sort of period. I think

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Speaker 1: growth is going to get much much harder from here.

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Speaker 1: UM and UH. As we said, there are some significant

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Speaker 1: downside risks. UH in before us as well, and love

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Speaker 1: catching up down on that. It's US economist over at BMP.

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Speaker 1: Parabolt also heads up that macro Strategy covered the markets

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Speaker 1: as well. Thanks for listening to the Bloomberg Surveillance podcast.

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Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

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Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom

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Speaker 1: Keene Before the podcast, you can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio