WEBVTT - US CPI Rises, Hurricane Milton 0:00:02.440 --> 0:00:09.479 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:09.520 --> 0:00:13.600 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:13.680 --> 0:00:17.200 Eastern on applecar Play and Android Auto with the Bloomberg 0:00:17.239 --> 0:00:20.439 Business app. You can also listen live on Amazon Alexa 0:00:20.520 --> 0:00:23.799 from our flagship New York station, Just say Alexa play 0:00:23.920 --> 0:00:25.200 Bloomberg eleven thirty. 0:00:26.600 --> 0:00:28.000 Let's get back to the CPI number. 0:00:28.000 --> 0:00:30.880 So the takeaway in general seems to be that disinflation 0:00:31.560 --> 0:00:34.320 is not what we've seen, say, in the last three months, 0:00:34.360 --> 0:00:36.800 that what we're used to, But that doesn't necessarily mean 0:00:36.840 --> 0:00:39.040 that the economy is reaccelerating. So we kind of want 0:00:39.080 --> 0:00:42.440 to understand the nuance here. Here's Lindsay Pigs, chief economist 0:00:42.520 --> 0:00:45.800 over at Stifel. She joins us from Minneapolis. Lindsay, how 0:00:45.800 --> 0:00:48.519 would you categorize the CPI data this morning and does 0:00:48.520 --> 0:00:51.840 it change the trajectory at all for the FED? Well? 0:00:51.960 --> 0:00:54.960 I would categorize it as a somewhat disappointing report for 0:00:55.040 --> 0:00:59.640 the Fed's that's still struggling desperately to reinstate price stability. Now, 0:00:59.680 --> 0:01:02.960 it's important not to look at one data point. That's 0:01:03.000 --> 0:01:05.480 never enough to sway the FED in one direction. Or 0:01:05.520 --> 0:01:07.000 the other. But we do have to put this in 0:01:07.040 --> 0:01:12.959 the context of ongoing, an ongoing lack of even downward 0:01:13.080 --> 0:01:17.720 momentum in prices at best. Inflation has been uneven moving 0:01:17.800 --> 0:01:20.840 sideways for the past couple of months, and so this 0:01:21.040 --> 0:01:24.880 really underscores the need for the FED to remain focused 0:01:24.959 --> 0:01:29.080 on reaching that two percent target. Now, last month they 0:01:29.080 --> 0:01:32.880 were buoyed by this mounting concern for the labor market. 0:01:33.200 --> 0:01:36.080 But as we saw in the latest September labor market data, 0:01:36.600 --> 0:01:40.800 the employment reports are still near full employment. The data 0:01:40.840 --> 0:01:44.000 suggests the labor market is still very solid, and so 0:01:44.080 --> 0:01:46.520 I do think that at this point the fed's focus 0:01:46.560 --> 0:01:50.640 may be better directed towards that price stability component of 0:01:50.680 --> 0:01:51.440 the dual mandate. 0:01:51.800 --> 0:01:54.160 You know, Lindsa we were talking to Tom Keen and 0:01:54.160 --> 0:01:56.280 I are earlier today with the professor Cam Harvey at 0:01:56.360 --> 0:01:59.120 Duke University, and he's a big proponent of the fed's way, way, 0:01:59.160 --> 0:02:03.520 way behind, because they're using really dated data, particularly housing data, 0:02:03.560 --> 0:02:04.640 and if you take a look at some of the 0:02:04.720 --> 0:02:07.760 real rents and stuff like that, inflation's already whipped and 0:02:07.760 --> 0:02:11.720 this FED should be you know, cutting rates. Maybe how 0:02:11.720 --> 0:02:12.480 do you feel about that? 0:02:14.400 --> 0:02:16.200 Well, I think there's a number of different ways to 0:02:16.240 --> 0:02:18.720 look at inflation, and sure, if we take out some 0:02:18.800 --> 0:02:21.919 of the stickiest components, you can get a much better 0:02:22.000 --> 0:02:25.480 read on inflation. But when we're trying to look at 0:02:25.560 --> 0:02:28.840 the overall price index for consumers, what we're feeling in 0:02:28.919 --> 0:02:32.440 terms of costs for goods and services out in the marketplace, 0:02:33.040 --> 0:02:36.120 that underlying core measure, which excludes food and energy because 0:02:36.120 --> 0:02:40.079 those are extremely volatile. From a policy standpoint, that suggests 0:02:40.080 --> 0:02:43.400 that inflation is not quote whipped, and that the Fed's 0:02:43.520 --> 0:02:47.120 job of reinstating price stability has not been complete and 0:02:47.240 --> 0:02:51.760 remaining on a downward trajectory back to two percent is 0:02:51.919 --> 0:02:55.880 not a foregone conclusion. So I would caution against that 0:02:55.960 --> 0:02:58.120 line of thinking. That could leave us in a very 0:02:58.200 --> 0:03:01.600 difficult position where the FED takes a more aggressive approach 0:03:01.680 --> 0:03:06.080 to policy in anticipation of further improvement, only to find 0:03:06.120 --> 0:03:08.600 out we're not there yet and the FED either has 0:03:08.639 --> 0:03:13.440 to reverse course or simply has driven us into the 0:03:13.480 --> 0:03:16.320 most unfavorable scenario of stagulation at that point. 0:03:16.400 --> 0:03:18.360 But but, but, but that brings us to the other 0:03:18.440 --> 0:03:20.560 data point, which is initial jobless claims. 0:03:20.600 --> 0:03:21.800 I know that they can be volatile. 0:03:21.840 --> 0:03:24.160 I know you also have a hurricane Helene as well 0:03:24.160 --> 0:03:26.799 as the Boeing strike impact, Like there's those reads too, 0:03:27.480 --> 0:03:31.040 So which path is a FED follow like inflation slowing 0:03:31.520 --> 0:03:34.680 less than we thought or initial jobless claims rising more 0:03:34.720 --> 0:03:35.680 than we thought. 0:03:36.240 --> 0:03:38.040 Well, I think you have to put the jobless claims, 0:03:38.040 --> 0:03:40.360 as you said, in the context of the events that 0:03:40.400 --> 0:03:43.160 are occurring in the economy at this point. Between the 0:03:43.200 --> 0:03:46.760 strikes and the hurricanes, we anticipated a lot of volatility, 0:03:47.080 --> 0:03:49.360 and you can tell that this is an outsized increase 0:03:49.400 --> 0:03:52.280 relative to the very calm trend that has been well 0:03:52.400 --> 0:03:55.080 established for the past couple of years. You also have 0:03:55.120 --> 0:03:57.760 to put this one weekly data point in the context 0:03:57.760 --> 0:04:01.400 of again that September employment report, where we see wages, 0:04:01.440 --> 0:04:04.080 we see job vacancies, we see the participation rate, we 0:04:04.120 --> 0:04:09.120 see top line hiring, all suggesting tight ish conditions, lingering 0:04:09.160 --> 0:04:12.480 tightish conditions for the labor market, which does not support 0:04:12.680 --> 0:04:16.440 this pop in weekly jobless claims, again, which is primarily 0:04:17.040 --> 0:04:20.080 a reflection of some of these one off incidents in 0:04:20.120 --> 0:04:22.200 the economy. The FED knows that the FED is not 0:04:22.240 --> 0:04:25.960 going to adjust policy based on a weekly data point, 0:04:26.360 --> 0:04:31.400 but again it does underscore this bifurcation among FED officials. 0:04:31.400 --> 0:04:34.520 As we saw in the Minutes yesterday, there are a 0:04:34.760 --> 0:04:37.239 number of FED officials that are concerned about the labor 0:04:37.279 --> 0:04:40.080 market and say that we should continue to cut in 0:04:40.160 --> 0:04:43.719 anticipation of weakness to support the labor market and the 0:04:43.720 --> 0:04:47.160 broader economy regardless of what it takes. On the other side, 0:04:47.240 --> 0:04:49.880 you have Governor Bowman leaving the pack saying no, they're 0:04:50.000 --> 0:04:53.440 still upside risk to inflation, and that's where we need 0:04:53.480 --> 0:04:56.800 to keep our focus because without price stability, the economy 0:04:56.839 --> 0:04:57.920 doesn't work for anybody. 0:04:58.520 --> 0:05:00.880 How about the consumer, lindsay, some of the data points 0:05:00.920 --> 0:05:03.000 you've seen over the last couple weeks, what's your read 0:05:03.040 --> 0:05:03.880 on the yost consumer. 0:05:04.880 --> 0:05:09.080 Well, I think that consumer is surprisingly resilient at this point. 0:05:09.080 --> 0:05:11.479 The consumer is still out in the marketplace spending on 0:05:11.520 --> 0:05:15.440 goods and services, but they're doing so at a noticeably 0:05:15.560 --> 0:05:18.839 reduced pace. We've gone from double digits to eight to 0:05:18.960 --> 0:05:21.320 six now down to an average pace of three. Again 0:05:21.440 --> 0:05:25.480 still positive, but a very clear second derivative decline or 0:05:25.720 --> 0:05:30.400 slower pace of positive expenditures as consumers are feeling the 0:05:30.440 --> 0:05:34.440 weight of higher prices, higher borrowing costs, the resumption of 0:05:34.480 --> 0:05:38.320 student debt payments, and so we see consumers increasingly turning 0:05:38.360 --> 0:05:42.160 to these less organic measures for support in order to 0:05:42.240 --> 0:05:44.680 keep spending in the marketplace. We see four oh one 0:05:44.760 --> 0:05:48.680 k hardship withdrawals of double digits. We see consumers turning 0:05:48.680 --> 0:05:52.080 to an intergenerational wealth transfer, and of course, surprise, surprise, 0:05:52.240 --> 0:05:53.960 credit cards are up there on the list. 0:05:54.320 --> 0:05:56.920 Yeah, absolutely, all right, lindsay, thanks a lot, really appreciate it. 0:05:56.920 --> 0:05:58.520 I still feel like it's all a ork check test 0:05:58.560 --> 0:06:01.360 at the end of the day, pigs. As she joins 0:06:01.400 --> 0:06:03.440 us from Stefelt. 0:06:03.800 --> 0:06:07.679 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:06:07.760 --> 0:06:11.280 weekdays at ten am Eastern on applecar Play and Android 0:06:11.279 --> 0:06:14.080 Auto with the Bloomberg Business app. You can also listen 0:06:14.200 --> 0:06:17.280 live on Amazon Alexa from our flagship New York station 0:06:17.640 --> 0:06:21.400 Just Say Alexa playing Bloomberg eleven thirty. 0:06:22.160 --> 0:06:24.280 Let's say on the Hurricane Milton track. Of course, there 0:06:24.279 --> 0:06:27.920 were reports of tornadoes also pumbling through the state as well. 0:06:28.040 --> 0:06:29.800 Let's take an impact. Let's take a look on the 0:06:29.839 --> 0:06:31.120 impact on the housing market. 0:06:31.240 --> 0:06:33.680 Ken Johnson is Walker Family Chair of real Estate at 0:06:33.680 --> 0:06:37.640 the University of Mississippi. Ken, it's great to get your 0:06:37.640 --> 0:06:40.799 perspective on this. How do we know what the full 0:06:40.920 --> 0:06:43.800 damage is to say, the housing market. How long does 0:06:43.839 --> 0:06:44.880 that assessment take? 0:06:46.520 --> 0:06:50.920 So we can make some upfront esturbations, but we probably 0:06:51.000 --> 0:06:53.440 won't know the full results quite honestly, for a couple 0:06:53.440 --> 0:06:57.360 of years. Using Ian as a test case, we're still 0:06:57.400 --> 0:07:01.640 recovering South Florida. That is, is still covering southwest Florida. 0:07:02.080 --> 0:07:05.560 From Ian, this appears to be less in scope, so 0:07:05.600 --> 0:07:09.320 we're probably still looking at several months before we've completely 0:07:09.400 --> 0:07:11.400 gotten rid of Hurricane Milton. 0:07:12.320 --> 0:07:14.680 Talk to us about just I don't know you think 0:07:14.720 --> 0:07:17.680 about owning real estate Florida. But that is not for 0:07:17.720 --> 0:07:19.760 the faint of heart here because talk to us at 0:07:19.800 --> 0:07:24.800 just about I don't insurance and how this folks that 0:07:24.920 --> 0:07:25.240 are just. 0:07:25.240 --> 0:07:27.920 Keep rebuilding and rebuilding. Is there are there lessons learned 0:07:27.960 --> 0:07:28.400 down there? 0:07:29.760 --> 0:07:33.920 Well, many, many folks predict that these hurricanes are going 0:07:33.960 --> 0:07:36.760 to end the growth in Florida, and they've been on 0:07:36.880 --> 0:07:39.000 record for one hundred and fifty plus years. Going back 0:07:39.040 --> 0:07:42.120 over one hundred years, I think there's over thirty category 0:07:42.120 --> 0:07:46.080 threes or higher that have struck the state. Dire predictions 0:07:46.080 --> 0:07:48.240 have been made in the past and they never come about. 0:07:48.280 --> 0:07:50.960 And it's because the demand to live in Florida just 0:07:51.040 --> 0:07:58.320 keeps increasing. Nice, solid economy, good weather, Son's hurricanes, warm 0:07:58.360 --> 0:08:01.000 in the winter, air conditioning works in the summer, strong 0:08:01.040 --> 0:08:03.640 business climate. People are coming to Florida and this is 0:08:03.640 --> 0:08:04.360 not going to stop. 0:08:04.680 --> 0:08:08.600 What about the prices of those particular houses though, because 0:08:08.760 --> 0:08:11.960 what we can't argue is that insurance companies are dump 0:08:12.000 --> 0:08:14.880 in Florida right there's any local insurance companies. There are 0:08:14.880 --> 0:08:19.200 many stories of people's insurance premium is just rising really fast, 0:08:19.200 --> 0:08:21.040 which means it's hard then to sell the house. At 0:08:21.080 --> 0:08:23.960 the same time, maybe it's more expensive than to buy 0:08:24.000 --> 0:08:24.400 a house. 0:08:24.560 --> 0:08:25.960 Does this need to settle out? 0:08:27.520 --> 0:08:29.480 It does, and this has been an issue in Florida 0:08:29.560 --> 0:08:33.080 for quite some time now. It's slowly getting better. Some 0:08:33.240 --> 0:08:38.600 legislation was brought about in terms of limiting liability exposure 0:08:39.320 --> 0:08:42.440 off of certain types of damages and that you had 0:08:42.440 --> 0:08:47.160 to be timely and filing your claims slowly slowly taking effect. 0:08:47.520 --> 0:08:50.120 But home insurance is going to be an issue in 0:08:50.160 --> 0:08:54.640 Florida for years to come. The state does have an 0:08:54.640 --> 0:08:57.960 insurer of last resort and that's the Citizens Group. If 0:08:58.000 --> 0:09:01.680 you there in Florida, you're very familiar with Citizens, So yes, 0:09:01.800 --> 0:09:05.640 it's a problem. It's something that'll work through. The reinsurance 0:09:05.720 --> 0:09:07.880 rates have gone down this year for Florida. That was 0:09:08.040 --> 0:09:11.560 really good news. Probably will not be again. So in 0:09:11.559 --> 0:09:16.480 other words, the people ensuring the insurance companies their rates 0:09:16.480 --> 0:09:20.040 had went down an end of twenty three, they'll probably 0:09:20.040 --> 0:09:22.079 be back up end of this year now due to 0:09:22.120 --> 0:09:24.040 the two storms combined. 0:09:24.320 --> 0:09:26.640 All right, let's zoom out a little bit from Florida 0:09:26.679 --> 0:09:29.000 and just talk about affordability. 0:09:29.040 --> 0:09:32.840 Housing affordability or lack there of in this country. Can 0:09:32.880 --> 0:09:35.320 you just give us a sense of how do we 0:09:35.360 --> 0:09:36.719 got to this place where we are now where it 0:09:36.800 --> 0:09:39.319 really seems to be a real stretch for so many Americans. 0:09:39.400 --> 0:09:40.440 Housing affordability. 0:09:41.320 --> 0:09:44.640 Sure, So, if I had to pick one item that 0:09:44.800 --> 0:09:48.960 was the most influential in this or the approximate cause 0:09:49.000 --> 0:09:52.720 of unaffordable housing at this point in time was post 0:09:52.800 --> 0:09:56.560 the last housing crash circa two thousand and seven and eight, 0:09:56.800 --> 0:09:59.880 depending on where you were in the country. The markets 0:10:00.040 --> 0:10:02.440 turned out. Real estate markets all over the country turned down. 0:10:02.880 --> 0:10:05.600 They bottomed about twelve but during that period in time, 0:10:05.679 --> 0:10:13.080 we lost thousands of small builders. Today we mostly have large, 0:10:13.160 --> 0:10:18.200 publicly owned developers. It's hard to keep pace. We've just 0:10:18.280 --> 0:10:21.079 lost so many builders. You know, the difference between a 0:10:21.080 --> 0:10:24.400 builder and developer quite often is maybe the scale. So 0:10:24.440 --> 0:10:28.960 we have fewer but much much larger developers, But we 0:10:29.000 --> 0:10:32.240 still need those mom and pop builders that build those 0:10:32.280 --> 0:10:35.000 fifty plus or minus homes a year, and they just 0:10:35.120 --> 0:10:37.440 they left the market, or they were forced out, or 0:10:37.440 --> 0:10:40.280 they were forced into bankruptcy, and they have not come 0:10:40.360 --> 0:10:43.600 back into the marketplace. That might so we're not building enough. 0:10:43.520 --> 0:10:45.920 Years explanation I've heard for what we don't have enough 0:10:45.920 --> 0:10:49.680 supply that nuance. Does that mean then that this is 0:10:49.679 --> 0:10:52.480 a cyclical industry still, as you say, like, okay, so 0:10:52.520 --> 0:10:54.080 then you got to then we're going to overbuild at 0:10:54.120 --> 0:10:55.920 some point and then prices come down or is this 0:10:56.040 --> 0:10:56.959 truly structural? 0:10:59.160 --> 0:11:02.800 I think it's still more cyclical. But this is this 0:11:02.840 --> 0:11:05.040 is an ongoing issue. So if we go through a 0:11:05.080 --> 0:11:07.160 few cycles and we haven't solved it, then yes, we 0:11:07.559 --> 0:11:12.320 have a chronic, persistent problem. I would love to see 0:11:12.920 --> 0:11:15.520 a little bit easier for the small builder to develop 0:11:15.600 --> 0:11:21.280 and thrive and restart. Getting that done is another set 0:11:21.320 --> 0:11:23.120 of circumstances to work through. 0:11:24.000 --> 0:11:25.360 You know, one of the issues for a lot of 0:11:25.360 --> 0:11:28.000 folks is nobody wants to leave their home because so 0:11:28.040 --> 0:11:30.680 many people are sitting on you know, three four percent 0:11:30.760 --> 0:11:32.599 mortgages some people below. 0:11:32.440 --> 0:11:34.520 You set me up, man, you do it on purpose. 0:11:34.559 --> 0:11:36.440 At this point, I have two point seventy five, which 0:11:36.480 --> 0:11:38.080 I talk about all the time all the time. 0:11:38.200 --> 0:11:40.120 So where do you think mortgage rates need to go? 0:11:40.559 --> 0:11:43.720 Professor for you know, the Alex Steels of the world, saying, 0:11:43.720 --> 0:11:46.200 all right, I can consider selling my existing home and 0:11:46.200 --> 0:11:46.800 going somewhere else. 0:11:46.840 --> 0:11:48.480 That would free up some inventory. 0:11:49.800 --> 0:11:53.000 So our overall mortgage rates in the country, they're higher. 0:11:53.000 --> 0:11:56.040 Oddly they're higher since the Fed's announcement to lower the 0:11:56.080 --> 0:11:58.680 interbank loan rate, but that that'll correct itself in the 0:11:58.679 --> 0:12:01.520 next few weeks or so. But it's not necessarily what 0:12:01.760 --> 0:12:05.040 rate will have to come about such that folks will 0:12:05.040 --> 0:12:07.320 start to begin to sell those two point seventy five 0:12:07.400 --> 0:12:10.680 three percent loans. What will happen, probably more likely for 0:12:10.760 --> 0:12:14.080 those folks is they'll have a change in life event 0:12:14.559 --> 0:12:19.680 I'm moving to another city. Unfortunately, financial distress will cause 0:12:19.720 --> 0:12:22.040 a lot of sale. So a lot of these things 0:12:22.040 --> 0:12:23.480 are going to be brought back. A lot of these 0:12:23.480 --> 0:12:25.600 properties are going to be brought back into the marketplace 0:12:25.640 --> 0:12:28.560 because I have to sell rather than I want to sell. 0:12:28.960 --> 0:12:31.839 But we're probably going to see an environment we'll get 0:12:31.880 --> 0:12:33.800 back to the four and a half spives. We're never 0:12:34.320 --> 0:12:36.959 I don't think in my professional lifetime will we ever 0:12:37.000 --> 0:12:39.360 see two point seventy five or three percent again. That 0:12:39.559 --> 0:12:42.839 was just so unusual and we can't have that as 0:12:42.840 --> 0:12:45.400 the norm. And oh we're not back to the norm. 0:12:45.400 --> 0:12:46.959 Well that wasn't the norm. 0:12:47.240 --> 0:12:49.480 Yeah, I was doing a little happy dance for those 0:12:49.480 --> 0:12:51.680 of you who were unfortunately smug. 0:12:52.040 --> 0:12:54.319 Yes I am. I mean the air of smugness. 0:12:54.679 --> 0:12:57.520 It's the one thing I can literally, the one thing 0:12:57.600 --> 0:13:00.360 I can brag about, and so I do walk about. 0:13:00.360 --> 0:13:03.720 It's still being a cyclical industry. How long do you 0:13:03.760 --> 0:13:06.360 think that cycle then could be? Like when do we 0:13:06.440 --> 0:13:08.839 get to like an oversupply situation? 0:13:09.040 --> 0:13:10.360 Ten years? What does it look like? 0:13:11.640 --> 0:13:15.600 So hard to say. Again, the cycle, this last cycle 0:13:15.679 --> 0:13:19.320 has been extended for several reasons, one of which is COVID, 0:13:19.320 --> 0:13:21.280 And we were talking about the low interest rates. We 0:13:21.280 --> 0:13:25.040 were pretty near a peak back in twenty ish, and 0:13:25.080 --> 0:13:28.440 then we had COVID and we've all had much easier 0:13:28.480 --> 0:13:32.440 access to capital, shortage of housing, we bid prices up. 0:13:33.000 --> 0:13:35.559 This is going to be quite some time. We're years 0:13:35.600 --> 0:13:39.600 in the catchup, so minimum another three to four years 0:13:39.640 --> 0:13:41.719 to catch up, maximum a decade. 0:13:42.160 --> 0:13:45.120 All right, you just made the big move from Boca Raton, Florida, 0:13:45.240 --> 0:13:49.080 Florida Lanta University to Oxford, Mississippi thirty seconds. 0:13:49.280 --> 0:13:50.199 What's the big difference. 0:13:52.200 --> 0:13:57.199 Well, I have the best of both worlds now. Originally 0:13:57.240 --> 0:14:00.640 I'm from the South and I've always loved are that 0:14:00.920 --> 0:14:05.560 dreamt of being at a state university, flagship school SEC 0:14:05.679 --> 0:14:09.040 football and sports. I love Boca. So we've kept a 0:14:09.080 --> 0:14:10.880 place there in Boca, my wife and I have and 0:14:11.160 --> 0:14:13.679 we will continue to be there in the summers and 0:14:14.920 --> 0:14:17.679 at Christmas time. You know, to be anything above it 0:14:17.840 --> 0:14:22.120 ten is like a reflecting barrier in terms of winter cold. 0:14:22.320 --> 0:14:24.920 But if you come to Oxford, you would understand why 0:14:24.960 --> 0:14:27.080 I wouldn't pass on this opportunity to come here and 0:14:27.120 --> 0:14:27.840 build a program. 0:14:27.920 --> 0:14:29.400 Yeah, it's fantastic. 0:14:29.920 --> 0:14:33.080 Old Miss Ken Johnson Walker Family Chair of real Estate 0:14:33.120 --> 0:14:36.560 at the University of Mississippi that is in Oxford, Mississippi. 0:14:36.560 --> 0:14:38.920 I just kind of googled map the because I always forget. 0:14:38.680 --> 0:14:42.280 Where Oxford is. Northwestern part of the state. Just it's 0:14:42.360 --> 0:14:44.960 very close to Memphis. Tennessee. Actually, oh, it's closely the 0:14:45.040 --> 0:14:48.680 Arkansas border, but it is. You know, that's deep sec. 0:14:48.560 --> 0:14:51.480 Country, Old miss but pretty cool there. But again, a 0:14:51.480 --> 0:14:53.680 big move from Bocah to Oxford. 0:14:54.120 --> 0:14:55.560 I thought you were looking at an uber and I'm like, 0:14:55.600 --> 0:14:57.520 you're not goingwhere. For like two hours, I don't know 0:14:57.520 --> 0:14:58.280 what this guy's doing. 0:14:58.280 --> 0:15:00.880 But now now I understand you where it's all about. 0:15:02.360 --> 0:15:06.200 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:15:06.280 --> 0:15:09.360 weekdays at ten am Eastern on fo car playing Android 0:15:09.400 --> 0:15:12.520 Otto with the Bloomberg Business App. Listen on demand wherever 0:15:12.560 --> 0:15:16.400 you get your podcasts, or watch us live on YouTube. 0:15:17.400 --> 0:15:20.200 Let's check in with somebody who's paying attention to earnings 0:15:20.200 --> 0:15:22.880 because they're going to kick off in size tomorrow with 0:15:23.040 --> 0:15:25.200 JP Morgan. We always pay attention to what Jamie Dimond 0:15:25.240 --> 0:15:29.320 says about the overall economy. Karen Murphy Joints is. She's 0:15:29.320 --> 0:15:33.400 a CIO at Kestra Investment Management. So Carol, we're gonna 0:15:33.400 --> 0:15:35.600 have earnings tomorrow. But I love to just get your 0:15:35.880 --> 0:15:39.640 thoughts here on that CPI print today and maybe how 0:15:39.680 --> 0:15:43.400 you think that may impact FED actions going forward. 0:15:44.800 --> 0:15:47.280 Yeah, so I given the print today, I don't think 0:15:47.320 --> 0:15:49.960 there are too many doves who are celebrating. You know, 0:15:50.040 --> 0:15:51.840 this is definitely a little bit of a fly in 0:15:51.920 --> 0:15:55.360 the ointment of the deceleration and inflation that we've seen 0:15:55.400 --> 0:15:56.760 over the last couple of months. 0:15:57.240 --> 0:15:57.680 That's it. 0:15:57.720 --> 0:16:00.280 I mean, it looks like markets are taking it in stride. So, 0:16:00.600 --> 0:16:03.240 you know, inflation showed up a little bit hotter than 0:16:03.280 --> 0:16:04.960 what I think many of us would have liked to 0:16:04.960 --> 0:16:08.280 have seen, and I think it's a really good reminder 0:16:08.440 --> 0:16:11.320 that the FED has a tough job. You know, we 0:16:11.400 --> 0:16:14.640 saw also claims happened to come in today a little 0:16:14.640 --> 0:16:18.000 bit higher than expected. So what we're seeing now is 0:16:18.120 --> 0:16:21.000 inflation a little bit hotter than expected, labor market a 0:16:21.040 --> 0:16:25.000 little bit weaker than expected. So it's a really difficult trajectory. 0:16:25.040 --> 0:16:26.920 So I think the FED is still on track to 0:16:26.920 --> 0:16:29.480 do a twenty five bit cut at its next meeting. 0:16:30.120 --> 0:16:32.840 Today's print won't be enough to really change the Fed's mind, 0:16:32.920 --> 0:16:36.040 but you know, it does highlight that there's a lot 0:16:36.040 --> 0:16:39.400 of complexity and a couple more sort of hotter inflation 0:16:39.480 --> 0:16:40.960 prints between now and the end of the year. It 0:16:40.960 --> 0:16:42.840 could start to slow those FED rate cuts. 0:16:42.960 --> 0:16:45.480 Yeah, exactly, we've seen FED cuts kind of priced down 0:16:45.480 --> 0:16:48.920 a little bit up for twenty twenty five. So if 0:16:49.120 --> 0:16:52.520 we are okay, it's a two firm, does that mean 0:16:52.520 --> 0:16:55.960 that the US economy could reaccelerate? And then if we 0:16:56.040 --> 0:16:59.240 are seeing a longer economic cycle, does it change where 0:16:59.280 --> 0:17:01.480 in the market have to be invested with in equities. 0:17:03.000 --> 0:17:05.440 I think that's the question that we should be asking ourselves, 0:17:05.720 --> 0:17:08.160 and I think the easy answer is that, like, we 0:17:08.240 --> 0:17:10.879 know that the economy and the market typically doesn't go 0:17:10.920 --> 0:17:14.280 in a straight line, So the FED is actively trying 0:17:14.320 --> 0:17:16.919 to pivot. Right. We had our first rate cut in 0:17:17.000 --> 0:17:20.000 quite a while, and that introduces a lot of cross 0:17:20.000 --> 0:17:22.040 currents into the market, and so it makes sense that 0:17:22.119 --> 0:17:24.320 the economy is going to kind of, you know, chunk 0:17:24.359 --> 0:17:27.080 around for a little bit. So yes, we could see 0:17:27.080 --> 0:17:30.359 a reacceleration. I think the Fed will then you start 0:17:30.400 --> 0:17:33.399 to pull back a little bit. But this like lag 0:17:33.480 --> 0:17:36.800 issue in monetary policy is a really big challenge because 0:17:37.240 --> 0:17:40.439 the labor market starting to weaken a little bit is 0:17:40.520 --> 0:17:43.320 responding to rate cuts that happened quite some time ago. 0:17:43.880 --> 0:17:46.760 So even sorry rate hikes that happened quite some time ago. 0:17:47.040 --> 0:17:49.640 So even if the Fed starts to cut, it will 0:17:49.680 --> 0:17:51.680 be a while before we see it in the market, 0:17:52.280 --> 0:17:54.480 So it makes sense that the market will or the 0:17:54.520 --> 0:17:57.560 economy will sort of like reaccelerate and then slow down again, 0:17:58.600 --> 0:18:00.159 and it'll take a little while before we get to 0:18:00.240 --> 0:18:02.800 like that firm footing and determine where the FED should 0:18:03.200 --> 0:18:05.919 have its resting place be. So then what does the 0:18:05.960 --> 0:18:08.880 market do in the meantime? I think smaller companies who 0:18:08.920 --> 0:18:12.120 rely more heavily on debt are a little bit more 0:18:12.200 --> 0:18:15.960 subject to the fed's whims, so as FED rates come down, 0:18:16.000 --> 0:18:19.040 they'll benefit more. If those rates take longer, it might 0:18:19.080 --> 0:18:22.399 take longer for them to see that real earnings reacceleration 0:18:22.480 --> 0:18:25.639 that we're waiting for. But there are multiple different pieces 0:18:25.640 --> 0:18:26.760 that kind of feed into that. 0:18:27.720 --> 0:18:31.280 So given all that background, how are you guys positioned? First, 0:18:31.320 --> 0:18:32.919 let's go with the equity side of the equation. 0:18:32.960 --> 0:18:33.840 How are you positioned there? 0:18:34.920 --> 0:18:37.840 So we still are really favorable on equities, But what 0:18:37.880 --> 0:18:41.600 we found is that your core benchmarks have moved very 0:18:41.640 --> 0:18:45.320 heavy into large cap or megacap and into growth. So 0:18:45.359 --> 0:18:47.680 what we're doing is kind of taking a step closer 0:18:47.720 --> 0:18:50.240 towards a little bit more even split between value and 0:18:50.280 --> 0:18:53.719 growth and favoring some of those somewhat smaller companies, and 0:18:53.760 --> 0:18:55.159 like I often say, you don't have to go all 0:18:55.200 --> 0:18:58.040 the way down to small cap in order to benefit 0:18:58.119 --> 0:19:00.360 from being out of that megacap You just you can 0:19:00.400 --> 0:19:02.720 just go into the smaller large cap or we think 0:19:02.760 --> 0:19:06.280 megacap MidCap is really attractive as well. So just starting 0:19:06.320 --> 0:19:08.680 to step a little bit towards the center of that 0:19:09.280 --> 0:19:11.119 while still remaining overweight equities. 0:19:11.280 --> 0:19:13.240 Yeah, I feel like I've been talking about mid caps 0:19:13.280 --> 0:19:15.320 for a bit, and every kind of day you got 0:19:15.320 --> 0:19:18.479 the SMP making a record high, the midcaps also make 0:19:18.520 --> 0:19:21.360 a run for it at the same time. Okay, how 0:19:21.359 --> 0:19:24.040 does that then position you in the bond market? Like, 0:19:24.119 --> 0:19:25.960 do we still get a steepener? It's just a matter 0:19:26.000 --> 0:19:27.840 of how we get that steepener that matters. 0:19:29.520 --> 0:19:32.639 Yes, it does. And I think the easier sort of 0:19:32.720 --> 0:19:35.199 bet to make on the fixed income side is to 0:19:35.280 --> 0:19:38.200 be out of high yield credit, not completely out, but 0:19:38.320 --> 0:19:41.520 underweight high yield credit where we think if the FED 0:19:41.640 --> 0:19:44.320 rate cutting cycle takes longer than we'd like to, those 0:19:44.320 --> 0:19:46.280 are the companies that are going to face some pressure. 0:19:46.680 --> 0:19:49.040 And you see really low spreads there right, so you're 0:19:49.080 --> 0:19:51.280 not being paid a lot in order to take that risk. 0:19:52.200 --> 0:19:54.439 High quality corporate on the other hand, we think is 0:19:54.440 --> 0:19:57.320 pretty attractive. There you get a nice interest rate bomb, 0:19:57.640 --> 0:19:59.800 you're not taking a huge amount of duration risk, but 0:20:00.040 --> 0:20:03.800 still benefiting from that higher overall yield compared to treasuries. 0:20:04.160 --> 0:20:06.240 So in treasuries there you know, would be more in 0:20:06.280 --> 0:20:08.879 the belly of the curve outside those really long duration 0:20:09.040 --> 0:20:12.720 which we've seen be fairly volatile as inflation sort of 0:20:12.760 --> 0:20:15.080 comes and goes. But you want to start to step 0:20:15.119 --> 0:20:16.760 off of those really short term rates. 0:20:17.119 --> 0:20:19.240 And if I look at then GO function on the 0:20:19.240 --> 0:20:21.280