WEBVTT - Jobs Day, Markets, And Shinzo Abe (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.600 at Bloomberg dot com slash podcast. A change in non 0:00:22.640 --> 0:00:24.800 farm payrolls for the month of June came in at 0:00:24.800 --> 0:00:27.440 three seventy two thousand. It's better than the consensus of 0:00:27.480 --> 0:00:29.920 two and sixty five thousand, and it's a good news. 0:00:29.920 --> 0:00:32.840 Of bad news is it's less than uh the month 0:00:33.040 --> 0:00:35.360 before and several months before. Let let's break it down 0:00:35.360 --> 0:00:37.680 with Jay Brice, and he's a managing director and chief 0:00:37.680 --> 0:00:40.320 economists at Wells Fargo. I think he's also a multi 0:00:40.440 --> 0:00:45.000 time graduate of some small college or university in Chapel Hill, 0:00:45.040 --> 0:00:47.520 North Carolina, or something along those lines, but we'll bear 0:00:47.560 --> 0:00:50.839 with that. Jay, Thanks for joining us. We really appreciate it. 0:00:50.920 --> 0:00:52.800 Would you make of the job's number here today? When 0:00:53.040 --> 0:00:56.720 kind of what's your take forward move? Yeah? So apaulogist, 0:00:56.760 --> 0:01:02.000 you know, go heels um uh, But yeah, so as 0:01:02.120 --> 0:01:04.720 as you just noted. So the good news is we 0:01:04.880 --> 0:01:08.360 created a lot of jobs in soon. You know, this 0:01:08.440 --> 0:01:10.440 is one of these good news is bad news sort 0:01:10.480 --> 0:01:12.959 of deals. I mean, I still kind of seals the 0:01:13.000 --> 0:01:16.240 case for the FED going in another seventy five UM 0:01:16.280 --> 0:01:19.280 at its meeting later this this week or later the 0:01:19.319 --> 0:01:22.200 sponsor rather so. UM. And that's you know, kind of 0:01:22.200 --> 0:01:24.800 why markets are you know, the stock market is off 0:01:24.880 --> 0:01:28.119 right now. Suddenly you know, recession fears are back if 0:01:28.160 --> 0:01:32.320 the Fed, you know, it gets really aggressive. So do 0:01:32.400 --> 0:01:36.160 we expect the Fed to get really aggressive? Um? Are 0:01:36.160 --> 0:01:40.560 you in the seventy five or the fifty camp for July? Yeah? 0:01:40.720 --> 0:01:43.520 So before this, before this number prints today, we were 0:01:43.600 --> 0:01:47.280 seven D five And I think there's just reinforces um 0:01:47.400 --> 0:01:49.560 to our belief that they're gonna go seventy five. I mean, 0:01:49.640 --> 0:01:52.120 I think the wheels would just have to come completely 0:01:52.200 --> 0:01:54.120 off between now and the end of the month. But 0:01:54.240 --> 0:01:56.440 I'm not to go seventy five, And then I think 0:01:56.440 --> 0:01:58.680 it's gonna be interesting where do they go from there? 0:01:58.840 --> 0:02:00.720 You know, if they get if they goes seventy five, 0:02:00.800 --> 0:02:04.040 then you're at a fit funds rate roughly two and 0:02:04.120 --> 0:02:06.920 a quarter that's starting to move into the range where 0:02:07.000 --> 0:02:09.520 most people in the f O m C would say, 0:02:09.680 --> 0:02:13.839 we're quote at neutral at that point, and so that's 0:02:13.880 --> 0:02:16.120 what they seem to want to be getting to where 0:02:16.240 --> 0:02:20.200 policy isn't stimulating the economy anymore. Some of the jay, 0:02:20.240 --> 0:02:22.000 how do you measure that? By the way, I mean, 0:02:22.040 --> 0:02:25.240 I know that it's not an exact science, but where 0:02:25.280 --> 0:02:27.760 where do you do you use the tailor rule or 0:02:27.840 --> 0:02:32.480 what do you do to what we do? Yeah, So 0:02:32.560 --> 0:02:34.520 what we do is we you know, we kind of say, 0:02:34.680 --> 0:02:37.000 so what do we think the uh, you know, the 0:02:37.040 --> 0:02:40.840 underlying real rate of the economy is, So that's probably 0:02:40.919 --> 0:02:43.560 somewhere where the real rate of the economy can kind 0:02:43.560 --> 0:02:46.680 of grow. That's probably somewhere around one and a half 0:02:46.720 --> 0:02:49.239 to two percent. Now, you don't want to real Fed 0:02:49.280 --> 0:02:51.840 funds rate at that high because you know, the yield 0:02:51.840 --> 0:02:55.360 curve is kind of upward sloping, so generally, so you know, 0:02:55.520 --> 0:02:58.880 we would put it somewhere around you know, two and 0:02:58.919 --> 0:03:02.320 a half to maybe three would be in nominal terms 0:03:02.360 --> 0:03:05.120 that we would think the neutral rate would be. But 0:03:05.160 --> 0:03:07.000 you know, as you just know, it's not it's certainly 0:03:07.000 --> 0:03:08.880 not an exact sort of sort of science. I'm just 0:03:08.919 --> 0:03:11.440 trying to on my Bloomberg I have t a y 0:03:11.680 --> 0:03:13.400 l go at the Taylor rule and you've got to 0:03:13.400 --> 0:03:18.000 plug in your own neutral rate. Um, no matter what 0:03:18.080 --> 0:03:22.079 I do, it seems like the estimate is way higher 0:03:22.120 --> 0:03:26.680 than anybody else's terminal rate expectation. Yeah, and you know 0:03:26.720 --> 0:03:29.560 the Taylor rule was, you know, John Taylor estimated that, 0:03:29.639 --> 0:03:32.400 you know, years ago, and the economy has has has 0:03:32.480 --> 0:03:36.720 changed over time, and so um, you know, I think 0:03:36.760 --> 0:03:39.040 it would be It's probably not as high as what 0:03:39.320 --> 0:03:41.320 you know, many people would would think it to be 0:03:41.400 --> 0:03:44.120 at this point. And terminal terminal rate, what do you 0:03:44.120 --> 0:03:46.720 think we get we get to here? Because with eight 0:03:46.720 --> 0:03:50.640 percent inflation, a terminal rate of four wouldn't be out 0:03:50.680 --> 0:03:53.760 of this world, would it. Order. I think you're looking 0:03:53.840 --> 0:03:55.800 kind of around four. And I think what's going to 0:03:55.920 --> 0:03:59.160 happen as we go forward here is that the inflation, 0:03:59.200 --> 0:04:01.840 your all inflation rate in the space is the rate 0:04:01.880 --> 0:04:04.240 that it's going to plant. Next week for June is 0:04:04.280 --> 0:04:07.560 going to be another ugly print. But going forward you 0:04:07.600 --> 0:04:10.360 should see the rates start to come down. You know 0:04:10.440 --> 0:04:12.280 what what are the you know, we're looking at commodity 0:04:12.280 --> 0:04:17.080 prices down pretty significantly. That will eventually feed into goods prices. 0:04:17.400 --> 0:04:19.880 You know, the wage number that we saw today average 0:04:19.880 --> 0:04:23.520 hourly earnings only zero point three percent, So we're getting 0:04:23.560 --> 0:04:26.960 some deceleration in terms of wages that will feed into 0:04:27.240 --> 0:04:30.120 service sector sort of employment. So by the end of 0:04:30.120 --> 0:04:33.400 this year, if you have the terminal rates roughly around 0:04:33.400 --> 0:04:37.240 four percent and the inflation rate, it's still gonna be 0:04:37.320 --> 0:04:39.920 higher than that. But as we move into next year, 0:04:40.560 --> 0:04:44.400 you should start to see a positive real Fed funds rate. 0:04:44.760 --> 0:04:47.000 And with all the other tightening that you're seeing in 0:04:47.080 --> 0:04:51.360 financial markets, credit spreads widened, the dollar stronger, stock bar 0:04:51.600 --> 0:04:56.119 stock indussees moving lower, that's all financial tightening. All those 0:04:56.160 --> 0:04:59.640 things put more headwinds on the economy, and we're afraid 0:04:59.640 --> 0:05:02.039 to lead to a modest sort of recession, you know, 0:05:02.120 --> 0:05:05.360 either late this year or early next year. So is 0:05:05.640 --> 0:05:07.920 that really the risk here, Ja, because we again, as 0:05:07.920 --> 0:05:10.200 you mentioned, we do have some inflation metrics to are 0:05:10.200 --> 0:05:13.120 in fact coming back down. So it appears that maybe 0:05:13.160 --> 0:05:15.400 that issue can be put on backburn. A little bit 0:05:15.480 --> 0:05:18.320 of a recession still on the table. I think I 0:05:18.320 --> 0:05:21.400 think it is. I just think it's it's becoming less 0:05:21.520 --> 0:05:24.320 credible to expect the SAIED to be able to engineer 0:05:24.480 --> 0:05:26.800 a you know, a soft landing here. And I'm not 0:05:26.800 --> 0:05:29.160 saying that's not important, is that that's impossible. I mean 0:05:29.200 --> 0:05:33.239 that certainly could happen. But whereas before we saw these 0:05:33.400 --> 0:05:36.280 nasty inflation prints starting, you know, about a month or 0:05:36.320 --> 0:05:39.000 two ago, you know, we would say the probability of 0:05:39.040 --> 0:05:43.840 recession or probability of a soft landing was, I think 0:05:43.880 --> 0:05:46.760 it's more like now, and so the probability of a 0:05:47.200 --> 0:05:50.320 modest recession next year is kind of like, you know, 0:05:50.720 --> 0:05:53.000 in the sixty sort of range. I think that's kind 0:05:53.000 --> 0:05:55.440 of what we're looking at. Just you know, given the 0:05:55.480 --> 0:06:00.120 defends aggressive here, given the amount of financial type mean 0:06:00.200 --> 0:06:02.919 that we're seeing, and the slowdowns in the rest of 0:06:02.920 --> 0:06:05.880 the world, all those things pause. Um, you know, growth 0:06:05.920 --> 0:06:09.320 shers too slow significantly, And I think the turn you know, 0:06:09.440 --> 0:06:12.000 negative on on a on a you know a few 0:06:12.080 --> 0:06:14.800 quarter sort of basis alright, good stuff. More importantly, I 0:06:14.800 --> 0:06:19.880 think you're looking at negative um employment prints. All right, Jay, 0:06:19.920 --> 0:06:21.960 good good stuff. You appreciate you taking the time on 0:06:22.000 --> 0:06:24.640 this job today. J Bryson, managing director and chief economist 0:06:25.279 --> 0:06:28.760 at Wells Fargo and a proud graduate of the University 0:06:28.760 --> 0:06:32.440 of North kind of former economist at Federal Reserve. Yeah, 0:06:32.560 --> 0:06:35.039 I know, these guys get around and then they got 0:06:35.080 --> 0:06:38.240 a strong resume. Does Yeah, very good. We love having 0:06:38.320 --> 0:06:43.800 him on. I don't know where you go in terms of, 0:06:43.920 --> 0:06:48.679 you know, a nice uh down middle market investor. Stocks 0:06:48.720 --> 0:06:51.919 down over so far in the first half of the year, Bonds, 0:06:52.000 --> 0:06:55.440 double digit declines pretty much everywhere you look, including treasuries. 0:06:55.760 --> 0:06:57.480 What do you do from here? Are we at a 0:06:57.640 --> 0:07:01.239 near a bottom? David Katz, President and Chief investment Officer 0:07:01.400 --> 0:07:05.400 Matrix Asset Advisors, David, what are you telling your clients 0:07:05.480 --> 0:07:08.760 here about where we go from here? Giving that brutal 0:07:08.839 --> 0:07:13.120 first half and both stocks and bonds after a miserable 0:07:13.200 --> 0:07:17.000 first half, we're pretty upbeat, surely in the stock market 0:07:17.040 --> 0:07:19.240 for the second half. Since nineteen thirty, there have been 0:07:19.440 --> 0:07:23.000 five periods where the market has opened down more than 0:07:23.040 --> 0:07:25.440 fifteen percent in the first six months, and five out 0:07:25.440 --> 0:07:28.440 of five the market was up in the following six months, 0:07:28.440 --> 0:07:30.840 and that was more than fifteen percent in most cases. 0:07:31.120 --> 0:07:33.080 So we're feeling pretty good about stocks and when we 0:07:33.120 --> 0:07:34.520 can go into that in a little bit, because there 0:07:34.560 --> 0:07:36.560 are a lot of other indicators that are pretty bullish 0:07:37.080 --> 0:07:40.000 on the bond side, after a very poor start of 0:07:40.000 --> 0:07:43.440 the year. We're still cautious about intermediate and long term 0:07:43.440 --> 0:07:46.200 bonds because we think that rates can move higher still. 0:07:46.680 --> 0:07:49.000 But for the first time in a long time, we 0:07:49.040 --> 0:07:52.640 are very positive on six months to two and three 0:07:52.720 --> 0:07:55.080 year bonds because you're getting about a three percent return. 0:07:55.760 --> 0:07:57.720 We don't think rates are going to move up that sharply. 0:07:57.760 --> 0:08:00.840 So you're finally getting rewarded, uh for we're owning bonds, 0:08:00.920 --> 0:08:04.520 whereas a year ago you were getting point two by 0:08:04.520 --> 0:08:08.560 the way. Uh So, today we had this good news 0:08:09.320 --> 0:08:11.600 on on the job at least better than expected news 0:08:11.680 --> 0:08:14.360 on the jobs front, and I guess the market then 0:08:14.520 --> 0:08:17.560 thinks the Fed can get more aggressive. Does that affect 0:08:17.600 --> 0:08:20.600 your outlook for stocks? I mean, if the Fed goes 0:08:20.920 --> 0:08:24.600 seventy five and then you know, fifty and fifty, does 0:08:24.640 --> 0:08:28.680 that hurt your outlook for stocks? If the Fed has 0:08:28.760 --> 0:08:31.960 to keep raising its seventy five and fifties, and definitely absolutely, 0:08:32.000 --> 0:08:33.760 but we don't think that's going to be the case. 0:08:33.800 --> 0:08:36.320 We are starting to see signs that inflation is breaking. 0:08:36.360 --> 0:08:39.600 You just ran that story about San Francisco housing prices 0:08:39.679 --> 0:08:44.440 or apartments coming down. We're seeing lower labor pressure. What 0:08:44.520 --> 0:08:46.960 you saw today the walmarts and the targets of the 0:08:46.960 --> 0:08:52.079 world are discounting because they're overstocked in apparel and home goods. 0:08:52.360 --> 0:08:54.959 So there you're starting to see some signs that inflation breaking. 0:08:55.000 --> 0:09:00.120 Commodity prices copper steel have sold off very significant. The 0:09:00.520 --> 0:09:03.000 we think if inflation comes down, it's going to allow 0:09:03.040 --> 0:09:06.280 the feed to be less aggressive in three For the moment, 0:09:06.280 --> 0:09:08.520 they've got to talk a very hawkish game, but we 0:09:08.559 --> 0:09:10.680 think they're going to be less hawkish next year. That's 0:09:10.720 --> 0:09:13.920 bullish for stocks, all right. So if we want to start, 0:09:14.440 --> 0:09:16.559 you know, maybe dipping our toe into this market, if 0:09:16.559 --> 0:09:19.000 we think most of the bear market maybe behind us, 0:09:19.000 --> 0:09:21.240 what are some of the sectors that you and your 0:09:21.240 --> 0:09:23.960 team are are kind of looking at. So we like 0:09:24.040 --> 0:09:26.480 a lot of things that have been beaten up this year, 0:09:26.640 --> 0:09:29.200 but we wouldn't be buying stocks just because they're beating up. 0:09:29.240 --> 0:09:31.840 But the sectors that we like most right now, or financials, 0:09:31.840 --> 0:09:37.359 consumer discretionary, we like select technology, communications services, medical technology 0:09:37.400 --> 0:09:40.720 and products, and some industrial, so pretty broad based. The 0:09:40.760 --> 0:09:43.280 one area that we're a little bit less enthusiastic has 0:09:43.280 --> 0:09:46.360 been consumers staples right now, and we've owned a lot 0:09:46.400 --> 0:09:49.080 of consumer staples going into the year. As they have 0:09:49.200 --> 0:09:51.120 done their job, as they have gone up when the 0:09:51.160 --> 0:09:53.840 market has gone down a lot, we've been scaling back 0:09:53.880 --> 0:09:56.280 on them and we think that at this point they're 0:09:56.360 --> 0:09:59.280 all about fully priced. We'd be taking that consumer staple 0:09:59.360 --> 0:10:01.560 money off the tap able putting it into the areas 0:10:01.559 --> 0:10:04.760 that I just highlighted. What about UM you know, the 0:10:04.840 --> 0:10:06.880 last couple of days and this is I guess this 0:10:06.960 --> 0:10:09.520 may be out of your universe, but we've seen Samsung 0:10:10.280 --> 0:10:13.800 UM beat on the revenue side, still margin pressure, t 0:10:14.040 --> 0:10:17.120 SMC beat on the revenue side, still margin pressure. Are 0:10:17.120 --> 0:10:18.840 we going to see that this earning season in the 0:10:18.960 --> 0:10:22.760 US texts as well? Well? You might continue to see 0:10:22.800 --> 0:10:24.959 some margin pressure, But the real key is going to 0:10:25.080 --> 0:10:28.319 be are they able to get their inputs and are 0:10:28.360 --> 0:10:30.960 they able to produce their product? And is their demand 0:10:31.360 --> 0:10:33.080 and if you can get through this quarter with a 0:10:33.160 --> 0:10:36.000 reasonable demand outlook, we think a lot of semiconductors that 0:10:36.040 --> 0:10:39.480 have been battered over the last six months are poised 0:10:39.480 --> 0:10:42.000 to do a lot better. So we like Qualcom. They 0:10:42.080 --> 0:10:45.080 just rebounded about twelve dollars in the last few days, 0:10:45.080 --> 0:10:47.240 so I wouldn't chase it today, but we think that's 0:10:47.280 --> 0:10:49.720 not goes a lot higher. Same thing with Texas Instruments. 0:10:49.720 --> 0:10:52.120 We think it's a hundred and eighty to two hundred 0:10:52.160 --> 0:10:54.520 dollar stock. You're getting a three percent yield. You're buying 0:10:54.520 --> 0:10:58.360 it at about a hundred and fifty so and we 0:10:58.400 --> 0:11:00.600 do like Cisco that that one has not moved yet, 0:11:00.640 --> 0:11:02.560 and we think it really is well positioned for the 0:11:02.600 --> 0:11:05.640 next twelve to eighteen months. It's a very inexpensive stock, 0:11:05.720 --> 0:11:08.959 has a good yield. We think management is very much 0:11:09.000 --> 0:11:11.760 on the ball in terms of maximizing shareholder value. And 0:11:11.800 --> 0:11:14.839 we think they demand is pretty good. And as all 0:11:14.840 --> 0:11:17.560 of a sudden their input costs come under control, which 0:11:17.559 --> 0:11:20.280 we're expecting to happen in the next three to six months, 0:11:20.360 --> 0:11:22.200 and they get more product and they're gonna be able 0:11:22.240 --> 0:11:24.319 to ship out and meet that demand. Uh. And it's 0:11:24.320 --> 0:11:27.079 at a really inexpensive price at about fourteen times earnings. 0:11:27.160 --> 0:11:29.760 And David, you've gotten Meta on your list as well, 0:11:29.760 --> 0:11:32.559 formerly known as Facebook. So much noise around that name. 0:11:32.600 --> 0:11:35.640 How do you get comfortable with that? Well that that's 0:11:35.679 --> 0:11:39.040 a great point. So we do not like Meta management. 0:11:39.080 --> 0:11:41.440 We don't think Ziggerberger is a particularly good guy. We 0:11:41.480 --> 0:11:45.679 don't like their uh ethics. However, it is one of 0:11:45.720 --> 0:11:48.520 the most powerful brands in the world. You know, half 0:11:48.559 --> 0:11:51.600 the population uses it every month. They have a great 0:11:51.640 --> 0:11:55.040 advertising model. They also have a lot of levers to 0:11:55.120 --> 0:11:58.560 control costs. Is advertising slows down this period and and 0:11:58.640 --> 0:12:01.400 this is you know, the most critical factor. It tells 0:12:01.400 --> 0:12:03.720 it about twelve times this year's earnings and that those 0:12:03.720 --> 0:12:07.320 earnings that we think are understated. So powerful franchise, good 0:12:07.400 --> 0:12:10.520 long term prospects at a great price. Uh, and we're 0:12:10.520 --> 0:12:12.440 willing to put up with management that were a little 0:12:12.440 --> 0:12:15.559 bit less enamored with that's uh. That's certainly a call 0:12:15.640 --> 0:12:17.880 from some of the folks that are looking at that name. 0:12:18.360 --> 0:12:21.880 David Kat's president and chief investment officer of Matrix Asset 0:12:21.920 --> 0:12:27.199 Advisers that joins us. Well, the world, at least in 0:12:27.200 --> 0:12:30.800 the Western world awoke to news of the horrific assassination 0:12:30.920 --> 0:12:35.400 of former Japanese Prime Minister Shinzo abe Um, and I 0:12:35.440 --> 0:12:36.840 think the market is trying to get a sense here 0:12:37.040 --> 0:12:40.439 of what, if any, are the implications for Japanese policies, 0:12:41.000 --> 0:12:44.360 politics and markets, and get some perspective there. We welcome 0:12:44.400 --> 0:12:49.839 Ben Emmons Medley Global Advisors, Managing Director of Global macro strategy. Ben, 0:12:49.920 --> 0:12:53.280 you're out with the note this morning after the news 0:12:53.320 --> 0:12:56.640 became public. What are your thoughts there's relates to Japan 0:12:56.679 --> 0:13:01.160 and its policies and politics. Hey, Paul, thanks for having me. Uh, 0:13:01.440 --> 0:13:03.800 first of all, it's obviously an horrific event and it's 0:13:03.960 --> 0:13:07.400 something that you don't wishue anyone to happen. Right, So 0:13:07.840 --> 0:13:11.520 created Javan being in a major morning this today is 0:13:11.679 --> 0:13:13.920 is you know, really a shock for that nation that 0:13:14.000 --> 0:13:16.760 that that happens, because that doesn't as I actually had 0:13:16.840 --> 0:13:20.280 happened at all or rare this this sort of event. 0:13:20.760 --> 0:13:24.240 But yeah, there are implications, um, you know in in 0:13:24.400 --> 0:13:28.680 Japanese politics, Abby was obviously significant influential of last decade. 0:13:29.080 --> 0:13:32.560 His three arrows policy was really trying to move the 0:13:32.559 --> 0:13:36.200 country out of the moon term slump of deflation with 0:13:36.320 --> 0:13:39.599 some success, you know, because they actually are out of deflation. 0:13:39.960 --> 0:13:43.680 But I think as as this unfortunate passing has happened, Um, 0:13:43.720 --> 0:13:45.880 you know, you could at least think that Kashia, the 0:13:46.000 --> 0:13:50.200 current Prime Minister, has more leeway within within this government 0:13:50.360 --> 0:13:54.360 also towards the Little Democratic Party. What did they clash on, Ben? 0:13:54.840 --> 0:13:58.160 What what did which direction did Kashida want to go 0:13:58.400 --> 0:14:02.120 that Abbe was kind of hearing him away from Yeah, 0:14:02.160 --> 0:14:05.160 I think it was all about like pro growth policies 0:14:05.200 --> 0:14:09.640 and and versus redistribution of wealth. That that was the clashing. 0:14:09.800 --> 0:14:12.800 And most of all that of course you have really 0:14:12.840 --> 0:14:15.959 up lose mounetary and fiscal policy on the Abbe and 0:14:15.960 --> 0:14:19.880 on the Koshibashi Kashida. That's say, could potentially be a 0:14:19.920 --> 0:14:24.640 different tone, a different shift there in terms of like direction, 0:14:24.760 --> 0:14:28.120 because there's a lot of disaffection now with with inflation 0:14:28.200 --> 0:14:32.120 and the weekend in Japan. So will will she that 0:14:32.160 --> 0:14:35.840 could uh be successful now and you know moving to 0:14:35.880 --> 0:14:38.200 the Bank of Chipan and Ministry Finance into different directions 0:14:38.800 --> 0:14:40.960 that's to be seeing because they do have policy discretion, 0:14:41.080 --> 0:14:44.720 but that the influence will become greater now because you 0:14:44.760 --> 0:14:48.440 know that still had too much rely on Abby's political 0:14:48.480 --> 0:14:51.520 support for what he was doing. And that's I think clear. 0:14:51.600 --> 0:14:55.880 So the end yesterday did rally on that that unfortunate 0:14:55.920 --> 0:14:59.640 news somewhat of in the small indication of yes, there's 0:14:59.680 --> 0:15:03.680 going to at some point a real policy effort here 0:15:03.680 --> 0:15:06.640 to get not let the end get so weak that 0:15:06.680 --> 0:15:10.160 it would lead to inspiring inflation in Japan. So what 0:15:10.560 --> 0:15:14.200 is the economic outlook ben for UM Japan we've seen 0:15:14.240 --> 0:15:16.920 just obviously you called out the weakness in the end 0:15:16.960 --> 0:15:19.080 that that we've all seen here. I mean, is there 0:15:19.200 --> 0:15:21.600 what are the growth prospects for the Japanese economy over 0:15:21.600 --> 0:15:25.440 the next several years. It's it's not a good prospect 0:15:25.480 --> 0:15:29.120 because Japan is dealing with what we say in terms 0:15:29.120 --> 0:15:32.360 of trade shock, because of the energy situation and the 0:15:32.360 --> 0:15:35.840 weakness of the end. Right, you're getting important inflation plus 0:15:35.960 --> 0:15:40.520 high energy, and in addition to that within Japan there's 0:15:40.840 --> 0:15:44.080 a natural caution, right, and particularly prices start to rise. 0:15:44.840 --> 0:15:47.960 So I think it's it's a very modest outlook, if 0:15:47.960 --> 0:15:52.760 not negative outlook. And therefore this and then if you're 0:15:52.760 --> 0:15:55.680 going towards the direction that you're going to restrain fiscal 0:15:55.720 --> 0:15:58.760 policy over time, then it's going to be a weak, 0:15:58.920 --> 0:16:02.520 weak growth outlook, which could lead to return of disflation 0:16:02.560 --> 0:16:06.880 in Japan. One of the key questions that investors probably 0:16:06.920 --> 0:16:10.280 have is will the Bank of Japan stick to zero 0:16:10.360 --> 0:16:14.040 point to five um? You know, because we've seen a 0:16:14.080 --> 0:16:17.280 lot of shorting of the yen and of jgbs to 0:16:17.360 --> 0:16:20.360 try and push the Bank of Japan. Maybe the betting 0:16:20.400 --> 0:16:24.200 that they can't hold, what do you think. Yeah, so 0:16:24.320 --> 0:16:27.640 far they have been able to uh keep that twenty 0:16:27.640 --> 0:16:30.960 five basis points right where it is because of that 0:16:31.040 --> 0:16:35.080 unlimited operation that the market doesn't seem to be able 0:16:35.120 --> 0:16:39.640 to really conquer that Rsian. They can't fight as and 0:16:39.720 --> 0:16:42.400 not with enough fire power which as yet. But it 0:16:42.480 --> 0:16:45.800 comes down to Matt that that s c EN continues 0:16:45.840 --> 0:16:49.560 to weaken because they haven't drawn any red line at 0:16:50.320 --> 0:16:52.640 five and the en maybe not even a one forty 0:16:52.640 --> 0:16:56.200 two to the yen two dollar. It could lead eventually 0:16:56.200 --> 0:16:59.560 that yen to the dollars. You really should change on 0:16:59.600 --> 0:17:02.200 the bank event policy that they're going to change yoko 0:17:02.320 --> 0:17:04.960 control or does it mean likely means the midpoint of 0:17:05.000 --> 0:17:08.080 that range will shift to a positive number and as 0:17:08.119 --> 0:17:11.800 a result, they're going to let that band maybe wide 0:17:11.880 --> 0:17:15.240 into and then you get that change. I don't expect 0:17:15.240 --> 0:17:16.919 that they will do what the Swiss Central Bank did 0:17:16.960 --> 0:17:20.080 in twenty fifteen. Suddenly you know that that the your 0:17:20.160 --> 0:17:23.720 Swiss back the couple, right, It's not like that that 0:17:23.760 --> 0:17:26.800 they're more cautious. So it does take us to a 0:17:26.800 --> 0:17:30.520 weak again to altoly get a change in BUJ policy. 0:17:30.880 --> 0:17:33.600 It's just that this political change is maybe happening as 0:17:33.640 --> 0:17:38.320 a result of the horrific event good potentially influence that 0:17:38.320 --> 0:17:40.320 that path to to that change of the Bank of 0:17:40.400 --> 0:17:43.600 Javan policy of Yoko control. And then let's switch gears 0:17:43.800 --> 0:17:47.200 to the US had some job numbers out today better 0:17:47.880 --> 0:17:51.480 than expected in non farm payrolls, although showing the client 0:17:51.520 --> 0:17:54.520 from the prior month. What's your takeaway and and what 0:17:54.640 --> 0:17:59.760 it might mean how the Federal Reserve might interpret these numbers? Yeah, this, 0:17:59.760 --> 0:18:02.439 this means all that the fact must go on, right, 0:18:02.480 --> 0:18:05.520 There's no reason to think of any pause or any 0:18:05.520 --> 0:18:09.600 downshifting and tightening whatsoever. Definitely not between now and September. 0:18:09.880 --> 0:18:13.480 And if anything, the wage pressures in in this report 0:18:13.600 --> 0:18:15.960 are solid, right, and if it continues to be confirmed 0:18:15.960 --> 0:18:17.800 by employment costs in the action on the measures that 0:18:18.119 --> 0:18:22.040 they're off, then the possibility of even a larger hike 0:18:22.119 --> 0:18:27.680 in September is there, right, The market is carefully pricing that. Um. 0:18:27.720 --> 0:18:30.560 It also means that they, as they minute is outlined 0:18:30.600 --> 0:18:33.280 that they could move to even more restrictive stands if 0:18:33.359 --> 0:18:37.359 it warranted. So having strong payballs allows them to do that. Right, 0:18:37.640 --> 0:18:40.240 We're not actually in the stagflation environment, so to speak. 0:18:40.400 --> 0:18:43.200 Like from the seventies, we're more in environment of yeah, 0:18:43.400 --> 0:18:46.399 economy cooling off and high inflation, but pay all strong, 0:18:47.000 --> 0:18:50.560 so not a session therefore enough room to putie with 0:18:50.640 --> 0:18:53.000 these large rate highs of seven by base points. So 0:18:53.240 --> 0:18:56.280 the cements July seven by base points certainly fifty base 0:18:56.320 --> 0:19:00.479 points in September or perhaps more given that at you know, 0:19:00.960 --> 0:19:03.639 the momentum the label markets in Mainstrem, how far do 0:19:03.680 --> 0:19:06.399 you think they're gonna go? Ben and uh, you know, 0:19:06.440 --> 0:19:09.000 could they turn around and be headed back down by 0:19:09.040 --> 0:19:12.120 the end of next year. That's what the market tries 0:19:12.160 --> 0:19:14.760 to price. But I think that's actually a technical reason. 0:19:14.840 --> 0:19:17.920 It's more like the markets actually priced in complete front 0:19:17.920 --> 0:19:20.080 loading of this fat policy that we're in right now, 0:19:20.160 --> 0:19:22.560 meaning we're bringing up the funds rate as fast as 0:19:22.560 --> 0:19:25.560 possible to three three and a half percent um, and 0:19:25.600 --> 0:19:28.119 therefore you seeing that mechanicals slide down in the EU 0:19:28.200 --> 0:19:30.719 at all the futures. So I think it's more that 0:19:30.760 --> 0:19:32.520 we have to get to three three and a half percent. 0:19:32.560 --> 0:19:35.680 That's what they have indicated a few is restrictive policy. 0:19:36.119 --> 0:19:38.560 From there, it would be that even more restrictive as 0:19:38.560 --> 0:19:41.160 the minutes outline, would that be four percent? That's still 0:19:41.160 --> 0:19:43.840 a bit open question, but they're keeping that clearly on 0:19:43.880 --> 0:19:45.360 the table. So I think three three and a half 0:19:45.359 --> 0:19:48.720 per cent is your initial target, which maybe as early 0:19:48.720 --> 0:19:51.080 as September, right, if we're going to stay in this 0:19:51.200 --> 0:19:54.720 strong labor market. All right, Ben, great stuff. Really appreciate 0:19:54.720 --> 0:19:58.800 getting your perspective there. Ben Emmons Medally Global Advisors. He's 0:19:58.800 --> 0:20:05.840 a managing director of a global macro strategy. All I 0:20:05.840 --> 0:20:07.840 want to get back to this news coming out of Japan, 0:20:07.960 --> 0:20:14.800 the assassination of Prime Minister Shinzo Abe. Andrew Monaghan, he's 0:20:14.840 --> 0:20:19.040 the Asia Credit Managing editor for Bloomberg News. He's based 0:20:19.080 --> 0:20:21.280 in Hong Kong. Andrew, thanks so much for taking the 0:20:21.320 --> 0:20:24.080 time to join us here. I just give us our 0:20:24.119 --> 0:20:26.440 listeners here in the US and around the world a 0:20:26.800 --> 0:20:32.520 sense of how profound this event is in Japan. Sure, 0:20:32.640 --> 0:20:36.560 good morning there. I happened to be in Tokyo this week, 0:20:36.760 --> 0:20:39.879 and it's really a tragedy that's all the more striking 0:20:39.960 --> 0:20:43.760 because of the rarity of this kind of violence here. 0:20:44.359 --> 0:20:46.960 I think that's the first thing that stands out so 0:20:47.119 --> 0:20:50.800 much to so many people in Japan. Gun violence and 0:20:50.840 --> 0:20:55.160 political violence is exceedingly rare. There were no gun related 0:20:55.200 --> 0:20:59.680 injuries or deaths in Tokyo last year, which is really 0:20:59.680 --> 0:21:04.120 strike zero. I mean, that's that bears repeating. There were 0:21:04.200 --> 0:21:08.240 no gun deaths in Tokyo last year. UM, And I 0:21:08.240 --> 0:21:12.439 don't know how it is nationwide, but I think you 0:21:12.440 --> 0:21:15.719 could still count them on one hand. And meanwhile, in 0:21:15.720 --> 0:21:19.040 this country, and obviously we have a history of um, 0:21:19.080 --> 0:21:21.439 you know, gun violence, but we're looking at something like 0:21:21.520 --> 0:21:30.840 forty five thousand. Yeah, it's just really unbelievable. And there 0:21:30.960 --> 0:21:35.399 was no assassination attempt that killed the Japanese prime minister 0:21:35.600 --> 0:21:38.520 since World War Two as well, So all these things 0:21:38.560 --> 0:21:41.760