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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each

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Speaker 2: day for insight from the best in markets, economics, and

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Speaker 2: geopolitics from our global headquarters in New York City. We

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Speaker 2: are live on Bloomberg Television weekday mornings from six to

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Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify,

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Speaker 2: or anywhere else you listen, and as always on the

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Speaker 2: Bloomberg Terminal and the Bloomberg Business app.

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Speaker 1: We begin this hour wiz stocks rising after having their

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Speaker 1: best day since my on solid corporate earnings and a

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Speaker 1: renewed rate cut bed. Meanwhile, Jack Haffrey of JP Morgan,

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Speaker 1: writing with the weakness, we have gone from a market

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Speaker 1: with distinct cyclical and secular underpinning bias to a more

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Speaker 1: unique setup. Jack Noud joins us.

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Speaker 3: Now, Jack, the unique.

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Speaker 1: Setup has a lot to do with AI and the

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Speaker 1: fact that that seems to overwhelm all concerns is that

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Speaker 1: how you see.

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Speaker 4: It, Certainly, when you look through the market continues to

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Speaker 4: be dominated by the Magnificent seven and then to a

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Speaker 4: lot much lesser extent the forgotten for ninety three and

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Speaker 4: as we've worked our way through earning season, to some extent,

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Speaker 4: your biggest and best news has been less about the

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Speaker 4: earnings and more about the capital spending boosts that so

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Speaker 4: many of these companies have been talking about in order

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Speaker 4: to try to make the AI of the reality, and

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Speaker 4: then ultimately turning to how do we start incorporating how

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Speaker 4: AI is actually improving the quality of our business? Good

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Speaker 4: good That remains sort of, if you will, the trillion

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Speaker 4: dollar question in the markets of how this spending will

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Speaker 4: ultimately turn into higher margins, better growth rates, and ultimately

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Speaker 4: returns to shareholders.

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Speaker 1: We knew this so on Friday, we knew this on Thursday.

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Speaker 1: Suddenly on Monday yesterday there was a renewed sense of

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Speaker 1: vigor and excitement. How much of this is coming from

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Speaker 1: the expectation of rate cut bets and hopes that maybe

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Speaker 1: the economic data wasn't as bad as it looked.

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Speaker 4: Well, I think ultimately, in a world of the earnings

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Speaker 4: are in the future, the fact that you can start

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Speaker 4: trying to come up with a scenario of lower discount

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Speaker 4: rates for those future earnings makes them somewhat more valuable.

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Speaker 4: Why that'll happened yesterday morning? I wish I could come

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Speaker 4: up with a better answer than it was Monday. And

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Speaker 4: maybe there was a merger and someone had a really

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Speaker 4: good bit of earnings news for animal health early in

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Speaker 4: the morning, and so their stock up thirty percent, So

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Speaker 4: we should buy AI in response. You know, day to

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Speaker 4: day trying to figure out why markets moved is challenging,

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Speaker 4: even after thirty plus years of trying to do this.

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Speaker 4: Talk about eighteen twelve, eighteen twenty four months. I think

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Speaker 4: I have a better sense of what's going to be

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Speaker 4: driving things. And then I'll come back to the earning

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Speaker 4: story has gotten better. Two weeks ago, I would have

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Speaker 4: told you we're expecting earnings growth of five percent this year,

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Speaker 4: and now it looks like consuming closer to seven. Seven

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Speaker 4: turns to twelve next year, and it's August, and I

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Speaker 4: start turning not only to what you've done for me recently,

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Speaker 4: but what can you do for me next year? And

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Speaker 4: I think getting to this idea of trying to find

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Speaker 4: their way to policy clarity becomes really important. You know,

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Speaker 4: all right, we've gone from a mass of cone of

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Speaker 4: uncertainty for tariffs. Now we have a much better sense

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Speaker 4: of what they look like. For major and trading partners,

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Speaker 4: we have tax since clarity on what taxes look like,

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Speaker 4: where can I spend, how I benefit from that? And

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Speaker 4: so I think ultimately companies will do the right thing.

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Speaker 4: They're really good at managing their margins over the long term,

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Speaker 4: and I think that sets us up for where people

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Speaker 4: are starting to look for where's the good news coming

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Speaker 4: from next?

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Speaker 3: When it comes to policy, we have an outline of

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Speaker 3: what the policy is, but now it's going to take

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Speaker 3: effect last year this time last year, we had a

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Speaker 3: teriff rate of two point five percent on average. Now

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Speaker 3: it's going to be about twenty percent. How is that

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Speaker 3: going to hit the earnings and the companies you're watching,

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Speaker 3: especially the four ninety three, not the seven in the

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Speaker 3: S and P.

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Speaker 2: Five hundred.

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Speaker 4: Well, I think let's start with the US economy is

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Speaker 4: really a consumption economy, and so ultimately we have to

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Speaker 4: figure out how much of that tariff boost that twenty

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Speaker 4: percent is shared between the consumer companies reducing their margins,

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Speaker 4: or will the exporters actually decide, you know what, I'm

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Speaker 4: going to give the US a discount. And I do

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Speaker 4: think that we have ongoing academic debate on whether tariffs

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Speaker 4: are won and done from an inflation perspective, the fact that,

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Speaker 4: as you pointed out five minutes ago, that what we

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Speaker 4: think is certainty is actually not certainty because this this

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Speaker 4: hammer in the toolbox seems to be deployed frequently, and

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Speaker 4: so will you have consistent impacts on inflation rates coming

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Speaker 4: through the variability of policy, you know, And that's where

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Speaker 4: I think today's data should really you know, my issue

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Speaker 4: is what does the ism services come back to, because again,

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Speaker 4: this is this consumer led economy tariff' Ultimately, if you

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Speaker 4: thought that they were designed to try to encourage reindustrial

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Speaker 4: reindustrialization of the United States, policy which is both desired

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Speaker 4: by Democrats and Republicans, you know, runs into we already

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Speaker 4: have six hundred as an empty manufacturing jobs trying to hire.

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Speaker 4: How do you actually convince people to take those jobs

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Speaker 4: without paying them more? And last time I checked, that

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Speaker 4: was a potential supply shock to inflation.

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Speaker 3: You said you're looking forward to the data that comes

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Speaker 3: out today. Where do you where you thinking in terms

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Speaker 3: of the credibility of a data given the fact of

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Speaker 3: the President last week didn't like the jobs number and

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Speaker 3: then fire the head of the BLS.

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Speaker 4: You know, I think US economic data is the envy

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Speaker 4: of the world in general, but we do know that

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Speaker 4: there are some issues. You've been having stories for at

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Speaker 4: least a year now about falling response rates, and the

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Speaker 4: reality is, you know, we haven't completely used AI to

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Speaker 4: get all the economic data in real time. Certainly, the

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Speaker 4: one thing I have certainty end in life is economic

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Speaker 4: data will be revised. And when I sit back and

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Speaker 4: think what we were hearing, you know, a week and

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Speaker 4: a half ago at this probably sitting in the seat

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Speaker 4: someone talking about I'm seeing real weakness in the goods

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Speaker 4: producing sector of the economy. And yet then when we

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Speaker 4: got the data on Friday, the weakness was actually the visions,

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Speaker 4: and that weakness in the revisions was primarily in government.

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Speaker 4: So to some extent, we knew when you've been talking

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Speaker 4: about the scale of job reductions in the federal government,

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Speaker 4: at some point that was going to work its way

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Speaker 4: into either initial claims, it would work its way into

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Speaker 4: job elimination. So you're left with we didn't know timing,

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Speaker 4: but we knew that we knew that was something that

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Speaker 4: was going to work its way into the system. Unfortunately,

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Speaker 4: it managed to work its way into the system the

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Speaker 4: same day that the actual job creation numbers on the

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Speaker 4: weaker side. I'm not sure that eliminating a job because

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Speaker 4: you don't like the answer. It feels kind of very

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Speaker 4: ancient Roman in terms of how you respond.

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Speaker 1: Sure, at the same time, some people are saying this

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Speaker 1: actually gives a FED. Actually most people are saying this

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Speaker 1: gives it FED a lot of ammunition to cut race.

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Speaker 1: And you're seeing a ninety one percent chance priced into

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Speaker 1: FED funds futures.

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Speaker 3: How much do you see.

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Speaker 1: This really mandating a cut in September and mandating at

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Speaker 1: least two cuts this year, and that actually being a

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Speaker 1: positive for equity is given the fact that the underlying

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Speaker 1: weakness might not be as great is maybe the revisions

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Speaker 1: might suggest.

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Speaker 4: I mean, consensus has been I think for two cuts

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Speaker 4: this year. The question was really was it going to

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Speaker 4: be July? Was it going to be August? By the way,

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Speaker 4: Jackson Hole coming up in a few weeks tends to

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Speaker 4: have add it sort of an above average policy impact

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Speaker 4: ever since the global financial crisis. So I do think

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Speaker 4: that we certainly have a nice big window for the

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Speaker 4: FED to consider look at the data. I think, you know,

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Speaker 4: coming back to this idea, of the direction is lower rates.

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Speaker 4: I think the question is that we get it quickly

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Speaker 4: or not. If you look at, you know, the slope

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Speaker 4: of the eel curve two tens suggests that that is

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Speaker 4: more or less priced in three months, ten years, you

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Speaker 4: know that curve is still inverted. So I do think

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Speaker 4: you do wind up looking at the bond market is trying,

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Speaker 4: if you will, to force the Fed's hand, and the

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Speaker 4: FED is left with I've got two mandates I hadn't

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Speaker 4: seen until Friday, the employment picture actually cracking or weakening.

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Speaker 4: And I've got inflation that's still running two eight, two,

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Speaker 4: seven to nine, depending on which survey you look at,

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Speaker 4: still comfortably above two you know, lives to and licensed statisticians,

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Speaker 4: is that forty percent above trend or eighty basis points?

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Speaker 1: You know?

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Speaker 4: Yeah, Depending on which channel you listen to, you get

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Speaker 4: a different take on it.

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Speaker 1: Jack Caffrey of David Morgan Asset Management, thank you so

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Speaker 1: much for joining us staking with the FED. Lauren Goodwin

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Speaker 1: of New York Life, writing this, we discourage investors from

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Speaker 1: assuming a September cut would signal a series of cuts thereafter.

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Speaker 1: Our FED cuts checklist still signals risks from all sides,

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Speaker 1: Lauren joins us. Now with what is increasingly out of

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Speaker 1: consensus view, Lauren, how do you look at what we

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Speaker 1: got on Friday and the jet labor market data as

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Speaker 1: well as the lack of some sort of sustained inflationary impulse.

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Speaker 1: Put that together and so we could even be talking

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Speaker 1: about a right hike.

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Speaker 5: Yeah.

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Speaker 6: Well, so I think what the market is telling us

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Speaker 6: after Friday is that the Fed will be leaning more

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Speaker 6: towards the demand destruct and we're seeing in the labor

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Speaker 6: market than inflation in September, and on balance, I agree,

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Speaker 6: I think that we're likely to see a rate cut

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Speaker 6: in September, pending the data that we get between now

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Speaker 6: and then. Where we caution investors is assuming that a

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Speaker 6: cut in September means anything about October or December or

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Speaker 6: meetings thereafter. And the reason for that is that as

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Speaker 6: we look at the things that the FED cares about

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Speaker 6: the labor market, we're seeing some weakness on the demand side,

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Speaker 6: but we're also seeing a deterioration in labor supply. And

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Speaker 6: this is something that I think the market conversation is

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Speaker 6: not paying enough attention to because that deterioration in labor

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Speaker 6: market supply might mean that fifteen twenty thousand jobs a

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Speaker 6: month is actually a healthy labor market. It might mean

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Speaker 6: that the unemployment rate isn't going anywhere, or that wages

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Speaker 6: are moving potentially even higher. That's a market reaction function

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Speaker 6: that we're not used to as investors and something that

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Speaker 6: I think we have to consider as we see more

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Speaker 6: data between now and September.

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Speaker 1: So are you saying that we could still see one

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Speaker 1: rate cut this year or maybe two? Thing more than that?

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Speaker 1: Is your argument, essentially that people are overestimating any potential

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Speaker 1: weakening in the labor market that could curtail the inflationary

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Speaker 1: kind of overlays.

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Speaker 6: That's my view today. Now, if we think about the

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Speaker 6: things that the FED cares about, We've talked a little

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Speaker 6: bit about the labor market inflationary pressures. I tend to

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Speaker 6: agree with the market that we're unlikely to see a

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Speaker 6: major reacceleration of inflation, certainly nothing like we saw a

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Speaker 6: couple of years ago. But we are probably going to

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Speaker 6: be seeing prices move core PCE inflation move back above

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Speaker 6: three percent over the next few months. That's a tricky

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Speaker 6: situation for the FED. And if you add that financial

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Speaker 6: market conditions have been very loose. Equity valuations look great,

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Speaker 6: credit spreads are tight, the availability of credit is good.

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Speaker 6: Chairpal pointed to this last week. That's a balance of

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Speaker 6: data that doesn't call for an enormous amount of cuts. Now,

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Speaker 6: I do think that what we saw on Friday, in

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Speaker 6: terms of the demand side of the labor market, that

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Speaker 6: does concern me. But that balance of data is not

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Speaker 6: only tricky, but a lot of the things that are

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Speaker 6: impacting the data are supply factors, things that the FED

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Speaker 6: can't control when.

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Speaker 3: It comes to the demand side of the labor market

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Speaker 3: and the supply side are you looking at. Potentially there's

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Speaker 3: less participation because of immigration policy out of Washington or

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Speaker 3: what we're seeing in terms of the Ai revolution.

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Speaker 6: At this moment, it's more related to immigration policy. So

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Speaker 6: we're seeing, and this was confirmed in the numbers on Friday,

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Speaker 6: fewer people participating in the labor force. Frankly, just less

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Speaker 6: labor supply, less labor availability. We're also seeing that companies

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Speaker 6: are hesitant on hiring, and that has more to do

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Speaker 6: with trade policy and let's call it general uncertainty. And

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Speaker 6: so that balance of factors is one where there's not

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Speaker 6: a lot of new jobs created that's not the end

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Speaker 6: of the world. But where I think it's tricky for

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Speaker 6: the FED is when you have not a whole lot

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Speaker 6: of new jobs created while still having an unemployment rate

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Speaker 6: that isn't going anywhere. That makes the again the reaction

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Speaker 6: function for the market looking at a weaker payrolls payrolls

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Speaker 6: gain as something that actually isn't negative.

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Speaker 3: When you say that, in the next few months you

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Speaker 3: see inflation ticking up, is it all tariff induced?

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Speaker 6: It's mostly tariff induced, So we see some stickiness in

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Speaker 6: the housing market related to rates. Other than that, services

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Speaker 6: disinflation has been pretty well pronounced, and it's one of

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Speaker 6: the reasons why we do think that the FED will

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Speaker 6: be able to look through some of the goods related

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Speaker 6: inflation we're seeing and move towards a cut in September.

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Speaker 6: But the challenge is that we've only just started to

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Speaker 6: see that goods related inflation hasn't included things like holiday

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Speaker 6: bar buying that are just starting now, and so we

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Speaker 6: do anticipate that prices are going to be moving in

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Speaker 6: the wrong direction later this year.

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Speaker 1: It's hard to figure out what's going on. It's even

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Speaker 1: harder when you've got accusations of political interference. You've got

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Speaker 1: questions about just how accurate the data to collection is

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Speaker 1: given the low response rates. You have a really interesting

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Speaker 1: take on this, Lauren. The political interference with the FED

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Speaker 1: or the Bureau of Labor Statistics will push long rates higher,

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Speaker 1: not lower. Why is the market not coming to that

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Speaker 1: conclusion right now?

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Speaker 6: My read on this, and I've thought a lot about

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Speaker 6: this over the weekend, but my read on this is

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Speaker 6: that the market isn't seeing evidence of actual interference.

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Speaker 1: Yet.

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Speaker 6: We don't know whose take is stepping into FED or

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Speaker 6: BLS seats. We don't have really in any indication that

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Speaker 6: there is interference with these important independent functions. I think

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Speaker 6: that calculus would change if the market does see that evidence,

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Speaker 6: does see that data or FED decision making is being

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Speaker 6: tampered with. And the reason that we think that's important

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Speaker 6: is that, especially in monetary policy making, credibility is one

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Speaker 6: of the most important policy tools. And though there are

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Speaker 6: an increasing amount of evidence that the FED could be

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Speaker 6: cutting rates slowly, stably over the next let's call it

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Speaker 6: six to twelve months, some of the conversations I have

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Speaker 6: with investors are, Oh, if we have a new FED

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Speaker 6: share and we get two hundred basis points of cuts.

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Speaker 6: You know right away that type of activity, though I

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Speaker 6: think incredibly unlikely, is going to derail inflation expectations. In

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Speaker 6: anticipation that there were even let's call it modest political interference,

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Speaker 6: I think would mean that market interest rates like the

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Speaker 6: ten year yield would be moving higher even if the

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Speaker 6: policy rate removing lower.

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Speaker 1: One thing that a number of analysts have said is

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Speaker 1: private data points cannot replace the gold standard, cannot replace

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Speaker 1: the Bureau of Labor Statistics, and even some of the

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Speaker 1: peripheral surveys don't really don't really serve as a counterpoint

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Speaker 1: for the labor market report, given the potential for the

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Speaker 1: market to not being tracking, not to not be tracking

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Speaker 1: the actual economy in real time. The way that they thought,

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Speaker 1: are there certain gauges that you're watching for a better sense?

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Speaker 1: Is im service? Is that much more important? Is CPI?

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Speaker 1: What sort of the gold standard? Increasingly for you.

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Speaker 6: I have to say that the labor market statistics have

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Speaker 6: had trouble now for more than a year, more than

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Speaker 6: actually more than a couple of years, as response rates

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Speaker 6: have declined in response to the pandemic. The BLS is

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Speaker 6: still the gold standard. Of course, there's this mattering of

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Speaker 6: data and evidence that we look at regardless of what

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Speaker 6: phase of the cycle that we're in. But when it

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Speaker 6: comes to the labor market, it is about the BLS statistics. Now,

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Speaker 6: what do we do to acknowledge that revisions are becoming larger,

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Speaker 6: more likely, etc. Goes back to essentially economic fundamentals. One

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Speaker 6: data point does not make a trend. I think what

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Speaker 6: was really important about Friday's data point is that it

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Speaker 6: showed that some of the early signs of cracks in

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Speaker 6: the labor market actually did make a trend with the

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Speaker 6: revisions that we saw.

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Speaker 1: Lauren Goodwin, thank you so much for being here. Lauren

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Speaker 1: Goodwin of New York Life. Amanda linam a Blackrock joins

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Speaker 1: this now. Amanda, wonderful to see you. Thank you for

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Speaker 1: being here. How much are we looking at the FED

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Speaker 1: rescuing markets from weakness before the weakness happens?

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Speaker 5: Good morning, Thank you for having me. I think that's

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Speaker 5: exactly the point. The reason for the rate cuts, in

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Speaker 5: my view, is more important than the timing. So our

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Speaker 5: expectation is that the rate cut is most likely in

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Speaker 5: the fourth quarter. Yes, the risks are skewed till September,

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Speaker 5: but why are they cutting. Are they cutting because the

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Speaker 5: growth backdrop is deteriorating, or are they cutting because inflation

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Speaker 5: is cooperating. It's looking more and more like they would

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Speaker 5: be cutting because the growth backdrop is deteriorating. I'm not

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Speaker 5: sure that's a great outcome for risk assets. It does

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Speaker 5: feel like the market is preempting this a bit. In

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Speaker 5: our world of corporate credits, spreads are still resilient. There's

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Speaker 5: some differentiation under the surface. But I actually think the

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Speaker 5: market is looking through this a bit. And the reason

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Speaker 5: I say that is you've had folks like Beth Hammock

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Speaker 5: last week talking about how we're not that far from neutral.

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Speaker 5: So leaving aside the timing of the cutting, and if

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Speaker 5: we focus on the reason and actually the scope for

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Speaker 5: the depth of the rate cutting cycle, I'm not sure

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Speaker 5: that there's that much relief in train absent a sharp

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Speaker 5: downturn and growth.

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Speaker 1: Why did people shrug off the labor market report on

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Speaker 1: Friday and there revisions that were incredibly negative and caused

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Speaker 1: the firing of the BLS chief.

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Speaker 5: What I think it is is that Chair Pal almost

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Speaker 5: went out of his way in the press conference to

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Speaker 5: talk about how he's emphasizing the unemployment rate over the

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Speaker 5: number of payrolls gained in any month, because, as he noted,

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Speaker 5: the break even rate of payrolls growth is slowing because

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Speaker 5: immigration is coming down. So if you look at we

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Speaker 5: are at four point one percent as of the July FMC,

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Speaker 5: we're now four point two, edging up on four point three.

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Speaker 5: Chair Pale characterized that four point one as being close

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Speaker 5: to maximum employment. So, yes, the revisions were very large,

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Speaker 5: not unprecedented, but large. But actually, if you look at

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Speaker 5: the unemployment rate with inflation still above target, I still

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Speaker 5: think there's actually some tension in that dual mandate. And

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Speaker 5: so it's not for me a base case or very

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Speaker 5: clear cut that they will cut in September, because I

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Speaker 5: think if you look back to the July FMC, Chair

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Speaker 5: Palm made a point to emphasize that unemployment rate, and

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Speaker 5: I think that's part of that undercurrent. When the market

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Speaker 5: had a bit of time to digest it, focusing on that,

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Speaker 5: I think you could come up with a different path.

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Speaker 5: But I think, to be clear, the direction of travel

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Speaker 5: is very clear. Rates are coming down. It's almost a

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Speaker 5: moot point. Is it September or October? Not sure it

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Speaker 5: quite matters.

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Speaker 3: Well, the market's pricing a ninety percent chance, and now

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Speaker 3: of September, what would it take you to say it

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Speaker 3: is September.

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Speaker 5: I think if you started to see some cooperation and inflation,

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Speaker 5: I think that could get you there. That actually that

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Speaker 5: tension on that price stability side of the mandate could

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Speaker 5: ease up a bit. And then, of course we do

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Speaker 5: have some more data between now and then, so if

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Speaker 5: you start to see some real continued weakening in the

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Speaker 5: labor market, We've already seen weakening, but if that is persistent,

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Speaker 5: I think that could really push them. There's a lot of.

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Speaker 3: Politics surrounding right now, the data and the FED, and

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Speaker 3: the President is going to have a chance to now

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Speaker 3: he's going to put a new name in for the

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Speaker 3: BLS commissioner, which he fired, and Adriana Kugler, the FED governors,

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Speaker 3: will step down in January. She resigned early. Are you

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Speaker 3: concerned that all this is getting politicized and there's no

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Speaker 3: independent credibility.

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Speaker 5: Our conversations with investors are very much focused on the fundamentals,

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Speaker 5: so I think there is a lot of noise in

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Speaker 5: the background, but actually top of mind in our conversation

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Speaker 5: is how are companies navigating this and what are the

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Speaker 5: levers that companies can going forward if the growth inflation

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Speaker 5: mix becomes more challenging as we expect. What I find

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Speaker 5: striking is that second quarter earnings have given us some

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Speaker 5: data points that companies in some instances are lowering their

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Speaker 5: estimated impact of tariffs relative to what they communicated in

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Speaker 5: the first quarter. Certainly not every company. There's a lot

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Speaker 5: of dispersion, but if you look at the myriad of

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Speaker 5: operational levers that are available to companies to navigate this,

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Speaker 5: that could include things like changing product mix, accelerating cost

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Speaker 5: cutting in other areas, there's actually a fair amount of levers.

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Speaker 5: It kind of reminds me of twenty twenty two, when

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Speaker 5: there was a swift rate hiking cycle. There were imminent

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Speaker 5: expectations for a recession. It didn't materialize. I'm wondering if

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Speaker 5: the several quarters of above trend growth from twenty twenty

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Speaker 5: three and twenty twenty four actually built up some cushions

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Speaker 5: in the corporate sector and there's resilience there.

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Speaker 1: There's also the one big beautiful Bill, and we haven't

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Speaker 1: talked about it as much as maybe we should have

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Speaker 1: in terms of the ramification for companies. But the Wall

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Speaker 1: Street Journal put out a story just highlighting the free

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Speaker 1: cash fload. How much its increased on the heels of

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Speaker 1: this particular piece of legislation. How much is that buffering

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Speaker 1: a lot of companies in ways that might have been

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Speaker 1: underestimated going into this.

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Speaker 5: It's a great point. You noted a company earlier this

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Speaker 5: morning that I think raise their guidance on be on.

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Speaker 5: Related to that, we also saw earlier in this earning

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Speaker 5: season a telecom company do the same, So I think

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Speaker 5: it's a great point. The two sided risks are very real.

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Speaker 5: It's not just about the downside risks to growth and

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Speaker 5: the tariffs, but it's also about the deregulation. Actually, M

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Speaker 5: and A strategic North American m and A is running

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Speaker 5: at the highest pace since twenty twenty one year today,

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Speaker 5: which and we know twenty twenty one was a banner

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Speaker 5: year for strategic deal making. So I can't help but

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Speaker 5: think that under the surface, and to the noise point

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Speaker 5: you mentioned, Henry, there is a fair amount of corporate

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Speaker 5: confidence that is coming through, and I think that is

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Speaker 5: why we are very mindful of two sided risks.

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Speaker 1: At the same time, it's priced in right and you're

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Speaker 1: looking at various tight spreads this is all kind of

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Speaker 1: priced perfection. A number of people have mentioned, where do

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Speaker 1: you still see value given that, Yes, there is a

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Speaker 1: lot of positivity, but it's also something a lot of

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Speaker 1: people have recognized riight.

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Speaker 5: I would say, if I had to pick one area,

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Speaker 5: it would be selectively moving down in credit quality within

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Speaker 5: corporate credit. So if an investor is confined to IG,

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Speaker 5: we like that triple B pocket of the cohort. If

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Speaker 5: there's a more flexible mandate, we like moving into the

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Speaker 5: high end of high yield. You make a great point,

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Speaker 5: there's not a lot of scope for absolute spread tightening

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Speaker 5: at current levels. Episodes of widening are short lived. The

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Speaker 5: dips get bought, so to speak. But similarly, I think

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Speaker 5: the bar for sustained selloff in widening in credit spreads

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Speaker 5: is actually quite high. And of course, as you know,

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Speaker 5: the yield based demand is a very real technical So

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Speaker 5: we're pretty constructive on corporate credit risk. That said, not

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00:21:34,119 --> 00:21:36,800
Speaker 5: everything is participating. Triple c's are still lagging. I think

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Speaker 5: that's appropriate. I think that reflects discipline in the market.

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Speaker 1: Yeah, maybe actually a market and not necessarily something that's

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Speaker 1: bad that's propped up by a particular policy of mandeli

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Speaker 1: of Blackrock. Thank you so much for being with us.

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Speaker 2: This is the Bloomberg Sevenants podcast, bringing you the best

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Speaker 2: in markets, economics, an gie politics. You can watch the

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Speaker 2: Bloomberg Terminal and the Bloomberg Business app.

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Speaker 5: Mm hmm