1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business app. 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:27,040 Speaker 1: us live on YouTube. 6 00:00:27,320 --> 00:00:30,440 Speaker 2: For Max Cutnery in London, it is not Thanksgiving. That 7 00:00:30,600 --> 00:00:34,240 Speaker 2: is something to do with the colonies. But he joins 8 00:00:34,280 --> 00:00:37,560 Speaker 2: us from HSBC. Max, you have for Global Wall Street 9 00:00:37,600 --> 00:00:41,840 Speaker 2: a killer sentence in your note, which is a spectacular 10 00:00:42,080 --> 00:00:48,600 Speaker 2: mystery about Q four earnings, revenues and cash flows. How 11 00:00:48,640 --> 00:00:51,400 Speaker 2: in the dark are we when we get to earnings 12 00:00:51,440 --> 00:00:53,400 Speaker 2: the middle of January. 13 00:00:54,280 --> 00:00:57,000 Speaker 3: Yeah, Loick, I think and thanks having me good morning. Look, 14 00:00:57,040 --> 00:00:59,400 Speaker 3: I think on the Q four reporting season, what has 15 00:00:59,440 --> 00:01:01,680 Speaker 3: been remind couple in fact in the last couple of 16 00:01:01,720 --> 00:01:05,759 Speaker 3: weeks is how much those earnings expectations have actually been 17 00:01:05,840 --> 00:01:10,480 Speaker 3: slashed even further. We already had almost expectations only about 18 00:01:10,520 --> 00:01:13,319 Speaker 3: flat Q four versus Q three at the end of 19 00:01:13,360 --> 00:01:16,399 Speaker 3: the third quarter reporting season. That now has all but 20 00:01:16,560 --> 00:01:20,319 Speaker 3: changed in November, where now consensus is actually looking for 21 00:01:20,360 --> 00:01:25,040 Speaker 3: a sequential drop in earnings from Q four to Q three. Now, 22 00:01:25,040 --> 00:01:27,000 Speaker 3: of course you could say that makes sense because of 23 00:01:27,040 --> 00:01:29,759 Speaker 3: the government shutdown and all that. But I do question 24 00:01:29,840 --> 00:01:32,800 Speaker 3: how much a government shutdown really is related to the 25 00:01:32,920 --> 00:01:35,360 Speaker 3: largest caps. Let's remember, when you look at the SMP, 26 00:01:35,760 --> 00:01:37,840 Speaker 3: we're not really buying five hundred stocks, right. Look at 27 00:01:37,840 --> 00:01:40,640 Speaker 3: the first twenty stocks in the SMB, that's half of 28 00:01:40,760 --> 00:01:43,920 Speaker 3: market cap. I do wonder really if people haven't got 29 00:01:43,920 --> 00:01:46,240 Speaker 3: a little bit ahead of themselves in terms of reducing 30 00:01:46,280 --> 00:01:47,160 Speaker 3: their expectations. 31 00:01:47,680 --> 00:01:50,800 Speaker 2: Max, you the Max Kuttner Hallmark Folks is to be 32 00:01:50,880 --> 00:01:53,760 Speaker 2: in the market. He has been dead on easily over 33 00:01:53,840 --> 00:01:56,760 Speaker 2: three years of saying you've got to participate, you've got 34 00:01:56,800 --> 00:01:59,920 Speaker 2: to be in the market, lo and behold, earning show 35 00:02:00,120 --> 00:02:02,200 Speaker 2: up better than good. Is that going to be the 36 00:02:02,240 --> 00:02:03,800 Speaker 2: same sequence as time, Max? 37 00:02:05,280 --> 00:02:07,360 Speaker 3: I think so, and I think actually it's a continuation 38 00:02:07,440 --> 00:02:09,720 Speaker 3: already in the second quarter we've seen that. You know, 39 00:02:09,840 --> 00:02:12,760 Speaker 3: remember second quarter was the first sort of earning season 40 00:02:12,800 --> 00:02:15,639 Speaker 3: where people were really worried that tariffs would show up, 41 00:02:15,919 --> 00:02:18,359 Speaker 3: whereas in fact what happened was that even the four 42 00:02:18,440 --> 00:02:22,120 Speaker 3: to ninety three stocks outside of the Magnificent seven, the 43 00:02:22,160 --> 00:02:24,560 Speaker 3: earnings expectations back then were two and a half percent 44 00:02:25,040 --> 00:02:28,200 Speaker 3: and the actual earnings were almost nine percent year of 45 00:02:28,240 --> 00:02:30,880 Speaker 3: a year, so they were really crushing estimates. And we've 46 00:02:30,880 --> 00:02:32,920 Speaker 3: had a similar sort of beat rate now in a 47 00:02:33,120 --> 00:02:37,359 Speaker 3: similar sort of earning surprise in the broader market as well, 48 00:02:37,760 --> 00:02:40,200 Speaker 3: now in the third quarter reporting season, and now when 49 00:02:40,240 --> 00:02:42,600 Speaker 3: we look ahead in the fourth quarter reporting season, what 50 00:02:42,680 --> 00:02:45,600 Speaker 3: I find remarkable is that we're going to get basically 51 00:02:45,960 --> 00:02:49,799 Speaker 3: consentus saying that eight out of the eleven SMP sectors 52 00:02:50,200 --> 00:02:53,040 Speaker 3: are seeing a sequential drop in earnings, and with such 53 00:02:53,080 --> 00:02:57,080 Speaker 3: a bearish backdrop, with such low earnings expectations, it's not 54 00:02:57,160 --> 00:02:59,120 Speaker 3: even what we shouldn't even be calling it a hurdle 55 00:02:59,240 --> 00:03:01,200 Speaker 3: or a bar to be as literally you just walk 56 00:03:01,240 --> 00:03:03,520 Speaker 3: over that. That's how low the bar really is. 57 00:03:03,720 --> 00:03:08,720 Speaker 4: Right, Hey, Max, you're the chief multi asset strategiest for HSBC. 58 00:03:09,600 --> 00:03:11,639 Speaker 4: What asset do you like and where in the world 59 00:03:11,680 --> 00:03:12,480 Speaker 4: do you like that asset? 60 00:03:13,680 --> 00:03:16,160 Speaker 3: Yeah, we can't really be much more buleish, to be honest, 61 00:03:16,200 --> 00:03:18,200 Speaker 3: we can be a tiny bit more, but in reality, 62 00:03:18,280 --> 00:03:22,040 Speaker 3: we've almost we're almost full on conviction, full on long equities, 63 00:03:22,080 --> 00:03:25,359 Speaker 3: so we're almost maximum overweight inequities, particularly in the US, 64 00:03:25,680 --> 00:03:27,960 Speaker 3: so really like the tech side of things. Still, the 65 00:03:27,960 --> 00:03:31,519 Speaker 3: AI Kapex story I think people are really throwing in 66 00:03:31,560 --> 00:03:33,400 Speaker 3: the towel a little bit too soon on that, but 67 00:03:33,440 --> 00:03:36,160 Speaker 3: also rotating a little bit into the cyclicals, right going 68 00:03:36,160 --> 00:03:39,360 Speaker 3: with the industrials, perhaps, you know, with some of the 69 00:03:40,000 --> 00:03:42,280 Speaker 3: more cyclical part of the market, because people, I think 70 00:03:42,320 --> 00:03:47,200 Speaker 3: people do underestimate how strong actually underlying fundamentals are, especially 71 00:03:47,200 --> 00:03:50,560 Speaker 3: going into next year with those really really positive effects 72 00:03:50,600 --> 00:03:54,440 Speaker 3: for next year's growth through the big beautiful bill four kpeggs, 73 00:03:54,520 --> 00:03:57,840 Speaker 3: but also with the tax reimbursements for consumers that should 74 00:03:57,840 --> 00:04:00,400 Speaker 3: be also perhaps leading to a little bit more of 75 00:04:00,440 --> 00:04:03,240 Speaker 3: a cyclic optic than consensus is currently expecting. 76 00:04:03,400 --> 00:04:06,360 Speaker 2: And it's Friday, A special edition of Bloomberg's Surveillance will 77 00:04:06,400 --> 00:04:08,880 Speaker 2: be with you through the ten o'clock our Paul Sweeney 78 00:04:08,880 --> 00:04:12,320 Speaker 2: and Evonnie Quinn moving forward to twelve doing there is trading, 79 00:04:12,560 --> 00:04:16,120 Speaker 2: as Paul mentions market stocks closing at one pm, bonds 80 00:04:16,120 --> 00:04:17,200 Speaker 2: closing at two PM. 81 00:04:17,560 --> 00:04:20,160 Speaker 5: But we welcome you around the world. 82 00:04:19,800 --> 00:04:23,360 Speaker 2: As we try to have good conversation today to summarize 83 00:04:23,400 --> 00:04:26,520 Speaker 2: where we are for the dash to the two thousand 84 00:04:26,560 --> 00:04:29,880 Speaker 2: and twenty six with Max Katner or Paul Sweeney. 85 00:04:30,279 --> 00:04:32,520 Speaker 4: Max, I can sit here in the US two year 86 00:04:32,720 --> 00:04:34,960 Speaker 4: treasury bond and get three and a half percent, which 87 00:04:35,000 --> 00:04:37,400 Speaker 4: is not a bad way to make a living. Are 88 00:04:37,400 --> 00:04:40,000 Speaker 4: you taking credit risk above and beyond and of what 89 00:04:40,080 --> 00:04:41,560 Speaker 4: you can get in just the US treasuries? 90 00:04:42,960 --> 00:04:43,680 Speaker 6: Yeah, I am. 91 00:04:44,040 --> 00:04:46,240 Speaker 3: We're still long high yield. We've been a bit more 92 00:04:46,320 --> 00:04:48,680 Speaker 3: longready over the years, so we've we've sort of tempered 93 00:04:48,720 --> 00:04:53,160 Speaker 3: our enthusiasm shifted more towards equity is rather than preferring credits, 94 00:04:53,240 --> 00:04:56,880 Speaker 3: or really preferring equities over credit. But the overall technical 95 00:04:56,920 --> 00:04:59,719 Speaker 3: picture for credit, whether that is in the US and 96 00:04:59,760 --> 00:05:02,839 Speaker 3: your really looks very very strong. When we think about 97 00:05:03,040 --> 00:05:07,279 Speaker 3: the improved index quality now, the improved average index credit quality. 98 00:05:07,520 --> 00:05:10,040 Speaker 3: When we think about the maturity wall for next year, 99 00:05:10,080 --> 00:05:12,320 Speaker 3: the maturity wall both the new IS high yield and 100 00:05:12,480 --> 00:05:15,479 Speaker 3: in Euro highild is much much lower compared to what 101 00:05:15,520 --> 00:05:17,800 Speaker 3: it was at the beginning of this year or last year. 102 00:05:18,120 --> 00:05:21,440 Speaker 3: So with such a strong technical backdrop, I do think 103 00:05:21,480 --> 00:05:24,560 Speaker 3: it's it's going to be tough really to actually see 104 00:05:24,560 --> 00:05:28,000 Speaker 3: credit spreads widening materially. And then you know, it's just 105 00:05:28,080 --> 00:05:31,640 Speaker 3: a really a game of harvesting carry and the game 106 00:05:31,680 --> 00:05:35,320 Speaker 3: of really sort of picking up the pennies in front 107 00:05:35,320 --> 00:05:38,120 Speaker 3: of the steam roller, but there is very little at 108 00:05:38,200 --> 00:05:40,159 Speaker 3: least in the next sort of two three months that 109 00:05:40,240 --> 00:05:42,760 Speaker 3: really should be in the way for credit spreads to 110 00:05:42,760 --> 00:05:43,600 Speaker 3: widen materially. 111 00:05:44,240 --> 00:05:47,640 Speaker 4: Hey, Max, we got the US dollar had its sold 112 00:05:47,680 --> 00:05:50,200 Speaker 4: off earlier this year with all the I guess the 113 00:05:50,320 --> 00:05:53,880 Speaker 4: tariff uh you know news in the beginning of the year, 114 00:05:53,880 --> 00:05:55,680 Speaker 4: but it's kind of recovered a little bit here. How 115 00:05:55,720 --> 00:05:58,200 Speaker 4: do you think about the currency markets? Where do you 116 00:05:58,200 --> 00:05:59,200 Speaker 4: see value out there? 117 00:06:00,360 --> 00:06:00,600 Speaker 5: Yeah? 118 00:06:00,600 --> 00:06:02,600 Speaker 3: I think look when we look at FX, I mean, 119 00:06:02,800 --> 00:06:06,160 Speaker 3: it's amazing the whole dollar debasement story and the story 120 00:06:06,200 --> 00:06:09,080 Speaker 3: around the end of the dollar is a reserve currency. 121 00:06:09,400 --> 00:06:11,039 Speaker 3: And in fact, you look at the last six months, 122 00:06:11,279 --> 00:06:14,279 Speaker 3: the number one thing that's really happened in the FX 123 00:06:14,320 --> 00:06:18,000 Speaker 3: and the currency of space has been that volatility has crushed. 124 00:06:18,200 --> 00:06:21,200 Speaker 3: So in reality, when you say where's value there, it's like, well, 125 00:06:21,240 --> 00:06:23,640 Speaker 3: you know, you can sort of short the one hundred 126 00:06:23,680 --> 00:06:26,440 Speaker 3: and dx y and then at ninety seven ninety eight, 127 00:06:27,200 --> 00:06:29,960 Speaker 3: it's not really that attractive to be selling the dollar anymore. 128 00:06:30,040 --> 00:06:32,320 Speaker 3: So there's no real conviction on the dollar right the 129 00:06:32,400 --> 00:06:35,920 Speaker 3: dollar largely trading sideways. What that means is is going 130 00:06:35,920 --> 00:06:40,360 Speaker 3: for the higher beta, higher higher carry currencies and the 131 00:06:40,440 --> 00:06:44,200 Speaker 3: higher beta, higher currency duration plays and rates. I think 132 00:06:44,400 --> 00:06:47,160 Speaker 3: like the likes of Brazil front end or Mexico or 133 00:06:47,240 --> 00:06:50,240 Speaker 3: South Africa really playing the sort of the short vole 134 00:06:50,360 --> 00:06:53,559 Speaker 3: theme that is still dominating in FX, that's really still 135 00:06:53,560 --> 00:06:56,680 Speaker 3: coming from the sort of very subdued frontend trading in 136 00:06:56,720 --> 00:06:57,080 Speaker 3: the US. 137 00:06:57,279 --> 00:07:01,080 Speaker 2: Maketually understanding yourself to folks HSBC more than anybody you 138 00:07:01,200 --> 00:07:04,320 Speaker 2: know who is out front and strong dollar again named 139 00:07:04,360 --> 00:07:04,960 Speaker 2: David Bloom. 140 00:07:06,000 --> 00:07:08,560 Speaker 5: I don't think Max could shave them, but they. 141 00:07:08,400 --> 00:07:11,240 Speaker 2: Were way out front on strong dollar ages ago and 142 00:07:11,280 --> 00:07:15,880 Speaker 2: absolutely nailed that. Called Max, I want your view on 143 00:07:15,920 --> 00:07:21,080 Speaker 2: the true madness of MAG seven. You're in London, You're immuved. 144 00:07:21,120 --> 00:07:22,960 Speaker 2: You would know Oracle if it hit you over the 145 00:07:23,080 --> 00:07:26,720 Speaker 2: head or all the rest of them, Max Katner and 146 00:07:27,200 --> 00:07:28,800 Speaker 2: enduring mag seven. 147 00:07:28,920 --> 00:07:30,440 Speaker 5: Will they have a good year next year? 148 00:07:31,880 --> 00:07:33,400 Speaker 3: I do things so, particularly in the next sort of 149 00:07:33,440 --> 00:07:35,600 Speaker 3: six months. I think, I really think that people are 150 00:07:35,720 --> 00:07:41,200 Speaker 3: underestimating the perhaps the ability of kapigs on the in 151 00:07:41,280 --> 00:07:44,600 Speaker 3: the AI space once again to surprise to the upside 152 00:07:44,920 --> 00:07:51,440 Speaker 3: versus consensus expectations, particularly given those incentives, those Kapigs incentives 153 00:07:51,440 --> 00:07:54,000 Speaker 3: in the One Big Beautiful Bill and I think you know, 154 00:07:54,080 --> 00:07:56,360 Speaker 3: if we're looking from twenty six to twenty seven, that 155 00:07:56,480 --> 00:07:59,080 Speaker 3: might be a different story. Perhaps what we're doing now 156 00:07:59,160 --> 00:08:03,000 Speaker 3: is is that effectively pulling growth forward from twenty twenty 157 00:08:03,040 --> 00:08:05,400 Speaker 3: seven to before the midterms. 158 00:08:05,560 --> 00:08:05,840 Speaker 6: Sure? 159 00:08:06,000 --> 00:08:08,720 Speaker 3: Fine, but that means that perhaps then a story for 160 00:08:09,280 --> 00:08:12,000 Speaker 3: this time next year where perhaps we might be might 161 00:08:12,040 --> 00:08:13,960 Speaker 3: have to be a little bit more cautious on the 162 00:08:14,000 --> 00:08:16,840 Speaker 3: magnificent seven, but particularly from the next one or two quarters. 163 00:08:17,120 --> 00:08:18,000 Speaker 6: I think, particularly on. 164 00:08:17,960 --> 00:08:20,800 Speaker 3: The Ka Kappek story and the Ai spies, I think 165 00:08:20,840 --> 00:08:24,240 Speaker 3: people are still underestimating the ability of those companies to 166 00:08:24,560 --> 00:08:25,400 Speaker 3: higns to the upside. 167 00:08:25,480 --> 00:08:29,080 Speaker 2: The Hong Kong and Shanghai Banking corporation, Max Kttner, where 168 00:08:29,120 --> 00:08:32,400 Speaker 2: are you on what we've seen with Chinese equities this year? 169 00:08:32,440 --> 00:08:35,560 Speaker 5: Does that endure? Do you see a China with their. 170 00:08:35,520 --> 00:08:41,840 Speaker 2: Exceptional politics in Beijing shifting to some amendment that allows 171 00:08:41,880 --> 00:08:42,960 Speaker 2: for better markets. 172 00:08:44,360 --> 00:08:44,600 Speaker 5: Yeah? 173 00:08:44,960 --> 00:08:48,360 Speaker 3: I do still see actually valiant in Chinese equities, particularly 174 00:08:48,480 --> 00:08:52,199 Speaker 3: China tech, whether that's on shore or offshore. Because when 175 00:08:52,200 --> 00:08:54,480 Speaker 3: we look at other markets, so if you're building a 176 00:08:54,520 --> 00:08:57,600 Speaker 3: global portfolio like ourselves, if you have a global ass allocation, 177 00:08:57,640 --> 00:08:59,439 Speaker 3: and you're saying, well, you know what I don't want 178 00:08:59,440 --> 00:09:01,600 Speaker 3: to just buy Magnificent seven. I just I don't want 179 00:09:01,600 --> 00:09:06,000 Speaker 3: to buy just the USAI story. I want to diversify away, 180 00:09:06,120 --> 00:09:10,120 Speaker 3: perhaps within the AI space, but at least diversify away 181 00:09:10,160 --> 00:09:11,800 Speaker 3: a little bit. Well, the problem is, if you go 182 00:09:11,880 --> 00:09:15,000 Speaker 3: in some of the other Asia techniques, you're really staying 183 00:09:15,080 --> 00:09:17,800 Speaker 3: within the same supply chain. So the issue is you're 184 00:09:17,800 --> 00:09:20,520 Speaker 3: sort of buying the same stuff, whereas with China Tech 185 00:09:21,080 --> 00:09:24,520 Speaker 3: it is truly, it is truly the different supply chain there, 186 00:09:24,520 --> 00:09:27,880 Speaker 3: and there is really apart from the earnings potential the 187 00:09:28,000 --> 00:09:30,760 Speaker 3: much lower evaluation, which of course are attractive. But to me, 188 00:09:30,960 --> 00:09:34,240 Speaker 3: the main real positive on the China equity space right 189 00:09:34,280 --> 00:09:37,120 Speaker 3: now is particularly the tech site that gives you a 190 00:09:37,320 --> 00:09:42,160 Speaker 3: genuine only space of AI dogosification, and particularly in regional 191 00:09:42,280 --> 00:09:43,160 Speaker 3: terms right now. 192 00:09:43,240 --> 00:09:45,200 Speaker 5: Right Max interesting? 193 00:09:45,200 --> 00:09:46,520 Speaker 2: You know, okay, folks, I want to give you a 194 00:09:46,600 --> 00:09:50,320 Speaker 2: window in the Bloomberg Surveillance a special edition today June 195 00:09:50,400 --> 00:09:52,480 Speaker 2: twenty third, twenty sixteen. 196 00:09:52,640 --> 00:09:53,720 Speaker 5: Are we okay? 197 00:09:54,040 --> 00:09:56,880 Speaker 2: Young John Faroh yep is because he is a British 198 00:09:56,920 --> 00:10:00,520 Speaker 2: accent has been told in London that he's on a for. 199 00:10:00,440 --> 00:10:01,480 Speaker 5: Like fifteen hours. 200 00:10:01,600 --> 00:10:04,480 Speaker 2: Yep. They take the American accent and they take me 201 00:10:04,559 --> 00:10:07,600 Speaker 2: off air. I have nothing to do, so I called 202 00:10:07,679 --> 00:10:10,400 Speaker 2: up Max Kentner and I said, Max, where do I 203 00:10:10,440 --> 00:10:12,880 Speaker 2: get a decent dinner? So Max sends me to Brown's. 204 00:10:13,120 --> 00:10:16,319 Speaker 2: Brown It's in Mayfair. It's like a wicked, wicked old 205 00:10:16,400 --> 00:10:21,040 Speaker 2: school Max. Here's the Thanksgiving dinner at Brown's yesterday. The 206 00:10:21,080 --> 00:10:27,920 Speaker 2: free range Norfolk bronze turkey sourced from Downland's estate, Maple Ranch. 207 00:10:28,440 --> 00:10:31,880 Speaker 2: It's a sustainable farm. And with that they've got the 208 00:10:31,960 --> 00:10:36,640 Speaker 2: pecan and gingerbread pie and the pumpkin crem brulet. Max, 209 00:10:36,679 --> 00:10:40,200 Speaker 2: did you celebrate an American Thanksgiving in London yesterday? 210 00:10:42,000 --> 00:10:42,560 Speaker 1: Sadly not? 211 00:10:42,760 --> 00:10:44,800 Speaker 3: Sadly not. It's not got to do with inflation. But 212 00:10:44,880 --> 00:10:46,840 Speaker 3: of course, I mean, all I would do is eat 213 00:10:47,000 --> 00:10:49,920 Speaker 3: Nitzels every day because I need to adhere to my 214 00:10:49,920 --> 00:10:51,000 Speaker 3: my Bavarian self. 215 00:10:51,080 --> 00:10:54,520 Speaker 2: Of course that would I could see that. I'm looking 216 00:10:54,520 --> 00:10:55,679 Speaker 2: at what Claradges did. 217 00:10:55,720 --> 00:10:56,520 Speaker 5: Are you kidding me? 218 00:10:56,559 --> 00:11:00,360 Speaker 2: They got downte in from New York City and you know, 219 00:11:00,480 --> 00:11:02,800 Speaker 2: I mean they're doing Thanksgiving big over in Max. 220 00:11:02,640 --> 00:11:04,640 Speaker 4: Kittener, Yeah, I know, I know. It's big. 221 00:11:05,120 --> 00:11:06,559 Speaker 7: Tim Craig had a big crew. 222 00:11:07,000 --> 00:11:09,800 Speaker 2: Look at this, I think Lisa started with Michael Barr. 223 00:11:09,800 --> 00:11:12,280 Speaker 2: I think Lisa started with this at three am, the 224 00:11:12,400 --> 00:11:17,960 Speaker 2: spiced cranberry sprits featuring Periosue Champaigne, appaol. 225 00:11:18,040 --> 00:11:19,640 Speaker 5: How was that, Lisa. 226 00:11:20,240 --> 00:11:22,040 Speaker 6: It's still good. It's still good. 227 00:11:22,120 --> 00:11:23,199 Speaker 5: It keeps on ticking. 228 00:11:23,400 --> 00:11:25,560 Speaker 2: Max Kttner, you're a trooper to be with us here 229 00:11:25,600 --> 00:11:30,040 Speaker 2: on this special day for America. Mister Kittener is with HSBC. 230 00:11:30,240 --> 00:11:33,800 Speaker 2: I can't say enough about he has said, participate in 231 00:11:33,840 --> 00:11:34,600 Speaker 2: the market. 232 00:11:36,080 --> 00:11:37,040 Speaker 5: Stay with us. 233 00:11:37,040 --> 00:11:40,280 Speaker 2: More from Bloomberg Surveillance coming up after this. 234 00:11:47,520 --> 00:11:51,120 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live 235 00:11:51,200 --> 00:11:54,320 Speaker 1: weekday afternoons from seven to ten am Eastern Listen on 236 00:11:54,440 --> 00:11:58,080 Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or 237 00:11:58,240 --> 00:11:59,760 Speaker 1: watch us live on YouTube. 238 00:12:00,120 --> 00:12:02,640 Speaker 2: He's a former chairman and CEO of Sex but so 239 00:12:02,800 --> 00:12:07,440 Speaker 2: much more. He has lived across the generations, folks, the 240 00:12:07,520 --> 00:12:11,000 Speaker 2: retail we have all done with our seventy percent of 241 00:12:11,040 --> 00:12:17,160 Speaker 2: American consumption. Affiliated as a senior advisor at MasterCard, and 242 00:12:17,280 --> 00:12:21,360 Speaker 2: years ago, the young sayed off with craft, I mean, 243 00:12:21,480 --> 00:12:25,360 Speaker 2: I mean Steve. When you advanced up into the pantheon executives, 244 00:12:25,960 --> 00:12:29,240 Speaker 2: they gave you the Jello brand now Jello's on a 245 00:12:29,320 --> 00:12:33,640 Speaker 2: rule right now, they're doing a retrospective thing on the 246 00:12:33,760 --> 00:12:36,680 Speaker 2: jello where you can buy it like a Jello mold. 247 00:12:36,720 --> 00:12:40,640 Speaker 2: It's the shape of the ocean spray Cranberry can really Okay, 248 00:12:40,800 --> 00:12:42,319 Speaker 2: where do these ideas come from? 249 00:12:42,400 --> 00:12:42,679 Speaker 5: Steve? 250 00:12:42,720 --> 00:12:45,960 Speaker 2: If you're in a room at Craft decades ago, is 251 00:12:46,000 --> 00:12:48,720 Speaker 2: it like seven young whipper snappers and you sitting around 252 00:12:48,720 --> 00:12:51,480 Speaker 2: a table going how can we goose jello brand? 253 00:12:52,679 --> 00:12:55,200 Speaker 8: Well, Tommy, first of all, it's great to talk to you, 254 00:12:55,280 --> 00:12:58,400 Speaker 8: and you have such wisdom on so many topics, and 255 00:12:58,600 --> 00:12:59,120 Speaker 8: I love. 256 00:12:58,960 --> 00:13:00,199 Speaker 7: Talking to you about retail. 257 00:13:00,600 --> 00:13:03,040 Speaker 8: Go back to my jell O days, and you know 258 00:13:03,080 --> 00:13:04,960 Speaker 8: you had some of that sitting around in a room, 259 00:13:04,960 --> 00:13:07,760 Speaker 8: but you also had people. I remember one of the 260 00:13:07,760 --> 00:13:11,920 Speaker 8: great recipe innovation ideas we had was Jello Jigglers, which 261 00:13:12,000 --> 00:13:16,160 Speaker 8: was handheld jello and it essentially doubled the size of 262 00:13:16,240 --> 00:13:18,240 Speaker 8: the business because he had to use two packets instead 263 00:13:18,280 --> 00:13:21,960 Speaker 8: of one pack to make handheld jello. So and the 264 00:13:22,040 --> 00:13:24,960 Speaker 8: idea came out of somebody in our test kitchen found 265 00:13:24,960 --> 00:13:28,439 Speaker 8: it in a recipe book that had been sitting around 266 00:13:28,480 --> 00:13:31,240 Speaker 8: and the recipe had been developed years years earlier. So 267 00:13:31,760 --> 00:13:34,199 Speaker 8: ideas can come from anyone, and I think part of 268 00:13:34,240 --> 00:13:38,200 Speaker 8: the role of leadership is finding, you know, getting people 269 00:13:38,240 --> 00:13:41,160 Speaker 8: to go look for all these great ideas. You know, 270 00:13:41,200 --> 00:13:44,480 Speaker 8: I found when I ran Bristol Myers the consumer businesses 271 00:13:44,520 --> 00:13:47,880 Speaker 8: and we created herbal Ess and shampoo, that was the 272 00:13:47,920 --> 00:13:51,720 Speaker 8: same thing. The ideas were kicking around. So I find 273 00:13:51,800 --> 00:13:54,720 Speaker 8: you know that that's to me, even in retail, it's 274 00:13:54,760 --> 00:13:57,240 Speaker 8: all about ideas and that's you know, that's what we 275 00:13:57,320 --> 00:13:58,000 Speaker 8: got to focus on. 276 00:13:58,160 --> 00:14:00,480 Speaker 5: STI SAIDOV, what would you do with Gucci? 277 00:14:02,480 --> 00:14:06,160 Speaker 8: Oh my gosh. You know, first of all, Gucci is 278 00:14:06,200 --> 00:14:09,640 Speaker 8: a great brand. I think that they need to come back, 279 00:14:09,720 --> 00:14:12,360 Speaker 8: and you know, they had a wonderful run for a 280 00:14:12,440 --> 00:14:15,920 Speaker 8: long time. I think that they went a little bit 281 00:14:15,960 --> 00:14:19,200 Speaker 8: too far fashion forward. I think that it's all about 282 00:14:19,360 --> 00:14:22,880 Speaker 8: getting the right designer the right fashion trends. I think 283 00:14:22,880 --> 00:14:25,920 Speaker 8: it'll come back. I think that the prices on a 284 00:14:25,960 --> 00:14:28,480 Speaker 8: lot of these brands have gotten out of whack, and 285 00:14:28,760 --> 00:14:30,560 Speaker 8: I think that it becomes a question of do you 286 00:14:30,600 --> 00:14:32,880 Speaker 8: have the mix of the right innovation and the right 287 00:14:32,920 --> 00:14:36,360 Speaker 8: price points, you know, And I look at any number 288 00:14:36,400 --> 00:14:39,560 Speaker 8: of these brands, Gucci's just won. I look at the 289 00:14:39,560 --> 00:14:42,480 Speaker 8: resurrection you're going through with Burberry right now, and you 290 00:14:42,560 --> 00:14:44,760 Speaker 8: lost sight of who the brand was and the prices 291 00:14:44,800 --> 00:14:47,600 Speaker 8: got too high. And they're doing a really good job 292 00:14:47,640 --> 00:14:49,760 Speaker 8: of sort of getting back to basics, and I think 293 00:14:49,800 --> 00:14:51,240 Speaker 8: Gucci needs to do the same thing. 294 00:14:52,120 --> 00:14:52,480 Speaker 7: Steve. 295 00:14:53,320 --> 00:14:55,600 Speaker 4: We're getting right into the teeth of the holiday shopping 296 00:14:55,640 --> 00:14:58,200 Speaker 4: season right here. What are some of the big I 297 00:14:58,200 --> 00:15:00,720 Speaker 4: don't know, trends, opportunity, but he's what are the big 298 00:15:00,760 --> 00:15:03,560 Speaker 4: themes for retailers these days? 299 00:15:04,680 --> 00:15:06,440 Speaker 8: Well, look, I think you got to start at a 300 00:15:06,440 --> 00:15:08,800 Speaker 8: macro level and say where is the consumer and what's 301 00:15:08,840 --> 00:15:10,960 Speaker 8: going on? And you've heard a lot about this K 302 00:15:11,160 --> 00:15:14,840 Speaker 8: shaped economy, and it's real. The high end consumers healthy, 303 00:15:15,080 --> 00:15:18,000 Speaker 8: the very high end consumer, they're tied to the market. 304 00:15:18,040 --> 00:15:19,840 Speaker 8: When Tom and I used to talk about this when 305 00:15:19,840 --> 00:15:22,280 Speaker 8: I ran Sacks, I would say there was a point 306 00:15:22,360 --> 00:15:25,200 Speaker 8: nine R square between the stock market and the high 307 00:15:25,320 --> 00:15:28,200 Speaker 8: end consumer. So the high end, the very high end 308 00:15:28,280 --> 00:15:33,360 Speaker 8: consumers healthy, but the aspirational luxury consumer is struggling. 309 00:15:33,400 --> 00:15:34,920 Speaker 7: And that's why you see. 310 00:15:34,840 --> 00:15:38,800 Speaker 8: Luxury and aggregate not doing quite as well, largely because 311 00:15:38,800 --> 00:15:42,280 Speaker 8: a lot of it was driven by the aspirational luxury customer, 312 00:15:42,640 --> 00:15:45,920 Speaker 8: and the lower end consumer is really stretched and you 313 00:15:46,000 --> 00:15:49,440 Speaker 8: see that one hundred thousand dollars consumer trading down to Walmart, 314 00:15:49,560 --> 00:15:54,360 Speaker 8: and you know that consumer is doing finding value. They're 315 00:15:54,360 --> 00:15:58,120 Speaker 8: looking for innovation and value. But I think that the 316 00:15:58,240 --> 00:16:00,920 Speaker 8: lower end is really having a hard People aren't as 317 00:16:01,000 --> 00:16:04,200 Speaker 8: secure in their jobs. They haven't lost their jobs, but 318 00:16:05,120 --> 00:16:07,840 Speaker 8: and their wages are okay, but they're really stretched and 319 00:16:08,200 --> 00:16:11,400 Speaker 8: being affected by some of this inflation and tariffs. So 320 00:16:11,640 --> 00:16:15,840 Speaker 8: I think that the overall trend is value. I think 321 00:16:15,880 --> 00:16:20,560 Speaker 8: it's about innovation. Luxury is getting itself, it's footing back. 322 00:16:20,640 --> 00:16:24,120 Speaker 8: I think you've stabilized and starting to see growth in luxury, 323 00:16:24,160 --> 00:16:27,200 Speaker 8: but you lost that value equation at the high end 324 00:16:27,240 --> 00:16:30,560 Speaker 8: because the price has just got a typical Chanel bag 325 00:16:30,640 --> 00:16:33,080 Speaker 8: when I was running it, it's probably two to three 326 00:16:33,120 --> 00:16:35,600 Speaker 8: times the price for the same item that it was 327 00:16:35,640 --> 00:16:36,760 Speaker 8: when I was running the business. 328 00:16:36,800 --> 00:16:39,320 Speaker 7: So the prices have gotten a little bit out of whack. 329 00:16:40,200 --> 00:16:40,440 Speaker 3: Steve. 330 00:16:40,480 --> 00:16:42,640 Speaker 4: When we talk about luxury, a big part of it 331 00:16:42,680 --> 00:16:45,800 Speaker 4: and a big variable is China. The Chinese consumer here. 332 00:16:46,320 --> 00:16:48,160 Speaker 4: How do you guys, if you were running sacks again, 333 00:16:48,200 --> 00:16:51,200 Speaker 4: how would you think about the Chinese consumer these days? 334 00:16:51,880 --> 00:16:53,760 Speaker 8: Well, if I was running sacks, we were largely a 335 00:16:53,800 --> 00:16:56,200 Speaker 8: domestic business, so I didn't have to worry as much 336 00:16:56,200 --> 00:17:00,960 Speaker 8: about the Chinese consumer. But clearly the Chinese consumer is 337 00:17:00,960 --> 00:17:03,520 Speaker 8: an important You know that in the US consumer the 338 00:17:03,520 --> 00:17:07,719 Speaker 8: biggest luxury consumers in the world, and the Chinese consumer, 339 00:17:07,920 --> 00:17:11,960 Speaker 8: I think their high end has been stretched also. You 340 00:17:12,000 --> 00:17:16,280 Speaker 8: know that that consumer has gone a lot more domestic 341 00:17:17,080 --> 00:17:19,440 Speaker 8: than they had been. You know, one of the things 342 00:17:19,480 --> 00:17:22,720 Speaker 8: that you deal with with the with the Chinese consumers, 343 00:17:22,760 --> 00:17:25,919 Speaker 8: they know very much what the global pricing is on 344 00:17:26,000 --> 00:17:29,919 Speaker 8: all of the varying brands, and they travel enormously, so 345 00:17:30,000 --> 00:17:32,040 Speaker 8: they would go where the best pricing was. 346 00:17:32,960 --> 00:17:34,680 Speaker 7: I wouldn't count the Chinese consumer. 347 00:17:34,720 --> 00:17:38,320 Speaker 8: You know, you have this vast growing uh middle class 348 00:17:38,440 --> 00:17:41,440 Speaker 8: and the aspirational luxury consumer is still there, so I 349 00:17:41,680 --> 00:17:43,480 Speaker 8: wouldn't count the Chinese consumer out. 350 00:17:43,760 --> 00:17:47,080 Speaker 2: Steve, the heart of the matter is Lisa Matteo needs 351 00:17:47,080 --> 00:17:49,840 Speaker 2: a new pair of shoes and the destination with its 352 00:17:49,840 --> 00:17:54,120 Speaker 2: own ZIP code is Sacks Fifth Avenue, the shoe department. 353 00:17:54,400 --> 00:17:57,920 Speaker 5: Have you been there the side of Rhode Island. What 354 00:17:57,960 --> 00:17:59,280 Speaker 5: was it like inventing that? 355 00:17:59,320 --> 00:18:01,159 Speaker 7: Steve said, oh my gosh, this was one of the 356 00:18:01,160 --> 00:18:06,440 Speaker 7: most fun things. And we by head of Marketing Taren 357 00:18:06,480 --> 00:18:09,679 Speaker 7: Schaeffer who's passed away. He was a great guy. We 358 00:18:09,920 --> 00:18:11,560 Speaker 7: came up with this idea that we. 359 00:18:11,520 --> 00:18:14,800 Speaker 8: Wanted to fundamentally change the way shoes are shopped in 360 00:18:14,880 --> 00:18:17,359 Speaker 8: luxury and you needed to have a lot more space. 361 00:18:17,400 --> 00:18:19,199 Speaker 8: We had had the shoe floor I think was on 362 00:18:19,240 --> 00:18:21,879 Speaker 8: the fourth floor, fifth floor in the New York store, 363 00:18:21,920 --> 00:18:23,760 Speaker 8: and we wanted to move it up to the eighth 364 00:18:23,800 --> 00:18:26,439 Speaker 8: floor and give it its own floor. We came up 365 00:18:26,480 --> 00:18:29,439 Speaker 8: with the idea of giving it its own zip code. 366 00:18:29,520 --> 00:18:33,760 Speaker 8: And most houses have a suffix, a four digit suffix 367 00:18:33,920 --> 00:18:36,560 Speaker 8: the end of their zip code. I have no idea 368 00:18:36,560 --> 00:18:39,560 Speaker 8: what mine is. And we went to the post office 369 00:18:39,560 --> 00:18:42,400 Speaker 8: and said, can we have a suffix? And post office said, 370 00:18:42,400 --> 00:18:44,440 Speaker 8: no one's ever asked for one before. Well, we said 371 00:18:44,440 --> 00:18:47,320 Speaker 8: we want shoe and our zip code was one two two, 372 00:18:47,760 --> 00:18:51,000 Speaker 8: and they said okay. So we became one two two shoe. 373 00:18:51,080 --> 00:18:53,040 Speaker 8: The shoe floor that was so big it had its 374 00:18:53,040 --> 00:18:57,520 Speaker 8: own zip code, and that concept took off. The shoe 375 00:18:57,520 --> 00:19:01,240 Speaker 8: floor essentially doubled these sales of shoes, and that became 376 00:19:01,280 --> 00:19:05,840 Speaker 8: the forerunner for every luxury retailer in the world going off. 377 00:19:06,080 --> 00:19:11,119 Speaker 8: After creating bigger and bigger shoe floors, because shoes. You know, 378 00:19:11,160 --> 00:19:15,240 Speaker 8: the two things that people if women, luxury shoes and 379 00:19:15,320 --> 00:19:17,719 Speaker 8: handbags were the two drivers. 380 00:19:17,200 --> 00:19:17,960 Speaker 7: Of the business. 381 00:19:18,080 --> 00:19:21,280 Speaker 8: And oh my god, you know, obviously apparent important, but 382 00:19:22,040 --> 00:19:24,120 Speaker 8: you know, the shoes and the handbags made the business 383 00:19:24,200 --> 00:19:28,439 Speaker 8: and that became up the destination in the world for 384 00:19:28,880 --> 00:19:29,560 Speaker 8: high end shoot. 385 00:19:29,960 --> 00:19:32,960 Speaker 2: I can't say enough about the stories, the expertise, and 386 00:19:33,000 --> 00:19:36,600 Speaker 2: the present tense wisdom of what's going on with retail America. 387 00:19:36,640 --> 00:19:40,280 Speaker 2: Steven Seedoff as a chairman, former chairman CEO of Saxon 388 00:19:40,320 --> 00:19:45,240 Speaker 2: of course senior advisor to MasterCard as well. 389 00:19:47,040 --> 00:19:47,960 Speaker 5: Stay with us. 390 00:19:48,000 --> 00:19:58,320 Speaker 2: More from Bloomberg Surveillance coming up after this. 391 00:19:58,320 --> 00:20:02,200 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 392 00:20:02,240 --> 00:20:05,560 Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto 393 00:20:05,680 --> 00:20:08,640 Speaker 1: with the Bloomberg Business app. You can also listen live 394 00:20:08,720 --> 00:20:12,280 Speaker 1: on Amazon Alexa from our flagship New York station, Just 395 00:20:12,320 --> 00:20:15,440 Speaker 1: say Alexa Play Bloomberg eleven thirty We. 396 00:20:15,440 --> 00:20:18,639 Speaker 2: Fall back on good conversation with Jeffrey Roach, chief economist 397 00:20:18,920 --> 00:20:22,879 Speaker 2: LPL Financial at least got a really twisted note. I mean, 398 00:20:22,920 --> 00:20:27,240 Speaker 2: it's just a whole different take on what's out there, 399 00:20:27,359 --> 00:20:31,000 Speaker 2: and you go, Jeffrey, is something that's percolating with our guests, 400 00:20:31,240 --> 00:20:35,320 Speaker 2: which is a set of tailwinds helping us into two 401 00:20:35,359 --> 00:20:40,359 Speaker 2: thousand and twenty six. Describe the major tailwind that advantages 402 00:20:40,480 --> 00:20:41,440 Speaker 2: us for next year. 403 00:20:43,280 --> 00:20:45,919 Speaker 9: Welcome morning, thank you for having me. And it is 404 00:20:45,960 --> 00:20:52,440 Speaker 9: somewhat unusual. So the more normal components. Clearly, when the 405 00:20:52,440 --> 00:20:57,879 Speaker 9: FED is easing and there's no recession risks at least 406 00:20:57,920 --> 00:21:01,280 Speaker 9: no heightened recession risks, typically pretty good. And then the 407 00:21:01,320 --> 00:21:05,960 Speaker 9: second one that everyone's talking about is the OBBBA tailwinds. 408 00:21:06,119 --> 00:21:08,919 Speaker 9: But I think there's a couple of things, two factors 409 00:21:09,000 --> 00:21:13,120 Speaker 9: that perhaps may not be major key players, but certainly 410 00:21:13,160 --> 00:21:15,600 Speaker 9: something to think about. You know, we are hosting World 411 00:21:15,640 --> 00:21:20,280 Speaker 9: Cup matches. That's certainly gonna do a little bit of 412 00:21:20,320 --> 00:21:24,600 Speaker 9: a boost on spending. And then the semi Quinn centennial celebrations, 413 00:21:24,840 --> 00:21:28,720 Speaker 9: and I think that's something that again somewhat unusual. 414 00:21:28,800 --> 00:21:31,240 Speaker 7: Perhaps it's pushing the cycle. 415 00:21:30,920 --> 00:21:34,400 Speaker 9: Out a little bit longer, longer, But those two non 416 00:21:34,480 --> 00:21:38,639 Speaker 9: consensus additions certainly important to put in the back of 417 00:21:38,680 --> 00:21:39,320 Speaker 9: the hopper here. 418 00:21:39,600 --> 00:21:42,000 Speaker 4: And Jeffrey, how do you view the US consumer? 419 00:21:42,040 --> 00:21:42,200 Speaker 5: Here? 420 00:21:42,240 --> 00:21:46,320 Speaker 4: We have this K shaped economy, but you put it 421 00:21:46,359 --> 00:21:49,320 Speaker 4: all together and on an average, it seemed like the 422 00:21:49,359 --> 00:21:50,800 Speaker 4: consumer's doing okay out there. 423 00:21:52,520 --> 00:21:57,400 Speaker 9: Well, I think the bigger question is have we always 424 00:21:57,600 --> 00:22:01,639 Speaker 9: lived with somewhat of a K shaped? To me, that 425 00:22:01,800 --> 00:22:04,760 Speaker 9: certainly happened. I remember, you know, I started my career 426 00:22:05,200 --> 00:22:09,560 Speaker 9: just before the GFC, and so you think about perhaps 427 00:22:09,760 --> 00:22:13,480 Speaker 9: just it's a more pronounced K this time around, But 428 00:22:13,520 --> 00:22:16,400 Speaker 9: we've always had it, and I do think that that 429 00:22:16,480 --> 00:22:20,840 Speaker 9: does continue into twenty twenty six. You do have the 430 00:22:21,359 --> 00:22:26,120 Speaker 9: upper income, the more affluent households doing fairly well and 431 00:22:26,200 --> 00:22:29,119 Speaker 9: there's not much a pullback there yet. 432 00:22:29,680 --> 00:22:30,640 Speaker 6: Seems like that's. 433 00:22:30,480 --> 00:22:33,359 Speaker 9: Going to continue into twenty twenty six, and then of 434 00:22:33,400 --> 00:22:37,320 Speaker 9: course the headwinds for the middle and lower income K 435 00:22:37,720 --> 00:22:39,240 Speaker 9: shape will continue. 436 00:22:39,280 --> 00:22:43,480 Speaker 2: I think Jeffrey roach, is nominal GDP linked to free 437 00:22:43,520 --> 00:22:46,480 Speaker 2: cash flow and gross a free cash flow? 438 00:22:46,760 --> 00:22:49,120 Speaker 5: Are we in such an odd place you can't link 439 00:22:49,160 --> 00:22:49,480 Speaker 5: the two. 440 00:22:51,200 --> 00:22:54,639 Speaker 9: Well, that's a good, good question on the nominal versus 441 00:22:54,680 --> 00:22:59,760 Speaker 9: the real dynamics. I think one of the biggest challenges fundamentally, 442 00:23:00,040 --> 00:23:02,360 Speaker 9: I think before you get to that question, fundamentally, you say, 443 00:23:02,560 --> 00:23:07,240 Speaker 9: are we even measuring the inflation component correctly? 444 00:23:07,800 --> 00:23:08,240 Speaker 7: And then, of. 445 00:23:08,119 --> 00:23:13,440 Speaker 9: Course with the hit to the BLS and BA staff 446 00:23:14,200 --> 00:23:17,800 Speaker 9: trying to measure inflation. I think we've had a real 447 00:23:17,960 --> 00:23:21,919 Speaker 9: challenge since COVID, so I don't know if people have 448 00:23:22,000 --> 00:23:26,520 Speaker 9: a good handle on the dynamics between how nominal is 449 00:23:27,240 --> 00:23:32,359 Speaker 9: relative to the economy. It is quite a distorted economy. 450 00:23:32,400 --> 00:23:35,720 Speaker 9: I think you just continue to listen to what the 451 00:23:36,240 --> 00:23:38,320 Speaker 9: businesses are saying. I think that's one of the reasons 452 00:23:38,320 --> 00:23:42,160 Speaker 9: why I think beijesbook continues to be very, very important 453 00:23:42,200 --> 00:23:47,560 Speaker 9: for policymakers because some of these more official metrics are 454 00:23:47,600 --> 00:23:48,560 Speaker 9: a little bit distorted. 455 00:23:49,160 --> 00:23:51,200 Speaker 4: Jeffrey, given that background, what do you think the FED 456 00:23:51,800 --> 00:23:54,560 Speaker 4: should do or will do any upcoming meetings? 457 00:23:56,600 --> 00:23:59,840 Speaker 9: Well, I think the should in the wood are actually 458 00:24:00,080 --> 00:24:03,000 Speaker 9: getting a little bit closer. I do think that they're 459 00:24:03,000 --> 00:24:05,399 Speaker 9: going to focus on the weakness and the labor market. 460 00:24:05,400 --> 00:24:08,840 Speaker 9: We've certainly seen a lot more announcements on layoffs. Now, 461 00:24:08,880 --> 00:24:11,399 Speaker 9: granted we haven't seen that show up in the weekly 462 00:24:11,480 --> 00:24:14,280 Speaker 9: claims numbers, and that's the reason why we have so 463 00:24:14,359 --> 00:24:16,359 Speaker 9: much debate going on. But I think there is going 464 00:24:16,440 --> 00:24:18,160 Speaker 9: to be a focus on the weakness and labor market. 465 00:24:18,400 --> 00:24:20,800 Speaker 9: There will be a cut in December now, granted, if 466 00:24:20,800 --> 00:24:22,720 Speaker 9: they don't do it in December, then it's just pushed 467 00:24:22,720 --> 00:24:25,520 Speaker 9: to the next meeting. I think the bigger picture for 468 00:24:25,600 --> 00:24:28,600 Speaker 9: markets is what is the trajectory for twenty twenty six 469 00:24:28,640 --> 00:24:31,280 Speaker 9: going into twenty twenty seven. I do think they stay 470 00:24:31,320 --> 00:24:35,240 Speaker 9: on that rate cutting campaign throughout the year, and again, 471 00:24:35,880 --> 00:24:38,879 Speaker 9: this is good for risk assets. If we avoid recession 472 00:24:39,280 --> 00:24:42,720 Speaker 9: and FED eases, that's typically a good recipe. 473 00:24:43,359 --> 00:24:46,640 Speaker 4: So, Jeffrey, for twenty twenty six, how do you think 474 00:24:46,680 --> 00:24:49,280 Speaker 4: this one big, beautiful bill will impact the economy and 475 00:24:49,320 --> 00:24:51,000 Speaker 4: a lot of the key question, Yeah, a lot of 476 00:24:51,000 --> 00:24:54,720 Speaker 4: folks are calling that out as a tailwind. 477 00:24:55,040 --> 00:24:56,960 Speaker 9: Well, I think we're going to see a little bit 478 00:24:57,119 --> 00:25:00,800 Speaker 9: perhaps a little bit more clarity perhaps in Q two. 479 00:25:01,240 --> 00:25:04,280 Speaker 9: I think Q one, I do forecast that that's going 480 00:25:04,359 --> 00:25:06,840 Speaker 9: to be a little bit of hit in growth, But 481 00:25:06,920 --> 00:25:09,040 Speaker 9: I think it's going to be this push pull here. 482 00:25:09,440 --> 00:25:14,600 Speaker 9: You have perhaps this risk that consumers will get much 483 00:25:14,680 --> 00:25:17,720 Speaker 9: larger returns than expected. That's going to be provide a 484 00:25:17,720 --> 00:25:21,359 Speaker 9: boost of spending. I don't know what businesses are going 485 00:25:21,480 --> 00:25:25,359 Speaker 9: to do in terms of passing along these tariff prices 486 00:25:25,840 --> 00:25:30,000 Speaker 9: to then consumer. That's the real uncertainty. Hear in Q one, 487 00:25:30,400 --> 00:25:32,520 Speaker 9: what's going to happen with inflation? Are we going to 488 00:25:32,600 --> 00:25:36,239 Speaker 9: see in fresh another bit of an uptick like we 489 00:25:36,320 --> 00:25:39,040 Speaker 9: did in August September. 490 00:25:39,280 --> 00:25:41,800 Speaker 2: Right, this has been wonderful, Jeffrey Roach, thank you so much, 491 00:25:41,920 --> 00:25:45,200 Speaker 2: really appreciate it. On this special edition of Bloomberg Surveillance, 492 00:25:45,240 --> 00:25:48,160 Speaker 2: Mister Roads, Chief Economist LPL. 493 00:25:48,400 --> 00:25:51,440 Speaker 5: Financial, stay with us. 494 00:25:51,720 --> 00:26:02,040 Speaker 2: More from Bloomberg Surveillance coming up after this. 495 00:26:02,040 --> 00:26:05,919 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 496 00:26:05,960 --> 00:26:09,280 Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto 497 00:26:09,400 --> 00:26:12,359 Speaker 1: with the Bloomberg Business app. You can also listen live 498 00:26:12,440 --> 00:26:16,000 Speaker 1: on Amazon Alexa from our flagship New York station, Just 499 00:26:16,080 --> 00:26:18,600 Speaker 1: Say Alexa Play Bloomberg eleven thirty. 500 00:26:18,840 --> 00:26:22,320 Speaker 2: Jordan Rochester has been on airplanes. He's back in London now. 501 00:26:22,600 --> 00:26:26,320 Speaker 2: He's had a fiic strategy for Emma at Mizuo, just 502 00:26:26,359 --> 00:26:29,800 Speaker 2: doing a fabulous job. They're summing off of Stever's Shudo 503 00:26:29,920 --> 00:26:33,080 Speaker 2: and Dominique at costume. Jordan, I want to go beyond 504 00:26:33,119 --> 00:26:33,800 Speaker 2: the London thing. 505 00:26:33,840 --> 00:26:36,159 Speaker 5: We did it. It's not that it's old news, but 506 00:26:36,400 --> 00:26:37,840 Speaker 5: I think what people. 507 00:26:37,600 --> 00:26:40,639 Speaker 2: Want to know from you is the framework of a 508 00:26:40,720 --> 00:26:46,359 Speaker 2: resilient US dollar will that's sustain into two thy twenty six. 509 00:26:47,640 --> 00:26:50,119 Speaker 10: Good morning, everybody, and happy Thanksgiving For those who I 510 00:26:50,119 --> 00:26:52,159 Speaker 10: didn't speak to yesterday, Well, yes, I think in the 511 00:26:52,160 --> 00:26:54,800 Speaker 10: short term, Tom the setup is quite good for the 512 00:26:54,840 --> 00:26:58,080 Speaker 10: dollar right now. Part of that, despite lower US yields, 513 00:26:58,320 --> 00:27:00,960 Speaker 10: is because of the US exceptionalism creeping back into the 514 00:27:01,000 --> 00:27:04,479 Speaker 10: equity market, where in the European space there was equity 515 00:27:04,520 --> 00:27:06,199 Speaker 10: trades that have done very well this year, such as 516 00:27:06,200 --> 00:27:08,719 Speaker 10: defense and banks are looking a little bit more tired. 517 00:27:09,200 --> 00:27:11,560 Speaker 10: But really it's about the fact that we've got a 518 00:27:11,560 --> 00:27:14,320 Speaker 10: lot of positioning that has already been short the dollar 519 00:27:14,359 --> 00:27:16,760 Speaker 10: for most of this year, especially since the Liberation Day. 520 00:27:17,200 --> 00:27:20,480 Speaker 10: The momentum in euro dollar has completely flat lined. If 521 00:27:20,520 --> 00:27:24,360 Speaker 10: you look at volatilities in terms of THEFX volatilities, you've 522 00:27:24,359 --> 00:27:27,080 Speaker 10: got realized volatility on a three handle. I know it's 523 00:27:27,080 --> 00:27:29,240 Speaker 10: a bit complicated, but that is just not something that 524 00:27:29,320 --> 00:27:32,000 Speaker 10: is very high at all. It's extremely low volatility. So 525 00:27:32,240 --> 00:27:34,240 Speaker 10: I think you're seeing people take on the trades that 526 00:27:34,280 --> 00:27:37,240 Speaker 10: were profitable this year, which was long the euro, short 527 00:27:37,280 --> 00:27:39,119 Speaker 10: the dollar, and you're seeing a little bit of that 528 00:27:39,160 --> 00:27:40,520 Speaker 10: feedback through into dollar strength. 529 00:27:40,720 --> 00:27:44,080 Speaker 2: So we ended next year take this question where you want, Jordan. 530 00:27:44,640 --> 00:27:47,959 Speaker 2: What we're looking for is big figure moves. Do you 531 00:27:48,040 --> 00:27:52,000 Speaker 2: see big figure moves in week euro or week sterling 532 00:27:52,119 --> 00:27:53,800 Speaker 2: this year, I. 533 00:27:53,840 --> 00:27:56,240 Speaker 10: Think you'll see it in terms of the next month. 534 00:27:56,320 --> 00:27:58,800 Speaker 10: We're currently short the euro, long the dollar. I'm looking 535 00:27:58,800 --> 00:28:01,119 Speaker 10: for one fourteen to fifty, which is at least a 536 00:28:01,119 --> 00:28:03,919 Speaker 10: big figure from where we are now. That's something more 537 00:28:03,920 --> 00:28:06,520 Speaker 10: of a tactical trade. I think what will happen is 538 00:28:06,560 --> 00:28:09,040 Speaker 10: the Federal Reserve will cut rates in December. 539 00:28:09,520 --> 00:28:10,760 Speaker 6: There's gonna be a hawkish cut. 540 00:28:10,800 --> 00:28:12,879 Speaker 10: I think Chair Power is going to buy himself some 541 00:28:13,000 --> 00:28:16,879 Speaker 10: optionality for the first few meetings of next year because 542 00:28:16,920 --> 00:28:20,200 Speaker 10: of the sort of tussle that's taking place between Fed 543 00:28:20,280 --> 00:28:23,640 Speaker 10: members worried about inflation and those worried about the labor markets. 544 00:28:23,960 --> 00:28:27,000 Speaker 10: But I am worried Tom that actually what could happen 545 00:28:27,040 --> 00:28:29,760 Speaker 10: next year is the labor markets just really collapse and 546 00:28:29,800 --> 00:28:33,800 Speaker 10: we're starting to see negative ADP figures on the weekly basis. 547 00:28:34,119 --> 00:28:36,600 Speaker 10: Next week we get the monthly version of that. If 548 00:28:36,600 --> 00:28:40,000 Speaker 10: the private payroll continues to have negative sort of job losses, 549 00:28:40,280 --> 00:28:42,200 Speaker 10: then perhaps actually doing to see much bigger move that 550 00:28:42,240 --> 00:28:44,480 Speaker 10: moves and rates and efxx and what the current current 551 00:28:44,520 --> 00:28:45,400 Speaker 10: market pricing is. 552 00:28:45,640 --> 00:28:48,960 Speaker 5: You know part You know, Joe Wisenhal has a band called. 553 00:28:48,840 --> 00:28:52,800 Speaker 2: Late sweet crude. If I had a band, if I 554 00:28:52,840 --> 00:28:55,520 Speaker 2: put a band together, generally call it what hawkish cut? 555 00:28:55,720 --> 00:28:56,440 Speaker 5: Hawkish cut? 556 00:28:56,480 --> 00:28:58,440 Speaker 4: That would be the game of the So Jordan, I 557 00:28:58,480 --> 00:29:00,520 Speaker 4: mean our fed, I mean we I'm looking the work 558 00:29:00,520 --> 00:29:03,360 Speaker 4: function here, Jordan, and it looks like eighty percent chance 559 00:29:03,360 --> 00:29:05,720 Speaker 4: for rate cut in December. How do you think the 560 00:29:05,800 --> 00:29:09,120 Speaker 4: cadence will be with this US Federal Reserve in any 561 00:29:09,240 --> 00:29:10,920 Speaker 4: future rate cuts in twenty twenty six. 562 00:29:11,960 --> 00:29:14,280 Speaker 10: Indeed, it's a bit tricky for them because they don't 563 00:29:14,280 --> 00:29:16,280 Speaker 10: have much data before the next meeting. A lot of 564 00:29:16,280 --> 00:29:19,680 Speaker 10: private data, but non farm payrolls and CPI is what 565 00:29:19,720 --> 00:29:20,600 Speaker 10: they're kind of lacking. 566 00:29:20,720 --> 00:29:23,000 Speaker 6: So we're going into that December meeting. Where I think 567 00:29:23,080 --> 00:29:23,960 Speaker 6: the tee up. 568 00:29:23,880 --> 00:29:25,960 Speaker 10: For that is they told us in the dot plot 569 00:29:25,960 --> 00:29:27,760 Speaker 10: they were going to do one more rate cut this year. 570 00:29:27,840 --> 00:29:30,840 Speaker 10: They told us that in September, they then repeated in October. 571 00:29:30,920 --> 00:29:32,920 Speaker 10: The outlook hasn't changed, So I don't think the outlook 572 00:29:32,920 --> 00:29:35,840 Speaker 10: has materially changed for them to skip the December meeting. 573 00:29:36,040 --> 00:29:38,000 Speaker 10: That was a non consensus view just two weeks ago. 574 00:29:38,080 --> 00:29:40,040 Speaker 10: So I've just got to make that clear then for 575 00:29:40,160 --> 00:29:43,480 Speaker 10: January and onwards, the key point will be we'll start 576 00:29:43,520 --> 00:29:46,800 Speaker 10: to get inflation coming back into we'll actually get the releases, 577 00:29:47,200 --> 00:29:51,200 Speaker 10: and do we see the tariff impact actually accelerate. It 578 00:29:51,240 --> 00:29:53,280 Speaker 10: seems to me that the answer is not as much 579 00:29:53,320 --> 00:29:56,680 Speaker 10: as feared. So I'm not that actually worried about tariffs 580 00:29:56,680 --> 00:29:59,640 Speaker 10: feeding through to stronger inflation. But if I'm wrong about 581 00:29:59,640 --> 00:30:02,640 Speaker 10: that that I can really see the market reprice what's 582 00:30:02,680 --> 00:30:05,240 Speaker 10: put in for January, then the labor market. Is this 583 00:30:05,320 --> 00:30:07,800 Speaker 10: youth unemployment spike that we're getting, is that just a 584 00:30:07,840 --> 00:30:11,640 Speaker 10: temporary phenomenon or is that an AI structural story. If 585 00:30:11,640 --> 00:30:14,160 Speaker 10: that carries on, then maybe January is more of a 586 00:30:14,200 --> 00:30:16,400 Speaker 10: live meeting than I give it credit for. But I'm 587 00:30:16,400 --> 00:30:19,120 Speaker 10: not worried about growth whatsoever. I think that you've got 588 00:30:19,120 --> 00:30:22,960 Speaker 10: fiscal stimlus from the US, Europe, Japan and elsewhere, combined 589 00:30:22,960 --> 00:30:25,800 Speaker 10: with FED cuts, so you're going to have a pretty 590 00:30:25,800 --> 00:30:28,239 Speaker 10: good Q one Q two FROW. On top of that 591 00:30:28,320 --> 00:30:30,320 Speaker 10: the AI capex, which I don't think is going to 592 00:30:30,360 --> 00:30:34,920 Speaker 10: roll over the Fed's torn good growth, mild inflation close two, 593 00:30:35,000 --> 00:30:37,400 Speaker 10: close to three, but a weakening labor market. I think 594 00:30:37,440 --> 00:30:39,719 Speaker 10: it's like no cycle we've ever seen. So they just 595 00:30:39,800 --> 00:30:42,280 Speaker 10: need time, and I think they might skip January March. 596 00:30:42,440 --> 00:30:44,120 Speaker 5: Paul, you brought this up earlier. 597 00:30:44,280 --> 00:30:46,720 Speaker 2: This is like the balloon over MetLife Stadium for the 598 00:30:46,840 --> 00:30:52,040 Speaker 2: Jets game. There's stimulus coming. We are not factoring in 599 00:30:52,160 --> 00:30:56,400 Speaker 2: the stimulus that we're going to see from a President 600 00:30:56,440 --> 00:30:57,360 Speaker 2: Frump's legislation. 601 00:30:57,440 --> 00:30:59,360 Speaker 4: Yep, we'll see if that comes to fortune in twenty 602 00:30:59,400 --> 00:31:01,760 Speaker 4: twenty six. George, give us a sense of how the 603 00:31:01,880 --> 00:31:03,200 Speaker 4: UK economy is. 604 00:31:03,240 --> 00:31:04,040 Speaker 1: I know, you know. 605 00:31:04,000 --> 00:31:08,440 Speaker 4: The OBR leaked the numbers on the budget last week. 606 00:31:08,640 --> 00:31:10,960 Speaker 4: Just give us a sense how the economy is in 607 00:31:11,000 --> 00:31:11,320 Speaker 4: the UK. 608 00:31:12,720 --> 00:31:16,640 Speaker 10: Well, it's had sticky inflation thanks to Administer's prices, which 609 00:31:16,720 --> 00:31:19,560 Speaker 10: was the Chancellor's reckoning of the last budget where she 610 00:31:19,640 --> 00:31:23,280 Speaker 10: raised taxes. So we've had a mixture of higher taxes 611 00:31:23,360 --> 00:31:26,600 Speaker 10: from last year's budget leads to higher than expected inflation 612 00:31:26,720 --> 00:31:27,160 Speaker 10: this year. 613 00:31:27,320 --> 00:31:29,080 Speaker 6: But it wasn't just the Chancellor's decisions. 614 00:31:29,080 --> 00:31:32,480 Speaker 10: It was also food and other items that came through 615 00:31:32,560 --> 00:31:36,000 Speaker 10: more hot So the banking has been torn between growth 616 00:31:36,000 --> 00:31:38,840 Speaker 10: that has been quite sluggish around one percent or so 617 00:31:39,560 --> 00:31:42,160 Speaker 10: and not really screaming that you need to be a 618 00:31:42,200 --> 00:31:45,000 Speaker 10: hawkish here, and then the labor market data has been 619 00:31:45,200 --> 00:31:48,800 Speaker 10: very much on the weak side. So similar less optimistic 620 00:31:48,840 --> 00:31:51,560 Speaker 10: than the US, so growth is middling around one percent, 621 00:31:51,600 --> 00:31:55,680 Speaker 10: and I actually see downside risks to growth myself. Inflation 622 00:31:55,880 --> 00:31:58,480 Speaker 10: has been much higher than we'd like to have seen, 623 00:31:58,720 --> 00:32:01,520 Speaker 10: but we've now seen the peak inflation. We've gone past 624 00:32:02,000 --> 00:32:04,720 Speaker 10: the hump essentially, and from here it's all about how 625 00:32:04,800 --> 00:32:08,080 Speaker 10: quickly will inflation fall. I see inflation falling quite quickly 626 00:32:08,120 --> 00:32:11,680 Speaker 10: to a two percent handle, possibly by the second quarter 627 00:32:11,760 --> 00:32:15,560 Speaker 10: of next year. And that's by the OBR zone sort 628 00:32:15,600 --> 00:32:18,280 Speaker 10: of reckoning as well. Why is that because the chance 629 00:32:18,320 --> 00:32:20,840 Speaker 10: to learned her lessons and instead she introduced measures at 630 00:32:20,880 --> 00:32:23,840 Speaker 10: this budget to knock off zero point three percent from 631 00:32:23,920 --> 00:32:26,560 Speaker 10: UK inflation. Then there's the housing market, which in the 632 00:32:26,640 --> 00:32:28,040 Speaker 10: UK drives everything. 633 00:32:28,600 --> 00:32:30,360 Speaker 6: Just think about it. When you buy a house, you 634 00:32:30,400 --> 00:32:30,960 Speaker 6: get new. 635 00:32:30,800 --> 00:32:33,640 Speaker 10: Carpets and new sofa, new TV, and you might even 636 00:32:33,680 --> 00:32:36,840 Speaker 10: hang up the curtains. Or the housing markets really in 637 00:32:36,880 --> 00:32:39,280 Speaker 10: some respects in free fought depends what chart you're looking at. 638 00:32:39,360 --> 00:32:43,479 Speaker 10: Transactions near record lows. We're seeing even the rental market 639 00:32:44,080 --> 00:32:48,000 Speaker 10: slow down significantly. I think that's because of immigration title 640 00:32:48,080 --> 00:32:51,680 Speaker 10: rules around visas, so net immigration has also really dropped 641 00:32:51,720 --> 00:32:55,280 Speaker 10: in the UK and we're seeing tenants really not in 642 00:32:55,320 --> 00:32:57,960 Speaker 10: the surveys not showing up in the demand space, and 643 00:32:58,080 --> 00:33:00,680 Speaker 10: landlords are lowering the rents as well. So you've got 644 00:33:00,720 --> 00:33:05,400 Speaker 10: a combination of tax cuts, slower housing market, middling growth, 645 00:33:05,640 --> 00:33:06,800 Speaker 10: and negative base effects. 646 00:33:06,840 --> 00:33:09,520 Speaker 6: It makes it quite easy for the banking to cut rates. 647 00:33:09,600 --> 00:33:13,320 Speaker 2: Combine in your work with Rushido and Constant and the tariffs. 648 00:33:13,560 --> 00:33:17,200 Speaker 2: Holl n Jordan are surprised how the tariff discussion has 649 00:33:17,280 --> 00:33:19,480 Speaker 2: walked away through November. 650 00:33:19,760 --> 00:33:21,760 Speaker 5: Are we over the tariffs or is that going to 651 00:33:21,840 --> 00:33:23,480 Speaker 5: revisit in January? 652 00:33:24,720 --> 00:33:27,440 Speaker 10: I think well, in terms of you make a good 653 00:33:27,480 --> 00:33:29,920 Speaker 10: point here about timing, because the Supreme Court decision is 654 00:33:29,920 --> 00:33:32,719 Speaker 10: probably coming soon. It might even be in December. So 655 00:33:32,760 --> 00:33:35,600 Speaker 10: if the tariffs are repaid, then the market will like 656 00:33:35,640 --> 00:33:38,840 Speaker 10: to see that, and you'll see importers receiving possibly around 657 00:33:38,880 --> 00:33:42,600 Speaker 10: forty five billion dollars in receipts back to them because 658 00:33:42,640 --> 00:33:45,240 Speaker 10: the IEE PA is therefore not allowed to be used. 659 00:33:45,400 --> 00:33:47,400 Speaker 10: But the White House has the ability to raise Section 660 00:33:47,480 --> 00:33:50,440 Speaker 10: three oh one two three two investigations, which they're already doing. 661 00:33:50,480 --> 00:33:54,160 Speaker 10: They've they've definitely prepared themselves for this eventuality. So it's 662 00:33:54,200 --> 00:33:57,360 Speaker 10: not the end of tariffs, but bigger picture, what we've 663 00:33:57,400 --> 00:33:59,840 Speaker 10: really seen is in the amount of money coming in 664 00:33:59,840 --> 00:34:02,400 Speaker 10: for tariffs is about half what it should have been, 665 00:34:02,720 --> 00:34:05,720 Speaker 10: which suggests that importers are finding a way to mark 666 00:34:05,800 --> 00:34:08,200 Speaker 10: lower their prices and pay half the amounts that they 667 00:34:08,200 --> 00:34:10,600 Speaker 10: should have on the tariffs. And I think there are 668 00:34:10,640 --> 00:34:12,760 Speaker 10: clever ways of doing that where if you're a Chinese 669 00:34:12,760 --> 00:34:15,120 Speaker 10: company and you set up in the US and export 670 00:34:15,160 --> 00:34:18,560 Speaker 10: to yourself, there are ways around it. It's called importer 671 00:34:18,600 --> 00:34:21,200 Speaker 10: of record before you then sell on to the US 672 00:34:21,200 --> 00:34:22,280 Speaker 10: of final consumer. 673 00:34:22,680 --> 00:34:23,680 Speaker 6: That's what the data says. 674 00:34:23,880 --> 00:34:26,120 Speaker 10: We're roughly getting an effective tariff rate of nine and 675 00:34:26,120 --> 00:34:28,879 Speaker 10: a half percent versus what we calculated and the rest 676 00:34:28,880 --> 00:34:31,240 Speaker 10: of the market, it should have been closer to eighteen percent. 677 00:34:31,719 --> 00:34:34,160 Speaker 10: That means the inflation impact has been half the amount, 678 00:34:34,560 --> 00:34:37,080 Speaker 10: plus you built the ability for tariff to maybe be 679 00:34:37,200 --> 00:34:40,239 Speaker 10: rolled back by the Supreme Court. Tom, in answer your question, 680 00:34:40,280 --> 00:34:42,640 Speaker 10: I'm not too worried about tariffs pushing up inflation. 681 00:34:43,239 --> 00:34:45,520 Speaker 2: This is critical enough that the budget labitt yells in 682 00:34:45,600 --> 00:34:48,879 Speaker 2: your a nine percent level as well. Normal for US 683 00:34:48,920 --> 00:34:51,680 Speaker 2: growing up was two to three percent, right, so it's 684 00:34:51,719 --> 00:34:55,840 Speaker 2: still really elevated. I mean, I mean the President Lisa 685 00:34:55,920 --> 00:34:58,520 Speaker 2: helped me here. The president is taking away the tariff. 686 00:34:58,560 --> 00:35:00,600 Speaker 2: I'm bananas. 687 00:35:00,880 --> 00:35:02,680 Speaker 4: I think so that's good. 688 00:35:02,719 --> 00:35:06,640 Speaker 5: I mean in the banana aisle at Costco. Yeah, get 689 00:35:06,640 --> 00:35:08,160 Speaker 5: a couple more in here with Jordan. 690 00:35:07,920 --> 00:35:09,680 Speaker 4: And the hot dog anisodas that are still there. 691 00:35:09,800 --> 00:35:13,520 Speaker 2: Could you imagine working with Dominice Constant and Steve Shuddo everythings? 692 00:35:13,640 --> 00:35:16,520 Speaker 4: No, thank you, it's just extra tough Jordan. So what's 693 00:35:16,560 --> 00:35:18,759 Speaker 4: the in terms of the currencies after what's the best 694 00:35:18,880 --> 00:35:21,440 Speaker 4: value as you think about twenty twenty six, let. 695 00:35:21,440 --> 00:35:23,960 Speaker 2: Me rephrase this, what's the best trade? Because Paul and 696 00:35:24,000 --> 00:35:26,480 Speaker 2: I lost money the Detroit Lions. 697 00:35:28,000 --> 00:35:30,160 Speaker 10: Well, look, we're currently short the euro, olong the dollar. 698 00:35:30,280 --> 00:35:32,200 Speaker 10: That's the sort of FX trade we like. In terms 699 00:35:32,239 --> 00:35:34,920 Speaker 10: of rates, we're much more dubbish on the UK. So 700 00:35:34,960 --> 00:35:37,799 Speaker 10: we're doing lots of front end flatners. We're doing lots 701 00:35:37,800 --> 00:35:38,800 Speaker 10: of received positions. 702 00:35:38,800 --> 00:35:39,239 Speaker 6: In the UK. 703 00:35:39,280 --> 00:35:41,879 Speaker 10: We just bought guilts despite the big rally. I think 704 00:35:41,920 --> 00:35:44,080 Speaker 10: that can go further. In terms of the front end. 705 00:35:44,120 --> 00:35:45,640 Speaker 10: For the Bank of England, we look for them to 706 00:35:45,640 --> 00:35:48,040 Speaker 10: get to three percent. High conviction views are in the 707 00:35:48,120 --> 00:35:50,960 Speaker 10: UK curve. For the US we're doing Z five, Z 708 00:35:51,120 --> 00:35:54,040 Speaker 10: six flatteners. I do think in the US you're doing 709 00:35:54,120 --> 00:35:58,480 Speaker 10: what Okay, So what we're doing is we're expecting the 710 00:35:58,560 --> 00:36:00,919 Speaker 10: rates in the US to continue to hover around three 711 00:36:01,000 --> 00:36:03,080 Speaker 10: percent for the next year or so, which is why 712 00:36:03,160 --> 00:36:06,040 Speaker 10: it's currently priced. The new FED chair means the market 713 00:36:06,080 --> 00:36:09,000 Speaker 10: will constantly think that the new FED chair will be dubbished. 714 00:36:09,000 --> 00:36:11,680 Speaker 10: Therefore it's hard for that market to sell off. But 715 00:36:11,760 --> 00:36:15,319 Speaker 10: in FX, the yen's the one that screams cheap. We 716 00:36:15,400 --> 00:36:17,400 Speaker 10: haven't got it on as a trade. We're not currently 717 00:36:17,400 --> 00:36:19,640 Speaker 10: short Dolly, and I actually think the risks are it 718 00:36:19,680 --> 00:36:21,799 Speaker 10: goes even even higher than where we are currently. 719 00:36:21,480 --> 00:36:24,440 Speaker 6: Because the bj WOW needs to act. They need to 720 00:36:24,440 --> 00:36:25,160 Speaker 6: do a rate hike. 721 00:36:25,640 --> 00:36:27,880 Speaker 10: They've been delaying and delaying and delaying. We're now thinking 722 00:36:27,880 --> 00:36:31,520 Speaker 10: descend might happen. But it's now only fifty percent priced, 723 00:36:31,760 --> 00:36:34,120 Speaker 10: So I actually think the Bankjapan might disappoint us on 724 00:36:34,200 --> 00:36:36,640 Speaker 10: December and dollienn has another leg higher. 725 00:36:36,360 --> 00:36:40,440 Speaker 2: When this is delicate folks with missoul when it finally 726 00:36:40,520 --> 00:36:44,600 Speaker 2: goes Jordan Rochester, what will be the magnitude of a 727 00:36:44,760 --> 00:36:48,160 Speaker 2: yen's strengthening from one fifty six fIF seven? 728 00:36:48,800 --> 00:36:50,520 Speaker 5: What size do you see there? 729 00:36:51,719 --> 00:36:54,480 Speaker 10: We've got one forty down to one thirty five if 730 00:36:54,960 --> 00:36:57,400 Speaker 10: the FED new chair goes ahead and cuts rates and 731 00:36:57,440 --> 00:37:00,319 Speaker 10: we talk about a two percent terminal, and that's if 732 00:37:00,400 --> 00:37:03,359 Speaker 10: the Bank Japan raises rates twice next year, which is 733 00:37:03,360 --> 00:37:05,600 Speaker 10: not fully priced at the moment. That isn't a high 734 00:37:05,600 --> 00:37:08,080 Speaker 10: conviction view, so we're not yet understood understood. That's where 735 00:37:08,080 --> 00:37:09,080 Speaker 10: we could see a big move next. 736 00:37:09,200 --> 00:37:09,920 Speaker 5: So that's fine. 737 00:37:10,040 --> 00:37:12,600 Speaker 2: That's fifteen big figure move folks, that get your attention 738 00:37:12,719 --> 00:37:15,480 Speaker 2: as well. Jordan, thank you so much for joining us 739 00:37:15,480 --> 00:37:18,040 Speaker 2: on the special edition of Bloomberg Surveillance. 740 00:37:18,080 --> 00:37:21,320 Speaker 5: Mister Rochester in London is with Miszoo. 741 00:37:21,680 --> 00:37:26,520 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 742 00:37:26,640 --> 00:37:30,920 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 743 00:37:31,040 --> 00:37:34,560 Speaker 1: seven to ten am Eastern on Bloomberg dot com, the 744 00:37:34,600 --> 00:37:38,640 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 745 00:37:38,680 --> 00:37:42,040 Speaker 1: can also watch us live every weekday on YouTube and 746 00:37:42,239 --> 00:37:43,960 Speaker 1: always on the Bloomberg terminal