Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. Matt and I have
Speaker 1: really been focusing on during this whole pandemic, the global
Speaker 1: supply chain issue, because that affects so many companies in
Speaker 1: so many industries on a global scale, and weekend we
Speaker 1: still don't. We heard about it again today from Targets,
Speaker 1: so huge issue. The New York Federal Reserve Bank is
Speaker 1: weighing in now and they've got what I'm what they're
Speaker 1: calling today the New York Federal New York Fed Global
Speaker 1: Supply Chain Pressure Index. That's what we need. I need
Speaker 1: a picture, I need some numbers, and Dr John grown
Speaker 1: joins us here. He is Economic Research Advisor for the
Speaker 1: Federal Reserve Bank of New York. Dr Groan, thanks so
Speaker 1: much for joining us here. Supply cham I'm looking at
Speaker 1: your graph. Tell me what your index is. What it
Speaker 1: tries to measure and what it's telling you, sure, good morning,
Speaker 1: and thank you for having me on. So what we're
Speaker 1: launching you to this this morning is what we've denoted
Speaker 1: as the Global Supply Chain Pressure Index or g s
Speaker 1: c p I, and it's a it's a single measure
Speaker 1: of global supply chain pressures, uh, and it's it's can
Speaker 1: be used to gauge the importance of the disruptions to
Speaker 1: global supply chains and how they infect economic conditions and
Speaker 1: how they these constrains uh evolve over time. Basically, all right,
Speaker 1: so I'm looking for the folks on radio. I'm looking
Speaker 1: at a graph here and it just kind of shows
Speaker 1: the standard deviations from the average supply chain time goes
Speaker 1: back to it's usually plus one minus one. We're up
Speaker 1: like plus three, four or five. I mean, give us
Speaker 1: a sense of kind of the the magnitude of the
Speaker 1: supply chain shock we're experiencing right now. Yeah, So basically
Speaker 1: what we've seen since to e twenties, essentially precious has
Speaker 1: been like at the peak, it was like five times
Speaker 1: as high as the average level of the whole sample. Right,
Speaker 1: so starting from to twenty two, uh so before twenty
Speaker 1: really we haven't seen anything even closer that. I mean,
Speaker 1: what what what has been closes was what happened during
Speaker 1: twenty eleven, you know, when we had the Fukushima earthquake
Speaker 1: that hit a lot of the Japanese supply chains, and
Speaker 1: then later that year the flow floodings in Thailands, which
Speaker 1: which had hit a lot of like companies that you
Speaker 1: know were supplying electric components to you know, electronic electronic
Speaker 1: producers and auto producers. So this is like completely unprecedented. Uh,
Speaker 1: and yeah, that's it's it's a new unique phase in
Speaker 1: the global economy. So what is it taking into account? Exactly?
Speaker 1: Is these transportation cost is this raw input coast um?
Speaker 1: What are we looking at in terms of the contributors
Speaker 1: to this index? Right, So basically the index summarizes developments
Speaker 1: in twenty seven series and basically there are two main
Speaker 1: categories of global transportation costs and then regional surveys about
Speaker 1: the state of manufacturing in in in seven inter linked economy.
Speaker 1: So in terms of the transportation cost you know, they're
Speaker 1: looking we're looking at you know, the b d I
Speaker 1: for example, which is a measure of just war war
Speaker 1: raw good shipping transportation, and we're also looking at the
Speaker 1: container shipping rates. And then in terms of you know,
Speaker 1: the manufacturing data, we we we really heavily rely on
Speaker 1: p m I surveys and especially data about you know,
Speaker 1: supply supply delivery times, backlogs and inventories of manufacturing firms
Speaker 1: in UH in the US, in China and Taiwan, South Korea, Japan,
Speaker 1: the Ara area, and in the UK. So DR going
Speaker 1: a lot of investors, you know, I think as they
Speaker 1: think about inflation, they want to get a sense of
Speaker 1: has it peaked to what extent and what you know,
Speaker 1: kind of rate will it decline? What is has your
Speaker 1: data indicated to you that perhaps the supply chain bottlenecks
Speaker 1: have peaked, well, so what the what the index really
Speaker 1: shows that the peak up to now was kind of
Speaker 1: reach in December, So then we reased you know a
Speaker 1: level of like five times higher disruptions than than the average.
Speaker 1: And between December and basically April, we've seen a steady
Speaker 1: decline I mean at the motor pace, but quite steady,
Speaker 1: but still well made that historically historically high level. So
Speaker 1: it still was about you know, less than three three
Speaker 1: times the average level. What we've seen having in April
Speaker 1: is kind of a little bit of a resurgence in disruptions.
Speaker 1: So pastures went up again on the back of you know,
Speaker 1: the geopolitical tensions in Europe due to the Ukraine Russia
Speaker 1: conflict as well as the COVID lockdowns in China. So
Speaker 1: it went back up to just over three times the
Speaker 1: average levels. So yes, we speak, but it seems to
Speaker 1: do at the moment, seems to botton out and maybe
Speaker 1: become a little bit worse again. I mean going forward.
Speaker 1: This measure is not a forecasting measure for future supply
Speaker 1: chain pressures. I mean it's more like where we are
Speaker 1: now at the moment. But it would be interesting to see,
Speaker 1: you know how how it involved going forward. Alright, good stuff,
Speaker 1: very interesting that to young grown economic research advisor for
Speaker 1: the Federal Reserve Bank of New York, the New York
Speaker 1: Fed releasing today a brand new index that tries to
Speaker 1: measure the supply chain is called the New York Fed
Speaker 1: Global Supply Chain Pressure Index. Fascinating stuff because again it
Speaker 1: is an issue that really has come to the fore
Speaker 1: and made all of us, i think, kind of experts
Speaker 1: at logistics and supply chain and all that type of stuff.
Speaker 1: Because Curtty we hear about it from all different types
Speaker 1: of companies. Yeah, we really do. I mean we're talking
Speaker 1: about retailers heavily in focus right now. But wasn't this
Speaker 1: the story for Tactics a couple of weeks earlier. I mean,
Speaker 1: some of these chip shortages that we've been talking about
Speaker 1: for going on two years now, they are still there.
Speaker 1: That chip shortage is still there. You hear it in
Speaker 1: automakers even trying to get their hands on metals. So
Speaker 1: this isn't a a right now story. But I think
Speaker 1: he made a very apt point in the nine o'clock
Speaker 1: is we've been talking about this for ages, why is
Speaker 1: the market still not pricing it in? Yeah, it's interesting,
Speaker 1: and um, you know, part of it is China and
Speaker 1: getting those factories open on a consistent basis. And we're
Speaker 1: starting to hear some news that parts of China are
Speaker 1: starting to reopen, and most notably in the Shanghai region,
Speaker 1: So maybe that will help things. And we had the
Speaker 1: head of the l A Ports on yesterday he sees
Speaker 1: the backlog of ships off the port coming down. You've
Speaker 1: got gasoline prices at the pump uh at or near
Speaker 1: a record high. I think about Matt having to flow
Speaker 1: up that twenty three gallon. I don't know what is it,
Speaker 1: Chevy Silverado pickup truck, gas tank that's gonna be You're
Speaker 1: gonna take out a mortgage to do that? All right,
Speaker 1: Let's check in on the consumer here. We've had a
Speaker 1: lot of retail sales numbers, We've had a lot of
Speaker 1: retailers report quarterly earnings. Uh, A mixed back here, but
Speaker 1: inflation is the number one story we had earlier President
Speaker 1: of Chicago FED, President Charles Evanson with Michael McKee talking
Speaker 1: about the offensibility to impact and lower inflation. Let's check
Speaker 1: in with Jennifer Leasing, your economist and managing director for
Speaker 1: BMO Capital Markets. Uh. Jennifer, again, the Federal Reserve seems
Speaker 1: to be laser focused on inflation. In reality, how much
Speaker 1: can they impact inflation when some of the inflation we're
Speaker 1: seeing is just kind of commodity driven, whether it's gasoline
Speaker 1: or food prices. How do you think about its ability
Speaker 1: to impact and good morning? UM. I think they have
Speaker 1: a pretty good way of a pretty as strong UM handle.
Speaker 1: I think on on what they or their tools of
Speaker 1: what they can do to UM to to curb inflation
Speaker 1: or to rein up back to the two percent a target.
Speaker 1: But it's going to be painful as that share Powell
Speaker 1: has has said, and you know, it's just going to
Speaker 1: be using higher rates and they're going to keep going higher.
Speaker 1: And it's like you just said that they're almost very
Speaker 1: much laser focused now it was. It's kind of funny.
Speaker 1: It's like last year it was almost like they were
Speaker 1: looking for a reason to tighten, and now it's almost
Speaker 1: like they're looking for a reason to stop. You know,
Speaker 1: they're going to keep going faster and higher, and they're
Speaker 1: just going to go beyond neutral before they stop and
Speaker 1: take a break. Jennifer, there's a difference between an outright recession,
Speaker 1: a contraction of the economy and to slow down. And
Speaker 1: it feels like, if you are listening to the market commentary,
Speaker 1: we've gone very quickly from a deceleration and growth to
Speaker 1: an outright recession. Is that justify? So this is where
Speaker 1: it gets a little dicey, Okay. So in in you know,
Speaker 1: your textbook term of recession is two consecutive quarters of decline,
Speaker 1: and we've already had one quarter on the headline drop
Speaker 1: in GP at one point four percent annualized. Again in
Speaker 1: Q one and um, you know Q two's I don't
Speaker 1: think it's gonna be a decline, but I mean it
Speaker 1: certainly does feel like a recession. But again I'm just
Speaker 1: gonna focus now on the first quarter, Like what dropped,
Speaker 1: what caused GDP to slow down? It was all imports,
Speaker 1: like a huge surgeon imports, which speaks to very strong
Speaker 1: domestic demand and less or slower inventory accumulation. Businesses are
Speaker 1: still trying to you know, stock the shelves, but they're
Speaker 1: doing it at a slower pace because they can't get
Speaker 1: enough stuff to stuff to to stock their shelves with.
Speaker 1: So you know, again the headline figure is because suggest
Speaker 1: that there is recession, but again I don't think it's
Speaker 1: the true true definition. Um. And I'm going to point to,
Speaker 1: you know, the fact that we still had a really
Speaker 1: solid retail sales figure for April, which do you guys
Speaker 1: are all talking about yesterday? Um, And even though it's
Speaker 1: a nominal terms, you know, in real terms, it was
Speaker 1: sort of flat from ugal levels. But the still fact
Speaker 1: that consumers are still well, they're buying, I think speaks volumes.
Speaker 1: In the fact that there's still a very strong labor
Speaker 1: market for now, and that guarantees that you know if
Speaker 1: you have ever wage, if you sort off, you have
Speaker 1: a job, then that means you're going to get a
Speaker 1: study paycheck, which I think is um the key factor
Speaker 1: to all of this. You mentioned inventories. That's a really
Speaker 1: key piece. I wanted to kind of harp on and on.
Speaker 1: In Target earnings today, you heard that one of the
Speaker 1: costs from or when the margin pressures was coming not
Speaker 1: from headcount of compensation in their stores, but in their
Speaker 1: distribution centers. And I've actually chart this. You can do
Speaker 1: this folks on the terminal and chart the inventory to
Speaker 1: sales spread of a lot of these major retailers. It's
Speaker 1: essentially spiking to a twenty year high, which I believe
Speaker 1: is as far as the data goes. Jennifer, I have
Speaker 1: to ask you if you see this inventory build up
Speaker 1: doesn't create more reasons for the economy to slow down.
Speaker 1: The idea being that if you see demand slow down,
Speaker 1: even demand increase for that matter, and you have this
Speaker 1: inventory build up, there's less incentive to produce more things
Speaker 1: or even import more things. Does that add to the slowdown? Well,
Speaker 1: right now, it's um. The fact that you're adding to
Speaker 1: their inventories you know, um, you know, from on a
Speaker 1: trend basis, I guess that is actually adding um to
Speaker 1: growth and that's not potentially slowing it down. But you know,
Speaker 1: of course you've got it's like you just pointed out,
Speaker 1: you just have to look at the the demand side,
Speaker 1: and so far there is still and I'm going to say,
Speaker 1: there's still a lot of strong demand. There's still a
Speaker 1: lot of people, a lot of businesses waiting for items
Speaker 1: to come through. Um. You know, I I love to
Speaker 1: look at the I s M surveys not for the headlines,
Speaker 1: but for the comments, and for these are the people
Speaker 1: that are directly working you know, Um, they're they're they're
Speaker 1: are you know, in the factories, and they're the ones
Speaker 1: who are counting all the widgets that are coming in.
Speaker 1: And all the comments still point to the fact that
Speaker 1: they are running low on materials and that which is
Speaker 1: driving costs higher. Um. And still you know, there's still
Speaker 1: a lot of demand. But the interesting thing to all
Speaker 1: of this is that businesses are actually turning down orders
Speaker 1: still because you know, it's like it's almost like your
Speaker 1: money is don't go here, right you um, uh, your
Speaker 1: orders are coming in, but sorry, we can't fulfill it
Speaker 1: out of reasonable time, so you know, we we can't
Speaker 1: take your order right now, which is a very weird
Speaker 1: place to be at right now. But I still think
Speaker 1: that there is demand out there. As long as there
Speaker 1: is demand, the inventory levels, you know, they're just trying
Speaker 1: to build it up in order to meet that, all right.
Speaker 1: Jennifer Lee, thank you so much for joining us giving
Speaker 1: your thoughts here on these markets, on this federal reserve,
Speaker 1: and on inflation that is rife in this economy. Jennifer Lee,
Speaker 1: Senior economist and Managing director for BMO Capita Markets. Looking
Speaker 1: at the markets here, rolling over yet again, we're down
Speaker 1: about two percent here on the SMP five, a little
Speaker 1: more than two percent on nastack. Looking at the tenure treasury, Uh,
Speaker 1: there's a bit out there for the tenure treasure. Yields
Speaker 1: are coming back. We have the tenure yielding two point
Speaker 1: nine three percent. We were about three percent uh this morning,
Speaker 1: so yields really coming in. Oil. Crew to oil was
Speaker 1: up a little bit earlier, but the off just slegged
Speaker 1: off about a half percent for w t I crude
Speaker 1: oil that's called twelve dollars a barrel, still way elevated.
Speaker 1: Do we have a bottom in this market. I don't
Speaker 1: think so, and not by today's trading hill off another
Speaker 1: one point eight percent on the smp UH five hundred.
Speaker 1: But let's talk to somebody who does this for a
Speaker 1: living and talks to traders for a living. Barry metzger
Speaker 1: managing director and head of Trading and Education at Charles Schwab,
Speaker 1: joins us here in our Bloomberg in our actor Broker
Speaker 1: studio Live. He's in town in the Bloomberg headquarters for
Speaker 1: a Bloomberg Intelligence Investor conference today. Barry, thanks so much
Speaker 1: for joining us here. You know, I think the question
Speaker 1: that I started hearing more and more in the last
Speaker 1: week or two is are we at the bottom? How
Speaker 1: do I identify a bottom? When you talk to your traders,
Speaker 1: when you do your surveys, our traders thinking about calling
Speaker 1: a bottom anytime soon? Well, first of all, Paul, it's
Speaker 1: great to be here live, so thanks for having me.
Speaker 1: You know, our traders are very vocal, and you know,
Speaker 1: when it comes to calling a bottom, that's always tough.
Speaker 1: But certainly what we seen in this recent survey as
Speaker 1: clients are very bearish. They are definitely bearish given the UH,
Speaker 1: given the events inflation is absolutely on their mind. I
Speaker 1: would say issues one, two, and three are inflation, inflation, inflation.
Speaker 1: So when you take that into account, and we listened
Speaker 1: to the survey from our clients, you know that inflation
Speaker 1: issues the biggest one. And I would say from the data,
Speaker 1: a third of our clients stint inflation is going to
Speaker 1: stick around for a little bit. But um, excuse me,
Speaker 1: a third of them think it's gonna last until so
Speaker 1: based on that sunament, that's that could be quite well too.
Speaker 1: Thirds thinks it's a little bit more of a shorter term.
Speaker 1: But um, certainly our clients are looking at what we're
Speaker 1: calling a Russian Bear Russian Bear meeting. All the three
Speaker 1: major industries are down in Bear territory by the end
Speaker 1: of two a Russian Bear, a Russian Bear tie to Ukraine.
Speaker 1: Of course. Um, you know it's interesting. I camera christ
Speaker 1: our Macroman strategist. Always he was when my teachers used
Speaker 1: to tell me find the historical precedents that I've been
Speaker 1: obset with the nineteen sixty two President Cuban missile crisis,
Speaker 1: the market just slid for nine months straight and didn't
Speaker 1: recover until the Cuban missile crisis was over. So I
Speaker 1: have to ask, we're painting a lot of the sell
Speaker 1: off on inflation, We're painting it on supply chain issues,
Speaker 1: even COVID. The minute the war in Ukraine ends, whenever
Speaker 1: that might be, is that when we see a complete turnaround. Yeah,
Speaker 1: certainly our clients are very much looking at the geopolitical
Speaker 1: roosts in Ukraine. So, as I mentioned, inflation is number one,
Speaker 1: Ukraine is absolutely number two. So could you see a
Speaker 1: bump based on what our clients are saying once that ends,
Speaker 1: and what does that look like? It depends, But I
Speaker 1: would certainly think there would be positive news based on
Speaker 1: what we're seeing, But a lot more goes into it
Speaker 1: as well. You know, it is inflation, it is Ukraine,
Speaker 1: but it is you know, obviously the prices that they're seeing.
Speaker 1: And frankly, the question I get after often a lot is, Okay,
Speaker 1: if if I were to hand you ten thousand dollars,
Speaker 1: what would you do with that? You know, that decision
Speaker 1: was pretty easy a couple of years ago. You could
Speaker 1: put in your megacap socks and be happy. Now all
Speaker 1: of a sudden, you gotta pause, you have to think
Speaker 1: about it. And our clients are actually looking more towards
Speaker 1: real estate, um oil, gold, and even crypto as potential
Speaker 1: other investments besides the typical ones that we've seen. Yeah,
Speaker 1: it's interesting. I mean the we had the Chicago FED
Speaker 1: President Charles Evans on Bloomberg Radio television earlier this morning,
Speaker 1: and you know, he was saying, as you were saying,
Speaker 1: that the Fed is absolutely laser focused on inflation. Um.
Speaker 1: That kind of goes to the point they're going to
Speaker 1: be aggressive here and they've already shown to be aggressive.
Speaker 1: And it kind of begs a question, what risk assets
Speaker 1: can perform well in that type of environment. Yeah, great question.
Speaker 1: And in fact, when we looked at the survey, clients
Speaker 1: did address this. And you know, when the survey was taken,
Speaker 1: I think most of our clients were thinking twenty five
Speaker 1: basis point increase was kind of the norm. If we
Speaker 1: had that survey taken today, they would probably be more
Speaker 1: a half or even you know, three quarters, So maybe
Speaker 1: even a different pump um. You know, it's it's hard
Speaker 1: to say. I think this speaks to having a diversified portfolio.
Speaker 1: I think this gets back to some of the basics
Speaker 1: of having a financial plan, understand your goals. Look, I
Speaker 1: leave the trading business. But I'm still a believer in
Speaker 1: your wealth management principles of having a plan tied your
Speaker 1: goals and objectives, having an asset allocated portfolio. And there's
Speaker 1: times when you need to ignore the noise um. And
Speaker 1: we've heard that many, many times, and so this, you know,
Speaker 1: for many investors, I think it is playing a little
Speaker 1: bit of the long game versus trying to get you know,
Speaker 1: swept up in some of these short term markets, which
Speaker 1: I think is really really important. I'm glad you mentioned
Speaker 1: a short term markets because you also said the conversation
Speaker 1: on where you spend your ten thousand dollars is really
Speaker 1: easy two years ago, but not so easy now. So
Speaker 1: let's put this to you. You have ten thousand dollars,
Speaker 1: You've got a three month time horizon. Where do you
Speaker 1: put it? So I'm not going to leave it in
Speaker 1: bank in the bank, I'm not going to leave it
Speaker 1: in cash. Listen. I still go to the the the
Speaker 1: philosophy of you know, if you walk past the store
Speaker 1: and you see an item that you wanted me to
Speaker 1: buy that was thirty or off, you're gonna buy it
Speaker 1: right away, like wow, such a deal. But when it's
Speaker 1: the market um for some reason, people are hesitant to
Speaker 1: take advantage that. So I would still look for opportunities
Speaker 1: that are tied to my objectives. Do a little dollar
Speaker 1: cost averaging, maybe not all once, but look at different
Speaker 1: sectors that I believe in more for the long term
Speaker 1: and start buying them on a discount. So that could
Speaker 1: be you know, your typical large cap sectors as well.
Speaker 1: And but I think there are opportunities for alternative investments,
Speaker 1: like I said earlier, and I do think there's some
Speaker 1: other opportunities specifically in rates, just like our clients are
Speaker 1: suggesting that do look opportunistic, you know, we're you know.
Speaker 1: There's one of the stock stories of the day today.
Speaker 1: Barry was a target reported some numbers with some disappointing guidance,
Speaker 1: citing the cost inflation impacting their business and their consumers.
Speaker 1: Started the day a hundred billion dollar market cap. It's
Speaker 1: off twenty five percent. It is rare in my experience
Speaker 1: to see such a large company very liquidly traded. Thirty
Speaker 1: one analysts follow the stock, widely held by some of
Speaker 1: the smartest institutional investors. What does it tell you about
Speaker 1: when when you see the price action in a big
Speaker 1: cap stock like that today. Yeah, I mean we're we're
Speaker 1: seeing the in lots of different places. I think this again,
Speaker 1: ghost e fact, you certainly don't want to have all
Speaker 1: your eggs in one basket, um, because you never know
Speaker 1: what could happen with that basket. I mean, the markets
Speaker 1: can be unpredictable. I think the important thing in all
Speaker 1: sincerity is not to panic and not to make grass decisions. Uh,
Speaker 1: it's to stick to your fundamental plans and recognize that
Speaker 1: markets move, and markets can move quickly, and it always
Speaker 1: seems like, man, they fall so much quicker than they rise. Um.
Speaker 1: And so maybe a good day for those of you
Speaker 1: invest in that To turn off the screens, that's okay,
Speaker 1: but take a long view approach versus getting whipsawed by
Speaker 1: the news on a day to day basis. Are you
Speaker 1: still seeing I mean your schwab, you've got the you know,
Speaker 1: you get the greatest view on individual traders and retail
Speaker 1: What are the retail folks doing these days? Yah? So
Speaker 1: retail folks are certainly still engaged in what we see
Speaker 1: in a lot of our more active traders is um.
Speaker 1: Even though there's more volatility, more unpredictability in the markets,
Speaker 1: and maybe certain sectors that they had to invest in.
Speaker 1: They're still using this time time to stay educated. I
Speaker 1: think that's really important. In my role, it's trading and education,
Speaker 1: and education, in my opinion, has never been more important.
Speaker 1: So let's say the example you said about ten dollars,
Speaker 1: maybe I don't investor right away. Maybe I spend more
Speaker 1: time researching, spend more time understanding different strategies that I
Speaker 1: could be utilizing, maybe looking at more risk, defying strategies,
Speaker 1: utilizing options, and other areas that potentially can help my
Speaker 1: portfolio or had some risk. So I would say, by
Speaker 1: and by and large, our clients are actively staying engage,
Speaker 1: utilizing more education, and trying to get more knowledgeable about
Speaker 1: the markets. All right, verty great stuff. Really appreciate you
Speaker 1: coming into the Bloomberg studio. Barry Metzger, He's managing director
Speaker 1: and head of Trading an Education at Charles Schwab. All right,
Speaker 1: I'm looking at d X Y index here, the dollar
Speaker 1: index on a trailing twelve month basis. We started about
Speaker 1: a year ago down around ninety. The index today's one
Speaker 1: h three spots six. Just a steady, steady move higher
Speaker 1: for the green back. Is there a bear case out there?
Speaker 1: For the dollar. Brent Don, president of Spectr Markets, joins us. Brent,
Speaker 1: I mean the the US dollar has just been marching
Speaker 1: higher and higher and higher. Is there a bear case
Speaker 1: for the dollar? Hey, good morning, Paul. Yeah, that's a
Speaker 1: really interesting thing that's happened. Is the death of the
Speaker 1: dollar is a popular theme, right It always is a
Speaker 1: popular theme. Ever since I was a kid. It's been
Speaker 1: a popular theme. And yet it's just a theme that
Speaker 1: doesn't work very well. Um. Currently with two engines of growth,
Speaker 1: China and Europe are both sputtering and you really see
Speaker 1: that especially in new orders UM and expectations in Europe. UM.
Speaker 1: The dollar is kind of the cleanest dirty shirt right now.
Speaker 1: People thought that with the swift band on Russia that
Speaker 1: that would be some kind of warning signed to other
Speaker 1: central banks to stay away from from US assets. The
Speaker 1: weaponization of the dollar potentially could have been negative for
Speaker 1: the dollar, but it hasn't had any impact at all,
Speaker 1: and in fact, it hasn't even had an impact on gold.
Speaker 1: Where people thought that was the obvious trade was if
Speaker 1: central banks are going to move away from US assets,
Speaker 1: and they certainly don't want European assets because they bend
Speaker 1: they made the band as well. Then gold seemed like
Speaker 1: an obvious beneficiary, and yet there's been no evidence of
Speaker 1: central banks buying gold either. So what it comes back
Speaker 1: to is the US is the most liquid capital market
Speaker 1: in the world, and when people are nervous, even if
Speaker 1: US equities are underperforming, which they are, when people are nervous,
Speaker 1: they come and buy the dollar. Brent Donnelly, I was like,
Speaker 1: this name sounds so familiar in the pole, I realized
Speaker 1: I have his book on my bookshelf, really the Art
Speaker 1: of Currency Trading. Well, he's been all currencies, yeah, HSBC,
Speaker 1: Lehman Brothers, Nomura, I mean, totally an expert on the dollar.
Speaker 1: But anyways, it's very cool to speak to an author
Speaker 1: I know for my bookshelf. But Brent, I have to
Speaker 1: ask you about stagflation. That seems to be a ward
Speaker 1: that comes up over and over and over agun Is
Speaker 1: that a inevitability for the United States or for Europe.
Speaker 1: I wouldn't say it's inevitable. Um, you know, forecasting is
Speaker 1: hard and that's something I say in my book, but
Speaker 1: I will say that so stagflation, stagflation obviously is stagnation
Speaker 1: and inflation. I don't think I need to talk about
Speaker 1: the inflation side, um, But the concern now is that Okay,
Speaker 1: first of all, you have Europe and China are both problematic.
Speaker 1: Like I said, new orders, especially which tends to be
Speaker 1: the most forward looking, is really ugly, especially in Europe.
Speaker 1: But the thing is now in the US people focus
Speaker 1: on on lagging data like the unemployment rate, But if
Speaker 1: you listen to the conference calls and you look at
Speaker 1: the more recent anecdotal stuff, those anecdotes add up to
Speaker 1: a little bit of concern, even on the labor market.
Speaker 1: So I wouldn't say that it's recessionary type of concern.
Speaker 1: But if you look at Amazon, Netflix, Facebook, Twitter, cameo Carvon,
Speaker 1: I mean I could actually make a longer list than that.
Speaker 1: There's been a lot of either hiring restraint announcements or
Speaker 1: outright layoffs, and that kind of stuff doesn't show up
Speaker 1: in the data for a while. So I think people
Speaker 1: that are relying on a strong US jobs market to
Speaker 1: make the case that everything's fine are probably a slightly
Speaker 1: misguided because that the unemployment rate specifically is a very
Speaker 1: lagging indicator. And to me, the the drop in unemployment
Speaker 1: or the freezes and or the freezes and employment are
Speaker 1: very reminiscent of two thousand, two thousand one. If you
Speaker 1: remember that era, stocks dropped about before you saw anything
Speaker 1: in in the unemployment or initial claims data. UM. So
Speaker 1: now you have the disruption and work from home stocks
Speaker 1: all down around and then the exact same pattern plays
Speaker 1: out where hiring slows because these tech companies know that
Speaker 1: the financing is drying up right. It's Powell Is is
Speaker 1: tightening financial conditions and VC and everyone is feeling that.
Speaker 1: So anyone that overbuilt, like Carbona being an extreme example,
Speaker 1: but even Amazon being another example, really have to pull
Speaker 1: back the reins now, UM, and specifically the tech companies
Speaker 1: that lose a lot of money are not going to
Speaker 1: have easy access to free money anymore. So I think
Speaker 1: that's leading to a drop in confidence, and you see
Speaker 1: that in the consumer confidence data. Now much of that's
Speaker 1: driven by inflation, but now you're starting to see a
Speaker 1: little bit of concern about employment too. So I think
Speaker 1: we're on the front edge of the stagnation part um,
Speaker 1: and we really have to monitor the data and actually,
Speaker 1: more importantly, I think monitor the conference calls of of
Speaker 1: the big names because you look at Target and Walmart.
Speaker 1: UM also kind of concerning right, you're moving out of
Speaker 1: the tech area and now into the consumer and that's
Speaker 1: a little bit worrisome too. So I would say people
Speaker 1: should be worrying about stagflation, all right, Brent, good stuff.
Speaker 1: Really appreciate you taking the time talking to us about
Speaker 1: this economy, talking to us about the currency markets here,
Speaker 1: focusing on again not just the government information, but UH
Speaker 1: info and forward forecast, forward looks from a lot of
Speaker 1: these companies. Brent Downley, president of Spectr Markets. He spent
Speaker 1: uh many many years trading currencies across Wall streeted number
Speaker 1: of firms, so he's got a good feel for here,
Speaker 1: what moves this U S Dollar relative to other currencies,
Speaker 1: UM and economic winds that push these currencies, uh, you know,
Speaker 1: from up and down on a global scale. So I
Speaker 1: always love talking to f X people just kind of
Speaker 1: market rolling over here, uh cretty. So a lot of
Speaker 1: folks not liking what they're seeing, not feeling like we've
Speaker 1: seen a bottom in this market. Got some more room
Speaker 1: to go. We have this fedtle reserve of course raising rates. Uh.
Speaker 1: And again a little bit of concern coming out of
Speaker 1: these retailers over the last three or four days as
Speaker 1: it relates to kind of the inflation impact on not
Speaker 1: only their business but on the consumers. Thanks for listening
Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen
Speaker 1: to interviews with Apple Podcasts or whatever podcast platform you prefer.
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three.
Speaker 1: On Fall Sweeney, I'm on Twitter at pt Sweeney. Before
Speaker 1: the podcast. You can always catch us worldwide at Bloomberg
Speaker 1: Radio