1
00:00:00,080 --> 00:00:02,360
Speaker 1: All right, let's get to Premisra, global head of rate

2
00:00:02,440 --> 00:00:06,000
Speaker 1: strategy at t D Securities. Keep period here. In the

3
00:00:06,040 --> 00:00:08,080
Speaker 1: next ten days. You've got a lot happening, as you

4
00:00:08,119 --> 00:00:10,520
Speaker 1: mentioned the FED and the Bank of England, but also

5
00:00:10,960 --> 00:00:15,280
Speaker 1: the October jobs report, the cp I, the latest CPI,

6
00:00:15,440 --> 00:00:18,840
Speaker 1: and the midterm elections. It's kind of crazy to think

7
00:00:18,840 --> 00:00:22,400
Speaker 1: of there being one story there that you can distill

8
00:00:22,600 --> 00:00:26,600
Speaker 1: into a strategy or can you Yes, there is a

9
00:00:26,600 --> 00:00:29,400
Speaker 1: lot of data. I think the one common story is

10
00:00:29,440 --> 00:00:32,200
Speaker 1: that the FED and other center banks have to keep

11
00:00:32,280 --> 00:00:35,680
Speaker 1: tightening policy. But the question is, you know, can does

12
00:00:35,720 --> 00:00:38,760
Speaker 1: the narrative of front loading come to an end? You know?

13
00:00:38,800 --> 00:00:40,360
Speaker 1: And I think that's what the market is waiting for

14
00:00:40,400 --> 00:00:43,120
Speaker 1: this pivot. I just think if the fact can signal

15
00:00:43,200 --> 00:00:45,120
Speaker 1: that they can go seventy five and then they can

16
00:00:45,360 --> 00:00:47,840
Speaker 1: slow down the pace of hikes, I think the market

17
00:00:47,840 --> 00:00:50,960
Speaker 1: will be comforted by that because let the data guide

18
00:00:51,040 --> 00:00:53,360
Speaker 1: how much tightening in policy has gone through, Because the

19
00:00:53,360 --> 00:00:55,720
Speaker 1: FED and other center banks have done a lot, and

20
00:00:55,760 --> 00:00:58,000
Speaker 1: I think just an acknowledgement of how much they have

21
00:00:58,120 --> 00:01:01,000
Speaker 1: tightened and the fact that data response with the lag,

22
00:01:01,040 --> 00:01:03,840
Speaker 1: I think that will be enough to comfort the market.

23
00:01:03,840 --> 00:01:06,039
Speaker 1: I think that's concerned that the Fair and other central

24
00:01:06,040 --> 00:01:08,240
Speaker 1: banks may have overdone it. So I think we'll be

25
00:01:08,319 --> 00:01:11,080
Speaker 1: data dependent, but we'll be watching the message from center

26
00:01:11,160 --> 00:01:14,200
Speaker 1: banks whether they've caught up and now they can afford

27
00:01:14,240 --> 00:01:17,000
Speaker 1: to be more responsive to data. Okay, we've got a

28
00:01:17,040 --> 00:01:19,080
Speaker 1: lot of angles to that, but I wanted to get

29
00:01:19,080 --> 00:01:21,760
Speaker 1: to China. We've got limited time in this slot. That

30
00:01:21,840 --> 00:01:24,720
Speaker 1: comment from Chris wood over at Jeffreys that this is

31
00:01:24,800 --> 00:01:28,199
Speaker 1: the end of the pro growth reform period in China,

32
00:01:28,640 --> 00:01:33,119
Speaker 1: is that truth to you or maybe over reaction? Now?

33
00:01:33,160 --> 00:01:35,600
Speaker 1: I think, you know, we know that China is struggling

34
00:01:35,640 --> 00:01:39,080
Speaker 1: with the debt overhang. They're still trying to go through

35
00:01:39,120 --> 00:01:42,920
Speaker 1: their deregulation part on on the tech sector. So I

36
00:01:42,959 --> 00:01:48,520
Speaker 1: think that it's probably more cohesive policy, more um, you know, operationally,

37
00:01:49,000 --> 00:01:53,920
Speaker 1: I think better implemented policy. But I think the years

38
00:01:54,440 --> 00:01:58,040
Speaker 1: or decades of China leading the world GDP, I think

39
00:01:58,080 --> 00:02:01,760
Speaker 1: that's over as they're trying to shift into more mature growth.

40
00:02:01,840 --> 00:02:04,080
Speaker 1: So I think the market is over reacting a little bit.

41
00:02:04,280 --> 00:02:06,880
Speaker 1: But we are likely to see slow growth from China

42
00:02:07,040 --> 00:02:10,120
Speaker 1: as they try and become a more mature economy, and

43
00:02:10,200 --> 00:02:13,240
Speaker 1: just really briefly with with yields up in the dollar up,

44
00:02:14,160 --> 00:02:17,720
Speaker 1: it might suggest to investors that inflation is is coming

45
00:02:17,800 --> 00:02:23,959
Speaker 1: under control. I mean, that seems doubtful, but the rallying

46
00:02:24,040 --> 00:02:29,040
Speaker 1: stock shows there's some resilience. So what gives I think

47
00:02:29,520 --> 00:02:32,160
Speaker 1: we are looking for some decline and inflation. I hear

48
00:02:32,200 --> 00:02:34,080
Speaker 1: you that it's been something we've been calling for for

49
00:02:34,080 --> 00:02:36,040
Speaker 1: a while and the market has been wrong on it.

50
00:02:36,080 --> 00:02:39,000
Speaker 1: But you know, commodity prices have come off. I think

51
00:02:39,040 --> 00:02:42,080
Speaker 1: some aspects of service inflation comes off um and I

52
00:02:42,080 --> 00:02:44,600
Speaker 1: think that's why the equity market has been a little

53
00:02:44,600 --> 00:02:47,680
Speaker 1: bit more positive, just because of the fact need not

54
00:02:47,800 --> 00:02:50,519
Speaker 1: go as fast. But I think inflation is going to

55
00:02:50,600 --> 00:02:54,480
Speaker 1: be sticky. Let's just you know, we've got the interest

56
00:02:54,600 --> 00:02:57,480
Speaker 1: rate move of course coming up. But the thing is

57
00:02:58,400 --> 00:03:02,000
Speaker 1: how much are they willing to sacrifice the economy to

58
00:03:02,080 --> 00:03:07,440
Speaker 1: restore their credibility. Sure, that's the trilling and all the question.

59
00:03:07,440 --> 00:03:09,560
Speaker 1: But I would say right now, the FED doesn't see

60
00:03:09,720 --> 00:03:12,280
Speaker 1: much of a conflict because the data is still strong

61
00:03:12,360 --> 00:03:15,640
Speaker 1: in the US, the labor market is well below what

62
00:03:15,760 --> 00:03:18,919
Speaker 1: they argue NERU is or non accelerating rate of unemployment.

63
00:03:19,240 --> 00:03:21,520
Speaker 1: So for now, I think the FED can continue to

64
00:03:21,600 --> 00:03:24,440
Speaker 1: raise rates. I would argue that they need to not

65
00:03:24,639 --> 00:03:26,720
Speaker 1: raise rates at seventy five basins points that they can

66
00:03:26,760 --> 00:03:29,280
Speaker 1: slow it down, but they can keep going because the

67
00:03:29,480 --> 00:03:32,440
Speaker 1: data is still strong on the on the day, on

68
00:03:32,440 --> 00:03:34,640
Speaker 1: on the growth front, on on the growth as well

69
00:03:34,680 --> 00:03:38,080
Speaker 1: as labor market front. I think that conflict will really

70
00:03:38,080 --> 00:03:40,640
Speaker 1: show up next year because we'll see the delayed impact

71
00:03:40,720 --> 00:03:44,040
Speaker 1: of hikes on the economy. But that's I think a

72
00:03:44,120 --> 00:03:46,400
Speaker 1: good six months away when the consumer starts to give

73
00:03:46,400 --> 00:03:49,960
Speaker 1: away pretty It's interesting you bring up narrow I mean,

74
00:03:49,960 --> 00:03:52,200
Speaker 1: of course, as as you mentioned on accelerating inflation, rate

75
00:03:52,200 --> 00:03:56,680
Speaker 1: of unemployment, because this would seem to then perhaps go

76
00:03:56,800 --> 00:03:59,840
Speaker 1: to the Phillips curve is alive and well, perhaps just

77
00:04:00,480 --> 00:04:06,280
Speaker 1: slightly more askew than it was. Yeah, I think you

78
00:04:06,320 --> 00:04:08,839
Speaker 1: know the talk around how the Phillips curve was dead.

79
00:04:08,880 --> 00:04:11,800
Speaker 1: I think we saw it re emerging. But I think

80
00:04:11,800 --> 00:04:14,280
Speaker 1: the question is what is neru um the you know,

81
00:04:14,480 --> 00:04:17,480
Speaker 1: the Fed says that's about four percent, Chapel has talked

82
00:04:17,480 --> 00:04:21,360
Speaker 1: about it being potentially higher. I mean, the wage inflation

83
00:04:21,440 --> 00:04:23,760
Speaker 1: is very high, so you could even make the case

84
00:04:23,839 --> 00:04:26,599
Speaker 1: that perhaps NERO is four and a half, which actually

85
00:04:26,640 --> 00:04:29,440
Speaker 1: means that the Fed probably does not respond even if

86
00:04:29,480 --> 00:04:32,320
Speaker 1: the unemployment rate rises by a percentage point from here,

87
00:04:32,720 --> 00:04:35,560
Speaker 1: which I would argue is very close to recessionary levels.

88
00:04:35,680 --> 00:04:38,120
Speaker 1: But the fact might be looking for more for five

89
00:04:38,320 --> 00:04:41,520
Speaker 1: or a higher unemployment rate, which actually means that the

90
00:04:41,560 --> 00:04:44,279
Speaker 1: seeds of a recession are being sold here. Well, it

91
00:04:44,320 --> 00:04:46,799
Speaker 1: also means that we probably haven't seen a peak in

92
00:04:46,800 --> 00:04:50,960
Speaker 1: in rates yet. In the front end, I would argue, yes,

93
00:04:51,000 --> 00:04:53,880
Speaker 1: and you know we talked about sticky inflation. If we

94
00:04:53,920 --> 00:04:56,520
Speaker 1: see inflation reading staying high, in the unemployment rate not

95
00:04:56,680 --> 00:04:59,440
Speaker 1: rising fast, I think in the front end, yes, In

96
00:04:59,520 --> 00:05:01,800
Speaker 1: the long and I think we have to think. I mean,

97
00:05:01,839 --> 00:05:04,279
Speaker 1: we're arguing that the peak has been set. It's in

98
00:05:04,320 --> 00:05:06,240
Speaker 1: the four to four and a half percent range. And

99
00:05:06,680 --> 00:05:09,360
Speaker 1: actually duration looks at risk is going to look attractive

100
00:05:09,880 --> 00:05:13,120
Speaker 1: as the economy starts to show signs of slowing. So

101
00:05:13,160 --> 00:05:15,640
Speaker 1: it's an unusual environment here. We're seeing quite a lot

102
00:05:15,640 --> 00:05:19,800
Speaker 1: of resilience, and somewhat interpret that as as confidence in

103
00:05:20,120 --> 00:05:23,520
Speaker 1: taking on more risk. It seems like you're suggesting that

104
00:05:23,560 --> 00:05:26,680
Speaker 1: we should be a little bit careful. I don't necessarily

105
00:05:26,680 --> 00:05:28,599
Speaker 1: want you to put in equities had on, but in

106
00:05:28,640 --> 00:05:30,800
Speaker 1: looking at risk for the end of the year. Is

107
00:05:30,839 --> 00:05:33,200
Speaker 1: there a big difference between what we can expect in

108
00:05:33,200 --> 00:05:37,480
Speaker 1: the short term versus the medium Yeah. I think in

109
00:05:37,520 --> 00:05:39,960
Speaker 1: the short term we've had a big pullback, so you know,

110
00:05:40,000 --> 00:05:43,240
Speaker 1: you can see risk stabilize, especially if the FED can

111
00:05:43,320 --> 00:05:45,880
Speaker 1: start to slow down the pace of hikes. But I

112
00:05:45,920 --> 00:05:49,080
Speaker 1: do think medium term, if the earnings estimates are going

113
00:05:49,120 --> 00:05:52,000
Speaker 1: to get revised lower because the consumer is dealing with

114
00:05:52,120 --> 00:05:54,720
Speaker 1: negative wage growth or there's been a lot of tightening

115
00:05:54,760 --> 00:05:58,560
Speaker 1: put in by the Fed, I have to worry about earnings. Um,

116
00:05:58,600 --> 00:06:02,279
Speaker 1: you know, revisions lower or recession. I would argue recession

117
00:06:02,360 --> 00:06:04,400
Speaker 1: is not priced and to risk ass it. So I

118
00:06:04,440 --> 00:06:07,080
Speaker 1: am more concerned medium term, though in the near term,

119
00:06:07,120 --> 00:06:08,960
Speaker 1: in two year end we could we could probably have

120
00:06:09,120 --> 00:06:12,159
Speaker 1: a bit of a bear market rally. But what about

121
00:06:12,360 --> 00:06:14,039
Speaker 1: the dollar? Where did it go next? I mean it

122
00:06:14,080 --> 00:06:16,560
Speaker 1: does look a bit whatbbly, have we had peak hakishness,

123
00:06:16,600 --> 00:06:21,080
Speaker 1: in which case, do we have peaked dollar behind us? Yeah?

124
00:06:21,120 --> 00:06:23,120
Speaker 1: We actually think. I mean, when it comes to the dollars,

125
00:06:23,400 --> 00:06:25,920
Speaker 1: all about relative performance with the rest of the world.

126
00:06:26,080 --> 00:06:28,400
Speaker 1: The US is still outperforming the rest of the world,

127
00:06:28,760 --> 00:06:31,440
Speaker 1: so we don't I mean, even if we've hit peak dollar,

128
00:06:31,520 --> 00:06:33,440
Speaker 1: I think we're going to plateau at a very high

129
00:06:33,520 --> 00:06:36,919
Speaker 1: level because I would argue the US is still performing

130
00:06:36,920 --> 00:06:39,640
Speaker 1: the best within the world in terms of growth, in

131
00:06:39,720 --> 00:06:42,480
Speaker 1: terms of how much the FED can continue due to

132
00:06:42,600 --> 00:06:44,800
Speaker 1: hike versus other central banks. So I think the dollar

133
00:06:44,880 --> 00:06:47,600
Speaker 1: strength is here to stay, though we might just you know,

134
00:06:47,839 --> 00:06:50,400
Speaker 1: be more stable around these levels if all central banks

135
00:06:50,400 --> 00:06:54,960
Speaker 1: can downshift a little bit and just briefly, I guess

136
00:06:55,000 --> 00:06:58,880
Speaker 1: the PC data late last week wasn't all that encouraging

137
00:06:58,920 --> 00:07:04,040
Speaker 1: if you're hoping inflation on its way down right now.

138
00:07:04,040 --> 00:07:05,760
Speaker 1: I think, you know, when you look at diffusion and

139
00:07:05,920 --> 00:07:10,120
Speaker 1: in disease around inflation or the broad based nature, inflation

140
00:07:10,200 --> 00:07:13,000
Speaker 1: is extremely broad based, and that makes me concerned that

141
00:07:13,040 --> 00:07:16,000
Speaker 1: it's kind to be sticky. Well on that bombshell, Thank you.

142
00:07:16,040 --> 00:07:18,040
Speaker 1: Pre at three and Mr the Global head of Great

143
00:07:18,200 --> 00:07:20,760
Speaker 1: Strategy of t D Security is getting her take on

144
00:07:20,920 --> 00:07:23,640
Speaker 1: what the Federal Reserve does and other central banks and

145
00:07:23,920 --> 00:07:26,000
Speaker 1: generally the economic zeitgeist