1 00:00:00,080 --> 00:00:02,480 Speaker 1: Let's get to our guest, vishnuv Rathan, who is head 2 00:00:02,520 --> 00:00:07,000 Speaker 1: of economics and Strategy at Missouho Bank. Vish, you're great 3 00:00:07,040 --> 00:00:09,840 Speaker 1: to have you on the program. We can't expect anything 4 00:00:09,880 --> 00:00:13,399 Speaker 1: to definitive definitive, I wouldn't think from the Fed this 5 00:00:13,480 --> 00:00:16,600 Speaker 1: week because we have a couple more CPI reports before 6 00:00:16,600 --> 00:00:19,160 Speaker 1: the December meeting, and that's the one that people are 7 00:00:19,239 --> 00:00:22,400 Speaker 1: kind of anxious about. Uh. And we also have a 8 00:00:22,400 --> 00:00:24,880 Speaker 1: lot of other economic data in the mid terms, but 9 00:00:24,920 --> 00:00:28,360 Speaker 1: they generally will hint at something. What are you expecting 10 00:00:28,760 --> 00:00:31,840 Speaker 1: to be the biggest hint to take away from this meeting? 11 00:00:33,720 --> 00:00:37,400 Speaker 1: I almost like the outset have to UH to to 12 00:00:37,720 --> 00:00:40,360 Speaker 1: you know, expand on that and say to just just 13 00:00:40,400 --> 00:00:42,720 Speaker 1: two things that I think markets will be looking up for. 14 00:00:43,240 --> 00:00:48,360 Speaker 1: One is a willingness to dial back quickly, but that 15 00:00:48,360 --> 00:00:50,760 Speaker 1: that doesn't come as a surprise because from the outset 16 00:00:50,800 --> 00:00:54,160 Speaker 1: that seventy five basis point move has been quote unquote 17 00:00:54,440 --> 00:00:58,040 Speaker 1: unusual UH and and so a dial back I think 18 00:00:58,080 --> 00:01:00,680 Speaker 1: it's the low bar that they all fulfill. But of 19 00:01:00,720 --> 00:01:02,720 Speaker 1: course there will be data dependency attached to it. As 20 00:01:02,960 --> 00:01:05,839 Speaker 1: you pointed out, there's a host of data. The other 21 00:01:05,880 --> 00:01:12,440 Speaker 1: point around it, maybe uh, their discomfort with stickness around inflation, 22 00:01:12,640 --> 00:01:16,520 Speaker 1: because I think they probably would want to or market 23 00:01:16,560 --> 00:01:19,360 Speaker 1: will be watching for more clues on what higher means, 24 00:01:20,200 --> 00:01:23,640 Speaker 1: and especially perhaps pay attention to the fall longer, because 25 00:01:23,680 --> 00:01:27,560 Speaker 1: this is where the biggest dissonances between what markets are 26 00:01:27,600 --> 00:01:30,440 Speaker 1: pricing and what the facts is suggesting in terms of 27 00:01:30,959 --> 00:01:35,160 Speaker 1: keeping rates elebated. We are a little looking towards a 28 00:01:35,240 --> 00:01:37,880 Speaker 1: peak in the global tightening circle and looking at some 29 00:01:38,040 --> 00:01:40,920 Speaker 1: central banks that might have already got there. Is the 30 00:01:41,000 --> 00:01:43,320 Speaker 1: kind of comment that you heard from Marko Kolanovitch that 31 00:01:43,360 --> 00:01:45,360 Speaker 1: we are nearing in And is that just to play 32 00:01:45,400 --> 00:01:49,400 Speaker 1: his book or do you agree with that? I think 33 00:01:50,000 --> 00:01:54,080 Speaker 1: you know one one has to agree given uh two 34 00:01:54,120 --> 00:01:57,560 Speaker 1: factors here. One is that the fact that a lot 35 00:01:57,600 --> 00:02:00,400 Speaker 1: of the playbook for central banks at this time has 36 00:02:00,440 --> 00:02:04,720 Speaker 1: been frontloading UM and and so almost by by default 37 00:02:05,400 --> 00:02:07,640 Speaker 1: we need to fall back to the beach boys and say, yeah, 38 00:02:07,640 --> 00:02:09,240 Speaker 1: if you want to get there fast, there must be 39 00:02:09,280 --> 00:02:11,959 Speaker 1: a piece where you take it slow and pace and watch. 40 00:02:12,840 --> 00:02:16,560 Speaker 1: So I certainly agree with that. I'm so happy to 41 00:02:16,560 --> 00:02:18,720 Speaker 1: hear you say that, because I was like just pounding 42 00:02:18,800 --> 00:02:22,000 Speaker 1: the table last week. You know you can't frontload the 43 00:02:22,000 --> 00:02:25,000 Speaker 1: whole thing. You know, at some point after you front load, 44 00:02:25,120 --> 00:02:26,919 Speaker 1: you kind of get into the middle stages and then 45 00:02:26,919 --> 00:02:29,720 Speaker 1: towards the end. So it's probably not unusual for investors. 46 00:02:29,760 --> 00:02:31,880 Speaker 1: I mean, if you're buying stocks, you're buying for like 47 00:02:32,000 --> 00:02:35,639 Speaker 1: nine months down the road most likely, And where do 48 00:02:35,720 --> 00:02:37,640 Speaker 1: you think will be in nine months? Will we be? 49 00:02:37,880 --> 00:02:42,160 Speaker 1: Will be beyond the FED rate hike cycle? Right? I 50 00:02:42,280 --> 00:02:44,799 Speaker 1: want to say we will be, because if we are not, 51 00:02:45,400 --> 00:02:50,040 Speaker 1: that would point to some kind of policy mistake or 52 00:02:50,840 --> 00:02:54,799 Speaker 1: very unforeseen circumstances to which we must question whether we'll 53 00:02:54,800 --> 00:02:58,160 Speaker 1: react or not. On on another front, we FAT that 54 00:02:58,720 --> 00:03:00,680 Speaker 1: I know the FAT doesn't want to at a tenure 55 00:03:00,680 --> 00:03:03,519 Speaker 1: to your inversion, but it's it's been inverted for seventeen 56 00:03:03,560 --> 00:03:06,400 Speaker 1: weeks now and to your reference of nine months, and 57 00:03:06,480 --> 00:03:09,359 Speaker 1: that may be edging up on a on a possible recession. 58 00:03:09,400 --> 00:03:12,120 Speaker 1: So certainly not the time to be tightening the cruise 59 00:03:12,440 --> 00:03:16,200 Speaker 1: given the legend policy. And and I guess, just quickly, 60 00:03:16,280 --> 00:03:18,600 Speaker 1: how much further upside do we see in in stocks 61 00:03:18,600 --> 00:03:20,360 Speaker 1: when you've seen that eight percent rally and the SNP 62 00:03:20,440 --> 00:03:25,280 Speaker 1: five hundred in October? I think we're not out of turbulence. 63 00:03:25,360 --> 00:03:27,960 Speaker 1: Yet so you know, as much as I wanted to 64 00:03:27,960 --> 00:03:30,080 Speaker 1: think that there could be five to ten percent upside, 65 00:03:30,720 --> 00:03:33,480 Speaker 1: we should brace for two way volatility at least still 66 00:03:34,000 --> 00:03:37,600 Speaker 1: first quarter next year. So we've been talking about the 67 00:03:37,640 --> 00:03:40,640 Speaker 1: downturned risk settles also of course, how that feeds into 68 00:03:40,880 --> 00:03:44,520 Speaker 1: the I guess demand story two. And watching very closely 69 00:03:44,640 --> 00:03:48,120 Speaker 1: the movement in oil. With these economic slowdown concerns hanging 70 00:03:48,160 --> 00:03:51,080 Speaker 1: over the market, you say economic gloom is bound to 71 00:03:51,160 --> 00:03:55,640 Speaker 1: overtake the oil market here, Yeah, I mean that that's you. 72 00:03:55,800 --> 00:03:58,800 Speaker 1: I mean, that's that's a tribe and tested thing that 73 00:03:58,840 --> 00:04:01,440 Speaker 1: we've seen in markets where you know, or usually tends 74 00:04:01,440 --> 00:04:04,440 Speaker 1: to hold up quite well and in some cases actually 75 00:04:04,480 --> 00:04:09,840 Speaker 1: accentuate the downtown initially, particularly in in in environments like 76 00:04:10,000 --> 00:04:14,040 Speaker 1: what we currently see in high oil prices despite head winds. 77 00:04:14,080 --> 00:04:18,120 Speaker 1: But when the recession sets in oil then typically react 78 00:04:18,680 --> 00:04:24,159 Speaker 1: quite sharply, dropping off. So the FED is openly looking 79 00:04:24,200 --> 00:04:28,800 Speaker 1: at lagging economic data like owners equivalent rent and and 80 00:04:28,880 --> 00:04:32,880 Speaker 1: also unemployment. Vishnu, what's the main early and again we 81 00:04:32,960 --> 00:04:35,600 Speaker 1: just talked about one, but what's the main early indicator 82 00:04:35,720 --> 00:04:39,839 Speaker 1: that tells the clearest story about inflation and where the 83 00:04:39,880 --> 00:04:44,599 Speaker 1: FED should be going? I think, you know, in terms 84 00:04:44,640 --> 00:04:48,240 Speaker 1: of looking at the the the the big drivers of inflation, 85 00:04:48,560 --> 00:04:50,680 Speaker 1: we probably need to go a lot more upstreams. And 86 00:04:51,120 --> 00:04:53,800 Speaker 1: if we if we continue, if we look at a 87 00:04:53,839 --> 00:04:59,000 Speaker 1: lot of the the commodity markets as well as shipping, uh, 88 00:04:59,000 --> 00:05:01,120 Speaker 1: and a cost of logic ticks, so on and so forth, 89 00:05:01,400 --> 00:05:05,200 Speaker 1: including energy particularly, these tend to feed through for quite 90 00:05:05,200 --> 00:05:08,960 Speaker 1: a while, so they tend to be better indicators, albeit 91 00:05:09,120 --> 00:05:12,240 Speaker 1: not perfect ones. Uh. And and you're right to point 92 00:05:12,240 --> 00:05:13,800 Speaker 1: out that you know that the FED is quite happy 93 00:05:13,800 --> 00:05:16,920 Speaker 1: to look at legging indicators. I think that's almost deliberate, 94 00:05:16,920 --> 00:05:20,279 Speaker 1: as was pointed out at Jackson Hole. Uh. They're fearful 95 00:05:20,360 --> 00:05:24,560 Speaker 1: of of letting up too quickly, uh, in case the 96 00:05:24,680 --> 00:05:28,080 Speaker 1: eighties type of inflation sets in with second round effects. 97 00:05:28,080 --> 00:05:30,279 Speaker 1: So that that is the conundrum now, whether to look 98 00:05:30,320 --> 00:05:34,360 Speaker 1: at leading indicators or to worry about you know, lingering effects. 99 00:05:34,800 --> 00:05:37,160 Speaker 1: What's the likelihood of that and the likelihood as well 100 00:05:37,240 --> 00:05:40,040 Speaker 1: that you continue to see dollar strength weighing into another 101 00:05:40,080 --> 00:05:45,680 Speaker 1: Asian financial crisis. The dollar strength uh, you know being 102 00:05:45,720 --> 00:05:49,120 Speaker 1: a risk is a particularly large one for me, mainly 103 00:05:49,160 --> 00:05:51,880 Speaker 1: because you know, we've seen the dollar not peaking out 104 00:05:51,960 --> 00:05:56,359 Speaker 1: despite you know, approaching peak grades, which is atypical. The 105 00:05:56,480 --> 00:06:00,280 Speaker 1: lack of alternatives, whether you ro sterling or again make it, 106 00:06:00,360 --> 00:06:02,039 Speaker 1: they roll it higher for longer. And I think the 107 00:06:02,080 --> 00:06:06,400 Speaker 1: financial risks from that and capital floor risks are barely enlarged, 108 00:06:06,480 --> 00:06:10,560 Speaker 1: even if not as evident currently. Uh. And I think 109 00:06:10,600 --> 00:06:15,039 Speaker 1: that's really what makes it dangerous. So I promised this question. 110 00:06:15,880 --> 00:06:18,799 Speaker 1: I had hoped that Julia would ask throw me a bone, 111 00:06:18,839 --> 00:06:22,520 Speaker 1: But so so a lot of times, because the market 112 00:06:22,680 --> 00:06:25,440 Speaker 1: is looking out a lot of times, you know, the 113 00:06:25,480 --> 00:06:29,000 Speaker 1: market will bottom and indeed start rallying even while in 114 00:06:29,040 --> 00:06:33,400 Speaker 1: recession and not even knowing that we had recession, but 115 00:06:33,400 --> 00:06:36,640 Speaker 1: but you know, seeing past it. Uh, what's the relationship 116 00:06:36,680 --> 00:06:42,159 Speaker 1: between a recession and markets botto me out? That's that's 117 00:06:42,160 --> 00:06:45,280 Speaker 1: a really good question, And I think it's probably going 118 00:06:45,320 --> 00:06:49,080 Speaker 1: to rely on a few factors. Our much more proximate 119 00:06:49,120 --> 00:06:54,200 Speaker 1: memory has got to do with an even earlier reaction 120 00:06:54,279 --> 00:06:57,440 Speaker 1: to two. Really, because markets have come to expect that 121 00:06:57,480 --> 00:07:00,640 Speaker 1: the FED would start cutting rates and perhaps even supplying 122 00:07:00,680 --> 00:07:06,000 Speaker 1: liquidity if if the recession risks look quite dire or threatening. 123 00:07:06,200 --> 00:07:08,480 Speaker 1: So that's one. The other could be during a recession, 124 00:07:08,600 --> 00:07:12,600 Speaker 1: we also tend to draw down tremendously on on inventory 125 00:07:13,200 --> 00:07:16,160 Speaker 1: uh and and and cut back production quite sharply. So 126 00:07:16,600 --> 00:07:19,960 Speaker 1: you know, a six to nine months a lead in 127 00:07:20,240 --> 00:07:24,000 Speaker 1: markets railing and anticipation of the of the demand that emerges. 128 00:07:24,560 --> 00:07:27,800 Speaker 1: It's also a very sound story to go with. Trouble 129 00:07:27,840 --> 00:07:30,760 Speaker 1: now is we don't know exactly which which uh you 130 00:07:30,800 --> 00:07:33,640 Speaker 1: know iteration will play out uh and and I think 131 00:07:33,680 --> 00:07:38,040 Speaker 1: that means that markets railing next year is not unfeasible, 132 00:07:38,600 --> 00:07:41,920 Speaker 1: but perhaps it's not a guaranteed as yet. Alright, always 133 00:07:41,920 --> 00:07:43,960 Speaker 1: a pleasure VISU. Thank you Vishuvath and his head of 134 00:07:43,960 --> 00:07:46,080 Speaker 1: economics and strategy at Missoo who bank joining us on 135 00:07:46,080 --> 00:07:49,000 Speaker 1: the line from Singapore for us here on Bloomberg Daybreak Asia.