WEBVTT - US CPI Rises Less Than Expected, Keeping Fed on Track to Cut 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.480 --> 0:00:30.720 Constancena joins us right now, thrilled that she could be 0:00:30.760 --> 0:00:37.080 with us today. I look at where we are, and BOYD, 0:00:37.120 --> 0:00:40.960 does it reaffirm? I'm gonna call it Wallerian rate cuts? 0:00:41.640 --> 0:00:44.640 Are we now generating rate cuts into the first quarter 0:00:44.680 --> 0:00:45.400 of next year? 0:00:46.760 --> 0:00:49.319 Well? I think I said in my note to you 0:00:49.560 --> 0:00:53.200 that whatever we see in today's CPI is not going 0:00:53.240 --> 0:00:55.640 to reflect what's coming down the pike. 0:00:55.920 --> 0:00:56.200 Right. 0:00:56.320 --> 0:01:00.400 We have seen companies absorb a lot of the tariffs 0:01:00.480 --> 0:01:03.200 because there's so much uncertainty. And why would you pass 0:01:03.240 --> 0:01:05.319 on tariffs if you think that they're going to be 0:01:05.360 --> 0:01:08.720 removed or negotiated lower. You're just going to impair your 0:01:08.760 --> 0:01:11.840 market share and impair your brand. And I think that 0:01:12.040 --> 0:01:14.479 is about to come to an end, and we're going 0:01:14.520 --> 0:01:16.920 to see that in future CPI reports. 0:01:17.160 --> 0:01:19.479 With that said, the FED is going to. 0:01:19.400 --> 0:01:22.480 Cut next week, and this certainly gives them cover for 0:01:22.600 --> 0:01:26.040 next week and possibly even to cut again in December. 0:01:26.560 --> 0:01:29.720 Are we anywhere near the territory of a fifty basis 0:01:29.720 --> 0:01:32.600 point right and cut cool? We have a dearth of data, 0:01:33.440 --> 0:01:35.480 But I mean, come on, if we were just to 0:01:35.520 --> 0:01:38.640 make it up, folks, it's Friday helping her folks. If 0:01:38.680 --> 0:01:40.840 we made it up Constance and we said we got 0:01:40.880 --> 0:01:44.639 a fifty seven thousand non farm payroll and then maybe 0:01:44.640 --> 0:01:47.880 next month we get a forty two thousand non farm payroll, 0:01:48.480 --> 0:01:50.520 I mean, come on, they got to get it going, 0:01:50.680 --> 0:01:52.360 don't they. 0:01:52.560 --> 0:01:56.040 Well, it's interesting, and I'm actually sitting here in Michigan 0:01:57.240 --> 0:02:01.520 where close to GM where the where you mentioned those layoffs, 0:02:01.840 --> 0:02:06.360 And certainly if you look at at a state like Michigan, 0:02:06.440 --> 0:02:08.760 it's got a higher rate of unemployment than the rest 0:02:08.800 --> 0:02:12.519 of the country. It's definitely suffering. And it has been 0:02:12.560 --> 0:02:15.560 our view that the FED is going to look at 0:02:15.639 --> 0:02:21.040 labor markets more than inflation, because they're going to look 0:02:21.200 --> 0:02:24.919 through that that CPI increase that we do eventually expect 0:02:24.960 --> 0:02:29.760 from tariffs, and Paul to say, the private data suggests 0:02:29.800 --> 0:02:31.720 that the job market is weakening as well. Right in 0:02:31.760 --> 0:02:34.680 the absence of government data, we have the ism we 0:02:34.760 --> 0:02:36.720 have ADP we have. 0:02:36.800 --> 0:02:40.840 Indeed, Paul I just figured it out. Constance Hunter is 0:02:40.880 --> 0:02:44.280 going with Diane Swack to the Michigan Michigan State. 0:02:44.120 --> 0:02:49.720 Go compan Good, good, good, Constance. I mean again, I'm 0:02:49.760 --> 0:02:52.920 just looking at the CPI data today. I'm just not 0:02:53.000 --> 0:02:56.840 seeing this tariff induced inflation here. I know, seems like 0:02:56.840 --> 0:02:59.120 maybe the companies are just kind of taking it in 0:02:59.200 --> 0:03:01.520 a P and L and we are not going to 0:03:01.560 --> 0:03:03.120 see tariff induced inflation. 0:03:04.560 --> 0:03:05.839 Well, I don't think. 0:03:05.600 --> 0:03:09.280 That that means we're never going to see it. On 0:03:09.320 --> 0:03:10.880 the other hand, I mean, I guess there is the 0:03:10.919 --> 0:03:15.160 possibility that firms find ways to be efficient and absorb 0:03:15.280 --> 0:03:18.720 these tariff costs, but it seems somewhat unlikely, and firms, 0:03:18.760 --> 0:03:21.680 if you survey them, have said they want to pass 0:03:21.760 --> 0:03:26.360 on tariff price increases. But it's really challenging when you 0:03:26.400 --> 0:03:29.200 think of what a CA shaped economy we are in, 0:03:29.320 --> 0:03:33.920 right that top ten percent of consumers of wage earners 0:03:33.919 --> 0:03:36.800 are also those that own equities and are participating in 0:03:36.840 --> 0:03:39.400 this bowl market. Where's the bottom part of that k 0:03:39.640 --> 0:03:45.480 We're starting to see increased delinquencies with credit cards and 0:03:45.600 --> 0:03:48.200 auto loans. Those are levels that we saw coming out 0:03:48.240 --> 0:03:51.320 of the global financial crisis, and that indicates that that 0:03:51.360 --> 0:03:53.600 segment of the market is really struggling. 0:03:54.520 --> 0:03:57.360 So where will we see that when we see that 0:03:57.400 --> 0:04:00.480 in consumer spending? Will we see that in retail sales? 0:04:00.480 --> 0:04:01.400 Where do you think we'll see that? 0:04:02.960 --> 0:04:04.640 Well, we're not going to see it in retail sales 0:04:04.680 --> 0:04:07.520 because it's not inflation adjusted. So if anything, we might 0:04:07.520 --> 0:04:09.880 see retail sales go up a bit, but I think 0:04:10.000 --> 0:04:13.480 we'll see it in the inflation adjusted consumer spending numbers. 0:04:14.520 --> 0:04:16.159 Households are going to have to pull back. 0:04:16.560 --> 0:04:18.320 And the other thing is, while it's not in. 0:04:18.240 --> 0:04:21.440 This report, the anticipation is that we're going to see 0:04:21.520 --> 0:04:25.400 upward pressure on utilities like electricity, which is going to 0:04:25.520 --> 0:04:28.440 curb the ability of households to spend in other areas. 0:04:29.800 --> 0:04:33.400 Labor market here, that's another mandate of this Federal Reserve. 0:04:34.480 --> 0:04:38.360 The headline numbers look fine, but I know there are 0:04:38.480 --> 0:04:40.960 definitely some concerns underneath the hood there. How do you 0:04:41.240 --> 0:04:42.599 think about the US labor market? 0:04:44.360 --> 0:04:48.320 Well, the labor market is weakening because we're seeing a 0:04:48.360 --> 0:04:51.120 declining breadth that we have seen for some time now. 0:04:51.200 --> 0:04:53.600 I'm looking at them talking about the August data. Of course, 0:04:53.600 --> 0:04:57.200 we don't have that September data. And then if we 0:04:57.279 --> 0:05:00.720 look at again alternative indicators. So so if you look 0:05:00.760 --> 0:05:04.440 at the ISM employment indicator, that's been a very good 0:05:04.560 --> 0:05:07.520 especially on service, is a very good predictor of overall 0:05:08.520 --> 0:05:11.760 jobs growth, and that also is weak. And then we're 0:05:11.880 --> 0:05:16.760 seeing a pullback in state and local hiring. The state 0:05:16.800 --> 0:05:21.120 and local municipalities received huge windfall money from the rise 0:05:21.160 --> 0:05:25.560 in real estate prices, and they were hiring a deficit 0:05:25.600 --> 0:05:27.640 of workers that they didn't hire coming out of the 0:05:27.640 --> 0:05:29.440 global financial crisis. 0:05:29.200 --> 0:05:32.560 Comes as quickly. Here does a president deserve to be 0:05:32.720 --> 0:05:34.440 impatient with the Fed? 0:05:35.360 --> 0:05:38.800 Well, it depends on what you think the Fed's job is. 0:05:39.080 --> 0:05:39.279 Right. 0:05:40.400 --> 0:05:42.520 If you think the Fed's job is to move fast, 0:05:42.560 --> 0:05:47.000 break things, be anticipatory, behave like a hedge fund, I 0:05:47.040 --> 0:05:52.160 suppose yes. But by design, the FED is supposed. 0:05:51.600 --> 0:05:53.080 To be a little late to. 0:05:53.120 --> 0:05:55.440 React because if they react. 0:05:55.080 --> 0:05:59.640 Preemptively and they're wrong, there's much more downside risk then 0:05:59.680 --> 0:06:03.279 there than if they're fashionably late but still in the 0:06:03.360 --> 0:06:05.320 right direction like that fashionly lady. 0:06:05.400 --> 0:06:09.159 Yes, Constant, thank you so much. Constance Hunter. Coming to 0:06:09.240 --> 0:06:12.800 us to the Economic Intelligence Unit today on this inflation 0:06:12.920 --> 0:06:16.600 to review here REQUIESCE and report futures up twenty two 0:06:16.680 --> 0:06:20.080 they double features up forty one, up sixtents of a percent, 0:06:20.400 --> 0:06:23.400 Nazak one hundred and features up one percent, now a 0:06:23.600 --> 0:06:27.760 point nine percent as well, the vics solidly under seventeen wow, 0:06:28.520 --> 0:06:31.560 sixteen point sixty four. Speaking of well, let's do this 0:06:31.600 --> 0:06:35.000 first Bloomberg surveillance. I'm so out of practice with their data, Paul, 0:06:35.160 --> 0:06:37.520 I know, it's a shock to have data. He is 0:06:37.560 --> 0:06:40.640 at the height of fashion at all time. It's good 0:06:40.640 --> 0:06:42.640 to catch up and get a framework for the weekend 0:06:42.680 --> 0:06:46.200 with Kit Jukes. He's had a foreign exchange strategy at 0:06:46.200 --> 0:06:50.040 Society General. Kit just cut to the chase. What are 0:06:50.040 --> 0:06:53.760 you going to write about for Monday within the geopolitics 0:06:53.760 --> 0:06:57.200 that you see the litmus paper of the foreign exchange system? 0:06:57.480 --> 0:06:59.440 What's your theme to get to Monday morning? 0:07:01.160 --> 0:07:03.880 Going into Monday morning, I suspect it's going to be 0:07:04.640 --> 0:07:07.880 the resilience of this strong dollar. In all honesty, even 0:07:08.000 --> 0:07:11.200 just looking now over my shoulder at what's going on 0:07:11.560 --> 0:07:15.440 since the release of a soft CPI print, the market 0:07:15.480 --> 0:07:17.160 is not you know, it's going to price in some 0:07:17.560 --> 0:07:20.240 rate cuts from the Fed with more enthusiasm at the 0:07:20.280 --> 0:07:22.840 margin than before. We don't know much more than we did, 0:07:22.840 --> 0:07:25.880 but we'll price a little bit more enthusiastically on easing. 0:07:26.400 --> 0:07:28.680 And I'm not seeing the dollar backing off very much 0:07:28.680 --> 0:07:30.840 at all on that because and it's. 0:07:31.080 --> 0:07:34.320 Sorry, no, not continue, please please, I. 0:07:34.200 --> 0:07:36.880 Was going to say, because the CPI numbers don't tell 0:07:36.920 --> 0:07:40.520 us anything new about growth, and that's where the real 0:07:40.560 --> 0:07:42.600 debate about the US economy is going to happen. 0:07:42.800 --> 0:07:45.320 What you're so good at, kit, Is there a bet 0:07:45.360 --> 0:07:46.600 in the market right now? 0:07:48.480 --> 0:07:51.640 I think the market's betting on rate carts, but it's 0:07:51.760 --> 0:07:55.560 also betting on resilient growth. That keeps me confused. And 0:07:55.600 --> 0:07:57.960 I should add this is the most dollar centric, US 0:07:58.000 --> 0:08:00.840 centric economic cycle that I can remember in ages because 0:08:01.040 --> 0:08:05.400 the uncertainty around the US GDP numbers retail sales number 0:08:05.400 --> 0:08:08.120 because sure prize numbers is much bigger than the uncertainty 0:08:08.120 --> 0:08:10.640 about the lack of growth in Europe or in Asia. 0:08:10.760 --> 0:08:14.480 So it's all about you, guys, and and we're getting 0:08:14.480 --> 0:08:17.000 no information. So when we get some we think the 0:08:17.360 --> 0:08:20.800 we think the labor market's weakening, but not knowing more 0:08:20.560 --> 0:08:25.160 where I think collectively assuming that we shouldn't be revising 0:08:25.200 --> 0:08:28.280 down GDP forecasts so that there's lots of productivity, there's 0:08:28.320 --> 0:08:30.280 lots of ail, there's lots of good things. The equity 0:08:30.280 --> 0:08:33.960 market's still strong. So US exceptionalism is still in place. 0:08:34.280 --> 0:08:38.640 That bet is there. Today's soft CPI prints will encourage 0:08:38.920 --> 0:08:42.240 rate cuts, but they won't change that optimism about the 0:08:42.280 --> 0:08:43.319 economy is my bet. 0:08:43.600 --> 0:08:46.320 And Kit it's interesting for me at least to hear 0:08:46.400 --> 0:08:48.160 you say it's it's it's still all about the US, 0:08:48.280 --> 0:08:51.960 US exceptionalism because the trade has been that. It's you know, 0:08:51.960 --> 0:08:53.959 it's kind of about you guys over in Europe. I mean, 0:08:54.000 --> 0:08:58.520 you're starting to spend some money on defense and infrastructure, 0:08:58.679 --> 0:09:01.160 and you know you can't really depend upon the US 0:09:01.200 --> 0:09:03.679 to the extent that you did maybe you did before. 0:09:04.800 --> 0:09:06.320 How do you think about that dynamic? Because we do 0:09:06.400 --> 0:09:10.319 have the euro again add at one sixteen here, well, the. 0:09:10.240 --> 0:09:12.360 Europopped up to one sixteen on a move down in 0:09:12.480 --> 0:09:16.360 US rate expectations that narrawed the gap significantly, on some 0:09:16.400 --> 0:09:19.480 optimism in growth. Obviously the fiscal problems in France haven't 0:09:19.520 --> 0:09:23.600 helped on that. And equally that there's a there's not 0:09:23.640 --> 0:09:26.520 a huge amount of you know, there's hope, but if 0:09:26.520 --> 0:09:28.719 we look at the if we look at the exceptional 0:09:28.760 --> 0:09:31.560 spending that the Germans were getting ready to unleash. It's 0:09:31.600 --> 0:09:34.439 not happening fast enough. So you see, the real performers 0:09:34.440 --> 0:09:36.160 in Europe are the people that can be more fleet 0:09:36.200 --> 0:09:38.640 of foot. The Swedish Chrona has been doing very well 0:09:38.679 --> 0:09:40.480 because they are going to be they have a bigger 0:09:40.559 --> 0:09:44.040 arms industry their economy, but they also are pushing forwards. 0:09:44.240 --> 0:09:47.600 The Norwegian kroner is doing really well. The euro is 0:09:47.720 --> 0:09:50.439 lagging those and the Swiss Frank is doing as well 0:09:50.440 --> 0:09:53.920 as the euro is speaks volumes about safe Aden's that's right. 0:09:53.800 --> 0:09:56.320 Where I wanted to go. Audrey Child Freeman with Bloomberg 0:09:56.360 --> 0:09:59.800 at Queen Victoria's Street Kit was just brilliant yesterday. And 0:10:00.080 --> 0:10:02.720 analyzing Swiss franc I mean, I guess it's out of 0:10:02.760 --> 0:10:06.760 the purview of many of our listeners and viewers explain 0:10:06.840 --> 0:10:12.600 the ramifications for America, for Zurich, for Geneva. If the 0:10:12.679 --> 0:10:15.600 Swiss Frank breaks to new strength. 0:10:15.720 --> 0:10:17.720 I think it causes I mean, I think people will 0:10:17.760 --> 0:10:21.360 then turn around and see much more clearly that there's 0:10:21.480 --> 0:10:25.160 money chasing Haven's. That the money that we see enthusiastically 0:10:25.160 --> 0:10:28.040 going to gold, because we quite like that story that Actually, 0:10:28.080 --> 0:10:30.559 this is a world where people want to put their 0:10:30.559 --> 0:10:34.160 money somewhere safe and a vault deep underneath the alps. 0:10:34.880 --> 0:10:38.560 That that's not animal spirits in the sense that we 0:10:38.600 --> 0:10:40.920 know and understand them. So it tells people that although 0:10:40.920 --> 0:10:44.880 the US economy is dominant, people aren't really confident in 0:10:44.920 --> 0:10:48.400 the dollar, and they're not confident in the euroe. They're 0:10:48.440 --> 0:10:51.600 not confident in the yet. And hey, hey, presto, we 0:10:51.640 --> 0:10:54.400 don't mind if the rates of zero were coming to Switzerland. 0:10:54.600 --> 0:10:56.959 Kitchooks, thanks for the brief wait too short, Kitchooks for 0:10:57.080 --> 0:10:59.800 society general. Let us know kid, when you're in New 0:10:59.880 --> 0:11:03.240 York City next. I'm honored to have you in the studio. 0:11:03.600 --> 0:11:07.800 Stay with us. More from Bloomberg Surveillance coming up after this. 0:11:15.040 --> 0:11:18.600 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:11:18.679 --> 0:11:21.840 weekday afternoons from seven to ten am Eastern Listen on 0:11:21.920 --> 0:11:25.319 Apple Karplay and Android Otto with the Bloomberg Business app, 0:11:25.480 --> 0:11:27.200 or watch us live on YouTube. 0:11:27.240 --> 0:11:32.920 Michael Darta joins some roth capital here steeped in Wisconsin economics. Michael, 0:11:32.920 --> 0:11:36.520 I'm just going to cut to the chase. Everyone's head spinning, 0:11:37.240 --> 0:11:41.040 and yet we just got a disinflationary vector. All in all, 0:11:41.960 --> 0:11:46.240 like we got real GDP wrong and nominal GDP wrong 0:11:46.320 --> 0:11:49.760 this year, are we getting massively wrong? The need for 0:11:49.800 --> 0:11:51.440 the FED to cut where they're. 0:11:51.320 --> 0:11:54.959 Going to have to pick it up, Well, that is 0:11:55.080 --> 0:11:55.840 yet to be seen. 0:11:55.960 --> 0:11:58.480 Tom, I think the FED is a little bit on 0:11:58.520 --> 0:12:01.240 a preset course here at for the next two meetings, 0:12:01.280 --> 0:12:05.520 and then we'll see what happens to this big divergence 0:12:05.640 --> 0:12:09.320 between the labor market data which has been exceptionally weak 0:12:09.960 --> 0:12:13.160 and the activity indicators. Uh, you know, looks like Q 0:12:13.240 --> 0:12:17.559 three probably ended on a pretty strong note with underlying 0:12:17.800 --> 0:12:22.079 you know, real growth pretty close to three percent and 0:12:22.360 --> 0:12:25.240 you know, not nominal you know, up in the fives. 0:12:26.600 --> 0:12:29.079 You know, that is not a picture of an economy 0:12:29.080 --> 0:12:32.720 that needs a lot of monetary support. Yet the labor 0:12:32.760 --> 0:12:36.839 market indicators that the fees watching have been have been weak, 0:12:37.200 --> 0:12:41.040 and and so there's a bit of a divergence and puzzle. 0:12:40.640 --> 0:12:42.240 That I think needs to be solved there. 0:12:43.280 --> 0:12:43.480 You know. 0:12:44.080 --> 0:12:46.880 Tom Michael is a native of Wisconsin. He did graduate 0:12:46.880 --> 0:12:50.760 from the University Wisconsin at Whitewater, but it lives in Naples, Florida. 0:12:50.800 --> 0:12:54.720 He bailed on the Wisconsin winters residents. 0:12:54.800 --> 0:12:56.480 Yeah, I mean, you know, I mean. 0:12:56.400 --> 0:12:58.800 I see these Wisconsin people that you know, they're all 0:12:58.840 --> 0:13:00.000 they just they go to Florida. 0:13:00.160 --> 0:13:04.480 A transportation of the dogs, keeping united in delting in chips. 0:13:04.559 --> 0:13:06.880 Hey, Michael, So we're not I guess if youuld just 0:13:06.880 --> 0:13:09.480 look at the CPI print today, we're not seeing any 0:13:09.880 --> 0:13:13.760 real tariff induced inflation in this economy. 0:13:14.840 --> 0:13:17.520 Does that surprise you, Well. 0:13:17.400 --> 0:13:20.680 We definitely saw a lift, you know, mostly in goods 0:13:20.720 --> 0:13:23.280 prices over the course of the last few months. 0:13:23.520 --> 0:13:25.839 And that may be easing back now. 0:13:26.760 --> 0:13:28.880 But I will say this, I mean, the bond market 0:13:28.920 --> 0:13:32.000 does not look like it's really concerned about inflation. The 0:13:32.320 --> 0:13:34.920 bond yields have fallen from a high of four point 0:13:34.960 --> 0:13:37.640 eight percent early in the year. You know, we're just 0:13:37.679 --> 0:13:41.120 a touch below four now. Inflation expectations in the bond 0:13:41.160 --> 0:13:43.840 market have been coming down. That's a forward looking measure, 0:13:44.480 --> 0:13:47.120 and so I think a lot of the tariff oriented 0:13:47.440 --> 0:13:51.760 upward pressure on inflation is likely to be quite temporary. 0:13:52.760 --> 0:13:56.040 And that's exactly what forward looking markets are saying. I'll 0:13:56.080 --> 0:13:59.679 also throw this out. There's a private sector group called Trueflation. 0:14:00.040 --> 0:14:03.240 The data is on the Bloomberg terminal and they update 0:14:03.480 --> 0:14:06.760 daily in terms of year over year inflation readings, and 0:14:06.800 --> 0:14:10.240 it's a much broader swath of prices. The CPI is 0:14:10.280 --> 0:14:14.040 based on about ninety thousand prices. The True Inflation Index, 0:14:14.120 --> 0:14:19.520 which is blockchain based, is driven by fifteen million or 0:14:19.520 --> 0:14:23.720 so prices, and that's pretty close to two percent, And 0:14:23.920 --> 0:14:28.880 historically it doesn't typically undershoot overall CPI inflation, So there's 0:14:28.960 --> 0:14:32.680 not an obvious downward bias there. It's just higher frequency 0:14:32.720 --> 0:14:36.160 and it's you know, it's measuring a much broader swath 0:14:36.280 --> 0:14:40.600 of prices, and this kind of a divergence is exactly 0:14:40.640 --> 0:14:44.320 what you'd expect with a one time relative price shock 0:14:44.400 --> 0:14:45.200 from the tariffs. 0:14:45.200 --> 0:14:46.640 It's very different. 0:14:46.280 --> 0:14:49.760 From a monetary inflation, and so that definitely gives the 0:14:49.760 --> 0:14:52.800 FED a bit more room to maneuver here to try 0:14:52.840 --> 0:14:55.440 to support the labor market trueflation. 0:14:56.480 --> 0:14:59.280 Tom, I've worked here at Bloomberg for sixteen years. This guy, 0:14:59.360 --> 0:15:01.640 this Michael Dark guy, just taught me a Bloomberg function 0:15:01.680 --> 0:15:02.720 I didn't even know existed. 0:15:04.040 --> 0:15:05.480 The history here, I mean, we've got to get to 0:15:05.520 --> 0:15:07.760 the market open here. But I really want to express 0:15:08.160 --> 0:15:11.360 the originality of what young Darda did years ago. He 0:15:11.440 --> 0:15:14.600 used to put out he worked for Jude Weninski. It 0:15:14.640 --> 0:15:18.120 was legendary when he was like eighteen years old, and 0:15:18.160 --> 0:15:20.200 then he went over and all of a sudden there 0:15:20.200 --> 0:15:24.640 were these research reports melding the market and economics. And 0:15:24.640 --> 0:15:26.320 the only reason we talked to him is he used 0:15:26.320 --> 0:15:29.840 Bloomberg terminal screens boom, and it was like ed Heimens. 0:15:30.560 --> 0:15:34.520 People were like stealing research from data over the years. 0:15:34.520 --> 0:15:36.440 Now at rough Capital, Michael, I think I want to 0:15:36.480 --> 0:15:40.960 focus on the equity markets. Here it's Friday, and I'm 0:15:40.960 --> 0:15:45.240 going to get my angst of gloom crew rationalizing this 0:15:45.320 --> 0:15:48.880 is going to end. What's your treatment? Speaking of Jude Weininsky, 0:15:49.360 --> 0:15:53.000 of the history of great bull markets, how do they end? 0:15:53.280 --> 0:15:56.240 Well, Tom, you know, if you want some efficient markets 0:15:56.320 --> 0:16:00.760 hypothesis and theory here you know the market will end 0:16:00.800 --> 0:16:05.320 when the profits expansion ends. So typically bear markets are 0:16:05.320 --> 0:16:10.040 clustered around recessionary periods. But here, how's this for a statistic. 0:16:10.600 --> 0:16:13.440 Ninety percent of the time post World War Two, the 0:16:13.480 --> 0:16:16.720 economy is in an expansion phase, not a contraction phase, 0:16:17.280 --> 0:16:19.640 and the equity market tends to go up about seventy 0:16:19.680 --> 0:16:23.040 five percent of the time. So the default position should 0:16:23.080 --> 0:16:27.120 be more optimistic than pessimistic. All of that said, people 0:16:27.200 --> 0:16:30.880 are nervous because the valuations are quite high concentrated and 0:16:31.040 --> 0:16:34.680 infotech and the AI driven story, but that's not going 0:16:34.720 --> 0:16:37.080 to be enough to know, to cause the market to 0:16:37.160 --> 0:16:39.480 crack here. I really think you'd need to have the 0:16:39.560 --> 0:16:43.240 earning story evaporate. Q three earnings have been pretty good 0:16:43.280 --> 0:16:45.720 so far, high single digits. It looks like we're probably 0:16:45.720 --> 0:16:48.520 going to end up double digits year over year for 0:16:48.600 --> 0:16:52.760 earnings growth. So as long as that support structures under 0:16:52.800 --> 0:16:56.160 the equity market, you know, I think we'll probably hold 0:16:56.160 --> 0:16:57.720 on to most of these games. 0:16:58.120 --> 0:17:01.120 Michael, what's your view of the US labor market here? 0:17:01.160 --> 0:17:05.600 The headline numbers seem pretty more than fine, more than good, 0:17:05.600 --> 0:17:07.480 but I know there are concerns under the hood. 0:17:08.480 --> 0:17:11.800 Yeah, there are some concerns, Paul. You know, the ADP 0:17:12.000 --> 0:17:15.600 figures that we have through September showed actual job declines 0:17:15.640 --> 0:17:17.520 in three out of the last four months. That's not 0:17:17.640 --> 0:17:20.320 typically something that you would see in a healthy economy. 0:17:20.800 --> 0:17:24.480 Yet the activity indicators I mentioned, GDP tracking and so 0:17:24.560 --> 0:17:28.480 forth still look pretty strong. There's a Dallas Fed index 0:17:28.520 --> 0:17:31.840 that is weekly that scaled to year to year GDP growth, 0:17:31.920 --> 0:17:33.280 and that's still running up. 0:17:33.440 --> 0:17:33.679 You know. 0:17:33.760 --> 0:17:35.840 Above two percent, and. 0:17:35.840 --> 0:17:38.719 So I think what could end up happening here is 0:17:38.760 --> 0:17:41.320 that as we move into next year, we'll see some 0:17:41.400 --> 0:17:44.240 of these jobs figures improve. I think the tariff and 0:17:44.320 --> 0:17:48.040 uncertainty shock caused employers to pull back, But if the 0:17:48.040 --> 0:17:50.800 top line growth is still there, the profitability story is 0:17:50.840 --> 0:17:53.680 still intact, then you know pretty unlikely that you would 0:17:53.720 --> 0:17:56.760 see the labor market completely fall out of bed. And 0:17:56.800 --> 0:17:59.520 that is something you know, Tom asked about the FED. 0:17:59.600 --> 0:18:02.840 And if the easing expectations were too aggressive. If we 0:18:02.920 --> 0:18:05.159 do start to see a better tone and tenor to 0:18:05.240 --> 0:18:08.119 the employment data, you know, the market will have to 0:18:08.200 --> 0:18:12.159 reprice the the totality of the easing cycle that you 0:18:12.200 --> 0:18:13.720 know is now pretty aggressive. 0:18:14.080 --> 0:18:16.840 Michael Data. Thank you so much, Ruth Kapa, I really 0:18:16.840 --> 0:18:20.760 appreciate it. Stay with us. More from Bloomberg Surveillance coming 0:18:20.840 --> 0:18:28.880 up after this. 0:18:28.880 --> 0:18:32.800 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:18:32.840 --> 0:18:36.240 starting at seven am Eastern on Applecarplay and Android Auto 0:18:36.280 --> 0:18:39.240 with the Bloomberg Business app. You can also listen live 0:18:39.320 --> 0:18:42.879 on Amazon Alexa from our flagship New York station, Just 0:18:42.920 --> 0:18:45.560 Say Alexa Play Bloomberg eleven thirty. 0:18:45.320 --> 0:18:48.399 One LUs A Palti Guswin right now, founder Vista Energy. 0:18:48.440 --> 0:18:52.440 She has been absolutely fabulous about the larger politics of it. 0:18:52.840 --> 0:18:57.479 Just a Friday question, maybe the president meets with the president. 0:18:57.520 --> 0:19:03.119 G Is China energy independent? They really rely an oil 0:19:03.200 --> 0:19:04.760 coming through Singapore, right. 0:19:05.280 --> 0:19:09.520 Yes, but China once, maybe one day to become independent. 0:19:09.560 --> 0:19:12.080 They are producing a lot of hydrocarbons right now. I 0:19:12.080 --> 0:19:16.120 mean they're producing their own coal and they are becoming 0:19:16.160 --> 0:19:20.320 one of the largest natural gas producer. The amount of 0:19:20.320 --> 0:19:24.040 gas they are producing now is but almost the same 0:19:24.119 --> 0:19:27.720 as the whole African continent. But they are still importing. 0:19:27.920 --> 0:19:31.520 They are still importers, and their strategy has been also 0:19:31.560 --> 0:19:34.920 to create links and relationship between all those suppliers. 0:19:35.280 --> 0:19:39.399 My head is spinning this morning with your geography. Which 0:19:39.520 --> 0:19:42.960 geography are you most interested in? What you're writing about 0:19:42.960 --> 0:19:43.520 for Monday? 0:19:45.359 --> 0:19:48.239 My focus has always been global, as you can hear 0:19:48.320 --> 0:19:51.600 with my accents. I was born and raised educated in France, 0:19:51.640 --> 0:19:54.200 so Europe, I know it. But I've been based in 0:19:54.240 --> 0:19:57.440 the US for twenty years now and I've been focusing 0:19:57.440 --> 0:20:02.439 a lot on Asia. So the US maritime roots so 0:20:02.680 --> 0:20:08.119 very global. But my sectorial is, you know, expertise is 0:20:08.320 --> 0:20:10.680 energy commodities geologetics. 0:20:10.760 --> 0:20:14.760 Yeah, it's not a job interview. More so, there's lots 0:20:14.800 --> 0:20:17.760 of boats on the water that everything's floating around right now, 0:20:17.840 --> 0:20:18.560 Is that true? 0:20:19.400 --> 0:20:21.000 There are many boats, Yeah. 0:20:21.080 --> 0:20:21.439 There is. 0:20:21.440 --> 0:20:24.240 There a lot of oil in the marketplace these days. 0:20:25.280 --> 0:20:27.359 So we have the same question on the gas side too. 0:20:27.880 --> 0:20:31.439 There are you know, we are washed with oil and 0:20:31.440 --> 0:20:35.520 gas potentially, but the key question for countries is how 0:20:35.560 --> 0:20:38.280 to get it just on time in a safe manner. 0:20:38.320 --> 0:20:43.120 Diversification of roots prices and I think we need more 0:20:43.119 --> 0:20:45.359 oil c the countries exporting their supply. 0:20:45.520 --> 0:20:49.720 Where do we where in reality does the Russia gas 0:20:49.760 --> 0:20:54.000 and oil go and can that be curved or is 0:20:54.080 --> 0:20:56.200 always going to be a way for that that those 0:20:56.359 --> 0:20:58.200 hydrocarbons to find their way to a buyer. 0:20:58.720 --> 0:21:01.120 Yeah, that's a great question because actually this week we've 0:21:01.119 --> 0:21:04.160 seen a ramping up of sanctions on the European side 0:21:04.200 --> 0:21:11.040 and on the US side. In Europe, the European Union 0:21:11.520 --> 0:21:17.320 has agreed on phasing out Russian gas and Russian energy 0:21:18.200 --> 0:21:20.720 by the first of January two Salon twenty six, with 0:21:20.800 --> 0:21:23.560 a two year transition period. So they will start first 0:21:23.560 --> 0:21:27.880 potentially with energy and then pipeline gas. Right now, there 0:21:27.920 --> 0:21:31.159 is almost no I mean, you know, the share of 0:21:31.200 --> 0:21:34.320 Russian gas in Europe we used to be forty five 0:21:34.400 --> 0:21:39.720 percent is done to you know, a trivial amount and 0:21:39.880 --> 0:21:44.560 zero into zero persons in twenty twenty eight. And so 0:21:44.600 --> 0:21:46.680 it means that in Europe is going to be possible 0:21:48.840 --> 0:21:51.639 with a cost potentially, So Europe is going to be 0:21:51.680 --> 0:21:55.679 more dependent on other suppliers. Like the mix has really changed, 0:21:56.080 --> 0:21:59.159 more Norwegian gas, more US energy into Europe. 0:22:01.160 --> 0:22:03.919 Russian hydrocarbons. Are they going to go to India? Are 0:22:03.920 --> 0:22:05.639 they going to go to China? Because that's kind of 0:22:05.680 --> 0:22:08.200 where I think we Absolutely. 0:22:08.000 --> 0:22:13.640 We've seen a reconfiguration of trid flows. The gas from Russia, 0:22:13.960 --> 0:22:18.320 especially the sanctioned gas is going to China, like the 0:22:18.480 --> 0:22:21.560