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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
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Speaker 2: Terminal and the Bloomberg Business app. The EU. We'll be
Speaker 2: hoping this is the same political theater as twenty eighteen.
Speaker 2: I would argue that hope is not a plan, and
Speaker 2: Alan g imports won't address the size of the US
Speaker 2: trade deficit. But it's the best that EU have got
Speaker 2: to work with. Jordan, Welcome to the program Siran news
Speaker 2: or noise. When you read that statement, it's news because
Speaker 2: if you think about it, John, and Merry Christmas. By
Speaker 2: the way, I can see, if you think about it,
Speaker 2: we've had come in winning the election. He targeted Canada
Speaker 2: and Mexico and China, and I noted to clients mysteriously
Speaker 2: absent on the rest of the world Europe, Japan, the
Speaker 2: rest of Asia, and he started to pick.
Speaker 3: Them off one by one. As time has gone on,
Speaker 3: we've had India this week and now we've had the
Speaker 3: EU today. And as I've put in the note to clients,
Speaker 3: the tricky thing is if he's serious. If he's serious,
Speaker 3: the EU can definitely buy more LNG, but the problem
Speaker 3: is they won't at all be able to plug the
Speaker 3: deficit with the US just from LLERG alone. Oil might
Speaker 3: help as well, but I think oil is pretty much
Speaker 3: maxed out too. If you look at the LNG purchases
Speaker 3: the EU has made from the US, it's already half
Speaker 3: of EU LNG imports. It's a fantastic achievement. And the
Speaker 3: exports of LERG from the US have been ramping up
Speaker 3: a lot over the past five years, but they can't
Speaker 3: double in the space of this one year period, I
Speaker 3: would say, And they're annuallyzing around twenty six billion dollars
Speaker 3: a year in what the EU buys from the US
Speaker 3: if it was to take all American LLERG exports. So
Speaker 3: it's just really difficult for the mass to add up.
Speaker 3: So in answer your question, it's news if he's serious
Speaker 3: because the eu A won't be able to negotiate a
Speaker 3: deal on behalf of other members. Junker didn't have that
Speaker 3: power Arsen Ofvonderland now And what Junker did in twenty
Speaker 3: eighteen was a political charade. Really, it was a memorandum
Speaker 3: of understanding. It wasn't a trade deal. It was just
Speaker 3: a sort of loosely worded statement saying we'll buy more
Speaker 3: lerg and soybeans.
Speaker 4: Or they have.
Speaker 3: And Trump's still complaining the deficit has gotten wider since
Speaker 3: the EU has actually already increased their energy purchases.
Speaker 1: So if he's serious, the.
Speaker 3: Master doesn't add up and tariff's come into place. But
Speaker 3: I think perhaps John, he's giving them a way out
Speaker 3: to do the same they did in twenty eighteen of
Speaker 3: a memorandum of understanding, and maybe he avoids tariff in
Speaker 3: Europe to begin with. But it's all down to human
Speaker 3: decision at the end of the day.
Speaker 2: John Jordan, Let's take this story and push it through
Speaker 2: through an exchange, as we often do. We've already had
Speaker 2: a five percent move on euro dollar week of euro
Speaker 2: through this year so far. Is this another reason in
Speaker 2: a long list of reasons to keep selling the euro Yea.
Speaker 3: There's a long list of reason to keep saying that the
Speaker 3: Europe's like cats and dogs. You've got what's going on
Speaker 3: with the tariff situation, You've got what's going on with
Speaker 3: European macro. The industrial recession in Germany just keeps getting worse.
Speaker 3: In the short term, we've had services strength in Europe
Speaker 3: keep us in doubt about how far the ECB can
Speaker 3: cut rates. But I think the services sector will turn
Speaker 3: lower next year. It's just so difficult for services to
Speaker 3: do well if you're laying off your manufacturing employees, as
Speaker 3: Germany and others are doing in Europe right now. So
Speaker 3: we've got one oh one so near parity in Eurojohn,
Speaker 3: But the key message from my side, John, is that's
Speaker 3: a view into January the twentieth, and I think the
Speaker 3: inauguration is an event risk in itself. It could be
Speaker 3: a day where we get a list of executive orders
Speaker 3: in the afternoon from Donald Trump. If tariffs do not
Speaker 3: feature in that list, if he doesn't start a sort
Speaker 3: of investigation into raising tariffs on others, it could be
Speaker 3: a by the room of cell the fat moment. And
Speaker 3: that's why I think one oh one we price in
Speaker 3: maximum pain and then if it goes more smoothly, if
Speaker 3: there's not a significant tariff hike on day one of
Speaker 3: his present and see, perhaps it's mean reversion and this
Speaker 3: market likes to mean revert and the dollar sells off
Speaker 3: from there.
Speaker 4: In the past, the dollar has sort of had a
Speaker 4: self correcting mechanism where if it gets too strong, things
Speaker 4: start to break and then suddenly weakness takes it over
Speaker 4: and there is this normalization. At what point do you
Speaker 4: see that risk coming into play?
Speaker 3: Indeed, it ties to the f MC response function. Typically
Speaker 3: you have a big self in equities, the f MC
Speaker 3: kind of rides out for a bit, but when you
Speaker 3: have a ten percent draw down, they tend to circle
Speaker 3: wagons and reverse course. I think that could be the case.
Speaker 3: It feels a lot like twenty eighteen to me, Lisa.
Speaker 3: Remember twenty eighteen, we had a pretty hawkish fed. We
Speaker 3: had a ten percent sell off in the S and
Speaker 3: P five hundred, and then we got to January and
Speaker 3: power changed is sort of mood music quite quickly in
Speaker 3: just public statements, and we had most of that sell
Speaker 3: off come back in the first part of January twenty nineteen,
Speaker 3: so we could be in for a case of that
Speaker 3: sort of story. I'm not calling for a ten percent
Speaker 3: draw down, but that's the saw of pain threshold where
Speaker 3: you get the FED members responding and perhaps changing their language.
Speaker 3: But it's really difficult because the macro data supports are
Speaker 3: much more hawkish FED. We've long had a four percent
Speaker 3: terminal as our view at Mazoo before Trump won the election.
Speaker 3: A lot of people joined us in that race to
Speaker 3: four percent once Trump was elected, but we're now pricing
Speaker 3: that pretty much perfectly in the rates curve, so it
Speaker 3: could be the case lead. So I think the risk
Speaker 3: reward is we actually price in a little bit more
Speaker 3: cuts than what's now in the market. I think we
Speaker 3: should be at least pricing a cup by March or June.
Speaker 3: There's about one cut by June, but March is around
Speaker 3: fifty to fifty, so we should see some curves steepening
Speaker 3: on the back of it. Two tens looks really interesting here.
Speaker 4: We've talked about two different issues or whether it's the
Speaker 4: tariffs and just the Donald Trump risk two potentially a
Speaker 4: weaker euro, stronger dollar, and then there's the FED response mechanism,
Speaker 4: which do you think is in the driver's seed?
Speaker 3: Ugh, well, I think the Trump trade is in the
Speaker 3: driver's seat for everything in January. It all boils down
Speaker 3: to that. And then once we know that, once we
Speaker 3: know what's happening with tariffs.
Speaker 1: It's done.
Speaker 3: It's essentially the informations in the market, and then we
Speaker 3: go back to following what the inflation data says, what
Speaker 3: the GDP data says. And it's just difficult for the
Speaker 3: Fed to be dubbsh when you've got GDP at three
Speaker 3: percent and they're now casting even a bit higher than that.
Speaker 3: You've got inflation reaccelerating on the month of month numbers,
Speaker 3: and tying this into the LNG story. Have a look
Speaker 3: at natural gas prices at Henry Hub. They're at the
Speaker 3: highst of the month. They're rising in fashion that could
Speaker 3: bring energy services CPI as a problem next year for
Speaker 3: the Fed. So all together, Trump's in the driving seat
Speaker 3: trying to push up LNG price at LERG exports push
Speaker 3: us up domestic prices. It's inflationary as a policy. And
Speaker 3: then you've got the situation with tariffs, which of course
Speaker 3: are inflationary. I suspect they'll stagger the tariffs though over
Speaker 3: a year to try and reduce the knee jerk reaction
Speaker 3: from firms having to raise prices as soon as the
Speaker 3: news is out, and we're hoping to see or we're
Speaker 3: probably going to see FX depreciation in China and all
Speaker 3: those otherrencies such as euro to help offset the impact
Speaker 3: of any tariffs if they come in. So if you
Speaker 3: have the sixty percent tariff on China, that's a huge
Speaker 3: piece of news. That's definitely in the driving seat right now.
Speaker 2: Last question, then, Jordan year Today, if I go on
Speaker 2: the screen on the Bloomberg terminal and have a look
Speaker 2: at where things are at the moment, everything in G
Speaker 2: ten is weaker against the US dollar, including the Japanese
Speaker 2: m with a ten percent move. When I do the
Speaker 2: same thing at the end of twenty twenty five, it's
Speaker 2: that screen gonna look any different.
Speaker 3: Good question. I think it will look different. As I say,
Speaker 3: I think we actually get a dollar weakness by the
Speaker 3: end of next year, but it's dollar up for the
Speaker 3: next quarter and then down from Q two onwards. I
Speaker 3: think you will see the the end strength come back
Speaker 3: in as we're still in a rate hiking cyber from
Speaker 3: the Bank Japan, and you will see the economic data improve.
Speaker 3: I'm an optimist John for the second half of next year.
Speaker 3: We've got all this monetary easing, we've got the potential
Speaker 3: for China fiscal stimulus in Q two. We should be
Speaker 3: seeing a week of dollar when that happens. So we've
Speaker 3: got euro bouncing back to one oh five. But it's
Speaker 3: such a mild rally. I'd focus more on the sort
Speaker 3: of story for the dollar right here and now.
Speaker 2: Got it, Jordan, Merry Christmas, sir, thanks for everything this year.
Speaker 2: I appreciate it. Thank you, buddy, Jordan Rochester there of
Speaker 2: Mazumo Savantaria for SoC GEN with a surround a table
Speaker 2: sapantry Kamonic, good morning. I think before the Federal Reserve
Speaker 2: you had two is going down to something like three
Speaker 2: p fifty at the front end of the curve. Has
Speaker 2: that changed since you heard from Chairman Powell.
Speaker 5: Three point fifty for the end of next year. So
Speaker 5: we don't really, I mean, we're we were anticipating. We
Speaker 5: are anticipating more cuts next year. You know, our economists
Speaker 5: surely haven't changed their call for the FED because we
Speaker 5: just don't have much by way of new information. Yes,
Speaker 5: the Fed, the Committee itself recalibrated to just two cuts
Speaker 5: for next year. But there you know, the way the
Speaker 5: economy has been going, you should see a moderation in growth,
Speaker 5: you should see a moderation in employment, you should see
Speaker 5: a moderation in inflation. And under the circumstances, the event
Speaker 5: might be able to deliver four cuts. But as a
Speaker 5: rate strategist, I do my biases that they deliver less cuts.
Speaker 5: So the market is very very efficiently priced in for
Speaker 5: a very benign policy path. But if they do deliver
Speaker 5: four cuts and aligned with our economists call, then the
Speaker 5: two year could end the year next year on three
Speaker 5: and a half percent.
Speaker 1: Interesting.
Speaker 2: We've had a robust debate around this table over the
Speaker 2: last few days about what was behind and what underpinned
Speaker 2: those changes to the forecastle of feder Reserve, the data
Speaker 2: or Trump. We're teasing out some of that information from
Speaker 2: officials on the FMC Mary Daily. The San Francisco FED
Speaker 2: president told us about an hour ago that for her
Speaker 2: it was the data, but for others it was clear.
Speaker 2: There was also about the policies. What is it for you?
Speaker 2: What are you basing your calls on?
Speaker 5: So I think it's going to be a bit of both,
Speaker 5: and I think it's going to be a constant recalibration
Speaker 5: process as we get new information hitting the tapes, and
Speaker 5: there's going to be a lot of that three am
Speaker 5: tweets that we have to respond to next year, so
Speaker 5: we're all getting ready for of that. But you know,
Speaker 5: it's going to be quite difficult depending on how the
Speaker 5: tariffs are rolled out. I mean, last go around, tariffs
Speaker 5: were over a two year period and on you know,
Speaker 5: sometimes on very specific products. This time this could be
Speaker 5: it could be much more of a sweeping terraff regime.
Speaker 5: So we're going to have to recalibrate as the data
Speaker 5: comes in. I mean the FED, I think, as we
Speaker 5: heard from from a chair power, some of the fair
Speaker 5: FED members are already incorporating some of the changes that
Speaker 5: could come down the pike, and others are not. And
Speaker 5: that's exactly what you're seeing among street economists.
Speaker 4: What's your reaction function to the tweets?
Speaker 5: You know, it's it's funny because I'm now mentally preparing
Speaker 5: myself to wake up in the morning to stuff that
Speaker 5: I was not prepared for and then having to react
Speaker 5: very quickly. And and our counterparts in Asia especially are
Speaker 5: looking forward to it because they can react to the
Speaker 5: volatility as it's happening because they're awake at three am
Speaker 5: New York time to to to respond to the incoming
Speaker 5: new So you know it's going to be it's going
Speaker 5: to be interesting. It's it's just a paradigm shift to
Speaker 5: where we were between twenty sixteen and twenty twenty.
Speaker 4: So things are going to get pretty noisy, right. I
Speaker 4: mean it's sort of a question of do you get
Speaker 4: more tactical or long term and how much is this
Speaker 4: increasingly a tactical market because of how obscured what's going
Speaker 4: on underneath actually is.
Speaker 5: Yeah, I know it's going to be a very tactical market.
Speaker 5: We're going to have to constantly reculber. Just look at
Speaker 5: the last two days. We've gone back and forth on
Speaker 5: whether there's going to be government shutdown or not, based
Speaker 5: on information from either the Trump Aids or from Trump.
Speaker 5: So you're going to need to see that. It's going
Speaker 5: to be a lot of back and forth like that
Speaker 5: for the next you know, two years, and then perhaps
Speaker 5: in the next four years.
Speaker 2: Things really are obvious if you just take the example
Speaker 2: of this morning, we've all woken up to this post
Speaker 2: from the present elect on truth, so so suggesting that
Speaker 2: if the Europeans don't close the trade deficit and buy
Speaker 2: more LERG, there'll be tariffs. I don't think it's clear
Speaker 2: what happens with that at all. The Europeans have already
Speaker 2: come out ahead of time and said we want to
Speaker 2: buy the LNG. I think Collie Crook said a little
Speaker 2: bit earlier reference in one of our colleagues that they're
Speaker 2: pushing on an open door at the moment they want
Speaker 2: that to happen. Of course, there's an outstanding question whether
Speaker 2: it's enough to close the trade deficit, and whether if
Speaker 2: they don't, whether you actually get those tarifts. So I
Speaker 2: don't think anything's clear before you even begin to assess
Speaker 2: how inflationary or not those tarifts would actually be. There
Speaker 2: is nothing cut and dry about twenty five and beyond.
Speaker 4: Especially given the fact that even the reaction in markets,
Speaker 4: the reaction and the economy will look different, given that
Speaker 4: we're coming from a very different starting point. And I
Speaker 4: think about right now, you're talking about a government shutdown,
Speaker 4: and we did get a tweet from Donald Trump saying
Speaker 4: that let's set it down now before I get into office,
Speaker 4: because then that's on his head, not my head. And
Speaker 4: I'm just wondering what's the response to that in the
Speaker 4: fixed income market.
Speaker 5: So I think that you're right in pointing out that
Speaker 5: the starting point is very, very different, And I'm really
Speaker 5: concerned about that from the inflation perspective, because you know,
Speaker 5: between twenty sixteen and twenty twenty, inflation was not a concern.
Speaker 5: I mean, we had like maybe a two year decade
Speaker 5: period when you know, core CPI, core PCE never really
Speaker 5: exceeded that two to two and a half percent level.
Speaker 5: Now our starting point is a lot higher. You're looking
Speaker 5: at core PCE around two point eight percent. The economy
Speaker 5: is extraordinary vulnerable to inflationary shocks on the services side.
Speaker 5: So I think that that is really the game changer
Speaker 5: this time around, is that if you do see you know,
Speaker 5: tweets and the market reacts and things that it's going
Speaker 5: to be inflationary, then you're going to see these volatility
Speaker 5: and inflation expectations. So the break even market is not
Speaker 5: really priced for that. So I'm expecting a lot more
Speaker 5: volatility inflation break evens next year because of the fact
Speaker 5: that we're in a very different inflation regime this time around,
Speaker 5: as opposed to back in you know, the Trump one
Speaker 5: point or timeframe.
Speaker 2: Savantra, It's good to say it, Scredie, catch up. I
Speaker 2: appreciate it's time. Thank you, Savantra. Jampa of self check,
Speaker 2: Jim Carrot and Mooke and Stanley writes him, sell off
Speaker 2: inequities is healthy? Better to happen now when Yes, today
Speaker 2: equities are up more than twenty percent versus early January
Speaker 2: and stopped the year in a hole.
Speaker 1: Jim joins us.
Speaker 2: Now for more, Jim, welcome, buddy, It's good to see you.
Speaker 2: What's healthy about this?
Speaker 1: Good morning? I'm sorry I didn't catch that.
Speaker 2: What's healthy about this? Fourteen days and negative breadth on
Speaker 2: the S and P? What's healthy about it? Jim?
Speaker 1: Yeah?
Speaker 6: So, look, I mean, you know, the markets were technically
Speaker 6: very overbought. This sell off does not represent a change
Speaker 6: and trend. As you were saying earlier on the show,
Speaker 6: there's been a very heavy concentration in a very few names.
Speaker 6: That narrowness of breath has already started to widen out.
Speaker 6: But when you get these big adjustments, and you get
Speaker 6: these expectations of earnings still coming in good but maybe
Speaker 6: not as stellar as people had thought in the past,
Speaker 6: then I think you start to get the sell off.
Speaker 6: Look I mean, the S and P five hundred was
Speaker 6: up about twenty seven percent on a year today basis,
Speaker 6: and we owed that to a very very few set
Speaker 6: of names.
Speaker 1: This is now starting to broad out.
Speaker 6: And as the market broadens out, what that means is
Speaker 6: that the former winners are going to start to decline
Speaker 6: a bit.
Speaker 1: Doesn't mean it's the start of a bear market.
Speaker 6: It just means that we're in an adjustment process of
Speaker 6: broadening out the markets, moving into sectors that are more
Speaker 6: MidCap orientated, which is our view that we think can
Speaker 6: potentially do better from an earning's growth perspective.
Speaker 2: Jim, did anything change for you Wednesday afternoon when Sham
Speaker 2: and Poal finished speak.
Speaker 6: In You know, it's kind of interesting, right because this
Speaker 6: is the dilemma for the market. All Powell basically did. Yes,
Speaker 6: he did announce a slower pace of rate cuts. The
Speaker 6: dots did move up fifty basis points across the curve.
Speaker 6: But guess what, that's exactly almost exactly what the market
Speaker 6: was expecting. If you looked at fedpund's futures prior to
Speaker 6: the meeting and then after the meeting, they were you know,
Speaker 6: I mean, they were a little bit higher, but they
Speaker 6: weren't materially higher. I think what the market's reaction is
Speaker 6: here is it's really about the bond market, so effectively,
Speaker 6: where people are arting to get nervous is from a
Speaker 6: positioning standpoint. If you look at year to date returns
Speaker 6: in bonds, it's in the low single digits. It's around
Speaker 6: two to three percent, let's say for most of the
Speaker 6: AG indices. If you get another twenty five basis point
Speaker 6: rise and yields between now and year end, which which
Speaker 6: is possible, and you get a widening of spreads, many
Speaker 6: bond investors are at risk of losing their whole year
Speaker 6: in the next two weeks.
Speaker 1: That's not our forecast, that's not our.
Speaker 6: Base case, but it does create this riskiness that you
Speaker 6: could get these extended sell offs in the market, yields rising,
Speaker 6: and that.
Speaker 1: Could have a negative impact on equities.
Speaker 6: So we have to put this into context and understand
Speaker 6: those technicals as well.
Speaker 4: Jim, I'd like to dig a little bit more into that.
Speaker 4: At what point is that the reason why you're not
Speaker 4: buying bonds right now, even though they've sold off and
Speaker 4: generally you're optimistic about the disinflationary narrative, you still think
Speaker 4: you want to wait for a greater sell off. What's
Speaker 4: the point, what's the trigger for you to buy?
Speaker 1: Yeah?
Speaker 6: So look, I mean the place that we're looking to
Speaker 6: line up and buy, really our holiday shopping list is
Speaker 6: really going to go towards the equity market because we
Speaker 6: have to understand why is the FED willing to cut
Speaker 6: rates by less. It's probably because the economy is doing
Speaker 6: a bit better. That's good news for equities, right, So
Speaker 6: moving into midcaps, you know, active, over passive materials, more cyclicals,
Speaker 6: all of that. Now in bonds though, I think that
Speaker 6: at this level, I think this is this is an
Speaker 6: area where bond yields can kind of hang out. I'm
Speaker 6: looking for an overshoot. I'm looking for bond yields ten
Speaker 6: year treasuries. Let's use that as a proxy to move
Speaker 6: up towards about four point seventy five percent before I
Speaker 6: would start to get long duration extend my positions in bonds,
Speaker 6: because at the end of the day, I still think
Speaker 6: the FED is going to cut a couple of times
Speaker 6: next year, which means that the upside in yield for
Speaker 6: bonds is somewhat limited. And this is why when you
Speaker 6: look at a sixty forty portfolio or balanced portfolio inequities
Speaker 6: that it's not quite like twenty twenty two. There is
Speaker 6: some upside, potential upside stopping of yields. We're just not
Speaker 6: in the same cycle that we were back in twenty
Speaker 6: twenty two. So I think the setup right now going
Speaker 6: into twenty twenty five is much more healthy because it's
Speaker 6: giving you higher bond yields potentially wider spreads.
Speaker 1: So therefore more value for twenty twenty five.
Speaker 6: And you're getting a sell off in the equity market
Speaker 6: in areas that you maybe wanted to rebalance into in
Speaker 6: the first place, and here's your gift, here's your opportunity
Speaker 6: to do that.
Speaker 4: So Jim, just putting this all together, it sounds like
Speaker 4: it's overly simplistic to say simply higher yields causes the
Speaker 4: sell off in the stock space, right, So it's not
Speaker 4: that that alone can make you perish, But that tied
Speaker 4: with the context, as John was pointing out, of the
Speaker 4: high flying aspects of the market. We're really the reason
Speaker 4: why this is a positioning move. It is not some
Speaker 4: sort of longer standing trend.
Speaker 1: Is that right, That's right.
Speaker 6: Yeah, So we don't see this as an economic fundamental
Speaker 6: change in right. We still think the labor market is
Speaker 6: reasonably strong. We still think that the retail sales data.
Speaker 6: I still think the broad economy is still doing okay.
Speaker 6: We do not have a recession forecasted into twenty twenty five.
Speaker 6: The issue that we have in twenty twenty four, though,
Speaker 6: was that we had a significant acceleration in the earnings
Speaker 6: growth rate for many of these mag seven type companies
Speaker 6: in the top ten and much of the tech and
Speaker 6: we don't expect that kind of an acceleration in earnings
Speaker 6: for those companies in twenty twenty five. So now, because
Speaker 6: there's such a high concentration of the index at this point,
Speaker 6: as their earnings slow to a more normalized pace, then
Speaker 6: that what that means is that is that there's a
Speaker 6: rotation that takes down the index because there's such a
Speaker 6: high weight in the index.
Speaker 1: But then it gives you the opportunity.
Speaker 6: To buy other segments of the market that are more cyclical,
Speaker 6: like materials industrials for example, that can actually have a
Speaker 6: better earnings growth rate going forward and potentially even a
Speaker 6: pe multiple expansion. So that's what twenty twenty five is about.
Speaker 2: Jim, just ahead of this conversation, we talked about tours
Speaker 2: and slock an Apollo and the risk of a repeat
Speaker 2: of twenty twenty two. Could I get a little bit
Speaker 2: more color from you on that the risk of that
Speaker 2: actually developing stocks and bonds really struggling next year.
Speaker 1: Yeah.
Speaker 6: So in twenty twenty two, I mean, we started from
Speaker 6: a very low interest rate level, and the amount that
Speaker 6: rates could rise was quite significant. We were just earlier
Speaker 6: in the cycle in twenty twenty two, you know, for
Speaker 6: rates to rise at this point, we're probably later in
Speaker 6: the cycle. And in interest rates, yes, they can rise.
Speaker 6: I mean, there's no question if inflation starts to pick up.
Speaker 6: But we're also not at a point here where we
Speaker 6: expect inflation to be, you know, high single digits like
Speaker 6: we did back then. Inflation is likely just to say, well,
Speaker 6: we're not going to get to target at two percent.
Speaker 6: Maybe we'll stay at two and a half percent, maybe
Speaker 6: we'll go to three. And the market's not yet forecasting
Speaker 6: rate hikes by the Fed, and so I think that's
Speaker 6: a big difference, you know, right there, in terms of
Speaker 6: the bond element to this. On the equity side, what
Speaker 6: we have to recognize is that in acceleration higher in
Speaker 6: interest rates. We like what we got in twenty twenty
Speaker 6: two will bring down the present valuations of a lot
Speaker 6: of those equity assets.
Speaker 1: If we're not.
Speaker 6: Likely to get the same acceleration higher in interest rates
Speaker 6: in twenty twenty five as we did in twenty twenty two.
Speaker 1: Then we think the earnings set up.
Speaker 6: The earnings path for twenty twenty five might be a
Speaker 6: little bit more more muted, but.
Speaker 1: Certainly still positive and still okay.
Speaker 6: So I don't think the setup is quite the same
Speaker 6: as twenty twenty two right now.
Speaker 2: Interesting, Jim, I appreciate your time. You've been a good
Speaker 2: friend of the program for the year, and a whole
Speaker 2: lot longth in that. Thank you, sir, Monday, Christmas and
Speaker 2: happy holidays, Jim, Karen, that have Morgan Stanley. This is
Speaker 2: the Bloomberg Sevenants podcast, bringing you the best in markets, economics, angiopolitics.
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