1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,159 Speaker 2: Terminal and the Bloomberg Business app. We begin with our 10 00:00:37,200 --> 00:00:39,680 Speaker 2: top story and kicking off the week with all eyes 11 00:00:39,720 --> 00:00:42,600 Speaker 2: on Nvidio the City. Stuart Kais are writing this markets 12 00:00:42,640 --> 00:00:45,800 Speaker 2: will be captivated by Nvidia earnings, but after that event 13 00:00:46,120 --> 00:00:49,520 Speaker 2: there are about two weeks without clear catalysts. Last quarter, 14 00:00:49,640 --> 00:00:51,960 Speaker 2: Russell two thousand and s and P five hundred equal 15 00:00:51,960 --> 00:00:55,600 Speaker 2: weight both outperformed the SMP by about two hundred basis 16 00:00:55,600 --> 00:00:59,600 Speaker 2: points between Nvidia earnings and the March CPI report. We 17 00:00:59,720 --> 00:01:03,319 Speaker 2: like positioning for a similar patent. Steve judges for more 18 00:01:03,360 --> 00:01:03,680 Speaker 2: good on it. 19 00:01:03,760 --> 00:01:05,000 Speaker 3: Ste Good Morning to. 20 00:01:05,000 --> 00:01:07,080 Speaker 2: Find good is two weeks of no dates or a 21 00:01:07,080 --> 00:01:07,440 Speaker 2: good thing. 22 00:01:08,319 --> 00:01:09,920 Speaker 4: I Honestly, it's going to be a really big test. 23 00:01:09,959 --> 00:01:12,040 Speaker 4: Because last week when you had kind of no data, 24 00:01:12,080 --> 00:01:14,000 Speaker 4: the market was able to or two weeks ago when 25 00:01:14,040 --> 00:01:15,319 Speaker 4: you had no date to the market just sort of 26 00:01:15,319 --> 00:01:17,080 Speaker 4: trended hire you had a nice clean week. I think 27 00:01:17,120 --> 00:01:19,320 Speaker 4: this time you have a two week window. It's right 28 00:01:19,360 --> 00:01:20,080 Speaker 4: around month end. 29 00:01:20,440 --> 00:01:20,640 Speaker 5: You know. 30 00:01:20,680 --> 00:01:22,360 Speaker 4: The question I think is with the market at all 31 00:01:22,400 --> 00:01:24,280 Speaker 4: time high, did people kind of trim some risk and 32 00:01:24,280 --> 00:01:27,240 Speaker 4: do you get a little chop or is it everything's 33 00:01:27,280 --> 00:01:29,040 Speaker 4: fine and dandy. I see, if you had dandy, it 34 00:01:29,040 --> 00:01:32,280 Speaker 4: makes it much more enjoyable. If it's fine and dandy, I. 35 00:01:32,240 --> 00:01:33,800 Speaker 3: Think you can kind kind of drift higher. 36 00:01:33,840 --> 00:01:37,520 Speaker 4: So our view is strong earning season the same way 37 00:01:37,560 --> 00:01:39,520 Speaker 4: you had a strong earning season last time. That tends 38 00:01:39,520 --> 00:01:42,120 Speaker 4: to favor large cap because they're generating the bulk of 39 00:01:42,160 --> 00:01:44,000 Speaker 4: the earnings. Once you get out of that kind of 40 00:01:44,000 --> 00:01:45,759 Speaker 4: earnings event, we do think you can get a little 41 00:01:45,800 --> 00:01:48,520 Speaker 4: little episode of broadening into that big June twelfth day. 42 00:01:48,680 --> 00:01:51,160 Speaker 2: With the emphasis on a little episode and not maybe 43 00:01:51,160 --> 00:01:52,560 Speaker 2: a durable boarder think why is that? 44 00:01:53,280 --> 00:01:55,600 Speaker 4: Ye think I think there's still, as as you all 45 00:01:55,600 --> 00:01:57,680 Speaker 4: have highlighted, there's still some anxiety, you know, kind of 46 00:01:57,680 --> 00:01:58,200 Speaker 4: in the system. 47 00:01:58,200 --> 00:02:00,320 Speaker 3: I think a lot of it to be revolved around 48 00:02:00,320 --> 00:02:00,960 Speaker 3: the labor market. 49 00:02:01,000 --> 00:02:03,240 Speaker 4: I think that's the area that is by by far 50 00:02:03,320 --> 00:02:05,480 Speaker 4: the biggest risk to equity markets. And if you look 51 00:02:05,480 --> 00:02:08,800 Speaker 4: at the case fed labor tracker or other metrics, there 52 00:02:08,840 --> 00:02:11,720 Speaker 4: are some some sort of cracks or a little weeds 53 00:02:11,800 --> 00:02:13,040 Speaker 4: kind of in the garden that you need to deal 54 00:02:13,080 --> 00:02:15,480 Speaker 4: with them. It's going to kind of keep people a 55 00:02:15,480 --> 00:02:16,280 Speaker 4: little bit conservative. 56 00:02:16,400 --> 00:02:18,040 Speaker 6: And you point into the idea that momentum has not 57 00:02:18,160 --> 00:02:20,480 Speaker 6: recovered alongside the broader market. I was talking about that, 58 00:02:20,520 --> 00:02:22,040 Speaker 6: we were talking about that earlier. I thought that was 59 00:02:22,080 --> 00:02:25,320 Speaker 6: a really interesting point that this isn't necessarily the game 60 00:02:25,400 --> 00:02:27,760 Speaker 6: stop frenzy, that it's going to fuel the everything up 61 00:02:28,000 --> 00:02:30,560 Speaker 6: kind of moment, and yet you're still constructive. What do 62 00:02:30,600 --> 00:02:32,760 Speaker 6: you take from that the idea that momentum is not 63 00:02:32,880 --> 00:02:33,600 Speaker 6: really driving this. 64 00:02:34,120 --> 00:02:35,440 Speaker 4: It might be a little bit of kind of by 65 00:02:35,480 --> 00:02:37,600 Speaker 4: the rumor sell of effect type issue. You know, you 66 00:02:37,720 --> 00:02:41,079 Speaker 4: have very strong earnings from TMT companies. I think that's 67 00:02:41,120 --> 00:02:43,359 Speaker 4: really what stabilized the market that week of kind of 68 00:02:43,360 --> 00:02:45,640 Speaker 4: April twenty six or so, right, And I think now 69 00:02:45,680 --> 00:02:47,680 Speaker 4: that you've gotten through that period, you know, people are 70 00:02:47,680 --> 00:02:49,520 Speaker 4: probably taking a little bit of profits and maybe taking 71 00:02:49,560 --> 00:02:50,799 Speaker 4: a little bit of risk off the table. And we 72 00:02:50,840 --> 00:02:52,400 Speaker 4: were back at all time hues. Again we were below 73 00:02:52,480 --> 00:02:55,880 Speaker 4: five thousand pre TMPT earnings. Who are fifty three hundred dows. 74 00:02:55,880 --> 00:02:57,440 Speaker 4: So I do think you're just seeing some people kind 75 00:02:57,440 --> 00:03:00,320 Speaker 4: of adjusting positioning and maybe it's seven million the lake 76 00:03:00,400 --> 00:03:01,320 Speaker 4: type situation here. 77 00:03:01,480 --> 00:03:02,919 Speaker 6: Is that what you're recommending? Do you feel fine? 78 00:03:03,400 --> 00:03:04,120 Speaker 3: I feel pretty good. 79 00:03:04,120 --> 00:03:05,760 Speaker 5: Actually, okay, that's different than fine. 80 00:03:05,760 --> 00:03:07,079 Speaker 6: I just want to say that one thing that you 81 00:03:07,160 --> 00:03:10,000 Speaker 6: pointed to was initial job was claims, and I thought 82 00:03:10,040 --> 00:03:11,760 Speaker 6: that was interesting because I remember when people used to 83 00:03:11,800 --> 00:03:13,560 Speaker 6: care about those and then they started to flat line 84 00:03:13,560 --> 00:03:15,639 Speaker 6: and then everybody ignored them. Is that going to be 85 00:03:15,680 --> 00:03:16,720 Speaker 6: first here data this week? 86 00:03:17,280 --> 00:03:19,000 Speaker 5: Yeah? I mean claims are important. 87 00:03:19,000 --> 00:03:20,639 Speaker 4: If you think back to last summer, last June, we 88 00:03:20,720 --> 00:03:22,880 Speaker 4: printed one oh five in non FORIGM payrolls and you 89 00:03:22,919 --> 00:03:25,120 Speaker 4: got claims, you know, kind of above two fifty. If 90 00:03:25,160 --> 00:03:27,000 Speaker 4: we got a repeat it that obviously the mark is 91 00:03:27,000 --> 00:03:28,520 Speaker 4: not going to light that combination to data. 92 00:03:28,600 --> 00:03:29,920 Speaker 3: So claims matter. 93 00:03:30,000 --> 00:03:31,639 Speaker 4: It's just tough when you're at such a you know, 94 00:03:31,800 --> 00:03:34,200 Speaker 4: such a low level, you would need a significant step 95 00:03:34,280 --> 00:03:36,440 Speaker 4: up in claims. I think to get people's you know, 96 00:03:36,520 --> 00:03:39,000 Speaker 4: people's attention kind of ticking up ten k here or 97 00:03:39,000 --> 00:03:40,360 Speaker 4: there is not going to do it. You know, you're 98 00:03:40,400 --> 00:03:42,280 Speaker 4: going to need a I think a significant step higher 99 00:03:42,360 --> 00:03:43,400 Speaker 4: claims to be disruptive. 100 00:03:43,520 --> 00:03:45,320 Speaker 7: Stuart, how do you read the inflation data? Because we 101 00:03:45,400 --> 00:03:47,160 Speaker 7: saw the bumps earlier in the year, it was just 102 00:03:47,280 --> 00:03:49,120 Speaker 7: that this is bumps, not a trend. Then we get 103 00:03:49,240 --> 00:03:53,000 Speaker 7: one print that's basically in line, and everyone's all excited, saying, Okay, 104 00:03:53,040 --> 00:03:55,400 Speaker 7: we're back to the disinflationary trend off of one report. 105 00:03:55,560 --> 00:03:56,080 Speaker 5: Is that fair? 106 00:03:57,000 --> 00:03:59,800 Speaker 4: I mean, it's a good question. The reason people are 107 00:04:00,240 --> 00:04:02,280 Speaker 4: taking it so well because I think they interpret the 108 00:04:02,320 --> 00:04:04,240 Speaker 4: FED is taking it very well. Right This is a 109 00:04:04,280 --> 00:04:06,080 Speaker 4: FED that has sort of a cutting bias to it, 110 00:04:06,400 --> 00:04:08,080 Speaker 4: and I think the market is saying, if you're printing 111 00:04:08,120 --> 00:04:10,800 Speaker 4: thirty basis points of of course CPI, that gives the 112 00:04:10,880 --> 00:04:14,040 Speaker 4: FED kind of leeway to cut later this year. If 113 00:04:14,040 --> 00:04:16,760 Speaker 4: you keep printing thirty basis points a core, you're almost 114 00:04:16,839 --> 00:04:18,440 Speaker 4: back to four percent by the end of the year. 115 00:04:18,760 --> 00:04:20,760 Speaker 4: So you know, thirty basis points is probably not going 116 00:04:20,839 --> 00:04:23,120 Speaker 4: to do it medium term, but right now I think 117 00:04:23,160 --> 00:04:25,160 Speaker 4: it gives people confidence that the FED is kind of 118 00:04:25,160 --> 00:04:27,279 Speaker 4: willing to cut in that environment. You know, we've said 119 00:04:27,279 --> 00:04:29,240 Speaker 4: at the beginning of the year, you're sort of uber 120 00:04:29,320 --> 00:04:31,440 Speaker 4: bowl case for markets, is you soft land or you 121 00:04:31,480 --> 00:04:33,480 Speaker 4: don't go under the recession, and the FED does a 122 00:04:33,520 --> 00:04:36,120 Speaker 4: couple insurance cuts behind that because that gives you a 123 00:04:36,160 --> 00:04:38,599 Speaker 4: strong EPs outlook and potentially you get a little bit 124 00:04:38,640 --> 00:04:39,080 Speaker 4: of juice on. 125 00:04:39,080 --> 00:04:40,000 Speaker 3: The valuation side. 126 00:04:40,279 --> 00:04:41,760 Speaker 4: So that was kind of what can get you up 127 00:04:41,760 --> 00:04:44,600 Speaker 4: to those fifty five hundred type levels. That's what the 128 00:04:44,680 --> 00:04:46,800 Speaker 4: market wants, ultimately, it's what we all want. So you know, 129 00:04:46,880 --> 00:04:48,640 Speaker 4: when you get data that allows you to confirm that 130 00:04:48,680 --> 00:04:50,200 Speaker 4: a little bit, I think the market tries to run 131 00:04:50,279 --> 00:04:50,400 Speaker 4: with it. 132 00:04:50,680 --> 00:04:52,240 Speaker 2: You've said for a while that when the labor market 133 00:04:52,279 --> 00:04:54,760 Speaker 2: starts to waken, you're going to get nervous. Your team 134 00:04:54,839 --> 00:04:57,880 Speaker 2: is predicting that on the economic side of the research division. 135 00:04:58,320 --> 00:04:59,880 Speaker 2: What does that mean for your call? Does it just 136 00:05:00,000 --> 00:05:02,159 Speaker 2: to come increased in these short term and much more tactical. 137 00:05:02,279 --> 00:05:03,800 Speaker 2: Is it much more difficult to have a longer term 138 00:05:03,880 --> 00:05:05,560 Speaker 2: view of where the secretary market is going. 139 00:05:05,520 --> 00:05:06,520 Speaker 3: To be one hundred percent? 140 00:05:06,720 --> 00:05:09,200 Speaker 4: I mean we'd recommended hedging a little bit, you know, 141 00:05:09,240 --> 00:05:11,000 Speaker 4: the last month, just to kind of manage that risk. 142 00:05:11,080 --> 00:05:12,720 Speaker 4: The risk reward of the market is not what it 143 00:05:12,839 --> 00:05:13,520 Speaker 4: was two months ago. 144 00:05:13,600 --> 00:05:14,040 Speaker 3: In our view. 145 00:05:14,080 --> 00:05:17,400 Speaker 4: You've had your US economic surprises has gotten quite negative. 146 00:05:17,400 --> 00:05:19,920 Speaker 3: You've got some hiccups going on in the labor market. 147 00:05:20,000 --> 00:05:21,800 Speaker 4: Earnings are strong, but it's starting to get priced in. 148 00:05:21,920 --> 00:05:24,599 Speaker 4: So yeah, we're we're keeping it much much more tactical. 149 00:05:24,680 --> 00:05:26,600 Speaker 4: When you get volatility down to these levels, I think 150 00:05:26,600 --> 00:05:28,240 Speaker 4: it makes a whole lot of sense either to hedge 151 00:05:28,600 --> 00:05:30,520 Speaker 4: or to use options for your upside. When you're paying 152 00:05:30,680 --> 00:05:33,160 Speaker 4: sub ten implied volatility for upside on the S and P. 153 00:05:33,560 --> 00:05:36,120 Speaker 4: That feels like a very responsible way to have your 154 00:05:36,240 --> 00:05:38,839 Speaker 4: kind of long exposure around. So yeah, we're much more tactical, 155 00:05:38,920 --> 00:05:41,120 Speaker 4: much more careful, And I think the market is showing 156 00:05:41,120 --> 00:05:43,760 Speaker 4: you that it's going to be a responsive to bad news. 157 00:05:44,240 --> 00:05:46,120 Speaker 4: Unfortunately or fortunately we just haven't had. 158 00:05:46,080 --> 00:05:46,599 Speaker 3: That bad news. 159 00:05:46,760 --> 00:05:49,360 Speaker 2: How high is the bar for Wednesday? Frinvidia got another 160 00:05:49,440 --> 00:05:50,880 Speaker 2: call right now in front of me, this time from 161 00:05:50,920 --> 00:05:53,960 Speaker 2: Stefhul on Nvidia price target race to ten eighty five 162 00:05:54,240 --> 00:05:57,880 Speaker 2: from nine to ten. The quote beaten rays widely anticipated. 163 00:05:58,080 --> 00:06:00,680 Speaker 2: Same thing came from Berkley's early this morning. Oh sign 164 00:06:00,760 --> 00:06:03,720 Speaker 2: still points to another revision higher. How high is that 165 00:06:03,800 --> 00:06:04,919 Speaker 2: bar Wednesday afternoon. 166 00:06:05,160 --> 00:06:06,160 Speaker 3: It's a pretty high bar, man. 167 00:06:06,240 --> 00:06:09,360 Speaker 4: The market's got used to them basically beating by two billion, 168 00:06:09,800 --> 00:06:11,320 Speaker 4: you know, every quarter for a number of quarters in 169 00:06:11,360 --> 00:06:11,520 Speaker 4: a row. 170 00:06:11,600 --> 00:06:12,920 Speaker 3: Two billion used to be a big number. 171 00:06:13,200 --> 00:06:15,840 Speaker 4: So I think I think it's the bar is pretty high, 172 00:06:16,000 --> 00:06:18,599 Speaker 4: you know for a video here, perhaps a little less 173 00:06:18,640 --> 00:06:20,400 Speaker 4: high than it was a couple of weeks ago, when 174 00:06:20,640 --> 00:06:22,359 Speaker 4: you know, the market was sub five thousand and there 175 00:06:22,440 --> 00:06:23,840 Speaker 4: was a little bit of stress in the system. But 176 00:06:24,240 --> 00:06:26,479 Speaker 4: the issue with a video is it's been a huge 177 00:06:26,520 --> 00:06:28,560 Speaker 4: part of revenue on Ernie's growth. It's also a huge 178 00:06:28,600 --> 00:06:30,400 Speaker 4: part of market cap, which is why if you take 179 00:06:30,440 --> 00:06:33,160 Speaker 4: the Nvidia implied move and you know, kind of multiply 180 00:06:33,200 --> 00:06:34,680 Speaker 4: it by its market cap, it could move the S 181 00:06:34,760 --> 00:06:37,360 Speaker 4: and P forty to fifty basis points that day by itself. 182 00:06:37,480 --> 00:06:39,480 Speaker 3: So you know, the bar is definitely high. 183 00:06:39,600 --> 00:06:41,960 Speaker 4: The way we track sort of sentiment, it's not quite 184 00:06:41,960 --> 00:06:45,160 Speaker 4: as aggressively high as it was last quarter. Last quarter 185 00:06:45,200 --> 00:06:48,000 Speaker 4: you had inverted skew, which means your calls cost more 186 00:06:48,040 --> 00:06:50,719 Speaker 4: than your puts. That's highly unusual at the single stock level. 187 00:06:51,000 --> 00:06:52,360 Speaker 4: Some of that has started to come out of the 188 00:06:52,400 --> 00:06:53,520 Speaker 4: system so bullish. 189 00:06:54,040 --> 00:06:55,599 Speaker 3: Definitely, bar is high. 190 00:06:55,440 --> 00:06:57,559 Speaker 4: But it does feel maybe I think people are starting 191 00:06:57,600 --> 00:07:00,680 Speaker 4: to just accept the fact that you can't continually beat 192 00:07:00,720 --> 00:07:02,840 Speaker 4: by two million every quarter, right, So I think people 193 00:07:02,880 --> 00:07:04,400 Speaker 4: have kind of prepared themselves for a little bit. 194 00:07:04,440 --> 00:07:04,920 Speaker 3: It'll be fine. 195 00:07:04,920 --> 00:07:06,760 Speaker 5: I think you think it's going to be fine. You 196 00:07:06,800 --> 00:07:07,240 Speaker 5: feel fine. 197 00:07:07,240 --> 00:07:07,960 Speaker 3: I think it will be fine. 198 00:07:08,000 --> 00:07:09,920 Speaker 6: Yeah, fine and dandy, which is actually better than that. 199 00:07:10,080 --> 00:07:12,520 Speaker 6: I will just say one thing that I find interesting 200 00:07:12,640 --> 00:07:14,240 Speaker 6: is that we used to have companies that were bell 201 00:07:14,280 --> 00:07:16,920 Speaker 6: Weather companies. Whether it was the banks, which no longer 202 00:07:17,080 --> 00:07:19,560 Speaker 6: serves that, whether it was Walmart, which maybe no longer 203 00:07:19,600 --> 00:07:21,360 Speaker 6: serves is that either it's sort of a Walmart story, 204 00:07:21,440 --> 00:07:25,240 Speaker 6: not necessarily a macro story. Is in Vidia serving more 205 00:07:25,360 --> 00:07:27,960 Speaker 6: as a macro story in terms of AI adoption. Will 206 00:07:27,960 --> 00:07:30,280 Speaker 6: we get a sort of broader read through to the 207 00:07:30,720 --> 00:07:33,600 Speaker 6: market and sort of the sentiment behind it from Nvidia 208 00:07:33,840 --> 00:07:35,400 Speaker 6: than just an Nvidia story. 209 00:07:35,880 --> 00:07:36,640 Speaker 3: I think definitely. So. 210 00:07:36,760 --> 00:07:39,400 Speaker 4: I think if video has become a macro store, you 211 00:07:39,480 --> 00:07:41,320 Speaker 4: see how aggressively it's even probably sitto the S and 212 00:07:41,320 --> 00:07:44,040 Speaker 4: P five hundred viece events or like our market based events. 213 00:07:44,360 --> 00:07:44,480 Speaker 6: You know. 214 00:07:44,480 --> 00:07:45,880 Speaker 4: I think we've talked in the past there's a view 215 00:07:45,920 --> 00:07:49,680 Speaker 4: that AI increases productivity and can potentially lift GDP growth 216 00:07:49,720 --> 00:07:51,680 Speaker 4: on a go forward basis. It has massive impacts on 217 00:07:51,720 --> 00:07:54,720 Speaker 4: the labor market. So you know, AI at large is 218 00:07:54,760 --> 00:07:57,200 Speaker 4: a macro story, and VIDIA is right now the cleanest, 219 00:07:57,240 --> 00:07:58,840 Speaker 4: most direct way to trade that. So it's made that, 220 00:07:58,960 --> 00:08:01,880 Speaker 4: you know, a macro story, Ei William. Those with the 221 00:08:01,960 --> 00:08:04,160 Speaker 4: GLP ones I think would fall into that category as well. 222 00:08:04,200 --> 00:08:06,480 Speaker 4: Those are probably the two sort of single stocks or 223 00:08:06,560 --> 00:08:08,360 Speaker 4: themes that would become macro over the years. 224 00:08:09,040 --> 00:08:10,600 Speaker 2: Take your point of the week, right date, a point 225 00:08:10,600 --> 00:08:10,880 Speaker 2: of the week. 226 00:08:11,200 --> 00:08:14,440 Speaker 7: Goldman Sachs last week said eleven hundred dollars per share 227 00:08:14,560 --> 00:08:17,320 Speaker 7: that they uplifted for Navidia. This is the data point 228 00:08:17,360 --> 00:08:19,000 Speaker 7: I think whether or not the markets will be fine 229 00:08:19,080 --> 00:08:20,160 Speaker 7: or maybe less than. 230 00:08:20,080 --> 00:08:22,240 Speaker 2: Fine Wednesday after the close, You've got a word on 231 00:08:22,280 --> 00:08:25,600 Speaker 2: Man City, a couple of words sad. Are they the 232 00:08:25,680 --> 00:08:26,760 Speaker 2: Mets not fine? 233 00:08:27,400 --> 00:08:28,320 Speaker 3: No, they're not the best. 234 00:08:28,800 --> 00:08:31,920 Speaker 4: Unfortunately they're not the Mets high root for the Mets 235 00:08:31,960 --> 00:08:35,400 Speaker 4: of the EPL, which is the unfortunate that the unfortunate situation. 236 00:08:36,320 --> 00:08:38,680 Speaker 2: Stuve, it's going to see you. It's fine, It's going 237 00:08:38,760 --> 00:08:41,160 Speaker 2: to be all right. Stuart Kaiser city. Thank you, sir. 238 00:08:50,559 --> 00:08:52,679 Speaker 2: Let's turn to travel shares of Rhyan Air love this 239 00:08:52,840 --> 00:08:55,440 Speaker 2: morning with the adlines saying some affairs may be flat 240 00:08:55,840 --> 00:09:00,320 Speaker 2: despite low capacity. Ryanair planning to offer discounts to stimulate demand, 241 00:09:00,440 --> 00:09:02,520 Speaker 2: and the the friend of our side, but he yes, 242 00:09:02,559 --> 00:09:04,400 Speaker 2: Michael Leary joins us some more. Michael, good morning to 243 00:09:04,440 --> 00:09:05,320 Speaker 2: you and welcome to New York. 244 00:09:05,440 --> 00:09:06,920 Speaker 5: More and John, great pleasure to be here again. 245 00:09:07,040 --> 00:09:08,560 Speaker 2: Grace to cant shat with you said, So, let's talk 246 00:09:08,559 --> 00:09:11,120 Speaker 2: about pricingw You're right, cfive said it was cantering Shiwit's 247 00:09:11,160 --> 00:09:14,120 Speaker 2: if helped me understand deck capacities down, prices are flat, 248 00:09:14,240 --> 00:09:14,760 Speaker 2: what's going on? 249 00:09:15,960 --> 00:09:17,360 Speaker 5: Difficult to understand it ourselves. 250 00:09:17,400 --> 00:09:20,320 Speaker 8: Like, we've come off two summers and twenty percent plus 251 00:09:20,400 --> 00:09:22,880 Speaker 8: pricing increases. So we thought pricing this year would be softer. 252 00:09:23,200 --> 00:09:25,040 Speaker 8: We thought up five to ten. At the moment, it 253 00:09:25,080 --> 00:09:27,360 Speaker 8: looks like it's flat to five percent through the summer peak. 254 00:09:27,520 --> 00:09:29,560 Speaker 8: I think there's just a bit of consumer resistance out there. 255 00:09:29,840 --> 00:09:32,600 Speaker 8: Capacity is constrained in Europe. We thought that would lead 256 00:09:32,640 --> 00:09:35,400 Speaker 8: to stronger pricing each of us early. That means that 257 00:09:35,520 --> 00:09:38,240 Speaker 8: April May June is a little bit softer. We still 258 00:09:38,240 --> 00:09:41,280 Speaker 8: see pricing up through the peak July August September. We're 259 00:09:41,320 --> 00:09:44,240 Speaker 8: constrained because of boy delivery delays, but I think pricing 260 00:09:44,360 --> 00:09:46,240 Speaker 8: is going to be softer than we had originally expected 261 00:09:46,280 --> 00:09:49,679 Speaker 8: this summer. Good for consumers, not necessarily quite so good 262 00:09:49,679 --> 00:09:52,080 Speaker 8: for shareholders. But then we've launched a seven hundred million 263 00:09:52,160 --> 00:09:54,560 Speaker 8: share by back today, so that will keep shareholders quiet 264 00:09:54,800 --> 00:09:56,679 Speaker 8: while we look after consumers all summer long. 265 00:09:56,760 --> 00:09:58,320 Speaker 2: It's just to be clear there strength of summer then 266 00:09:58,440 --> 00:10:00,640 Speaker 2: soft right now, but you do expect five to increase, 267 00:10:00,679 --> 00:10:02,600 Speaker 2: fest to increase as the summer progresses. 268 00:10:02,720 --> 00:10:05,120 Speaker 8: Yeah, there's no doubt. Indeed, the April May June quarter 269 00:10:05,240 --> 00:10:07,000 Speaker 8: pricing is down on the prior year. Now we had 270 00:10:07,000 --> 00:10:08,920 Speaker 8: a full easter in April. This year we only half 271 00:10:08,960 --> 00:10:11,280 Speaker 8: at easter. Their pricing still looks but it's up, but 272 00:10:11,360 --> 00:10:13,839 Speaker 8: it's up small. It's very weak and zero to five 273 00:10:13,880 --> 00:10:16,880 Speaker 8: percent through July August September. We've only sold about forty 274 00:10:16,920 --> 00:10:18,800 Speaker 8: percent of the seats in that quarter, so it could 275 00:10:18,840 --> 00:10:21,439 Speaker 8: still be up slightly higher, it could be lower. We're 276 00:10:21,520 --> 00:10:24,360 Speaker 8: reasonably relaxed. We have costs well under control. We've hedged 277 00:10:24,400 --> 00:10:26,679 Speaker 8: our fuel form for the next year. We've saved four 278 00:10:26,760 --> 00:10:28,559 Speaker 8: hundred and fifty million dollars on fuel for the next 279 00:10:28,600 --> 00:10:32,200 Speaker 8: twelve months, so we can use that to stimulate pricing. 280 00:10:32,520 --> 00:10:34,760 Speaker 8: And when we've done some price stimulation in reason weeks, 281 00:10:34,800 --> 00:10:37,440 Speaker 8: we've seen very strong responses from consumers. So I think 282 00:10:37,520 --> 00:10:40,320 Speaker 8: consumers are they're a little bit nervous spending this week, 283 00:10:40,559 --> 00:10:44,040 Speaker 8: but when you give them a price incentive, volumes the 284 00:10:44,200 --> 00:10:45,080 Speaker 8: volumes are very strong. 285 00:10:45,280 --> 00:10:47,320 Speaker 6: Does this take some of the pressure off the twenty 286 00:10:47,440 --> 00:10:50,000 Speaker 6: three deliveries of Boeing jets that you're waiting for that 287 00:10:50,080 --> 00:10:53,400 Speaker 6: could be delayed because ultimately capacity is less of an issue. 288 00:10:53,679 --> 00:10:56,439 Speaker 5: Yeah, I mean I don't think so least. 289 00:10:56,480 --> 00:10:58,480 Speaker 8: I mean I would prefer to take the aircraft. We 290 00:10:58,559 --> 00:11:02,040 Speaker 8: could fill those aircraft through the peak through July, August September. 291 00:11:02,120 --> 00:11:04,480 Speaker 8: We think travel will be strong, pricing will be strong. 292 00:11:04,840 --> 00:11:07,000 Speaker 8: We regret the fact that we'll be twenty aircraft short. 293 00:11:07,280 --> 00:11:09,040 Speaker 8: We've crewed up so we have all the pilots and 294 00:11:09,080 --> 00:11:11,000 Speaker 8: the cabin crew. Our label will be a little bit 295 00:11:11,040 --> 00:11:14,080 Speaker 8: higher in that second quarter, but volumes lower. We've had 296 00:11:14,080 --> 00:11:16,640 Speaker 8: to pair back our full year traffic forecast this year 297 00:11:16,679 --> 00:11:18,880 Speaker 8: from two hundred and five million to about two hundred 298 00:11:18,920 --> 00:11:22,400 Speaker 8: million passengers. So it doesn't really help because everything we're 299 00:11:22,440 --> 00:11:24,760 Speaker 8: geared up for the growth and we're just going to 300 00:11:24,760 --> 00:11:26,840 Speaker 8: be let Boeing go leave us twenty aircraft short. 301 00:11:26,960 --> 00:11:29,600 Speaker 6: You've always been known for being incredibly cost conscious, trying 302 00:11:29,640 --> 00:11:32,000 Speaker 6: to bring a lower cost to the consumer. Are you 303 00:11:32,080 --> 00:11:34,560 Speaker 6: trying to get a deal on some of these Boeing jets? 304 00:11:34,600 --> 00:11:37,680 Speaker 6: You're looking to maybe buy some from others, or you know, say, 305 00:11:37,880 --> 00:11:40,120 Speaker 6: if you want to shift to Airbus, that's fine, I'll 306 00:11:40,160 --> 00:11:42,160 Speaker 6: take your Max seven thirty seven jets. 307 00:11:42,200 --> 00:11:44,000 Speaker 8: Well, we've already said when United came out with those 308 00:11:44,080 --> 00:11:46,000 Speaker 8: stupid comments there in the year, you know, we're not 309 00:11:46,080 --> 00:11:50,200 Speaker 8: going to take those Max tens. Max Aircraft will take 310 00:11:50,240 --> 00:11:51,880 Speaker 8: them if you don't want them, will take them? Of course, 311 00:11:52,280 --> 00:11:55,280 Speaker 8: Yeah no, they kind of they mumbled and then decide 312 00:11:55,280 --> 00:11:57,840 Speaker 8: they were going to take him anywhere. Aircraft and deliveries 313 00:11:57,880 --> 00:12:00,600 Speaker 8: are incredibly tight. Airbus and Boeing are running way behind 314 00:12:00,640 --> 00:12:04,120 Speaker 8: in their deliveries. There's a real capacity constrained story in Europe. 315 00:12:04,120 --> 00:12:07,880 Speaker 8: For the next couple of summers, manufacturers are delayed. Airbus 316 00:12:08,000 --> 00:12:10,240 Speaker 8: fleet is twenty percent of the airbus fleet is grounded 317 00:12:10,240 --> 00:12:12,839 Speaker 8: because the pattern with me engine issue and Europe is 318 00:12:12,880 --> 00:12:16,079 Speaker 8: an airbus market, so capacity is constrained. Why it's a 319 00:12:16,160 --> 00:12:19,000 Speaker 8: little bit surprising pricing is soft this summer. We thought 320 00:12:19,080 --> 00:12:20,920 Speaker 8: pricing would be a little bit stronger because of those 321 00:12:20,960 --> 00:12:24,880 Speaker 8: capacity constraints. But hey, if the consumers are a little 322 00:12:24,880 --> 00:12:26,800 Speaker 8: bit more price conscious, if they're a little bit more 323 00:12:26,800 --> 00:12:28,520 Speaker 8: price sensitive, we'll stimulate. 324 00:12:28,760 --> 00:12:31,080 Speaker 5: It's good for our business because we're the lowest price provider. 325 00:12:31,200 --> 00:12:33,040 Speaker 7: Michael, what are you hearing from Boeing at the moments 326 00:12:33,080 --> 00:12:34,640 Speaker 7: in the past you said you thought the deliveries could 327 00:12:34,679 --> 00:12:35,240 Speaker 7: slip further. 328 00:12:35,640 --> 00:12:37,200 Speaker 3: How much further are we talking well? 329 00:12:37,240 --> 00:12:40,920 Speaker 5: And we re good question? I think two things. One, 330 00:12:41,040 --> 00:12:42,240 Speaker 5: we're twenty aircraft behind. 331 00:12:42,280 --> 00:12:44,199 Speaker 8: We're supposed to get fifty nine aircraft for this summer 332 00:12:44,240 --> 00:12:46,400 Speaker 8: running and get thirty nine at best. But we do 333 00:12:46,600 --> 00:12:49,440 Speaker 8: see signs of improvement in recent weeks. I think Stephanie 334 00:12:49,480 --> 00:12:51,040 Speaker 8: Pope and the new team in see After doing a 335 00:12:51,080 --> 00:12:53,880 Speaker 8: good job. They're taking fuselages that are not being taken 336 00:12:53,920 --> 00:12:55,040 Speaker 8: from which to unless. 337 00:12:54,800 --> 00:12:58,760 Speaker 5: They're completely defect free. But we're not yet seeing a 338 00:12:58,800 --> 00:12:59,959 Speaker 5: speed up in the turnaround time. 339 00:13:00,080 --> 00:13:02,520 Speaker 8: In Seattle, they're still taking twelve to fourteen weeks to 340 00:13:02,600 --> 00:13:04,959 Speaker 8: produce an aircraft whereas it should really be eight to ten. 341 00:13:05,400 --> 00:13:07,800 Speaker 5: Now. Two weeks ago they sent us an update. We 342 00:13:07,880 --> 00:13:11,280 Speaker 5: were expecting two deliveries in June, three in July. We're 343 00:13:11,280 --> 00:13:13,240 Speaker 5: getting two in June. It looks like seven in July. 344 00:13:13,440 --> 00:13:16,920 Speaker 8: So we're beginning to see the situation improve, but it's 345 00:13:17,080 --> 00:13:20,120 Speaker 8: very small baby steps. We're still going to take aircraft 346 00:13:20,200 --> 00:13:22,719 Speaker 8: through August, September and October, even though we can't fly 347 00:13:22,800 --> 00:13:25,360 Speaker 8: them during those months. We think we get all fifty 348 00:13:25,480 --> 00:13:28,280 Speaker 8: nine aircraft in this calendar year, and then the big 349 00:13:28,360 --> 00:13:29,880 Speaker 8: issue with US at going is will we get the 350 00:13:29,920 --> 00:13:33,000 Speaker 8: twenty nine aircraft deliveries we are contracted to deliver us 351 00:13:33,000 --> 00:13:35,959 Speaker 8: between January and April twenty twenty five. So I think 352 00:13:35,960 --> 00:13:40,320 Speaker 8: they're making small, small steps, little progress, but we don't 353 00:13:40,320 --> 00:13:41,600 Speaker 8: want to see any further bad news. 354 00:13:41,679 --> 00:13:44,000 Speaker 7: If that's your big question going into next year, then 355 00:13:44,120 --> 00:13:45,839 Speaker 7: how do you weigh the impact on What does that 356 00:13:45,880 --> 00:13:47,360 Speaker 7: mean for your business for twenty twenty five? 357 00:13:47,960 --> 00:13:49,840 Speaker 8: I figur at the moment it means that for twenty 358 00:13:49,920 --> 00:13:52,480 Speaker 8: twenty four, for FY twenty March twenty five, we're going 359 00:13:52,559 --> 00:13:54,400 Speaker 8: to be doing two hundred million passes instead of two 360 00:13:54,480 --> 00:13:57,079 Speaker 8: hundred and five million for March twenty six or summer 361 00:13:57,120 --> 00:13:59,080 Speaker 8: twenty five, we think we can step that up. 362 00:13:59,320 --> 00:14:00,520 Speaker 5: I think we'll get most. 363 00:14:00,320 --> 00:14:02,040 Speaker 8: Of those aircraft are Boeing, and then we'd like to 364 00:14:02,080 --> 00:14:04,679 Speaker 8: see ourselves grow to probably about two hundred and fifteen 365 00:14:04,679 --> 00:14:08,080 Speaker 8: million passengers through summer twenty five into March twenty six. 366 00:14:08,400 --> 00:14:09,880 Speaker 5: We think there'll be a strong rebound. 367 00:14:10,240 --> 00:14:13,160 Speaker 8: We still think pricing would be reasonably robust across Europe 368 00:14:13,320 --> 00:14:16,000 Speaker 8: because capacity is going to be constrained. Airbus and Boeing 369 00:14:16,080 --> 00:14:19,360 Speaker 8: can't deliver any additional aircraft. The engine manuf issue is 370 00:14:19,400 --> 00:14:21,880 Speaker 8: a huge problem for the airbus fleet. You know, they've 371 00:14:21,920 --> 00:14:24,000 Speaker 8: been talking about three hundred and fifty days to repair 372 00:14:24,080 --> 00:14:26,320 Speaker 8: these engines. We think it's going to be for five 373 00:14:26,440 --> 00:14:28,960 Speaker 8: hundred days, so a lot of Airbus aircraft are going 374 00:14:29,000 --> 00:14:30,560 Speaker 8: to be grounded for the next two or three years. 375 00:14:30,720 --> 00:14:32,640 Speaker 6: How much do you see just going back to this 376 00:14:32,720 --> 00:14:35,240 Speaker 6: idea of pricing power and that we're surprised that there's 377 00:14:35,320 --> 00:14:38,280 Speaker 6: not greater degree of pricing power given some of the 378 00:14:38,360 --> 00:14:40,680 Speaker 6: constraints with deliveries. How much is it sort of the 379 00:14:40,800 --> 00:14:42,920 Speaker 6: end of the boom that we saw in the travel 380 00:14:43,080 --> 00:14:45,200 Speaker 6: and that people are constrained by the fact that you know, 381 00:14:45,720 --> 00:14:49,320 Speaker 6: hotel prices have tripled. You can see that any restaurant 382 00:14:49,400 --> 00:14:51,080 Speaker 6: you go to is that which works, but it's ready 383 00:14:51,080 --> 00:14:53,520 Speaker 6: to be travel. I mean it's incredibly expensive. So how 384 00:14:53,600 --> 00:14:55,720 Speaker 6: much have we sort of reached the tipping point or 385 00:14:55,760 --> 00:14:58,280 Speaker 6: we're going back to something that's pre pandemic and not 386 00:14:58,400 --> 00:15:00,000 Speaker 6: this you can work anywhere and travel all the time 387 00:15:00,080 --> 00:15:01,040 Speaker 6: time kind of mentality. 388 00:15:01,080 --> 00:15:02,560 Speaker 5: I mean, I don't think we've reached. 389 00:15:02,920 --> 00:15:05,000 Speaker 8: I think Europe is a fundamentally different market to the 390 00:15:05,160 --> 00:15:07,760 Speaker 8: US North America. You've seen a lot of travel price 391 00:15:07,800 --> 00:15:09,840 Speaker 8: inflation in the last couple of years. You know, the 392 00:15:09,880 --> 00:15:12,480 Speaker 8: average Fair Southwest charge last two week last year was 393 00:15:12,480 --> 00:15:14,600 Speaker 8: one hundred and seventy dollars. The average Fair and Ryan 394 00:15:14,640 --> 00:15:17,840 Speaker 8: air across Europe is forty eight euros. So there's still 395 00:15:17,840 --> 00:15:19,840 Speaker 8: a bit to go in Europe. But there's no doubt 396 00:15:19,880 --> 00:15:22,200 Speaker 8: in my mind that the European consumer is cutting spend 397 00:15:22,600 --> 00:15:23,840 Speaker 8: is careful. 398 00:15:24,160 --> 00:15:26,920 Speaker 5: They're cautious. They want price stimulation. 399 00:15:27,520 --> 00:15:30,200 Speaker 8: We go out with seat sales, we sell out straight away, 400 00:15:30,600 --> 00:15:33,400 Speaker 8: but you know, we have higher interest rates in government's 401 00:15:33,400 --> 00:15:35,440 Speaker 8: cutting back on inflation. I think consumers are just a 402 00:15:35,480 --> 00:15:37,160 Speaker 8: little bit nervous there at the moment. I don't think 403 00:15:37,200 --> 00:15:39,440 Speaker 8: that's a longer term trend. I think, you know, interest 404 00:15:39,520 --> 00:15:42,680 Speaker 8: rates will fall, if not this year through into next year. 405 00:15:42,920 --> 00:15:45,400 Speaker 8: I think we will see some rebound and consumer spending, 406 00:15:45,800 --> 00:15:48,000 Speaker 8: but I think you know they will protect travel. The 407 00:15:48,120 --> 00:15:51,040 Speaker 8: experiential spend will continue. It'll just trend down to the 408 00:15:51,120 --> 00:15:53,120 Speaker 8: lowest cost provider, which in Europe is Ryanair. 409 00:15:53,440 --> 00:15:55,040 Speaker 2: Is this a time to get more aggressive and go 410 00:15:55,120 --> 00:15:57,200 Speaker 2: off the market share and ser giogra face. 411 00:15:57,200 --> 00:15:57,800 Speaker 5: I would love to. 412 00:15:58,000 --> 00:15:59,840 Speaker 8: If I could get more aircraft out of Bowing, I'd 413 00:15:59,840 --> 00:16:03,240 Speaker 8: be on it like a rash. You know, we are 414 00:16:03,400 --> 00:16:05,600 Speaker 8: taking more market share though at the moment in Central 415 00:16:05,640 --> 00:16:09,040 Speaker 8: Eastern Europe, Whiz have grounded forty five aircraft, nobody else 416 00:16:09,080 --> 00:16:11,480 Speaker 8: six banding in Europe, so we are winning huge amounts 417 00:16:11,520 --> 00:16:14,200 Speaker 8: of market share despite the fact that our own capacity 418 00:16:14,280 --> 00:16:16,760 Speaker 8: growth is constrained by Boeing delivery delays. 419 00:16:16,840 --> 00:16:20,080 Speaker 5: So we're taking market share. I think that will continue. 420 00:16:21,080 --> 00:16:23,400 Speaker 8: But if I could get more aircraft, I would I 421 00:16:23,400 --> 00:16:25,760 Speaker 8: would try and grow faster at the moment, albeit at 422 00:16:25,800 --> 00:16:26,360 Speaker 8: the cost. 423 00:16:26,160 --> 00:16:28,600 Speaker 2: Of lower airfas you've got a good rate on the consumer. 424 00:16:28,720 --> 00:16:30,000 Speaker 2: Do they care what plane they fly on? 425 00:16:30,240 --> 00:16:32,280 Speaker 5: No, I mean most of them don't know what plane 426 00:16:32,280 --> 00:16:33,920 Speaker 5: they're flying on. I don't know what plane I'm flying on. 427 00:16:34,040 --> 00:16:35,560 Speaker 5: Most of the time you're not check no. 428 00:16:36,080 --> 00:16:37,720 Speaker 8: I mean if you look at you whether it's the 429 00:16:38,320 --> 00:16:40,720 Speaker 8: Boeing ENNGS, the Boi Max. I mean I prefer to 430 00:16:40,760 --> 00:16:44,240 Speaker 8: find a Boi Max aircraft only because A it's materially quieter, 431 00:16:44,720 --> 00:16:47,040 Speaker 8: and I know that plane is burning about sixteen percent 432 00:16:47,120 --> 00:16:50,880 Speaker 8: less fuel than those the older fuel Guzzi seven three 433 00:16:50,920 --> 00:16:54,120 Speaker 8: seven energis BOYL are making great aircraft. They are getting 434 00:16:54,120 --> 00:16:56,080 Speaker 8: a lot of unfair publicity in the last twelve months. 435 00:16:56,200 --> 00:16:58,040 Speaker 8: You think, so even nose field falls off and it's 436 00:16:58,040 --> 00:17:00,240 Speaker 8: been unfair about it. A nose field falls off an 437 00:17:00,280 --> 00:17:02,240 Speaker 8: air cound of aircraft for an engine Cottle comes off 438 00:17:02,240 --> 00:17:03,920 Speaker 8: as Southwest and it's a Boeing aircraft. 439 00:17:04,040 --> 00:17:07,480 Speaker 2: Slightly slightly concerning, Yeah, but it's a it's a maintenance 440 00:17:07,560 --> 00:17:08,600 Speaker 2: issue for those airlines. 441 00:17:08,640 --> 00:17:11,360 Speaker 8: It's not fundamentally a seven three seven issue. The seven 442 00:17:11,400 --> 00:17:14,959 Speaker 8: three seven is a great airplane. They're making phenomenal new engines. 443 00:17:15,000 --> 00:17:18,280 Speaker 8: I mean the engine technology is being transformed. We can't 444 00:17:18,320 --> 00:17:20,040 Speaker 8: wait to get the Max ten's for du to get 445 00:17:20,040 --> 00:17:22,760 Speaker 8: the firstman twenty seventeen. They are carried twenty percent more 446 00:17:22,760 --> 00:17:25,760 Speaker 8: patches but burn twenty percent less fuel. So not longly 447 00:17:25,840 --> 00:17:28,960 Speaker 8: to transform our economics, but will make us a much better, 448 00:17:29,080 --> 00:17:30,720 Speaker 8: more greener, cleaner airline to fly on. 449 00:17:30,840 --> 00:17:32,560 Speaker 2: Michael, it's going to say it. John, good to see 450 00:17:32,560 --> 00:17:35,320 Speaker 2: you and thank you very much, Michael O. Larry there 451 00:17:35,359 --> 00:17:47,399 Speaker 2: the ran A CEO. Another busy way of FED spake 452 00:17:47,480 --> 00:17:50,400 Speaker 2: on deck, Boss Stick, bab Waller, Jefferson Mester kicking things 453 00:17:50,440 --> 00:17:53,080 Speaker 2: off lights on today investors also looking ahead to the 454 00:17:53,119 --> 00:17:56,080 Speaker 2: minutes from the last FED mating jobless claims and you 455 00:17:56,200 --> 00:17:59,280 Speaker 2: mitched consumer sentiment. Joining us now to discuss RANA tables 456 00:17:59,320 --> 00:18:02,399 Speaker 2: definitely brought them three search together with mar McCormick of 457 00:18:02,560 --> 00:18:04,920 Speaker 2: TD Securities, definitely first to you. We heard from the 458 00:18:04,960 --> 00:18:07,280 Speaker 2: Atlanta FED president about an hour ago. He said things 459 00:18:07,320 --> 00:18:10,040 Speaker 2: were softer in the labor market. They weren't soft. 460 00:18:10,200 --> 00:18:13,440 Speaker 9: Would you agree, absolutely, we've seen a softening. The latest 461 00:18:13,680 --> 00:18:16,280 Speaker 9: payrolls print was arguably a Goldilocks type of print where 462 00:18:16,280 --> 00:18:18,840 Speaker 9: you had a one seventy five payrolls number, which is 463 00:18:19,119 --> 00:18:21,840 Speaker 9: good by historical measures, and an avagelarly running to print 464 00:18:21,840 --> 00:18:23,520 Speaker 9: that was on the softer side. We're starting to see 465 00:18:23,560 --> 00:18:25,600 Speaker 9: some signs of softening. I have to say, there are 466 00:18:25,680 --> 00:18:27,399 Speaker 9: some concerns in the market out there that all of 467 00:18:27,440 --> 00:18:29,160 Speaker 9: a sudden, the labor market's going to start to crack, 468 00:18:29,240 --> 00:18:31,359 Speaker 9: and there are no signs of that, and people are 469 00:18:31,400 --> 00:18:33,600 Speaker 9: just taking the narrative and running and taking the opposite 470 00:18:33,600 --> 00:18:35,800 Speaker 9: of what we saw on Q one and flipping it 471 00:18:35,920 --> 00:18:39,320 Speaker 9: upside down. So that's not a fair characterization either. Realistically, 472 00:18:39,359 --> 00:18:41,560 Speaker 9: we're just seeing or rebalancing in the labor market that's 473 00:18:41,600 --> 00:18:42,800 Speaker 9: actually working out fairly well. 474 00:18:42,840 --> 00:18:45,560 Speaker 2: On part driven immigration, Marx, I bring you into the conversation, 475 00:18:45,680 --> 00:18:47,680 Speaker 2: should we flip Q one upside down? Is that what 476 00:18:47,840 --> 00:18:50,000 Speaker 2: Q two, Q three, Q four has in store for us? 477 00:18:51,160 --> 00:18:52,639 Speaker 1: No, I would agree. I think a big part of 478 00:18:52,680 --> 00:18:54,640 Speaker 1: it is the market's kind of taking what's a positioning 479 00:18:54,680 --> 00:18:57,560 Speaker 1: and a technical narrative and they're overlaying into fundamentals and 480 00:18:57,600 --> 00:18:59,879 Speaker 1: you're seeing maybe some reversal. But if you look at 481 00:19:00,000 --> 00:19:02,320 Speaker 1: one of the more important princes as well, like employment 482 00:19:02,359 --> 00:19:04,080 Speaker 1: cost index, if you look at some of the other 483 00:19:05,119 --> 00:19:07,719 Speaker 1: indicators that we track on inflation, there's no sign here 484 00:19:07,760 --> 00:19:10,240 Speaker 1: that inflation's cracking. To me, if you look into details, 485 00:19:10,280 --> 00:19:13,800 Speaker 1: it's still pretty robust and it's relatively strong so I 486 00:19:13,880 --> 00:19:15,760 Speaker 1: think also if you put in line where the fed's 487 00:19:15,760 --> 00:19:18,639 Speaker 1: supposed to be, FED is basically looking for fifteen basis 488 00:19:18,640 --> 00:19:20,560 Speaker 1: points a month over month to basically get their two 489 00:19:20,560 --> 00:19:22,399 Speaker 1: point six percent year over year, and it looks like 490 00:19:22,520 --> 00:19:25,399 Speaker 1: even PCE core PCE is tracking about twenty five basis 491 00:19:25,440 --> 00:19:26,960 Speaker 1: points right now. So it still feels like there's a 492 00:19:27,080 --> 00:19:27,920 Speaker 1: very big disconnect. 493 00:19:28,119 --> 00:19:30,000 Speaker 6: Stephanie, do you agree with that that there's this idea 494 00:19:30,040 --> 00:19:33,320 Speaker 6: that reflation are sort of a resurgence of an inflationary 495 00:19:33,440 --> 00:19:35,639 Speaker 6: wave is the biggest risk right now and looks more 496 00:19:35,680 --> 00:19:37,160 Speaker 6: and more feasible given the backdrop. 497 00:19:37,600 --> 00:19:39,600 Speaker 9: It's definitely the biggest risk. Is it one that I'm 498 00:19:39,600 --> 00:19:42,080 Speaker 9: particularly concerned about? No, because the inflation data are starting 499 00:19:42,119 --> 00:19:45,440 Speaker 9: to look a lot better. Q one was certainly driven 500 00:19:45,480 --> 00:19:48,240 Speaker 9: by seasonals, in my opinion. Powell seems to believe that 501 00:19:48,280 --> 00:19:50,679 Speaker 9: as well, although in the latest press conference it probably couldn't. 502 00:19:50,440 --> 00:19:50,760 Speaker 3: Lean on that. 503 00:19:51,640 --> 00:19:53,639 Speaker 9: But what we're starting to see is a real normalization 504 00:19:53,960 --> 00:19:56,320 Speaker 9: in inflation, and the latest print told us that. And 505 00:19:56,440 --> 00:19:58,800 Speaker 9: I think this was the most important clean read of 506 00:19:58,880 --> 00:20:01,560 Speaker 9: inflation that we've gotten this year, because seasonals were really 507 00:20:01,680 --> 00:20:04,440 Speaker 9: driven up, driving up QQ one inflation and April was 508 00:20:04,720 --> 00:20:07,000 Speaker 9: a lot better. So now we're tracking core pc of 509 00:20:07,200 --> 00:20:09,879 Speaker 9: the twenty five basis points. If we just get oere 510 00:20:10,000 --> 00:20:12,520 Speaker 9: coming back down a little bit and financial services and 511 00:20:12,560 --> 00:20:15,760 Speaker 9: it'll be back down towards point two percent point two 512 00:20:15,800 --> 00:20:17,520 Speaker 9: percent month one month, And that's exactly what the FED 513 00:20:17,600 --> 00:20:19,920 Speaker 9: is looking for. So it's very easy come the summer 514 00:20:20,000 --> 00:20:22,879 Speaker 9: months to actually be tracking along those lines, and then 515 00:20:22,880 --> 00:20:24,840 Speaker 9: the FED should be able to be comfortable cutting in 516 00:20:25,040 --> 00:20:26,200 Speaker 9: say September. 517 00:20:25,920 --> 00:20:29,040 Speaker 6: Even though you do still see this surgeence underneath the 518 00:20:29,280 --> 00:20:32,480 Speaker 6: hood of just some sort of stickier inflation. Commodity price 519 00:20:32,600 --> 00:20:34,800 Speaker 6: is getting a little hotter marked. From your perspective, you're 520 00:20:34,840 --> 00:20:37,960 Speaker 6: talking about how that's your fear. At what point is 521 00:20:38,040 --> 00:20:41,440 Speaker 6: this driving flows internationally into the US at a time 522 00:20:41,520 --> 00:20:43,320 Speaker 6: when some people are saying, well a week or dollar 523 00:20:43,400 --> 00:20:45,639 Speaker 6: can actually make sense, and the other people say, well, 524 00:20:45,720 --> 00:20:48,120 Speaker 6: just hold on a second, because on a relative basis 525 00:20:48,440 --> 00:20:51,440 Speaker 6: rates are so much higher in the US. Strength is there, 526 00:20:51,640 --> 00:20:53,239 Speaker 6: and the FED won't be able to cut as much 527 00:20:53,240 --> 00:20:54,120 Speaker 6: as say the ECB. 528 00:20:55,600 --> 00:21:00,440 Speaker 1: Yeah, it's very interesting because there's a clear focus on 529 00:21:00,560 --> 00:21:02,520 Speaker 1: growth and inflation, and towards the end of last year 530 00:21:02,520 --> 00:21:04,639 Speaker 1: and we were embarrassed the dollar there was a convergence 531 00:21:04,680 --> 00:21:06,560 Speaker 1: with the rest of the world coming into the US, 532 00:21:06,640 --> 00:21:10,359 Speaker 1: and US exceptionalism basically peaked last year. Everyone now seems 533 00:21:10,359 --> 00:21:14,360 Speaker 1: to be overlaying this like fading US exceptionalism now, which 534 00:21:14,359 --> 00:21:16,800 Speaker 1: I think is quite interesting because this is more about positioning, 535 00:21:16,880 --> 00:21:19,760 Speaker 1: and this is more about valuations that were extremely stretched 536 00:21:19,800 --> 00:21:22,320 Speaker 1: in favor of the dollar and then a couple good 537 00:21:22,400 --> 00:21:25,080 Speaker 1: data prints. But what we're seeing if you start back 538 00:21:25,160 --> 00:21:28,440 Speaker 1: testing and trading FX strategies, the FX market basically just 539 00:21:28,960 --> 00:21:32,280 Speaker 1: change its focus entirely in March on inflation. So I 540 00:21:32,320 --> 00:21:34,160 Speaker 1: think the one thing that's very interesting about the FED 541 00:21:34,240 --> 00:21:36,919 Speaker 1: is it's very asymmetric from a risk perspective. Right now, 542 00:21:37,200 --> 00:21:39,760 Speaker 1: there is an election, it's the big elephant in the room, 543 00:21:40,119 --> 00:21:43,200 Speaker 1: and there is no room for error for one inflation 544 00:21:43,320 --> 00:21:45,920 Speaker 1: print to come in through the summer above expectations and 545 00:21:46,040 --> 00:21:50,000 Speaker 1: still be able to reliably expect September to actually be live. 546 00:21:50,280 --> 00:21:52,920 Speaker 1: And if you take out September, then you have November 547 00:21:52,960 --> 00:21:55,080 Speaker 1: and December. So how is the FED going to cut 548 00:21:55,119 --> 00:21:58,520 Speaker 1: in November around the election? And given the result of 549 00:21:58,520 --> 00:22:01,320 Speaker 1: the election, how could the FED cut in December. So 550 00:22:01,520 --> 00:22:03,040 Speaker 1: the way that we're thinking about it from like a 551 00:22:03,119 --> 00:22:07,159 Speaker 1: trading perspective is that you could have inflation kind of 552 00:22:07,280 --> 00:22:09,320 Speaker 1: go back to the levels that people are comfortable with. 553 00:22:09,720 --> 00:22:11,679 Speaker 1: But do you price in three hikes? Do you get 554 00:22:11,760 --> 00:22:13,840 Speaker 1: more confident that you just get two? But you get 555 00:22:13,880 --> 00:22:18,240 Speaker 1: one bad number? And that basically makes September a very tricky, 556 00:22:18,640 --> 00:22:21,800 Speaker 1: tricky indicator, especially to trade it into the election. So 557 00:22:22,119 --> 00:22:23,359 Speaker 1: I think a big part of this is we know 558 00:22:23,400 --> 00:22:25,640 Speaker 1: that other G ten central banks are about to cut, 559 00:22:26,040 --> 00:22:28,480 Speaker 1: but we're not very clear on whether the FED can 560 00:22:28,680 --> 00:22:31,320 Speaker 1: and whether they will. And I think the big driver 561 00:22:31,480 --> 00:22:33,920 Speaker 1: here for the currency markets and for markets in general 562 00:22:34,119 --> 00:22:36,760 Speaker 1: is inflation divergence, and that's what our models and our 563 00:22:36,760 --> 00:22:38,440 Speaker 1: signals are telling us that we should be focused on. 564 00:22:38,560 --> 00:22:40,680 Speaker 2: Among there's tons to impact, there is the politics. The 565 00:22:40,760 --> 00:22:43,560 Speaker 2: stands out for me what convinces you the politics and 566 00:22:43,600 --> 00:22:45,800 Speaker 2: the election is so important. When we go back to 567 00:22:45,880 --> 00:22:49,720 Speaker 2: twenty twelve September, then that'ns QE three. What does it 568 00:22:49,800 --> 00:22:51,080 Speaker 2: matter so much more this time? 569 00:22:52,840 --> 00:22:54,760 Speaker 1: I think a big part of it rights of inflation. 570 00:22:55,000 --> 00:22:59,200 Speaker 1: So it's we can see that you get policy actions 571 00:22:59,240 --> 00:23:01,800 Speaker 1: and it's usually not a problem, but inflation is way 572 00:23:01,840 --> 00:23:04,760 Speaker 1: above target and so it's like this would be the 573 00:23:04,960 --> 00:23:08,040 Speaker 1: first cut with very elevated inflation and a very tricky 574 00:23:08,080 --> 00:23:10,680 Speaker 1: election where the polls are neck and neck and there's 575 00:23:10,880 --> 00:23:12,879 Speaker 1: just a lot on the line. It's a very contentious 576 00:23:12,920 --> 00:23:15,920 Speaker 1: election just to even start. And I think the policy 577 00:23:15,960 --> 00:23:18,600 Speaker 1: implications from one side or the other are so massive 578 00:23:19,200 --> 00:23:22,000 Speaker 1: that the market is placing so much emphasis, especially for 579 00:23:22,040 --> 00:23:24,680 Speaker 1: the FX market, because it is the most actionable way 580 00:23:24,720 --> 00:23:28,200 Speaker 1: to look at the presidential implications in terms of terrorists, 581 00:23:28,240 --> 00:23:30,880 Speaker 1: in terms of tax cuts, those are two big things 582 00:23:30,920 --> 00:23:32,520 Speaker 1: that are sitting on the table for next year. The 583 00:23:32,560 --> 00:23:35,919 Speaker 1: corporate tax cuts will expire and the discussions around terras 584 00:23:36,000 --> 00:23:39,200 Speaker 1: will remake the entire currency market. And this also fits 585 00:23:39,240 --> 00:23:43,160 Speaker 1: into the story around the geopolitics around capital flows, where again, 586 00:23:43,200 --> 00:23:44,960 Speaker 1: if you look at what's happening with the remed to be, 587 00:23:45,040 --> 00:23:47,320 Speaker 1: if you look at what's happening with currency, markets like 588 00:23:47,680 --> 00:23:50,800 Speaker 1: China and Russia and emerging markets are aligned where they 589 00:23:50,880 --> 00:23:54,960 Speaker 1: are basically settling currency and remedy be they're finding ways 590 00:23:55,000 --> 00:23:57,119 Speaker 1: to kind of nudge themselves away from the dollar, and 591 00:23:57,240 --> 00:23:59,159 Speaker 1: this is why gold is trading at the levels that 592 00:23:59,240 --> 00:24:02,080 Speaker 1: it's at. There are so many implications for this, and 593 00:24:02,160 --> 00:24:04,080 Speaker 1: so I think, with this in mind, the easiest thing 594 00:24:04,160 --> 00:24:06,760 Speaker 1: to think about is how much can the FED cut 595 00:24:07,000 --> 00:24:10,680 Speaker 1: into the election if inflation is still well above target. 596 00:24:10,720 --> 00:24:12,320 Speaker 2: It's Deephanie to see election matter. 597 00:24:13,480 --> 00:24:15,440 Speaker 9: I mean, I think the Fed's in a tough spot 598 00:24:15,480 --> 00:24:17,200 Speaker 9: and they've been in a tough spot all year, and 599 00:24:17,720 --> 00:24:22,440 Speaker 9: Powell has indicated they're planning on cutting if the conditions 600 00:24:22,480 --> 00:24:24,639 Speaker 9: are right. So it's purely on the last part of 601 00:24:24,680 --> 00:24:26,639 Speaker 9: that same If the conditions are right, which means the 602 00:24:26,680 --> 00:24:29,040 Speaker 9: CORPUC needs to be trending at about point two percent 603 00:24:29,160 --> 00:24:32,000 Speaker 9: month on month, and it's, as Mark mentioned, it has 604 00:24:32,080 --> 00:24:34,320 Speaker 9: to go exactly right in order for the FED to cut. 605 00:24:34,720 --> 00:24:37,520 Speaker 9: If they have a couple of misprints in the next 606 00:24:37,600 --> 00:24:39,280 Speaker 9: couple of months, then yeah, of course the Fed can't 607 00:24:39,320 --> 00:24:41,240 Speaker 9: be cutting. But our base case is that you have 608 00:24:41,280 --> 00:24:44,600 Speaker 9: a lot of conditions that should be continuously disinflationary between 609 00:24:44,640 --> 00:24:46,760 Speaker 9: now and September and then they'll be able to move. 610 00:24:47,119 --> 00:24:49,359 Speaker 9: But at this point they're kind of caught in a 611 00:24:49,400 --> 00:24:51,320 Speaker 9: box and they have to just just go on what 612 00:24:51,400 --> 00:24:54,880 Speaker 9: they've indicated is key benchmark indicators, and if those things 613 00:24:54,880 --> 00:24:55,840 Speaker 9: are consistent. 614 00:24:55,480 --> 00:24:56,920 Speaker 3: With the FED cutting, then they're going to be cutting. 615 00:24:57,520 --> 00:24:59,760 Speaker 9: Regardless of what they do, they're going to be painted 616 00:24:59,800 --> 00:25:02,720 Speaker 9: as politicize, so tough. It's a really tough one. So 617 00:25:02,760 --> 00:25:04,720 Speaker 9: our base cases they can still cut in September and 618 00:25:04,760 --> 00:25:07,200 Speaker 9: November is probably out, and then December is the next one. 619 00:25:07,320 --> 00:25:10,320 Speaker 7: But Cephanie, that's if inflation is on the trajectory lower. 620 00:25:10,600 --> 00:25:12,600 Speaker 7: But if there's a move and a bigger softness in 621 00:25:12,640 --> 00:25:14,879 Speaker 7: the labor market, that would give them this impetus and 622 00:25:14,920 --> 00:25:16,520 Speaker 7: maybe some cover to cut into an election. 623 00:25:16,600 --> 00:25:18,679 Speaker 9: Do you think absolutely, if you started to see softness 624 00:25:18,680 --> 00:25:20,240 Speaker 9: in the labor market, they would. 625 00:25:20,000 --> 00:25:21,160 Speaker 2: Have every indication to cut. 626 00:25:21,320 --> 00:25:22,800 Speaker 9: And this is different from where we were a year ago. 627 00:25:22,840 --> 00:25:24,720 Speaker 9: At the beginning of twenty twenty three, they were in 628 00:25:24,800 --> 00:25:27,000 Speaker 9: a position where inflation was so high that if we 629 00:25:27,040 --> 00:25:29,120 Speaker 9: saw weakness in the labor market, they couldn't cut immediately. 630 00:25:29,480 --> 00:25:31,159 Speaker 9: But now we're talking about two and a half to 631 00:25:31,200 --> 00:25:33,800 Speaker 9: three percent inflation. That's a much different backdrop than when 632 00:25:33,880 --> 00:25:36,040 Speaker 9: inflation was trending significantly higher. 633 00:25:36,320 --> 00:25:37,760 Speaker 3: So they're now able to be a. 634 00:25:37,760 --> 00:25:39,840 Speaker 9: Lot more nimble and even be able to cut interest 635 00:25:39,880 --> 00:25:42,080 Speaker 9: rates even if inflation is still a little bit sticky 636 00:25:42,520 --> 00:25:44,080 Speaker 9: and lean on the employment side of our. 637 00:25:44,040 --> 00:25:46,800 Speaker 6: Mandate mark, you see that there's very little room for 638 00:25:46,840 --> 00:25:48,639 Speaker 6: the Fed to be cutting rates or it could you 639 00:25:48,680 --> 00:25:50,760 Speaker 6: could see them not end up cutting at all this year, 640 00:25:50,840 --> 00:25:53,840 Speaker 6: just simply because it's inconvenient timing. At the same time, 641 00:25:53,920 --> 00:25:57,240 Speaker 6: you see a resurgent inflation as one of the biggest risks. 642 00:25:57,640 --> 00:26:00,520 Speaker 6: So put that together in terms of what's going to 643 00:26:00,560 --> 00:26:03,240 Speaker 6: be the main driver of either dollar strength or weakness. 644 00:26:04,400 --> 00:26:06,560 Speaker 1: So yeah, I'd say the last couple of months we flipped. 645 00:26:06,880 --> 00:26:10,000 Speaker 1: We're quite bullish to dollar, especially against G ten currencies. 646 00:26:10,280 --> 00:26:13,399 Speaker 1: I think that is the backdrop that it's asymmetric, right. 647 00:26:13,520 --> 00:26:16,440 Speaker 1: It's like from a risk trading perspective, like our view 648 00:26:16,520 --> 00:26:18,800 Speaker 1: is that the FED is going can cut. That's our 649 00:26:18,800 --> 00:26:20,720 Speaker 1: economist spaceline call. But I think when you think about 650 00:26:20,720 --> 00:26:22,800 Speaker 1: the markets on how people have to deal with the 651 00:26:22,920 --> 00:26:24,920 Speaker 1: risks around it. To me, the risks is if there's 652 00:26:24,960 --> 00:26:28,040 Speaker 1: no room for air and data is extremely volatile and 653 00:26:28,280 --> 00:26:30,280 Speaker 1: we constantly have to look at revisions and these kind 654 00:26:30,280 --> 00:26:32,800 Speaker 1: of things to understand the trend. The trend in US 655 00:26:32,880 --> 00:26:35,600 Speaker 1: inflation is quite different from all the other countries that 656 00:26:35,680 --> 00:26:37,639 Speaker 1: you track in the currency market. So I think the 657 00:26:37,720 --> 00:26:41,639 Speaker 1: other implication is that the asymmetric kind of outcome is 658 00:26:41,720 --> 00:26:44,159 Speaker 1: one where if you think about again, the market was 659 00:26:44,320 --> 00:26:47,399 Speaker 1: very excited to fed the Powell said that there's no hikes, 660 00:26:47,880 --> 00:26:50,479 Speaker 1: that's fine, But we were like, you know, starting this year, 661 00:26:50,520 --> 00:26:52,280 Speaker 1: the market was talking about five or six cuts, and 662 00:26:52,320 --> 00:26:54,080 Speaker 1: now we're saying it's okay that we don't get any 663 00:26:54,119 --> 00:26:55,359 Speaker 1: hikes at all, or we don't have to have that 664 00:26:55,600 --> 00:26:57,840 Speaker 1: narrative discussion around it. But I think if you think 665 00:26:57,840 --> 00:27:00,600 Speaker 1: about it this way, if we do have a more 666 00:27:00,720 --> 00:27:05,199 Speaker 1: volatile fall and inflation is generally sticky, and the polls 667 00:27:05,240 --> 00:27:07,560 Speaker 1: are kind of leaning towards kind of a change in 668 00:27:07,640 --> 00:27:10,879 Speaker 1: leadership for the dollar, it has to price in the 669 00:27:11,080 --> 00:27:13,840 Speaker 1: risk of terriffs. It has to price in the risk 670 00:27:14,040 --> 00:27:16,800 Speaker 1: that corporate tax cuts will be extended. So in a 671 00:27:16,960 --> 00:27:20,760 Speaker 1: very strong economy that's dealing with elevated inflation, you now 672 00:27:20,920 --> 00:27:24,320 Speaker 1: have macro policy that's moving more inflationary. So the market 673 00:27:24,359 --> 00:27:26,840 Speaker 1: will have to reprice the expectations whether or not it 674 00:27:26,960 --> 00:27:29,600 Speaker 1: evolves in that way, but it will have to basically 675 00:27:29,680 --> 00:27:32,399 Speaker 1: reprice a narrative next year that is, you know, the 676 00:27:32,480 --> 00:27:35,200 Speaker 1: rest of the world is cutting, the US economy looks 677 00:27:35,240 --> 00:27:37,720 Speaker 1: like it gets stronger, and the fact that you're adding 678 00:27:37,840 --> 00:27:41,600 Speaker 1: terriffts makes it much more inflationary, So you kind of 679 00:27:41,720 --> 00:27:43,639 Speaker 1: have to rethink the way that you look at the 680 00:27:43,760 --> 00:27:46,480 Speaker 1: entire markets, particularly from the FX side. So for US, 681 00:27:46,560 --> 00:27:50,240 Speaker 1: we are looking for a strong dollar against G ten currencies, 682 00:27:50,280 --> 00:27:53,440 Speaker 1: but we also like the commodity story. So it's still 683 00:27:53,480 --> 00:27:56,240 Speaker 1: a buffer for some emerging markets that are generally seen 684 00:27:56,280 --> 00:27:58,880 Speaker 1: as exporters, but it is again kind of moving back 685 00:27:58,920 --> 00:28:02,880 Speaker 1: into that terms of trade. It's also a world where 686 00:28:02,920 --> 00:28:06,120 Speaker 1: it kind of creates conditions where we were expecting financial 687 00:28:06,200 --> 00:28:10,719 Speaker 1: conditions to ease this year to see the economy evolve 688 00:28:10,760 --> 00:28:13,119 Speaker 1: in a better state. And if what we see is 689 00:28:13,240 --> 00:28:15,480 Speaker 1: US inflation and the FED and the dollar creating a 690 00:28:15,520 --> 00:28:17,920 Speaker 1: little bit of a tension around that, then we can't 691 00:28:17,960 --> 00:28:21,400 Speaker 1: realize those financial conditions and we can't realize the growth 692 00:28:21,440 --> 00:28:23,520 Speaker 1: expectations that we're priced in this year for next year. 693 00:28:23,880 --> 00:28:27,240 Speaker 1: So that's what starts to see the volatility increase, that's 694 00:28:27,280 --> 00:28:29,880 Speaker 1: what starts to see carry trades online. This is kind 695 00:28:29,920 --> 00:28:32,439 Speaker 1: of what a just market sentiment, and I think these 696 00:28:32,480 --> 00:28:34,280 Speaker 1: are the risks that we have to be really focused on, 697 00:28:34,720 --> 00:28:36,560 Speaker 1: and that's why we're more bullish the dollar in the 698 00:28:36,600 --> 00:28:37,320 Speaker 1: back af of the year. 699 00:28:37,640 --> 00:28:40,160 Speaker 6: Sephanie just to tease out one part that he was 700 00:28:40,240 --> 00:28:42,680 Speaker 6: talking about this idea that tariffs would mean that the 701 00:28:42,760 --> 00:28:45,680 Speaker 6: dollar would essentially be stronger that some of the protectionist 702 00:28:45,760 --> 00:28:49,880 Speaker 6: policies that some people are talking about being implemented, especially 703 00:28:49,880 --> 00:28:52,840 Speaker 6: if there is a change in leadership, would cause more 704 00:28:52,880 --> 00:28:55,640 Speaker 6: inflationary pressures and would cause a stronger dollar because the 705 00:28:55,680 --> 00:28:58,360 Speaker 6: FED would have to remain higher for longer. Is that 706 00:28:58,760 --> 00:29:01,440 Speaker 6: kind of an outcome that you agree with? I? 707 00:29:01,520 --> 00:29:03,280 Speaker 9: I mean, it's certainly a difficult one, and that might 708 00:29:03,320 --> 00:29:06,520 Speaker 9: be how the market prices the election initially. But face case, 709 00:29:06,880 --> 00:29:08,560 Speaker 9: First of all, the teriffs wouldn't go into place into 710 00:29:08,560 --> 00:29:12,000 Speaker 9: twenty twenty six because that's when the TCJA expires. Second 711 00:29:12,080 --> 00:29:15,040 Speaker 9: of all, it's possible that the labor market is actually 712 00:29:15,080 --> 00:29:17,080 Speaker 9: in better balance by the time the election comes, so 713 00:29:17,400 --> 00:29:19,960 Speaker 9: the Trump administration turning off some of the immigration flows 714 00:29:20,040 --> 00:29:23,000 Speaker 9: might not actually be as inflationary as many fear. And 715 00:29:23,120 --> 00:29:25,040 Speaker 9: by the way, the Biden administration has done a lot 716 00:29:25,080 --> 00:29:28,400 Speaker 9: of spending themselves, so it it's not actually I in 717 00:29:28,600 --> 00:29:30,720 Speaker 9: in t in in entirely clear that if we do 718 00:29:30,800 --> 00:29:32,600 Speaker 9: get a change in the administration, you'll start to get 719 00:29:32,640 --> 00:29:35,280 Speaker 9: a u a real pick up and spending. Either way, 720 00:29:35,800 --> 00:29:37,960 Speaker 9: we're gonna be getting tax cuts extended the Trump or 721 00:29:38,000 --> 00:29:41,200 Speaker 9: Biden administration in the next in the next cycle would 722 00:29:41,240 --> 00:29:43,120 Speaker 9: be extending the tax cuts. It just depends if you 723 00:29:43,200 --> 00:29:45,280 Speaker 9: carve out the the upper income people, which is what 724 00:29:45,360 --> 00:29:48,040 Speaker 9: the Biden administration would do. It's not gonna be a 725 00:29:48,120 --> 00:29:51,280 Speaker 9: boost to the economy certainly when you're thinking about tax cuts, 726 00:29:51,280 --> 00:29:53,640 Speaker 9: because it's it's actually just extending what we have today. 727 00:29:54,360 --> 00:29:56,440 Speaker 9: And the tariff one is is a difficult one, and 728 00:29:56,520 --> 00:29:59,920 Speaker 9: I would view that as more certainly could be dollar positive, 729 00:30:00,000 --> 00:30:02,640 Speaker 9: but it would also be an environment where growth would 730 00:30:02,680 --> 00:30:06,200 Speaker 9: likely weaken as well. The policies that Trumps has alluded 731 00:30:06,240 --> 00:30:08,800 Speaker 9: to with a sixty percent China tariff or ten percent 732 00:30:08,840 --> 00:30:12,720 Speaker 9: across the board tariff would be incredibly difficult for growth. 733 00:30:13,160 --> 00:30:16,280 Speaker 9: So realistically it's possible it wouldn't actually be that inflationary. 734 00:30:16,320 --> 00:30:20,120 Speaker 9: The Fed should probably just pause, see what happens, and 735 00:30:20,200 --> 00:30:23,640 Speaker 9: then they would likely react. So it's not as clear 736 00:30:23,720 --> 00:30:28,160 Speaker 9: cut as Trump is inflationary, and the Fed would no 737 00:30:28,280 --> 00:30:29,800 Speaker 9: longer be able to cut in that environment. 738 00:30:30,840 --> 00:30:32,960 Speaker 5: Necessarily, the case mark when it comes. 739 00:30:32,840 --> 00:30:35,680 Speaker 7: To tariffs and it comes to these tax cuts, both 740 00:30:35,720 --> 00:30:38,800 Speaker 7: of these issues coming into play twenty twenty five. Whether 741 00:30:38,880 --> 00:30:41,720 Speaker 7: or not it's Biden or Trump, we're likely going to 742 00:30:41,800 --> 00:30:44,640 Speaker 7: see more of the same. It just depends how aggressive 743 00:30:44,640 --> 00:30:46,760 Speaker 7: they are going to be. So in that case, what 744 00:30:46,920 --> 00:30:48,360 Speaker 7: do you have in terms of the direction of the 745 00:30:48,440 --> 00:30:51,760 Speaker 7: dollar under a Trump twenty twenty five or Biden twenty 746 00:30:51,800 --> 00:30:52,240 Speaker 7: twenty five. 747 00:30:54,320 --> 00:30:56,600 Speaker 1: I think the part of it is that with Trump, 748 00:30:56,680 --> 00:31:00,160 Speaker 1: it just creates more uncertainty, more volatility. And again, the 749 00:31:00,200 --> 00:31:03,160 Speaker 1: way the markets are trading the currency market right now 750 00:31:03,240 --> 00:31:05,040 Speaker 1: is they're actually trading, and I hear it a lot 751 00:31:05,080 --> 00:31:07,840 Speaker 1: from client discussions, and it's really the fact that the 752 00:31:07,920 --> 00:31:09,920 Speaker 1: rest of the world is improving right now is why 753 00:31:09,960 --> 00:31:12,680 Speaker 1: people want to sell the dollar. And we're a bit 754 00:31:12,720 --> 00:31:14,720 Speaker 1: confused about it because a lot of our leading indicators 755 00:31:14,720 --> 00:31:19,000 Speaker 1: are kind of suggesting that the global economy is not accelerating, 756 00:31:19,040 --> 00:31:21,520 Speaker 1: it's kind of losing steam. But there was some obviously 757 00:31:21,600 --> 00:31:23,520 Speaker 1: some anecdotes. Is China's trying to clean up the housing 758 00:31:23,600 --> 00:31:25,760 Speaker 1: market there, you know, the things are improving in the 759 00:31:25,840 --> 00:31:29,080 Speaker 1: right direction there. Commodities are doing quite well across the board, 760 00:31:29,120 --> 00:31:32,840 Speaker 1: so maybe that's again part of the reflation pmis and manufacturing, 761 00:31:33,000 --> 00:31:35,920 Speaker 1: those things are bouncing back. So people are excited about 762 00:31:36,040 --> 00:31:38,760 Speaker 1: the global economy and the slow down in the US, 763 00:31:38,840 --> 00:31:40,680 Speaker 1: and that is so you have to unpack it too 764 00:31:40,680 --> 00:31:45,120 Speaker 1: as well, because laying out like slower growth and those 765 00:31:45,200 --> 00:31:46,800 Speaker 1: type of things that would come from maybe a Trump 766 00:31:46,800 --> 00:31:49,920 Speaker 1: administration is bullish dollar because it's risk off, and then 767 00:31:50,080 --> 00:31:52,080 Speaker 1: you know, the world that the people are trading right 768 00:31:52,080 --> 00:31:54,520 Speaker 1: now is kind of risk on. US is slowing but 769 00:31:54,680 --> 00:31:56,280 Speaker 1: not by enough, and you can get FED cuts and 770 00:31:56,320 --> 00:31:59,680 Speaker 1: this is dollar bear. So I think what people are 771 00:31:59,720 --> 00:32:04,600 Speaker 1: trying to figure out is which matters more, US growth 772 00:32:04,680 --> 00:32:08,520 Speaker 1: outperforming others, US inflation being stronger. Therefore the FED has 773 00:32:08,560 --> 00:32:11,880 Speaker 1: to react to that or whether or not, you know, 774 00:32:12,040 --> 00:32:15,520 Speaker 1: in a Trump administration, does the rest of the world underperform? 775 00:32:16,000 --> 00:32:17,760 Speaker 1: Like do we get the rug kind of pulled out 776 00:32:17,800 --> 00:32:19,240 Speaker 1: from US right now as the rest of the world 777 00:32:19,280 --> 00:32:22,920 Speaker 1: seems like it's doing okay, Europe's leting indicators are improving. 778 00:32:23,200 --> 00:32:26,200 Speaker 1: Does that all go away under a Trump you know, 779 00:32:26,400 --> 00:32:28,040 Speaker 1: kind of a Trump present city which is what we 780 00:32:28,160 --> 00:32:31,080 Speaker 1: saw the first time around, which is the US kind 781 00:32:31,120 --> 00:32:33,440 Speaker 1: of outperformed the rest of the world. US growth look 782 00:32:33,520 --> 00:32:37,880 Speaker 1: good because basically tariffs and the macro policies were administered 783 00:32:38,160 --> 00:32:40,400 Speaker 1: basically slowed down the rest of the world. So I 784 00:32:40,520 --> 00:32:42,600 Speaker 1: think that is kind of what people are trying to 785 00:32:42,640 --> 00:32:46,200 Speaker 1: figure out is a high inflation, kind of weak growth 786 00:32:46,280 --> 00:32:48,560 Speaker 1: environment good for the dollar because we kind of move 787 00:32:48,640 --> 00:32:52,400 Speaker 1: out of this Goldilocks environment. Everyone's moved back to goldilocks, 788 00:32:52,400 --> 00:32:54,600 Speaker 1: and I feel like any state we go through over 789 00:32:54,640 --> 00:32:57,840 Speaker 1: the next six months is not Goldilocks. It's either it's 790 00:32:58,120 --> 00:33:01,240 Speaker 1: something that's more volatile, and the volatility and again there's 791 00:33:01,800 --> 00:33:04,200 Speaker 1: first order and second order effects. The first order effect 792 00:33:04,240 --> 00:33:06,880 Speaker 1: is you basically pricing the risk premium. Second order effect 793 00:33:06,920 --> 00:33:10,160 Speaker 1: is we actually agree like if Trump wins, it's actually 794 00:33:10,280 --> 00:33:14,120 Speaker 1: you could see the dollar week in dramatically after the 795 00:33:14,240 --> 00:33:16,440 Speaker 1: first year. You could see the implementation of a new 796 00:33:16,520 --> 00:33:19,480 Speaker 1: Plaza cord. But those are a result of the fact 797 00:33:19,520 --> 00:33:22,720 Speaker 1: that the dollar strengthens so much to pricen the risk 798 00:33:22,800 --> 00:33:24,560 Speaker 1: around these economic pulses. 799 00:33:24,760 --> 00:33:26,760 Speaker 6: Stephanie, you've been nodding the final word. 800 00:33:27,520 --> 00:33:30,400 Speaker 9: Yeah, I mean, I think it's a complicated backup. For now, 801 00:33:30,680 --> 00:33:33,800 Speaker 9: it's going to be all about Fed policy and whether 802 00:33:33,880 --> 00:33:36,080 Speaker 9: inflation can be consistent with the Fed being able to 803 00:33:36,120 --> 00:33:37,920 Speaker 9: cut The market's not going to be able to fully 804 00:33:37,960 --> 00:33:40,480 Speaker 9: price an election certainly leads through much of the summer 805 00:33:40,560 --> 00:33:42,600 Speaker 9: and probably not until the beginning of next year when 806 00:33:42,640 --> 00:33:45,520 Speaker 9: we start to really understand what those policies mean. So 807 00:33:45,680 --> 00:33:47,640 Speaker 9: for now it's going to be all about whether the 808 00:33:47,720 --> 00:33:50,120 Speaker 9: FED can be a little bit more dubbish, which arguably 809 00:33:50,200 --> 00:33:53,560 Speaker 9: in the first quarter we think we just passed peak hawkishness. 810 00:33:53,640 --> 00:33:58,880 Speaker 9: It was all about the US exceptionalism and inflation overheating. 811 00:33:59,000 --> 00:34:01,200 Speaker 9: But if you just remember back to December, we were 812 00:34:01,240 --> 00:34:03,560 Speaker 9: talking about the opposite, it was immaculate disinflation. We've just 813 00:34:03,640 --> 00:34:05,920 Speaker 9: been swung around by the data and it's really all 814 00:34:05,960 --> 00:34:07,560 Speaker 9: about just looking through a lot of that noise, and 815 00:34:07,640 --> 00:34:09,800 Speaker 9: what we're looking at is inflation running two and a 816 00:34:09,840 --> 00:34:11,880 Speaker 9: half to three percent, a little bit too sticky, but 817 00:34:12,040 --> 00:34:14,600 Speaker 9: nothing that's that dramatic, and an economy that's starting to 818 00:34:14,600 --> 00:34:16,440 Speaker 9: slow down a little bit. So for us, it does 819 00:34:16,520 --> 00:34:18,919 Speaker 9: actually look fairly goldiocked at least for the next couple 820 00:34:18,960 --> 00:34:19,239 Speaker 9: of months. 821 00:34:19,400 --> 00:34:21,440 Speaker 2: Stephanie, this was great. It's got to see you. Stephanie 822 00:34:21,520 --> 00:34:23,640 Speaker 2: Roth there of World for Research, alongside mart McCormick of 823 00:34:23,680 --> 00:34:28,200 Speaker 2: TD Securities. This is the Bloomberg Surveillance Podcast, bringing you 824 00:34:28,640 --> 00:34:32,000 Speaker 2: the best in markets, economics, antient politics. You can watch 825 00:34:32,080 --> 00:34:34,799 Speaker 2: the show live on Bloomberg TV weekday mornings from six 826 00:34:34,840 --> 00:34:39,200 Speaker 2: am to nine am Eastern, Subscribe to the podcast on Apple, Spotify, 827 00:34:39,400 --> 00:34:41,640 Speaker 2: or anywhere else you listen, and as always, on the 828 00:34:41,640 --> 00:34:44,040 Speaker 2: Bloomberg Terminal and the Bloomberg Business Amp.