WEBVTT - Bloomberg Surveillance TV: November 4th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordernt. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.879 Terminal and the Bloomberg Business app. Fed officials explaining their 0:00:37.960 --> 0:00:41.440 views after a very divided October interest rate decision. Joining 0:00:41.520 --> 0:00:44.160 us now to discuss is Torston Slock of Apollo Towston, 0:00:44.159 --> 0:00:47.040 Good mornity, Sir, Monday morning, super divided Federal Reserve. Based 0:00:47.040 --> 0:00:49.320 on the communication we've had so far from the committee 0:00:49.320 --> 0:00:51.559 following that decision, this line here from Governor Mayron to 0:00:51.640 --> 0:00:54.680 us just yesterday that we're a fair way away from neutral. 0:00:54.760 --> 0:00:56.920 I think we could get there a bit faster. How 0:00:56.920 --> 0:00:58.280 close are we to neutral? 0:00:58.760 --> 0:00:59.160 Well? 0:00:59.320 --> 0:01:01.920 The key quote here, of course, is were doing manactery 0:01:01.920 --> 0:01:04.679 pols here according to some framework with ours star or 0:01:04.680 --> 0:01:07.400 some forecast or are we're doing monetary posts according to 0:01:07.560 --> 0:01:09.840 data dependency, because it's very clear that a lot of 0:01:09.880 --> 0:01:11.960 the arguments that are being laid out for more cuts, 0:01:11.959 --> 0:01:15.160 of course, is really dependent more on the forecast, or 0:01:15.200 --> 0:01:17.280 its dependent on some framework about what do you think 0:01:17.319 --> 0:01:19.720 our star is? So the discussion about our star, which 0:01:19.720 --> 0:01:21.959 we now had for many years, of course, is very 0:01:21.959 --> 0:01:24.720 clear there's a lot of uncertainty. So with that backdrop, yes, 0:01:24.840 --> 0:01:27.160 some estimates are low, so you could argue that those 0:01:27.160 --> 0:01:29.240 are the ones should be focusing on. But it's very 0:01:29.240 --> 0:01:31.600 clear that the divide really here among AFMC members of 0:01:31.640 --> 0:01:34.080 the last few days has been around should we focus 0:01:34.319 --> 0:01:38.000 the policy decisions today on our star and some forecast 0:01:38.080 --> 0:01:40.280 that we may have, or should we focus it on 0:01:40.319 --> 0:01:41.040 the incoming data. 0:01:41.120 --> 0:01:44.160 Well, let's talk about the incoming data. How can we forecast? Then, 0:01:44.200 --> 0:01:45.760 I think if we don't really know where we are 0:01:45.800 --> 0:01:46.360 at the moment. 0:01:46.480 --> 0:01:47.240 Well, we do have. 0:01:47.240 --> 0:01:49.720 CPI of course before the last DAYFMC meeting, but what 0:01:49.760 --> 0:01:51.480 we also have is a number of indicators for the 0:01:51.520 --> 0:01:54.800 label market also still showing the things are actually still okay. 0:01:55.080 --> 0:01:58.040 If you look, for example, at the macro Edge job announcement, 0:01:58.080 --> 0:02:00.400 cuts data that's still okay. The challenge the grant and 0:02:00.480 --> 0:02:03.400 Christmas job cuts data is actually also still okay. If 0:02:03.400 --> 0:02:06.240 you look at ADP job creation, it's also okay. If 0:02:06.280 --> 0:02:09.280 you look at revidio laps also job creation also okay. 0:02:09.440 --> 0:02:11.680 If you also look at paychecks, there's also link up. 0:02:11.800 --> 0:02:15.240 There's also indep job openings. Taken together, all these indicators 0:02:15.240 --> 0:02:17.359 are not showing a label market when the bottom is 0:02:17.400 --> 0:02:20.079 falling out. So that's why the conclusion from JPA last 0:02:20.120 --> 0:02:23.160 week was very clear. Inflation is still around three, the 0:02:23.240 --> 0:02:26.840 label market is still okay. So with that backdrop, what 0:02:27.000 --> 0:02:28.840 is the argument for cutting rates? At least when you 0:02:28.840 --> 0:02:30.399 look at it from a data dependent perspective. 0:02:30.600 --> 0:02:33.079 The argument is that you are passively tightening, as we 0:02:33.160 --> 0:02:36.160 heard from Stephen Myron yesterday, because of the demographics and 0:02:36.200 --> 0:02:38.520 because of the fact that inflation is coming down and 0:02:38.560 --> 0:02:41.920 with a labor market that's okay but relatively fragile in 0:02:41.960 --> 0:02:44.040 certain corners, why not give them a little bit of 0:02:44.080 --> 0:02:47.040 support if you are above neutral to get back closer 0:02:47.080 --> 0:02:47.720 to neutral. 0:02:47.800 --> 0:02:49.560 What do you make of that argument, Because there's also 0:02:49.600 --> 0:02:51.760 a broader discussion around it is not only about the 0:02:51.800 --> 0:02:54.680 fit funds rate, it's about financial conditions. More broadly, and 0:02:54.760 --> 0:02:57.399 if you look at my Bloomberg measure of financial conditions, 0:02:57.400 --> 0:03:00.440 it still shows me that financ traditions are very easy. 0:03:00.680 --> 0:03:03.760 So in that sense, companies, especially in the AI space, 0:03:04.000 --> 0:03:06.320 they're not barring as a function of the FED funds rate. 0:03:06.480 --> 0:03:09.200 They're barring as a function of equity prices. And given 0:03:09.200 --> 0:03:11.760 where equity prices a off for the Magnificent seven, that's 0:03:11.960 --> 0:03:15.200 very importantly coming at very significant tail went still to 0:03:15.280 --> 0:03:18.160 the economy and still even to hiring, simply because we 0:03:18.280 --> 0:03:21.639 now have that equity financing is getting huge help from 0:03:21.680 --> 0:03:24.040 the fact that equity prices are still as elevated as. 0:03:24.000 --> 0:03:24.640 The time moment. 0:03:24.680 --> 0:03:26.200 You've done a great job of talking about the key 0:03:26.240 --> 0:03:28.239 shaped market, and this is sort of the conundrum for 0:03:28.280 --> 0:03:30.600 the Fed. They've got this blunt tool of cutting rates, 0:03:30.960 --> 0:03:34.080 and there is this question of does that help the 0:03:34.160 --> 0:03:38.240 lower income consumers and companies that are catering to them 0:03:38.680 --> 0:03:41.400 more than it really risks creating a bubble in the 0:03:41.440 --> 0:03:45.120 AI names and those areas where financial conditions are very loose. 0:03:45.680 --> 0:03:47.640 How do you weigh in on that that's exactly right? 0:03:47.680 --> 0:03:50.160 And that's why what becomes exactly critical, Lisa, is to 0:03:50.240 --> 0:03:53.200 think about what is the weight in aggregate consumption from 0:03:53.200 --> 0:03:55.880 the bottom twenty percent of the population, which is roughly 0:03:55.880 --> 0:03:58.560 around eight percent of toward consumption, whereas the top twenty 0:03:58.560 --> 0:04:01.240 percent accounts for forty percent of total consumption according to 0:04:01.280 --> 0:04:04.080 the Consumer Expandsire Survey. So because of that, it still 0:04:04.120 --> 0:04:06.720 is the case that when stock priceer up, home prizer up, 0:04:06.760 --> 0:04:09.000 and when interst rates are high, the cash flow for 0:04:09.040 --> 0:04:11.840 those who own debt, who own private credit is still strong. 0:04:12.120 --> 0:04:14.560 So for those households at the other anything come distribution, 0:04:14.920 --> 0:04:17.400 things are still looking good. And that's a very important 0:04:17.400 --> 0:04:20.120 reason why the consumer still continues to do well. And critically, 0:04:20.160 --> 0:04:22.600 it's not only a case shaped economy for the consumer, 0:04:22.839 --> 0:04:25.679 it's actually also a case shaped economy for the corporate sector. 0:04:25.920 --> 0:04:28.120 If you look at EPs expectations since the beginning of 0:04:28.160 --> 0:04:31.040 the year Magnificent seven, the expectation is that earnings will 0:04:31.080 --> 0:04:33.800 grow further, but the S and P four ninety three 0:04:34.080 --> 0:04:37.160 earning expectations have actually come down. Likewise, the same thing 0:04:37.160 --> 0:04:39.680 for profit margins for the Magnificent seven is going up. 0:04:39.839 --> 0:04:42.560 For the SNP four ninety three profit markets expectations have 0:04:42.600 --> 0:04:44.640 been coming down. So we're seeing more signs of the 0:04:44.680 --> 0:04:47.279 case shaped economy, not only the division in terms of 0:04:47.320 --> 0:04:49.600 the consumer side, but also on the corporate side, where 0:04:49.600 --> 0:04:51.800 it's more and more the AI story that continues to 0:04:51.880 --> 0:04:52.520 drive everything. 0:04:52.640 --> 0:04:54.640 Do you see limits to that trend? 0:04:54.800 --> 0:04:57.000 Well, the key issue, of course is to what extent 0:04:57.240 --> 0:05:00.080 on the AI story. Of course, the AI companies that 0:05:00.120 --> 0:05:02.560 the Magnificent seven can continue to deliver the earnings that 0:05:02.600 --> 0:05:05.000 are priced in at the moment. If therefore, whatever reason, 0:05:05.320 --> 0:05:08.960 is any slowdown in earnings growth in AI, it will 0:05:09.000 --> 0:05:11.400 certainly begin to create some wabbles, not only in the 0:05:11.480 --> 0:05:13.799 data center build out and also of course the challenges 0:05:13.839 --> 0:05:15.920 of the associated the energy side, but it will also 0:05:15.920 --> 0:05:18.120 begin to have some wealth effix, especially if we do 0:05:18.200 --> 0:05:20.960 get the correction that we've had some conversations about in 0:05:21.040 --> 0:05:22.839 the last several here twenty four hours. 0:05:22.920 --> 0:05:25.239 Yeah, just to think throw this and the ultimate extreme. 0:05:25.360 --> 0:05:26.680 You need someone to have a job to buy the 0:05:26.680 --> 0:05:29.680 product you sounding, ultimately, don't you? And the fact that 0:05:29.680 --> 0:05:33.440 we've seen some decoupling between employment and corporate profits. I 0:05:33.480 --> 0:05:35.480 just wonder how much longer that can possess. 0:05:35.640 --> 0:05:37.760 Well, A very important part of that is, indeed that 0:05:37.800 --> 0:05:39.920 immigration has been slowing down, So the Dallas fat is 0:05:39.920 --> 0:05:42.120 now saying that the equlibrium non found pay rolls is 0:05:42.160 --> 0:05:44.720 thirty thousand. So think about the ADP that came out 0:05:44.800 --> 0:05:47.440 last week. The monthly number was around fifty sixty thousand, 0:05:47.720 --> 0:05:49.920 So that means that suddenly we have that fifty sixty 0:05:50.040 --> 0:05:52.000 is actually not too bad when you think about that. 0:05:52.080 --> 0:05:54.239 Suddenly the Fed is telling us that the new going 0:05:54.320 --> 0:05:56.920 rate where we should be is thirty. So from that perspective, 0:05:56.920 --> 0:06:00.240 we can have a slowdown for immigration restriction reasons. Also 0:06:00.240 --> 0:06:01.960 the one hundred thousand and the h one b that 0:06:02.080 --> 0:06:04.440 will slow down job growth and therefore still create a 0:06:04.480 --> 0:06:07.400 label market that's just having slower growth in jobs, but 0:06:07.560 --> 0:06:09.520 not so much because the economy is slowing in GDP, 0:06:09.880 --> 0:06:13.479 but simply because immigration inflows a lot weaken Touristan. 0:06:13.560 --> 0:06:15.720 If the federed a cup by twenty five basis points, 0:06:15.880 --> 0:06:19.440 does that cause the ke shape to get wider or narrower? 0:06:20.120 --> 0:06:22.440 So that depends on, of course, for the consumer side. 0:06:22.520 --> 0:06:24.640 If we continue to have a rally in the stock market, 0:06:24.720 --> 0:06:27.160 if we continue to have a divergence in asset prices 0:06:27.200 --> 0:06:29.600 going up further, then we will continue to see the 0:06:29.680 --> 0:06:32.040 key get even longer on each side of the leg. 0:06:32.200 --> 0:06:34.479 So in that sense, cutting rates is certainly something that 0:06:34.560 --> 0:06:37.840 normally boosts asset prices and therefore makes the wider k 0:06:38.360 --> 0:06:39.479 AT distinct possibility. 0:06:40.080 --> 0:06:43.520 Stay with US multile impact surveillance coming up after this 0:06:52.839 --> 0:06:55.400 gues selection dang here in New York City, President Donald 0:06:55.400 --> 0:06:58.520 Trump endorsing Andrew Cuomo for the city's next man, as 0:06:58.560 --> 0:07:01.839 the former governor faces an pill battle against the front runner, 0:07:01.880 --> 0:07:05.839 Democratic Socialist Mamdanie Hendritta triese fighter putas joins usnap for 0:07:05.920 --> 0:07:08.560 more Henriette. Is something that Lasa and I've been wrestling 0:07:08.560 --> 0:07:11.280 with throughout this morning. Is this election here in this 0:07:11.360 --> 0:07:14.160 city taking the temperature of the country, the mood of 0:07:14.200 --> 0:07:17.000 the country, or just taking the temperare of the Democratic Party, 0:07:17.280 --> 0:07:19.280 and which chargument's going to win out as we head 0:07:19.280 --> 0:07:20.240 towards the midterms. 0:07:20.920 --> 0:07:22.000 You know, it's fascinating. 0:07:22.080 --> 0:07:25.440 I think you said Donald Trump's name fifteen more times 0:07:25.440 --> 0:07:28.440 than either of the Democratic candidates in the race today 0:07:28.520 --> 0:07:30.160 in the lead into here, and I think that just 0:07:30.200 --> 0:07:32.800 really exemplifies where the Democratic Party is right now. They're 0:07:32.840 --> 0:07:36.040 so bifurcated and so lacking in a cohesive message that 0:07:36.080 --> 0:07:39.840 they can really only be anti Donald Trump now for Democrats. 0:07:39.840 --> 0:07:42.920 That's a good thing because Donald Trump is a massive 0:07:42.960 --> 0:07:44.160 vote turnout machine. 0:07:44.320 --> 0:07:47.560 So for Cuomo, for Mom Donnie. 0:07:47.040 --> 0:07:50.080 They're both going to be taking exactly what they want, 0:07:50.120 --> 0:07:52.440 spreading it out to voters, and making it all about Trump, 0:07:53.480 --> 0:07:56.240 which really speaks to the lack of comprehensive message that 0:07:56.320 --> 0:07:58.720 Democrats have struggled with since twenty sixteen. 0:07:58.800 --> 0:08:00.280 Quite frankly, I. 0:08:00.240 --> 0:08:01.840 Think Henryette, a lot of people think of this as 0:08:01.880 --> 0:08:05.680 sort of like a mini pre midterms moment, especially given 0:08:05.680 --> 0:08:07.320 the fact that there are races in New Jersey and 0:08:07.320 --> 0:08:10.800 in Virginia. In California, there's an initiative that people are 0:08:10.800 --> 0:08:13.680 going to be voting on about redistricting. How much are 0:08:13.720 --> 0:08:16.040 you going to take a big read through in terms 0:08:16.120 --> 0:08:19.800 of what type of mandate President Trump has, what kind 0:08:19.880 --> 0:08:23.160 of vision gets the most voters for Democrats? How much 0:08:23.280 --> 0:08:27.080 is this taking the temperature versus idiosyncratic races With a 0:08:27.160 --> 0:08:29.440 number of very specific inputs. 0:08:29.880 --> 0:08:33.679 The off year elections, this mid midterm is one of 0:08:33.720 --> 0:08:36.240 the best predictors of what will happen in the House 0:08:36.240 --> 0:08:41.280 of Representatives next November. It is an exceptional early indicator 0:08:41.320 --> 0:08:44.080 from New Jersey Virginia, not just two wins but what 0:08:44.120 --> 0:08:46.960 the margins are and the reason that President Trump is 0:08:47.000 --> 0:08:50.560 so animated about the midterms, if you follow his social 0:08:50.559 --> 0:08:54.280 media feeds, it's been forty straight hours of endorsements, is 0:08:54.360 --> 0:08:57.800 because he is very likely. Republicans are very likely to 0:08:57.840 --> 0:09:02.040 lose the House just statistically type margin, and that means 0:09:02.800 --> 0:09:05.880 massive subpoena power for the House of Representatives next year 0:09:06.040 --> 0:09:08.640 if it is democratically owned. So it is incumbent upon 0:09:08.679 --> 0:09:11.120 President Trump to do what I just said he does best, 0:09:11.160 --> 0:09:12.760 which is turn out the votes. But in favor of 0:09:12.760 --> 0:09:15.640 the Republican candidates, he really needs to hold onto the 0:09:15.679 --> 0:09:17.520 House more than anything else, and it's going to be 0:09:17.760 --> 0:09:21.160 a very serious uphill battle that you know, statistics and 0:09:21.280 --> 0:09:24.440 history show he is very likely to lose, so California, 0:09:24.679 --> 0:09:28.000 Pennsylvania Supreme Court, Virginia, New Jersey. The margins are where 0:09:28.200 --> 0:09:30.880 walks like myself will be watching just to see exactly 0:09:30.880 --> 0:09:32.280 what we should be looking for next year. 0:09:32.320 --> 0:09:33.240 Is it going to be a. 0:09:33.320 --> 0:09:35.720 Seven seat margin in the House of Representatives or are 0:09:35.720 --> 0:09:37.080 we talking like thirty seats. 0:09:37.120 --> 0:09:39.679 That's what this today's election. 0:09:39.480 --> 0:09:42.520 Can tell us how much our national concerns feeding into 0:09:42.559 --> 0:09:44.079 the local races. 0:09:44.400 --> 0:09:45.600 Given the fact that the. 0:09:45.559 --> 0:09:46.520 Government's shut down. 0:09:46.760 --> 0:09:47.360 There's a lot of. 0:09:47.280 --> 0:09:51.200 Dissatisfaction on a national level. At a local level, there 0:09:51.280 --> 0:09:55.520 is more engagement, an increasing amount of engagement from residents. 0:09:55.840 --> 0:09:57.840 Is there a divergence. 0:09:57.160 --> 0:09:59.439 Here or is there a pretty clear correlation. 0:10:00.320 --> 0:10:03.000 That's a fascinating question. I think it's different for each party. 0:10:03.080 --> 0:10:06.320 So in this cycle, the Republican Party has continued to 0:10:06.320 --> 0:10:06.960 be led. 0:10:06.720 --> 0:10:09.360 By Donald Trump, and he's not on the ballot. 0:10:09.400 --> 0:10:12.240 And so what Republican staff and campaign operatives I speak 0:10:12.280 --> 0:10:15.439 with will tell you is that Republican voters are tuned out. 0:10:15.720 --> 0:10:19.040 When we saw the returns on the national election last year, 0:10:19.240 --> 0:10:21.360 people would go to the polls, vote for Donald Trump, 0:10:21.440 --> 0:10:23.760 and then leave. So the fact that Trump is not 0:10:23.920 --> 0:10:26.199 on the ballot this cycle, he's not on the ballot 0:10:26.200 --> 0:10:28.480 in the midterms, and he won't be next year either, 0:10:28.559 --> 0:10:30.920 the Republican Party is trying to figure out, how can 0:10:31.000 --> 0:10:34.000 I backfill that darth and that absence left by Donald 0:10:34.000 --> 0:10:37.160 Trump himself the plane leader of the Republican Party, and 0:10:37.280 --> 0:10:40.839 get our voters excited for JD. Vans, Formarco Rubio, for 0:10:40.920 --> 0:10:43.600 any of these local politicians. So you see this depressed 0:10:44.360 --> 0:10:47.240 participation on the Republican side because Trump is not on 0:10:47.280 --> 0:10:49.319 the top of the ticket, and that leaves a vacuum 0:10:49.320 --> 0:10:50.680 for Democrats to turn out. 0:10:51.040 --> 0:10:52.800 So really it depends on which party you're. 0:10:52.640 --> 0:10:53.640 Talking about, Henrietta. 0:10:53.679 --> 0:10:56.040 I understand the temptation whenever we cover these stories the 0:10:56.080 --> 0:11:00.280 group in people in some very neat groups Republicans Democrats. 0:11:00.440 --> 0:11:03.240 But is there another group, another set of individuals that 0:11:03.280 --> 0:11:06.000 can't be put into one buckheit that are pretty fluid 0:11:06.200 --> 0:11:07.920 and they're willing to vote for someone who's got a 0:11:07.920 --> 0:11:09.840 solution to their problem. And right now, the problem for 0:11:09.880 --> 0:11:11.880 a lot of people in this country, and it's persisted 0:11:11.920 --> 0:11:15.199 for a long time, is affordability, and those problems were 0:11:15.200 --> 0:11:17.160 exacerbated through the Buider administration. 0:11:17.400 --> 0:11:18.559 They're looking for solutions. 0:11:18.600 --> 0:11:20.880 It might come from the far left, it might come 0:11:20.920 --> 0:11:23.400 from the conservative right, Henriette. So, I just wonder how 0:11:23.480 --> 0:11:25.240 much of a feature that's going to be in the 0:11:25.240 --> 0:11:27.280 elections through the next twelve eighteen months. 0:11:28.120 --> 0:11:30.160 Yeah, I think it's the biggest feature. 0:11:30.280 --> 0:11:32.880 You have sixty eight percent of the US population that 0:11:32.880 --> 0:11:35.080 does not support the state of the US economy and 0:11:35.160 --> 0:11:37.840 is very concerned about inflation and does not support the 0:11:37.880 --> 0:11:42.800 president's terrace. So the president and his trake, his committee 0:11:42.840 --> 0:11:45.600 officials and cabinet officials are saying, you know, give us 0:11:45.640 --> 0:11:48.400 another year, let us bring prices down. But when voters 0:11:48.400 --> 0:11:51.520 are looking at their grocery bill, their electricity bill, the 0:11:51.559 --> 0:11:53.680 cost of a new car, whatever they're looking at trying 0:11:53.720 --> 0:11:55.000 to buy, it's all more expensive. 0:11:55.000 --> 0:11:56.200 It's all because of the tires, and. 0:11:56.200 --> 0:11:59.240 They know that, and they are seeing manufacturing, they are 0:11:59.280 --> 0:12:02.559 seeing grocery prices increase, but not their wages. 0:12:02.880 --> 0:12:04.679 So the President. 0:12:04.520 --> 0:12:08.480 Ran on, you know, theoretically an inflation related campaign. Inflation 0:12:08.640 --> 0:12:12.080 was high after COVID, but it remains on the upper 0:12:12.160 --> 0:12:14.520 rise today as well, and you can see that again 0:12:14.559 --> 0:12:17.560 at the grocery stores most plainly. So when we go 0:12:17.600 --> 0:12:20.280 to the polls in November of next year, that's going 0:12:20.360 --> 0:12:22.320 to be paramount. Our grocery price is high. Is it 0:12:22.320 --> 0:12:25.240 our number one issue? Or do we care about immigration 0:12:25.520 --> 0:12:28.080 or crime or healthcare or other tertiary issues. 0:12:28.080 --> 0:12:29.559 But it's really always the economy. 0:12:29.760 --> 0:12:32.559 And the president is underwater with the lowest approval ratings 0:12:32.600 --> 0:12:34.680 that he has ever had in this term or last 0:12:35.080 --> 0:12:36.559 because of the state of the economy. 0:12:37.280 --> 0:12:40.760 Stay with us, mult Bloomberg Savannah's coming up after this. 0:12:49.640 --> 0:12:51.600 Stocks pulling back from their old time highs. 0:12:51.600 --> 0:12:54.440 It's Wall Street bosses issue a fresh warning on rich 0:12:54.520 --> 0:12:57.440 valuations and if possible, draw down, joining us not to 0:12:57.480 --> 0:13:00.840 discuss Henry. Anna mac christ strategist that Deutsche Henry, I 0:13:00.840 --> 0:13:03.439 feel like this is a move looking a fan a narrative. 0:13:03.559 --> 0:13:05.800 How would you describe this to clients this morning? What 0:13:05.880 --> 0:13:07.600 is this pullback so far today? 0:13:08.440 --> 0:13:10.080 I think this is actually just a kind of normal, 0:13:10.120 --> 0:13:12.280 regular pullback that you're going to get in any normal 0:13:12.360 --> 0:13:13.800 ball run. I mean, at the end of the day, 0:13:14.040 --> 0:13:16.000 you're not going to hit all time highs day after 0:13:16.080 --> 0:13:18.440 day after day. We've had over thirty this year, so 0:13:18.960 --> 0:13:21.360 getting these kind of pullbacks, which in the grand scheme 0:13:21.400 --> 0:13:23.960 of this relentless ball run, are pretty modest. We're still 0:13:23.960 --> 0:13:25.880 only around two percent off the all time highs to 0:13:25.920 --> 0:13:28.719 the SMP is to be expected. But you know, if 0:13:28.720 --> 0:13:31.080 we look at the macro fundamentals right now, they do 0:13:31.160 --> 0:13:34.200 remain pretty strong. Clearly, with the US China trade truce, 0:13:34.280 --> 0:13:36.839 the risk of near term tariffs has been taken off 0:13:36.840 --> 0:13:40.080 the table. We still have the tailwind from the recent 0:13:40.080 --> 0:13:42.040 FED rate cut and another fifty bits already this year 0:13:42.080 --> 0:13:45.079 even if they don't cut in December, and actually a 0:13:45.120 --> 0:13:47.559 lot of the activity data at a global level has 0:13:47.559 --> 0:13:49.880 been pretty good. I was struck, for instance, in Europe 0:13:50.400 --> 0:13:53.960 that the flash PMI, actually the composite PMI was at 0:13:53.960 --> 0:13:57.120 a two year high. So actually the ism manufacturing yesday, Yes, 0:13:57.120 --> 0:13:59.320 a little bit weaker than expected. But you know, I 0:13:59.360 --> 0:14:01.160 appreciate the day has been limited out of the US, 0:14:01.200 --> 0:14:03.520 but that has actually been the exception rather than the rule. 0:14:03.559 --> 0:14:05.920 And I think that fundamental bullish backdrop does remain in 0:14:05.960 --> 0:14:06.720 place Henry. 0:14:06.760 --> 0:14:08.160 At the same time, a thing we have to take. 0:14:08.200 --> 0:14:11.200 No, when a stock falls on good news, not bad 0:14:11.200 --> 0:14:14.559 news Palenteer and the earnings from Palenteer wasn't bad at all. 0:14:14.679 --> 0:14:16.840 If he goes through the numbers relative to expectations. Then 0:14:16.880 --> 0:14:19.280 you see the move this morning and the stock is 0:14:19.320 --> 0:14:22.120 down by six or seven percent. Does that speak to 0:14:22.160 --> 0:14:24.200 full valuations? What do you think that speaks too? 0:14:25.000 --> 0:14:25.480 I think you. 0:14:25.440 --> 0:14:28.440 Always get these moments where single headlines can create a 0:14:28.440 --> 0:14:31.120 lot of fear. I mean, I remember back in earlier 0:14:31.120 --> 0:14:33.080 in the year before the Liberation Day TERMOL, we had 0:14:33.120 --> 0:14:36.000 the deep seek AI model released and there was a 0:14:36.120 --> 0:14:39.240 very big temporary pullback in tech stocks that proved me 0:14:39.400 --> 0:14:41.360 very short lived. People thought this might be a new 0:14:41.400 --> 0:14:43.960 big narrative shift and it wasn't. But you know, I 0:14:44.040 --> 0:14:46.960 was thinking about those CEO warnings you played just before this. 0:14:47.520 --> 0:14:49.920 If you think about what has generated you got fifteen 0:14:49.960 --> 0:14:52.920 percent draw downs to the SMP. In recent decades, it's 0:14:53.000 --> 0:14:55.600 usually taken one of three things. One is a recession, 0:14:55.680 --> 0:14:57.760 which there's no sign of yet. The Alandzo fed's GDP 0:14:57.880 --> 0:14:58.680 track are actually at. 0:14:58.560 --> 0:15:01.440 Three point nine percent in Q three. Another is fears 0:15:01.440 --> 0:15:02.600 of a recession. 0:15:02.200 --> 0:15:05.600 Like we saw after Liberation Day, but no one's seriously 0:15:05.600 --> 0:15:08.080 talking about a recession right now. And the other third 0:15:08.080 --> 0:15:10.560 component that has gone with that is FED rate hikes. 0:15:10.560 --> 0:15:12.440 So a lot of the cellers we've seen in recent year, 0:15:12.480 --> 0:15:15.440 so twenty fifteen, sixteen, late twenty eighteen, and indeed twenty 0:15:15.520 --> 0:15:18.040 twenty two most notably, have gone hand in hand with 0:15:18.080 --> 0:15:21.600 FED rate hikes, but they're not talking about hiking anytime soon, 0:15:21.640 --> 0:15:23.920 and if anything, obviously, with a new fetcher coming in 0:15:24.000 --> 0:15:26.280 next year, the direction of travel remains pretty dubbish. 0:15:26.440 --> 0:15:28.480 We'll talk about the FED in just a second, but 0:15:28.560 --> 0:15:30.920 it's not just the big Wall Street CEOs that are 0:15:30.960 --> 0:15:33.440 talking about this. I actually took more notice of a 0:15:33.520 --> 0:15:36.320 story that came out this morning that Michael Burry of 0:15:36.400 --> 0:15:39.880 the Big short fame is shorting Palenteer and nvideo shares, 0:15:40.160 --> 0:15:42.720 and he's coming out and talking about valuations, but he's 0:15:42.800 --> 0:15:45.600 also kind of leaning into a narrative that increasing number 0:15:45.680 --> 0:15:48.120 people have talked about, which is this case shaped market 0:15:48.160 --> 0:15:51.760 can continue, you have to see some monetization of the 0:15:51.840 --> 0:15:55.080 software of the hardware in order to keep this AI 0:15:55.240 --> 0:15:57.280 trend going. Do you think there's validity in that that 0:15:57.360 --> 0:16:00.000 maybe some of the winners need to take a pause 0:16:00.080 --> 0:16:02.280 and there needs to be a transfer in terms of 0:16:02.440 --> 0:16:03.680 stock market leadership. 0:16:04.520 --> 0:16:06.280 I think to some extent there is, But I think 0:16:06.280 --> 0:16:08.280 a lot of the comparisons to the dot com bubble 0:16:08.440 --> 0:16:10.880 are really quite overregged at the moment. So for instance, 0:16:10.880 --> 0:16:13.520 you know, the nastak is up by twenty three percent 0:16:13.560 --> 0:16:14.360 year to date so far. 0:16:14.520 --> 0:16:16.000 Now that's very healthy, but in. 0:16:16.000 --> 0:16:18.440 Nineteen ninety nine, we had the nastak up eighty five 0:16:18.520 --> 0:16:20.560 percent that year, and in the final seven or eight 0:16:20.560 --> 0:16:22.640 months of the dot com bubble, the nassack literally doubled. 0:16:22.920 --> 0:16:25.480 So I don't think the games we're seeing, you know, 0:16:25.480 --> 0:16:28.200 it can really be compared to what we saw at 0:16:28.200 --> 0:16:30.160 the time of the dot com bubble. And another key 0:16:30.160 --> 0:16:33.160 difference between now and then is back then, you know, 0:16:33.200 --> 0:16:35.440 a lot of the assumptions that valuations rested on was 0:16:35.480 --> 0:16:37.760 a belief that four percent growth as we saw in 0:16:37.760 --> 0:16:40.200 the mid to late nineties would continue forever. You know, 0:16:40.280 --> 0:16:42.320 forecasts from reputable people like the FED were saying that 0:16:42.360 --> 0:16:44.680 would continue well into the two thousands. But then, as 0:16:44.720 --> 0:16:47.840 we know in retrospect, we had that downturn in two 0:16:47.840 --> 0:16:51.000 thousand and two thousand and one and there was a recession. Whereas, 0:16:51.040 --> 0:16:54.720 again today, valuations are not resting on continued four percent 0:16:54.760 --> 0:16:56.040 growth forever. We're kind of in a two and a 0:16:56.040 --> 0:16:58.280 half to three percent range, perhaps with some upside. If 0:16:58.440 --> 0:17:01.320 AI productivity does lead to a bo and again there's 0:17:01.360 --> 0:17:04.520 no recession on the horizon, so clearly about macro picture changes, 0:17:04.520 --> 0:17:06.560 and we do get a growth downturn, then I think 0:17:06.600 --> 0:17:08.439 that would take some of the underpinning away. But for 0:17:08.520 --> 0:17:11.600 now we're not seeing those relentless, remorseless gains that we 0:17:11.640 --> 0:17:13.399 saw at the time of the late nineties. 0:17:13.480 --> 0:17:16.040 We talked about the other catalyst to the potential catalyst 0:17:16.080 --> 0:17:17.639 for an end to the rally, which comes from the 0:17:17.640 --> 0:17:20.520 FED in a potential tightening, and FED policy seems like 0:17:20.520 --> 0:17:22.480 that is nowhere on the table. As you were mentioning, 0:17:22.560 --> 0:17:25.480 you did say that maybe inflation is underappreciated, and that's 0:17:25.480 --> 0:17:28.440 something that Deutsche Bank has been talking about quite a bit. 0:17:28.840 --> 0:17:31.720 What makes you think that based on the ism manufacturing, 0:17:31.720 --> 0:17:33.920 which was the opposite base in the fact that there 0:17:34.000 --> 0:17:37.040 is this case shaped economy that has put pressure on 0:17:37.080 --> 0:17:40.159 any additional price gains that we've seen in the consumer sector. 0:17:41.200 --> 0:17:43.240 Well, I think there are still a lot of inflationary catalysts. 0:17:43.240 --> 0:17:45.320 I think the market has been a bit too reassured 0:17:45.400 --> 0:17:48.800