WEBVTT - Wall Street Week: August 12th, 2022 0:00:00.560 --> 0:00:03.760 This is Bloomberg Wall Street Week. We turn our attention 0:00:03.840 --> 0:00:07.600 to the markets this week. Us CPI Nemers reinforcing concerns 0:00:07.600 --> 0:00:10.800 about inflation. The financial stories that chief are worth a 0:00:10.840 --> 0:00:13.760 really different reaction to Mark. It's more indications of just 0:00:13.960 --> 0:00:16.360 how hot the U. S. Economy really is. Through the 0:00:16.400 --> 0:00:19.799 eyes of the most influential voices Larry Summers, the former 0:00:19.800 --> 0:00:22.800 Treachery Secretary, Katherine Keating, CEO of v n Y, mom 0:00:22.960 --> 0:00:26.239 Sam's l Sharon and founder of Equatic Group Investment in 0:00:26.320 --> 0:00:30.280 Bloomberg Wall Street Week with David Weston from Bloomberg Radio. 0:00:30.680 --> 0:00:34.360 So much for the dog days of summer, to landmark 0:00:34.400 --> 0:00:38.000 pieces of legislation, a major river runs dry, inflation takes 0:00:38.040 --> 0:00:41.239 a holiday, and the FBI searches former President trump'st mar 0:00:41.320 --> 0:00:45.960 Alago residents. Welcome to August. This is Bloomberg Wall Street Week. 0:00:46.080 --> 0:00:49.680 I'm David Weston. This week's special contributor Larry Summers on 0:00:49.800 --> 0:00:53.800 not counting our chickens too soon, on inflation We've Sarah 0:00:53.840 --> 0:00:57.280 seen this movie before. And Melissa Carney of the University 0:00:57.280 --> 0:01:00.240 of Maryland on the risk of running out of workers. 0:01:00.720 --> 0:01:03.400 Our population is going to age and it's not going 0:01:03.440 --> 0:01:06.400 to grow. Eventually, we're going to have a shrinking working 0:01:06.400 --> 0:01:22.520 age population. Things are supposed to be quiet in August, 0:01:22.720 --> 0:01:25.640 but the news God's haven't gone that message. The week 0:01:25.760 --> 0:01:29.800 started off dramatically as dozens of FBI agents executed a 0:01:29.800 --> 0:01:34.000 warrant to search former President Trump's mar Alago residents. Trump 0:01:34.040 --> 0:01:37.199 allies were quick to comment, it's unpresidented that you would 0:01:37.200 --> 0:01:39.959 go into a former president. Why wouldn't they just ask 0:01:40.040 --> 0:01:42.960 the president if they have something there that they want. 0:01:43.200 --> 0:01:45.880 But Attorney General Merrick Garland waited until the end of 0:01:45.920 --> 0:01:49.840 the week before weighing in. I personally approved the decision 0:01:49.920 --> 0:01:53.680 to seek a search warrant in this matter. Second, the 0:01:53.760 --> 0:01:57.480 department does not take such a decision lightly. And then 0:01:57.600 --> 0:02:00.320 on Friday we got to see the warrant and what 0:02:00.520 --> 0:02:04.480 was taken. The FBI has again sees classified records, some 0:02:04.600 --> 0:02:07.200 that were marked as top secret from former President Donald 0:02:07.240 --> 0:02:10.200 Trump's marro Logo home. And this was a copy of 0:02:10.280 --> 0:02:13.919 the search warrant that was seen by Bloomberg. Congress moved 0:02:13.960 --> 0:02:17.279 forward on not one but two pieces of major legislation, 0:02:17.520 --> 0:02:21.240 that Chips Act that's been pending forever. The United States 0:02:21.360 --> 0:02:23.760 must lead the world in the production of these advanced hips. 0:02:24.280 --> 0:02:27.640 This law will do exactly that. And a piece or 0:02:27.680 --> 0:02:30.200 two of the bill back better proposal that had been 0:02:30.280 --> 0:02:33.560 left for dead but came back like Lazarus at the 0:02:33.600 --> 0:02:36.280 eleventh hour and the fifty ninth minute, and the bill 0:02:36.560 --> 0:02:41.400 as amended is past. And those summer in the northern 0:02:41.400 --> 0:02:44.560 Hemisphere is supposed to be hot, not so hot that 0:02:44.639 --> 0:02:48.760 europe Rhine River drives up, posing yet another problem for 0:02:48.919 --> 0:02:53.160 strained supply chains. It's also just getting extremely expensive. The 0:02:53.160 --> 0:02:56.400 same ball general I was speaking to you before, he 0:02:56.520 --> 0:02:58.840 said that he literally fell off his chat when he 0:02:58.880 --> 0:03:01.639 saw the coast they're shipping on the Rhine. But as 0:03:01.680 --> 0:03:05.520 hot as things were everywhere else. Inflation chose this week 0:03:05.680 --> 0:03:09.120 to cool down a bit, with headline CPI numbers flat 0:03:09.240 --> 0:03:12.919 month over month and core up less than expected. Though 0:03:13.000 --> 0:03:16.040 to be fair, we still are facing more inflation than 0:03:16.120 --> 0:03:18.800 anyone would like. It is good news, so though I 0:03:18.800 --> 0:03:21.120 do think we have to be cautious as fixed that 0:03:21.240 --> 0:03:25.480 all along, there's no silver bullet here, and after the 0:03:25.520 --> 0:03:28.720 Producer price Index numbers reinforced the idea of the inflation 0:03:28.800 --> 0:03:32.040 just might be softening a bit. The markets responded warmly, 0:03:32.280 --> 0:03:35.440 with the SMP posting its fourth weekly climb in a row, 0:03:35.720 --> 0:03:38.760 up three to six and the NASDAC back in bull 0:03:38.880 --> 0:03:42.560 territory up over three percent, while bonds were relatively calm, 0:03:42.760 --> 0:03:44.800 with the yield on the tenure ending the week not 0:03:44.920 --> 0:03:47.880 far from where it started at two point eight three percent. 0:03:48.240 --> 0:03:50.560 Here to help us sort it all out, or Joann Feeny, 0:03:50.640 --> 0:03:54.720 portfolio manager at Advisor's Capital Management, and Christina Hooper, chief 0:03:54.760 --> 0:03:58.000 Global market strategist at Investco. So welcome to both of you. Christina, 0:03:58.080 --> 0:03:59.840 let me start with you on the reaction of the 0:04:00.000 --> 0:04:03.880 markets to this. As CPI and pp I numbers some encouragement, 0:04:04.320 --> 0:04:06.120 does it sort of suggest maybe we're heading in a 0:04:06.280 --> 0:04:10.840 better direction. David, We're definitely heading in a better direction. Um. 0:04:10.920 --> 0:04:14.120 It looks like we're past peak for inflation, but the 0:04:14.200 --> 0:04:17.280 problem is inflation is still very very high. If we 0:04:17.360 --> 0:04:21.200 think about the FEDS inflation target of two, we're way 0:04:21.520 --> 0:04:23.479 far away from that and it's going to take us 0:04:23.720 --> 0:04:26.200 a significant amount of time to get there. Um. But 0:04:26.480 --> 0:04:29.640 this is the first step in that direction, and so 0:04:29.800 --> 0:04:32.680 it's progress. Joy. I think the market start of thought, 0:04:32.720 --> 0:04:35.840 maybe we can back off a little bit. Well, the market, 0:04:35.880 --> 0:04:37.880 I think might be a little bit too optimistic. About 0:04:37.920 --> 0:04:40.680 how much work the FEDS still has to do. Yes, 0:04:41.160 --> 0:04:43.279 the numbers have been good. In fact, a core pc 0:04:43.400 --> 0:04:45.640 inflation looks like a peaked back in March, and we 0:04:45.760 --> 0:04:48.479 got that information and that's a positive. And we're starting 0:04:48.520 --> 0:04:51.040 to see some of those items that were really short 0:04:51.080 --> 0:04:53.800 supply now start to become more available and that's helping 0:04:53.800 --> 0:04:56.400 to take the price pressure off. So christ take us 0:04:56.440 --> 0:04:57.920 over the next month a half or so, because we 0:04:58.000 --> 0:05:00.480 got Jackson hole first, right, well, he or from FED 0:05:00.520 --> 0:05:03.280 speakers including j Pow, and then there's phare amount of data. 0:05:03.279 --> 0:05:05.280 I think we get another CPI reading or two, we 0:05:05.360 --> 0:05:07.680 get jobs numbers reading things like that. Where do you 0:05:07.720 --> 0:05:10.960 think the FED will be come September. Well, I'm actually 0:05:11.000 --> 0:05:12.880 going to go out on a limb, David and say 0:05:13.040 --> 0:05:15.240 we're probably going to be in a place where the 0:05:15.320 --> 0:05:18.200 FED feels it should air on the side of a 0:05:18.279 --> 0:05:21.520 little more caution. Right, We've gone at a pretty breakneck 0:05:21.680 --> 0:05:24.360 speed in terms of back to back seventy five basis 0:05:24.440 --> 0:05:28.320 point hikes, and the FED is, as Joanne said, very 0:05:28.400 --> 0:05:30.640 data dependent, So it's going to be looking at data 0:05:30.680 --> 0:05:34.000 and seeing that longer term inflation expectations are better anchored 0:05:34.040 --> 0:05:36.440 than they were um and they are going to see 0:05:36.640 --> 0:05:40.800 inflation moving in the right direction. Uh. Inflation growth is 0:05:41.360 --> 0:05:44.160 obviously still an issue, so they're going to be hiking rates, 0:05:44.360 --> 0:05:47.039 but they don't have to be as aggressive. So perhaps 0:05:47.120 --> 0:05:49.920 they signal it in a Jackson Hoole speech. That might 0:05:49.960 --> 0:05:51.880 be too premature, but I think by the time we 0:05:51.960 --> 0:05:55.080 get to September October, we should see a FED that 0:05:55.240 --> 0:05:59.680 pivots to a less hawkish tightening stance. You know, I 0:05:59.720 --> 0:06:02.040 think the critical data, in addition to what you just 0:06:02.120 --> 0:06:04.679 mentioned Christina, is going to be the employee cost index 0:06:04.760 --> 0:06:06.880 that e c I. But we know the labor market 0:06:06.960 --> 0:06:09.640 is very tight, and we're concerned right that wages are 0:06:09.680 --> 0:06:11.839 going to continue to rise and that's going to put 0:06:11.880 --> 0:06:15.400 a floor early under price inflation as those bleed through 0:06:15.760 --> 0:06:17.840 into prices from firms. We're seeing that a lot. We're 0:06:17.839 --> 0:06:20.960 seeing firms actually be pretty successful at raising prices in 0:06:21.040 --> 0:06:23.240 the face of those higher costs. So, you know, if 0:06:23.400 --> 0:06:26.760 if job openings drop and some of the heat comes 0:06:26.760 --> 0:06:29.240 out of the labor market and we don't get as 0:06:29.400 --> 0:06:33.440 large increases in wages and overall employee costs, then I 0:06:33.520 --> 0:06:36.320 could see the FED, you know, becoming a little bit 0:06:36.360 --> 0:06:39.440 more at ease. Christina Hooper of Inbsco and joe Anfoni 0:06:39.600 --> 0:06:41.880 Advisor's Capital Mets. We'll be staying with us as we 0:06:42.000 --> 0:06:44.640 turn from the markets generally to what investors can do 0:06:44.800 --> 0:06:47.719 about them. That's next on Wall Street Week on Bloomberg. 0:06:59.240 --> 0:07:03.159 This is Bloomberg Wall Street Week with David Weston from 0:07:03.320 --> 0:07:13.520 Bloomberg Radio. Housing start reversed to four months decline and 0:07:13.600 --> 0:07:16.600 the overall economy grew in the spring at a modest 0:07:16.720 --> 0:07:20.040 two point three percent annual rate, but amid signs that 0:07:20.160 --> 0:07:24.480 inflation was again easing. That wasn't good news for everyone. 0:07:24.560 --> 0:07:28.840 This week the oil market stepped into a poodle, with 0:07:29.000 --> 0:07:31.280 the price taking its biggest one day hit in almost 0:07:31.320 --> 0:07:35.120 a year, and every currency in sight took a bite 0:07:35.160 --> 0:07:38.160 out of the dollar. That was Lewis ruck I just 0:07:38.240 --> 0:07:41.600 take on the economy on Wall Street Week back now 0:07:41.760 --> 0:07:44.360 thirty five years later, we're still focused on housing and 0:07:44.560 --> 0:07:47.680 energy and growth, but from a very different vantage point 0:07:47.840 --> 0:07:52.320 to Anfini of Capital Management and Christina Hooper of Investor 0:07:52.360 --> 0:07:54.000 are still with So Joanne, let me start with you 0:07:54.120 --> 0:07:56.080 if I could. Let's know what housing, because a lot 0:07:56.080 --> 0:07:57.640 of talking about housing right now, whether we in fact 0:07:57.680 --> 0:08:00.000 are in a bubble. Obviously, housing prices have gone up 0:08:00.120 --> 0:08:03.400 a lot, rent costs are really in record levels places. 0:08:03.480 --> 0:08:05.160 At the same time, the fits trying to come off 0:08:05.160 --> 0:08:08.360 with that sugar hunt. Yeah, it's clearly a reset going 0:08:08.400 --> 0:08:10.840 on in the housing market. Um, you know that those 0:08:10.920 --> 0:08:13.600 low interest rates clearly created a lot of demand, a 0:08:13.640 --> 0:08:15.640 lot of activity in the housing market. But people shouldn't 0:08:15.640 --> 0:08:18.080 forget that there's still an awful lot of younger folks 0:08:18.120 --> 0:08:21.120 out there who have delayed getting into their first, first home, 0:08:21.560 --> 0:08:23.880 and and that latent demand is still out there. And 0:08:24.040 --> 0:08:26.560 I think what we're seeing now is a reevaluation of 0:08:26.600 --> 0:08:28.520 how much house can I afford, And so we have 0:08:28.640 --> 0:08:30.880 seen people walk away from contracts. We've seen the builders 0:08:30.880 --> 0:08:33.120 slow down a little bit. But given how high mortgage 0:08:33.160 --> 0:08:35.520 rates are, the existing homeowners don't want to get out 0:08:35.520 --> 0:08:37.960 of their old cheap mortgages. So that's going to push 0:08:38.040 --> 0:08:41.160 demand to the new builds. So we're still pretty enthusiastic 0:08:41.240 --> 0:08:43.400 about some of the plays in the new uh you know, 0:08:43.520 --> 0:08:46.120 in in new building for housing like say Alinar for example, 0:08:46.160 --> 0:08:48.960 which tends to serve that lower end, the first home 0:08:49.040 --> 0:08:51.160 buyer or the one step up home buyer. So there 0:08:51.200 --> 0:08:53.760 are places to be in housing. You just have to 0:08:53.880 --> 0:08:56.000 be a little bit patient here as this reset place 0:08:56.040 --> 0:08:59.199 through and folks renegotiate contracts and then find slightly cheaper 0:08:59.240 --> 0:09:02.520 houses to buy. So Christian, you heard about Lenard there 0:09:02.600 --> 0:09:05.200 maybe lower end of housing. About what are you seeing? 0:09:05.240 --> 0:09:07.080 There's a lot of volatility in the marketplace. Where does 0:09:07.080 --> 0:09:10.160 it create opportunities for investors at this point? Well, it 0:09:10.280 --> 0:09:16.120 creates opportunities really at times when we see um sell offs. 0:09:16.280 --> 0:09:17.960 Of course we haven't seen much of a sell off 0:09:18.120 --> 0:09:20.720 in in recent weeks, but but when we do get those, 0:09:21.240 --> 0:09:25.280 that's an opportunity for investors to reshuffle portfolios right and 0:09:25.520 --> 0:09:30.600 and sometimes it's about exchanging lower quality um, less defensive 0:09:30.760 --> 0:09:34.400 for higher quality, more defensive, getting a little more yield 0:09:34.480 --> 0:09:36.440 in there. So I think the areas that I would 0:09:36.440 --> 0:09:39.680 focus on right now or are opportunities and healthcare like pharma, 0:09:40.280 --> 0:09:43.120 as well as as technology. The secular growth place there 0:09:43.880 --> 0:09:45.640 joan one of the things that have been driving the 0:09:45.720 --> 0:09:48.880 US a country. Sometimes our consumers. Consumers had a pretty 0:09:48.880 --> 0:09:50.800 good time of it, They've had really good balance sheets, 0:09:50.840 --> 0:09:53.280 they've got a very fair amount of income coming in. 0:09:53.520 --> 0:09:55.599 At the same time, there's more pressure there Now, what 0:09:55.679 --> 0:09:58.240 does that say in terms of investing in stocks if 0:09:58.280 --> 0:10:01.319 in fact there's more pressure on the consumer. Yeah, you know, 0:10:01.440 --> 0:10:03.959 it's become a very challenging time to invest in the 0:10:04.040 --> 0:10:06.360 consumer space, because what we have going on now is 0:10:06.360 --> 0:10:09.280 really a tale of two consumers. We have folks at 0:10:09.320 --> 0:10:12.400 the lower to middle end of the income distribution really 0:10:12.480 --> 0:10:15.600 being hurt by these high prices, this high inflation. For them, 0:10:15.840 --> 0:10:18.199 it's making their budgets a lot tighter. And so we're 0:10:18.240 --> 0:10:20.040 seeing that in the results of say a Walmart and 0:10:20.080 --> 0:10:22.800 a Target, where they're finding their shoppers aren't spending less, 0:10:23.320 --> 0:10:26.800 but they're switching away from discretionary products towards the necessities 0:10:26.840 --> 0:10:29.280 which have lower margins, so it's hurting their profits. But 0:10:29.360 --> 0:10:31.280 then you look at the higher end of the income distribution, 0:10:31.360 --> 0:10:35.199 you see companies like Apple selling expensive iPhones, they're not 0:10:35.240 --> 0:10:38.280 seeing a drop in demand. Or say Williams Sonoma, right, 0:10:38.360 --> 0:10:41.360 they sell higher end uh you know, kitchen gear and 0:10:41.480 --> 0:10:44.480 furnishing type stuff and they're not really seeing a drop. 0:10:44.640 --> 0:10:47.720 So it really depends what kind of a consumer products 0:10:47.800 --> 0:10:50.960 company you are and how much you can raise prices 0:10:50.960 --> 0:10:54.760 because you have a resilient uh supply of shoppers or 0:10:54.800 --> 0:10:56.760 how much you're having to really trim them back to 0:10:56.840 --> 0:10:58.920 keep the shoppers walking in the door. And so it 0:10:59.000 --> 0:11:03.360 does make it a selection question, and to Christina's point, 0:11:03.640 --> 0:11:06.480 finding the higher quality companies that have the more resilient 0:11:06.559 --> 0:11:11.280 shoppers is really going to help your portfolio. David, I 0:11:11.320 --> 0:11:14.960 would just argue that in this environment, having seen gas 0:11:15.040 --> 0:11:20.000 prices come down significantly, UM will incomes aren't as pressured 0:11:20.080 --> 0:11:22.559 now that they were just a little while ago. So 0:11:22.679 --> 0:11:26.839 I think that that chasm between those two sets of 0:11:26.920 --> 0:11:30.160 consumers might not be as wide. Um, there's a little 0:11:30.200 --> 0:11:33.720 alleviation of the pressure on lower and middle income American 0:11:33.800 --> 0:11:37.280 households right now, just because energy prices have come down. 0:11:37.520 --> 0:11:40.640 So it's certainly not a much better situation, but it 0:11:40.840 --> 0:11:43.559 is materially better, and we saw that born out in 0:11:43.600 --> 0:11:46.320 the most recent consumer sentiment numbers. Talk about earnings, if 0:11:46.320 --> 0:11:47.959 you would, Christina from while we're just getting through the 0:11:48.000 --> 0:11:50.920 earning season here, if we're seeing a tale of two consumers, 0:11:51.000 --> 0:11:52.719 as we just heard from joining, are we seeing a 0:11:52.760 --> 0:11:54.920 tale of two sets of companies as well, but high 0:11:55.000 --> 0:11:58.040 quality versus less high quality? Well, certainly there are some 0:11:58.280 --> 0:12:01.440 companies that are far better able to pass on their 0:12:01.520 --> 0:12:04.840 costs than others. Um, there are those that are really 0:12:04.920 --> 0:12:07.800 experiencing reduction in traffic. For example, if we're looking at 0:12:07.840 --> 0:12:10.800 some of the retailers, UM and and others that have 0:12:11.080 --> 0:12:13.280 have held up fairly well. So I think, you know, 0:12:13.400 --> 0:12:15.240 going forward, what we're going to have to make an 0:12:15.280 --> 0:12:18.320 assessment on is is which are those higher quality companies 0:12:18.400 --> 0:12:21.160 that can defend their margins, that can pass on crisis, 0:12:21.760 --> 0:12:24.679 that can weather this storm better, because let's face it, 0:12:24.679 --> 0:12:26.760 it's going to be you know, um there are gonna 0:12:26.760 --> 0:12:28.959 be some significant headwinds in the next two quarters. I 0:12:29.000 --> 0:12:32.280 would argue Joanne as a portfolio manager, how are you 0:12:32.280 --> 0:12:34.440 feeling about tech these days? I know text covers an 0:12:34.440 --> 0:12:36.000 awful lot of sins, there are a lot of different 0:12:36.040 --> 0:12:38.640 things called tech. But how are you feeling other opportunities 0:12:38.760 --> 0:12:42.120 right now in tech? Oh? Yeah, I think there definitely are. 0:12:42.320 --> 0:12:44.840 You know, it could take some patients really for investors 0:12:44.880 --> 0:12:47.439 to to reap the rewards of tech. But when we 0:12:47.480 --> 0:12:50.040 look at technology, what we look for our companies that 0:12:50.120 --> 0:12:52.360 are in the middle of a change in the way 0:12:52.440 --> 0:12:55.400 things are done. Demand coming from the market, whether it's 0:12:55.400 --> 0:12:58.840 demographics or taste. But you know, the cloud area companies 0:12:58.920 --> 0:13:01.719 shifting their active these away from internal service state of 0:13:01.760 --> 0:13:04.959 the cloud. This is still happening, and more traffic on 0:13:05.040 --> 0:13:07.480 the Internet is pushing data centers to have to expand 0:13:07.520 --> 0:13:10.320 and build in faster, wider pipes. So if you look 0:13:10.360 --> 0:13:12.800 for the companies that supply the parts to enable that, 0:13:13.280 --> 0:13:14.719 you know they're going to be able to sell well 0:13:14.920 --> 0:13:17.520 no matter what happens in terms of the cyclical side 0:13:17.559 --> 0:13:20.839 of the economy. And generally if you if you pick 0:13:20.880 --> 0:13:23.040 and choose carefully, you can find ones that have deep 0:13:23.120 --> 0:13:25.280 moats around them that don't have a lot of competition. 0:13:25.600 --> 0:13:28.599 You're not buying into companies that are selling commodities, so 0:13:28.760 --> 0:13:31.800 you know, whether it's a broad Calm or an Amazon 0:13:31.960 --> 0:13:36.079 which really enables the cloud out, or Microsoft which enables 0:13:36.120 --> 0:13:38.280 the software to make all this work, these are companies 0:13:38.280 --> 0:13:40.040 that are going to power through. It's gonna be a 0:13:40.080 --> 0:13:42.160 little bit cyclical, but they're going to hold up better 0:13:42.200 --> 0:13:45.400 than others will. Christina. Finally, let's go Overseas if we could, 0:13:45.600 --> 0:13:48.520 because we've talked about the FED. However faster they're going 0:13:48.559 --> 0:13:50.600 to tighten their tightening, no question about it. Europe looks 0:13:50.640 --> 0:13:52.800 like they're tightening. There are some places like Japan and 0:13:52.920 --> 0:13:55.720 China that maybe going the other direction, Does that create 0:13:55.720 --> 0:13:59.120 an opportunity for investors? I think so, David. It's not 0:13:59.400 --> 0:14:02.560 just prints in terms of monetary policy. So we both 0:14:02.760 --> 0:14:07.120 we have China easing and we have Japan remaining very easy. Um. 0:14:07.240 --> 0:14:10.439 But it's also fiscal stimulus. We're seeing fiscal stimulus in 0:14:10.559 --> 0:14:14.079 both those countries, whereas in the US and other Western 0:14:14.120 --> 0:14:17.719 developed countries they're pulling back on stimulus. And so that 0:14:17.960 --> 0:14:20.000 sets up an environment in which there are built in 0:14:20.240 --> 0:14:22.920 tail winds that we're just not seeing here. I think 0:14:22.960 --> 0:14:26.280 there's potential there now when we look specifically at China equities. 0:14:26.480 --> 0:14:29.160 There's a lot of pessimism right now around China, especially 0:14:29.240 --> 0:14:32.240 given headlines around the property sector. But if you ring 0:14:32.360 --> 0:14:36.720 fence the property sector and look at the broader market, 0:14:36.920 --> 0:14:40.520 especially technology, there are a lot of opportunities in China 0:14:40.560 --> 0:14:43.000 equities and I think there's the potential for positive surprise. 0:14:43.320 --> 0:14:46.120 Thank you so much to Christina Hooper of Investco and 0:14:46.200 --> 0:14:51.080 joe Anfini of Advisors Capital Management. Coming up, we ask 0:14:51.120 --> 0:14:54.320 our special contributor Larry Summers whether those CPI members have 0:14:54.480 --> 0:14:59.480 him feeling any better about inflation. This is Wall Street 0:14:59.520 --> 0:15:09.560 week on Bloomberg. Okay, this is Wall Street Week. I'm 0:15:09.640 --> 0:15:11.560 David Weston to take us through the high points of 0:15:11.640 --> 0:15:13.880 this week. We welcome back our very special continue to 0:15:13.920 --> 0:15:16.520 Larry Summers of Harvard. So, Larry, thank you so much 0:15:16.560 --> 0:15:18.720 for joining us from Aspen. Actually this week we'll talk 0:15:18.720 --> 0:15:20.680 a little later about what you're doing out there. But first, 0:15:20.800 --> 0:15:23.960 we got CPI numbers this week on Wednesday. They came 0:15:24.000 --> 0:15:26.280 in significantly better than a lot of people thought they would. 0:15:26.560 --> 0:15:28.960 So do you find some relief from this? Are we 0:15:29.160 --> 0:15:31.200 over the worst of it when it comes to inflation? 0:15:32.320 --> 0:15:35.520 I don't think these were encouraging numbers. We we knew 0:15:35.600 --> 0:15:38.400 that the headline number was going to be coming substantially 0:15:38.480 --> 0:15:42.560 down because we could see what had happened with gasoline prices. 0:15:43.160 --> 0:15:48.120 The core number was better than most people, uh expected. Uh, 0:15:48.520 --> 0:15:52.920 that's certainly better than the alternative to that. On the 0:15:53.000 --> 0:15:57.160 other hand, it was heavily driven by volatile sectors like 0:15:57.600 --> 0:16:01.680 used cars, like hotels, like air airs. We've Sarah seen 0:16:01.720 --> 0:16:05.360 this movie before. We had a terrific core number in March, 0:16:05.960 --> 0:16:08.600 but it was from those volatile sectors, and then it 0:16:08.680 --> 0:16:13.120 bounced back up in April, May and June so we'll 0:16:13.160 --> 0:16:17.480 have to see, uh what happens going forward. But this 0:16:17.720 --> 0:16:22.400 is certainly a better number than most people expected, and 0:16:22.480 --> 0:16:25.400 it will come as a bit of relief to the FED. 0:16:25.960 --> 0:16:30.480 But I certainly think it's nothing like we are out 0:16:30.520 --> 0:16:34.720 of the woods. It's nothing like a fundamental change in 0:16:35.280 --> 0:16:42.160 uh the orientation. It's nothing that means that we can 0:16:42.320 --> 0:16:48.000 pivot away from the overwhelming paradigm being in need for 0:16:48.120 --> 0:16:51.200 restrictive policy to contain inflation. Well, that's what I want 0:16:51.240 --> 0:16:53.240 to ask you about some relief for the FED. You said, 0:16:53.640 --> 0:16:56.280 is there a risk in that? And you've warned before 0:16:56.360 --> 0:16:59.600 about backing off too quickly in the cooling of the economy. 0:17:00.000 --> 0:17:02.160 There a risk the FED past too much attention to 0:17:02.280 --> 0:17:05.080 numbers like these. We'll have to we'll have to see 0:17:05.119 --> 0:17:08.960 what they do. If the FED regards this as a 0:17:09.119 --> 0:17:13.240 major game changer, they will be making another major mistake. 0:17:13.960 --> 0:17:16.720 I would be surprised if they regarded it that way, 0:17:16.920 --> 0:17:20.119 because I think when you look within it, you'll see 0:17:20.280 --> 0:17:26.720 that seasonally adjusted airfares coming out of two JULYES when 0:17:26.800 --> 0:17:30.440 air fares were highly distorted by COVID. How could you 0:17:30.560 --> 0:17:36.280 take that seriously as a huge harbinger of new UH trends, 0:17:36.760 --> 0:17:39.880 So I don't think they will make UH that kind 0:17:39.960 --> 0:17:44.080 of mistake. They certainly shouldn't make that kind of mistake. 0:17:44.600 --> 0:17:47.880 But you know, you get out of woods and even 0:17:48.040 --> 0:17:51.320 deep woods, you get out of them one step at 0:17:51.600 --> 0:17:56.280 a time. So I don't wanna deny that this is 0:17:56.440 --> 0:18:01.720 that there's some encouragement UH in this number, but overreacting 0:18:02.680 --> 0:18:07.680 to that would be a grave mistake. I think your show, before, David, 0:18:07.760 --> 0:18:12.320 I've talked about how prudent people finish their regiment of 0:18:12.400 --> 0:18:16.800 antibiotics even as they're gratified four days in that they 0:18:16.880 --> 0:18:20.280 feel better, and I still think that's the right metaphor 0:18:20.720 --> 0:18:25.160 for thinking about this situation. You and I have talked 0:18:25.160 --> 0:18:27.160 a lot about race. What about the balance sheet? Because 0:18:27.160 --> 0:18:29.280 I muna say, just about every week after we get 0:18:29.400 --> 0:18:32.320 done on this program, somebody emails me and says, what 0:18:32.400 --> 0:18:35.080 about the balance sheet? How effective is the balance sheet 0:18:35.119 --> 0:18:36.960 and helping to slow down the economy get our arms 0:18:36.960 --> 0:18:39.040 around inflation? And are they doing it the right way? 0:18:39.080 --> 0:18:41.280 Should they be coming off the balance sheet even faster 0:18:41.400 --> 0:18:44.920 than they are? I wonder if they should come off 0:18:45.960 --> 0:18:50.280 faster than they are. I think the clearest statement about 0:18:50.320 --> 0:18:55.480 the balance sheet is that they should have stopped buying 0:18:56.359 --> 0:18:59.560 six or nine months earlier than they did. I think 0:18:59.640 --> 0:19:04.480 it's clear that we had something that history will look 0:19:04.520 --> 0:19:07.520 back on as a bit of a housing bubble, and 0:19:08.200 --> 0:19:12.840 I think they contributed to that by buying mortgage backed securities. 0:19:13.680 --> 0:19:17.520 Now I certainly think they're going in the right direction 0:19:18.080 --> 0:19:24.320 with QT rather than QUE. Could they do it faster? 0:19:25.080 --> 0:19:29.320 Perhaps they could. Would it make a major difference, I'm 0:19:29.359 --> 0:19:34.160 not sure that it would. Would it add to financial risk, 0:19:34.880 --> 0:19:38.520 It might in terms of some kind of accident in 0:19:39.119 --> 0:19:45.240 markets in general, David, I think that yields are driven 0:19:46.080 --> 0:19:49.960 more by the fundamentals of what's happening in the economy 0:19:50.600 --> 0:19:56.280 and less by central bank policies like uh QT and 0:19:56.480 --> 0:20:00.080 QE that I think many in the markets thank know. 0:20:00.240 --> 0:20:01.800 I could be right about that, or I could be 0:20:02.160 --> 0:20:05.119 uh or I could be wrong. But I think people 0:20:05.480 --> 0:20:11.000 often ascribe to the direct impact of these policies. What 0:20:11.240 --> 0:20:16.119 is in fact a signaling with respect to future monetary policies. 0:20:16.600 --> 0:20:20.960 And I don't think that now the this is an 0:20:21.040 --> 0:20:25.600 area of stability to FED has set an expectation, that 0:20:25.840 --> 0:20:32.719 expectation is underway. I wouldn't be recommending a major change 0:20:32.800 --> 0:20:37.800 in balance sheet policies at at this point, Okay, Larry Summers, 0:20:37.840 --> 0:20:40.080 I'm delted to say, everybody staying with us, because we're 0:20:40.119 --> 0:20:42.680 gonna be joined by Melissa Carney. She's professor of economics 0:20:42.720 --> 0:20:45.159 in Maryland, and she has convened that Larry and some 0:20:45.320 --> 0:20:48.439 other esteemed economist and askment to address the very important 0:20:48.520 --> 0:20:51.240 question of after we come through whatever downturn we're going through, 0:20:51.600 --> 0:20:53.720 where will the growth come from. That's gonna have next 0:20:53.880 --> 0:20:59.640 on Wall Street Week on Bloomberg. This is Bloomberg Wall 0:20:59.720 --> 0:21:09.760 Street Week with David Weston from Bloomberg Radio. This is 0:21:09.800 --> 0:21:12.080 Wall Street Week. I'm David Weston, our special man Truitton. 0:21:12.119 --> 0:21:14.040 Larry Summers has stayed with us and we are joined now. 0:21:14.160 --> 0:21:16.760 But Melissa Carney, she's professor of economics at the University 0:21:16.760 --> 0:21:20.240 of Maryland, also director of the Aspen Economic Strategy Group, 0:21:20.400 --> 0:21:22.399 which she has convened and asked me this week with 0:21:22.560 --> 0:21:25.440 Larry and other esteemed economists to address a critical question 0:21:25.520 --> 0:21:28.320 really of where the United States could be facing seculation. 0:21:28.400 --> 0:21:30.600 So Melissa, welcome to Wall Street Week. Great to have 0:21:30.720 --> 0:21:33.040 you here. Let's start with the question of where growth 0:21:33.119 --> 0:21:35.080 will come on the other side of whatever it is 0:21:35.160 --> 0:21:37.159 we're going through, because that's ultimately going to be the 0:21:37.240 --> 0:21:39.920 question here. I understand from economists like you it comes 0:21:39.960 --> 0:21:42.919 from one of two sources, either more workers or more productivity. 0:21:43.080 --> 0:21:45.479 Are we going to get more workers? We're looking at 0:21:45.560 --> 0:21:48.520 both fewer workers and lower productivity, as you know, So 0:21:48.920 --> 0:21:52.200 let me focus on the fewer workers aspect for a moment. 0:21:52.880 --> 0:21:56.040 The real issue demographic issue facing the US is we 0:21:56.200 --> 0:21:59.879 have a plummeting birth rate, and so total fertility in 0:22:00.000 --> 0:22:03.880 the US is now below the level required to keep 0:22:04.000 --> 0:22:07.560 population growth constant. And so the issue here is that 0:22:07.720 --> 0:22:10.919 on average now a woman in the US is expected 0:22:10.960 --> 0:22:14.639 to have one point six five children over her lifetime. 0:22:14.880 --> 0:22:17.240 So women used to have three kids, then it fell 0:22:17.280 --> 0:22:20.040 to two. Women were having comfortably above two kids for 0:22:20.119 --> 0:22:23.920 many decades. With a with a fertility rate below too, 0:22:24.440 --> 0:22:27.480 that means our population is going to age and it's 0:22:27.520 --> 0:22:29.879