WEBVTT - End of YCC and Other Rate Decisions 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.800 --> 0:00:14.880 This is the Bloomberg Surveillance Podcast. I'm Paul Sweeney along 0:00:14.880 --> 0:00:17.240 with Tom Keen. Join us each day for insight from 0:00:17.239 --> 0:00:20.760 the best in economics, geopolitics, finance, and investment. You can 0:00:20.800 --> 0:00:24.439 also watch the show live on YouTube. Visit the Bloomberg 0:00:24.480 --> 0:00:27.760 Podcast channel on YouTube to see the show weekday mornings 0:00:27.760 --> 0:00:30.400 from seven to ten Eastern Remark Global Headquarters in New 0:00:30.480 --> 0:00:33.720 York City. Subscribe to the podcast on Apple, Spotify, or 0:00:33.760 --> 0:00:36.800 anywhere else you listen, and as always on Bloomberg Radio, 0:00:36.840 --> 0:00:39.720 the Bloomberg Terminal, and the Bloomberg Business App. The most 0:00:39.760 --> 0:00:42.920 read story on the Bloomberg Terminal, here's about this Bank 0:00:42.920 --> 0:00:46.959 of Japan and raising rates, scrapping the world's last negative 0:00:47.000 --> 0:00:49.960 interest rate and the most aggressive monetar Steller's program in 0:00:50.000 --> 0:00:53.800 modern history, but also indicating that financial conditions may stay 0:00:53.800 --> 0:00:57.000 accommative for now. This is big. It's the most read. 0:00:57.160 --> 0:00:58.960 I'm trying to get a sense of how important it is. 0:00:59.040 --> 0:01:01.040 Maybe our next guests can help out here. Jennifer Lee, 0:01:01.440 --> 0:01:05.480 Senior economists and Managing director at BMO Capital Markets. Jennifer, 0:01:05.480 --> 0:01:07.080 thanks so much for joining us. Can you put into 0:01:07.080 --> 0:01:10.920 context what we what the Bank of Japan did today 0:01:11.160 --> 0:01:14.160 and what it means because again most red story on 0:01:14.200 --> 0:01:17.360 the Bloomberg terminal for sure. 0:01:17.640 --> 0:01:19.640 Good morning everyone, thanks for having me on. You know, 0:01:19.760 --> 0:01:21.440 I think this first of all, I have to think 0:01:21.959 --> 0:01:24.920 all the local Japanese media for leaking out all the 0:01:25.080 --> 0:01:27.520 all the mooths ahead of time. So I mean, you 0:01:27.560 --> 0:01:29.240 can see from the reaction of the market, I wasn't 0:01:29.280 --> 0:01:32.760 a huge change in terms of reaction, I guess. But 0:01:33.080 --> 0:01:35.360 what this basically means is that, you know, as you 0:01:35.440 --> 0:01:38.080 just pointed out, the last era of negative rates and 0:01:38.080 --> 0:01:40.640 now we're turning to something more normal. You know, try 0:01:40.640 --> 0:01:42.280 to explain to anyone out there, you know what the 0:01:42.280 --> 0:01:44.640 heck does negative rates mean? You know, and you know 0:01:44.720 --> 0:01:46.520 Japan's have had this for so many years now, so 0:01:46.560 --> 0:01:50.120 now they're flowing back to normal, peaking above. You know, 0:01:50.360 --> 0:01:54.960 we're back in positive territory. Although at zero to zero 0:01:54.960 --> 0:01:59.200 point one percent range, it's still extremely extremely accommodative. But 0:01:59.640 --> 0:02:02.120 again it shows that the make Japan is no longer 0:02:02.120 --> 0:02:04.400 asleep at the wheel and is finally moving toward a 0:02:04.440 --> 0:02:05.360 more normal condition. 0:02:05.720 --> 0:02:07.760 And Jennifer, I'm looking at some of the market reaction 0:02:08.080 --> 0:02:11.360 from analysts and strategists basically saying that the forward guidance 0:02:11.560 --> 0:02:14.720 doesn't close the door on another hike. Is that something 0:02:14.760 --> 0:02:16.880 that you agree with? What's your read on what could 0:02:16.880 --> 0:02:17.320 be next? 0:02:18.280 --> 0:02:20.919 So you know, I did see you know, some people penciling, 0:02:20.919 --> 0:02:22.680 you know, a series of rate hikes. I think it's 0:02:22.760 --> 0:02:24.760 you know, way way too soon. I mean, this bank 0:02:24.840 --> 0:02:29.160 is very deliberate and very careful of what their moves are. Obviously, 0:02:29.200 --> 0:02:31.840 you know, we've had inflation well above the two percent 0:02:31.840 --> 0:02:34.120 target for you know, over two years now, and now 0:02:34.120 --> 0:02:36.600 they're finally moving. But you know, I think it's way 0:02:36.639 --> 0:02:38.960 too early to say that this is the beginning of 0:02:39.200 --> 0:02:40.919 a series of rate hikes. You know, I wouldn't be 0:02:40.919 --> 0:02:42.880 shocked if we see one more move. But you know, 0:02:42.960 --> 0:02:46.760 as you just pointed out, like the statements still said 0:02:46.800 --> 0:02:49.480 that they're going to be very accommodative for some time. 0:02:49.520 --> 0:02:52.720 They're still buying jgb's, They're going to buy more if 0:02:52.720 --> 0:02:54.920 you see some sort of a big abrupt move in 0:02:54.960 --> 0:02:57.760 the JGB JGB market, which we're not seeing this morning, 0:02:58.200 --> 0:03:00.840 So it all depends, but there's still there, there's still 0:03:00.919 --> 0:03:03.760 keeping rates very very low. Again not negative, but at 0:03:03.840 --> 0:03:05.720 least it's you know that's still very close to zero, 0:03:05.880 --> 0:03:08.720 so still very accommodative. I think it's too soon to 0:03:08.760 --> 0:03:10.239 say that there will be a series of rate hikes, 0:03:10.240 --> 0:03:11.679 but I wouldn't be surprised, would be kind of nudged 0:03:11.720 --> 0:03:14.079 it up a little bit further, depending on obviously how 0:03:14.160 --> 0:03:17.840 things play out. Everything it's data dependent and not calendar dependent, 0:03:17.960 --> 0:03:21.040 you know, to use all the famous words that various 0:03:21.040 --> 0:03:22.800 central bankers use these days. 0:03:22.600 --> 0:03:25.320 Yep, busy week here for central bankers to be sure, 0:03:25.360 --> 0:03:27.040 not just as the Bank of Japan, but tomorrow with 0:03:27.120 --> 0:03:29.680 the United States Federal Reserve, what do you think we're 0:03:29.720 --> 0:03:32.280 going to hear from FED chairman j Palle. I mean, 0:03:32.280 --> 0:03:35.040 obviously most people don't expect any movement in rage tomorrow, 0:03:35.120 --> 0:03:37.440 but what kind of commentary do you think we'll hear? 0:03:38.760 --> 0:03:42.040 He is going to stay uber cautious, I think, especially 0:03:42.040 --> 0:03:45.320 after what we saw the last week with the sticky 0:03:45.440 --> 0:03:49.040 inflation numbers both for CPI and PPI and the still 0:03:49.080 --> 0:03:51.880 you know, in my opinion, a little bit questionable retail 0:03:51.960 --> 0:03:56.600 sales data shows that you know, we're again it's we 0:03:56.640 --> 0:03:58.360 have still to be very cautious with what we say. 0:03:58.640 --> 0:04:00.440 You know that, Jane, I have just have to briefly 0:04:00.440 --> 0:04:02.520 about retail sales. You know, I was kind of disappointed 0:04:02.560 --> 0:04:05.120 to see you know that I'm going to say crappy, 0:04:05.160 --> 0:04:08.360 you know, January retail sales results, you know, even lower 0:04:08.440 --> 0:04:11.240 and even crappier, even though we did see the bounce 0:04:11.320 --> 0:04:13.280 back in February. So it's it's sort of interesting to 0:04:13.280 --> 0:04:15.320 see how that's going to play out. But definitely sticky 0:04:15.360 --> 0:04:17.520 inflation is what they're going to be worried about, and 0:04:17.640 --> 0:04:20.680 the FED chair is going to be extremely, extremely cautious. 0:04:20.960 --> 0:04:22.760 And what he says, he doesn't want to, you know, 0:04:23.160 --> 0:04:26.640 cause any undo you know, hoop law, I guess and 0:04:26.720 --> 0:04:29.360 markets to say, you know, to cause everyone to speculate 0:04:29.360 --> 0:04:32.000 that they're going to be cutting earlier or whatever. But 0:04:32.040 --> 0:04:35.200 I think he's probably gone to pushback again on expectations 0:04:35.240 --> 0:04:37.680 of when the feder will finally cut rates. We're sticking 0:04:37.720 --> 0:04:39.480 to our July call. I think it'd be very interesting 0:04:39.480 --> 0:04:41.400 to see what the dot plot does, you know, whether 0:04:41.480 --> 0:04:43.760 or not they're going to stick with those three cuts. 0:04:43.880 --> 0:04:45.440 I think that they have penciled in for this year. 0:04:45.880 --> 0:04:49.080 Jennifer looking at the warp function wi RP on the terminal. 0:04:49.120 --> 0:04:52.000 The first full cut fully priced in in July to 0:04:52.080 --> 0:04:55.320 your point, with potentially three at least according to our 0:04:55.400 --> 0:04:58.080 data through the end of the year early twenty twenty five. 0:04:58.560 --> 0:05:02.040 What can j Powell s say from a hawkish perspective 0:05:02.320 --> 0:05:05.279 that could make investors reshape expectations. 0:05:06.760 --> 0:05:09.680 He can talk about being very worried, or he won't 0:05:09.720 --> 0:05:11.160 feel very but he will say that, you know, we're 0:05:11.160 --> 0:05:15.279 still concerned about how inflation is still sticky, services in inflation, 0:05:15.400 --> 0:05:19.039 the supercore measurer and all that, you know. Again, just 0:05:19.279 --> 0:05:21.599 sounding a little bit more concerned, I think would would 0:05:22.320 --> 0:05:24.920 cause markets to push back the timing I think a 0:05:24.960 --> 0:05:27.279 little bit more. But again, he's been saying this, you know, 0:05:27.360 --> 0:05:29.400 for for some time now, and I think he's just 0:05:29.400 --> 0:05:31.600 going to stick to that script. And he sort of 0:05:31.640 --> 0:05:34.839 swaying away from from from his usual wording will, I 0:05:34.839 --> 0:05:37.080 think will cause markets to pounce as well. So he 0:05:37.120 --> 0:05:39.479 has to be so careful of what he says. You know, 0:05:39.520 --> 0:05:41.680 how many times he says, oh, how many times blinks, 0:05:41.680 --> 0:05:44.080 you know, and everyone will be focusing on every little 0:05:44.120 --> 0:05:46.760 new ones that he does, anything that's different. 0:05:46.400 --> 0:05:49.039 From what he has been, you know, doing in the past. 0:05:49.440 --> 0:05:50.320 In the past few months. 0:05:50.800 --> 0:05:54.000 Jennifer, what's your thoughts about the overall just looking at 0:05:54.000 --> 0:05:56.280 the US economy here, looks like inflation is trending in 0:05:56.320 --> 0:06:00.440 the right direction. There's still moderate economic growth that looks 0:06:00.440 --> 0:06:03.640 like the employment pictures pretty steady. What's your overall view 0:06:03.640 --> 0:06:04.640 of the US economy here? 0:06:05.839 --> 0:06:07.359 Still and I'm going to use the word that you know, 0:06:07.400 --> 0:06:09.520 your you're a couple of guests Ago was kept kept 0:06:09.520 --> 0:06:11.640 saying as well, you know, it's still quite resilient. I 0:06:11.680 --> 0:06:15.240 don't think anyone can or should be arguing that. I mean, 0:06:15.279 --> 0:06:17.960 after you know, five hundred twenty five basis points of 0:06:17.960 --> 0:06:20.200 great hikes, you know, the economy is still growing at 0:06:20.200 --> 0:06:23.040 a at a at a solid pace, and that's extremely impressive. 0:06:23.040 --> 0:06:24.919 And people are still hiring. You know, there may be 0:06:24.920 --> 0:06:26.760 some evidence of boarding, you know, as we talked about 0:06:26.760 --> 0:06:28.600 in the past, but at the same time, you know, 0:06:28.680 --> 0:06:31.320 we're not seeing mass layoffs either, which is very good news. 0:06:31.320 --> 0:06:33.800 And it just speaks to again the resilience of the 0:06:33.880 --> 0:06:37.360 US economy, the resilience of the labor market. The consumer 0:06:37.440 --> 0:06:39.640 is still has you know, a little bit of cash 0:06:39.680 --> 0:06:42.120 sashed away for a rainy day, and even though you 0:06:42.120 --> 0:06:45.600 know the consumers are also you know, quite volatile. Terms 0:06:45.600 --> 0:06:48.279 of the confidence lelveolst. They still have stuff in the 0:06:48.320 --> 0:06:51.360 bank to spend if needed, and it's okay to take 0:06:51.800 --> 0:06:53.360 a breather once in a while, you know, you don't 0:06:53.400 --> 0:06:55.800 just spend everything that you earn. But again, it speaks 0:06:55.839 --> 0:06:58.039 to overall broader resilience, and I think it's still about 0:06:58.040 --> 0:06:59.640 the US economy overall for this year. 0:07:00.040 --> 0:07:03.920 And Jennifer, we have BOJ, FED and BOE, but there's 0:07:03.920 --> 0:07:07.080 this company called Nvidia having their GtC conference. 0:07:07.279 --> 0:07:08.120 I talk to investors. 0:07:08.120 --> 0:07:10.280 They're more focused on in video than anything related to 0:07:10.320 --> 0:07:14.720 central banks. Is that concerning, Well, it's. 0:07:14.720 --> 0:07:16.720 Definitely more interesting. I personally wish I owned it, but 0:07:18.080 --> 0:07:20.040 I think, you know, but of course everything is going 0:07:20.080 --> 0:07:21.600 to you know, we're all going to be hinging on. 0:07:22.360 --> 0:07:24.040 Not only are the earnings and all that, but of 0:07:24.080 --> 0:07:27.240 course you know what monetary policy is going to be, 0:07:27.320 --> 0:07:28.840 how it's going to be playing out over the over 0:07:28.880 --> 0:07:30.800 the next year, how much easier it's going to be, 0:07:30.960 --> 0:07:33.720 or or less easy or less tight it's going to be. 0:07:34.800 --> 0:07:36.840 I think it's all going to go back to what 0:07:37.160 --> 0:07:39.320 the FED chair is going to say or not say, 0:07:39.360 --> 0:07:40.600 and how they're going to act for the. 0:07:40.560 --> 0:07:41.160 Rest of the year. 0:07:41.800 --> 0:07:45.520 At this labor market, Jennifer. In the US, we saw 0:07:45.640 --> 0:07:47.680 we did see unemployment tick up to I guess three 0:07:47.680 --> 0:07:50.720 point nine percent, three point seven percent, But still it 0:07:50.720 --> 0:07:53.360 feels like this is a fully employed economy here. What 0:07:53.400 --> 0:07:55.200 do you how do you think about the labor market, 0:07:55.240 --> 0:07:56.680 how do you think the Federal Reserve things about the 0:07:56.720 --> 0:07:57.280 labor market? 0:07:58.440 --> 0:08:01.000 You know this it's it's still you know tight. I mean, 0:08:01.040 --> 0:08:03.320 you know, yes, we have seen the unemployment rate tick up. 0:08:03.320 --> 0:08:05.880 We have seen job creations slow, but you know, one 0:08:05.920 --> 0:08:08.520 hundred nine, two hundred thousand or whatever, it's still you know, 0:08:08.640 --> 0:08:12.080 during normal times, this is still a very decent figure. 0:08:12.200 --> 0:08:14.160 And again you're not seeing mass layoffs. And this is 0:08:14.200 --> 0:08:16.320 like a situation that's playing out around the world, even 0:08:16.360 --> 0:08:18.520 like in the Euro Area where we saw labor costs 0:08:18.520 --> 0:08:21.200 take down. But meantime, you've got the jobless rate. It's 0:08:21.200 --> 0:08:23.080 still at a record low of six point four percent 0:08:23.120 --> 0:08:25.440 in the Euro Area. So this is, you know, again 0:08:25.480 --> 0:08:27.800 a bigger picture thing. You know, when you've got you know, 0:08:27.880 --> 0:08:30.640 demographics playing out, You've got all the people who are 0:08:30.720 --> 0:08:34.199 you know, in the sixty five general sixty five age 0:08:34.200 --> 0:08:37.559 bracket all getting ready to retire, you know, the silver wave. 0:08:37.600 --> 0:08:39.959 I think they're calling it, you know, and we're still 0:08:40.000 --> 0:08:44.240 seeing shortages in certain areas, certain industries, and because labor 0:08:44.240 --> 0:08:48.000 markets again globally are still quite tight, this is what's 0:08:48.040 --> 0:08:51.360 going to I think it's good news for the economy. 0:08:51.400 --> 0:08:53.440 I think it's good news for consumers, it's good news 0:08:53.440 --> 0:08:55.160 for workers. But at the same time, it's bad news 0:08:55.200 --> 0:08:57.839 for businesses who are still trying you know, some of 0:08:57.840 --> 0:09:01.360 them are still trying to find qualify because of that. 0:09:01.360 --> 0:09:03.080 That titles of the labor market. That's what's going to 0:09:03.200 --> 0:09:05.480 cause the FED. That's awesome contributed to some of the 0:09:05.559 --> 0:09:10.080 Fed's concerns I think over inflation and the economy in general. 0:09:10.200 --> 0:09:11.760 All right, Jennifer, thank you so much for joining us. 0:09:11.800 --> 0:09:14.200 Always appreciate getting some of your time and your thoughts. 0:09:14.280 --> 0:09:16.959 Jennifer Lee. She's a senior e commumist and managing director 0:09:17.280 --> 0:09:29.439 over at a Demo Capital Markets. What kind of kind 0:09:29.440 --> 0:09:31.559 of body language do we get from the FED here 0:09:31.600 --> 0:09:34.680 about interest rates? Alex Chaloff, I'm sure he'll be paying attention. 0:09:34.720 --> 0:09:39.559 He's the CIO of Bernstein Private Wealth Management. Alex, thanks 0:09:39.600 --> 0:09:42.160 so much for joining us here. I don't know what 0:09:42.200 --> 0:09:44.319 are you going to be looking for tomorrow From FED 0:09:44.400 --> 0:09:45.280 chairman J. Powell. 0:09:46.480 --> 0:09:48.600 Think you said it body language. 0:09:49.200 --> 0:09:52.760 It's highly likely that the dot plots change, that the 0:09:52.840 --> 0:09:57.600 language changes, that we go from this beginning of the 0:09:57.640 --> 0:10:00.200 year idea that we might have as many as fives, six, 0:10:00.360 --> 0:10:04.160 seven cuts down to probably two to four, and wouldn't 0:10:04.200 --> 0:10:08.240 be surprised to see some emphasis on two. So our 0:10:08.360 --> 0:10:10.640 view is that there's no action taken, but that the 0:10:10.720 --> 0:10:15.920 language changes and to be much more cautious and signaling 0:10:15.920 --> 0:10:17.600 to the market that we've got some time to wait. 0:10:18.160 --> 0:10:20.679 And if we do see a push towards potentially two 0:10:20.760 --> 0:10:22.640 on the dot, how do you think markets are going 0:10:22.679 --> 0:10:23.200 to react to that. 0:10:24.760 --> 0:10:27.360 I think it's been like a slow leak the last 0:10:27.400 --> 0:10:29.840 couple of months. I mean part of what's happened this 0:10:30.000 --> 0:10:33.840 year in equity markets. We've moved nicely, but there has 0:10:33.960 --> 0:10:37.520 been some reluctance to move a lot higher because I 0:10:37.520 --> 0:10:40.000 think this is the worst kept secret on the planet 0:10:40.280 --> 0:10:43.079 that they're not going to cut as aggressively as many 0:10:43.160 --> 0:10:46.079 thought they would. So I think the market will be disappointed, 0:10:46.080 --> 0:10:47.240 but it won't be a disaster. 0:10:48.120 --> 0:10:50.360 So what are you telling clients these days? Alex just 0:10:50.480 --> 0:10:53.320 kind of stepping back from the Bernstein Private Wealth folks 0:10:53.360 --> 0:10:57.880 here sixty forty portfolio is still something you guys talk about. 0:10:58.600 --> 0:11:01.280 Where do alternatives fit into that? I mean, again, if 0:11:01.280 --> 0:11:04.360 we're cutting rates, what's kind of the overall positioning here 0:11:04.360 --> 0:11:05.200 for you guys. 0:11:06.040 --> 0:11:09.000 We haven't been sixty forty people for probably six years 0:11:09.040 --> 0:11:11.440 at this point, so we're throwing darts at sixty forty. 0:11:12.480 --> 0:11:16.120 A big chunk of that has moved into alternative investments, 0:11:16.280 --> 0:11:19.120 both on the income alternative side as well as the 0:11:19.120 --> 0:11:24.160 growth alternative side, So investors looking at private equity, real estate, 0:11:24.400 --> 0:11:28.400 private credit, alternative credit of all types. That's really been 0:11:28.440 --> 0:11:31.240 the norm for our clients. And what we're talking about 0:11:31.360 --> 0:11:34.520 is a more accommodative environment to really invest across the 0:11:34.520 --> 0:11:37.280 board once we get past this peak and rates. We're 0:11:37.320 --> 0:11:38.960 not there yet, so it's a little bit of the 0:11:38.960 --> 0:11:41.400 waiting game, but we're getting close. 0:11:42.400 --> 0:11:45.240 And when you look at the expectations for the full 0:11:45.320 --> 0:11:48.720 year you mentioned that two to four range, What data 0:11:48.800 --> 0:11:52.520 what data points could draw that to go closer to two? 0:11:52.559 --> 0:11:55.600 If not one? If apparently Vince Cignarella is calling for. 0:11:55.600 --> 0:11:59.520 Nine, right, I think there's two that we focus on 0:11:59.559 --> 0:12:04.840 most One is CPI, that's obvious, but we've had some 0:12:05.000 --> 0:12:08.080 volatility in the month to month CPI readings, while the 0:12:08.200 --> 0:12:11.280 longer term trend is still intact that we're dropping, that 0:12:11.360 --> 0:12:14.120 inflation is coming down, you could get those fights in 0:12:14.440 --> 0:12:17.240 monthly CPI. So that would be one, and then two 0:12:17.360 --> 0:12:19.720 is labor. You know, the jobs market has been so 0:12:19.800 --> 0:12:23.960 impressive throughout this cycle that if we got a real 0:12:24.040 --> 0:12:27.640 disruption there, that would be nerve racking. 0:12:27.760 --> 0:12:28.640 Because there's some of. 0:12:28.640 --> 0:12:32.440 Us believe that just as the FED has tightened and 0:12:32.480 --> 0:12:34.800 we're starting to see it play out in the labor market, 0:12:35.040 --> 0:12:37.560 some companies are getting out in front of this to 0:12:37.679 --> 0:12:42.000 really start to change their hiring intentions and even reduce headcount. 0:12:42.400 --> 0:12:45.079 And so, even though the FED is working so hard 0:12:45.120 --> 0:12:48.880 to avoid causing a recession, if we stay at these 0:12:49.000 --> 0:12:51.040 rates for much longer, we may end there. 0:12:52.120 --> 0:12:55.560 So Alex, my colleague here, Bailey, he's a young Turk. 0:12:55.640 --> 0:12:57.440 He can go out and take all kinds of equity risk. 0:12:57.520 --> 0:13:01.560 I'm thinking about the two year treasury four point what's 0:13:01.559 --> 0:13:02.400 wrong with that trade? 0:13:03.880 --> 0:13:07.120 There's nothing wrong with a two year treasury as long 0:13:07.160 --> 0:13:09.320 as you don't have anything to do in two years. 0:13:10.120 --> 0:13:12.720 Our view is that it's better to build a buttonnew 0:13:12.800 --> 0:13:14.200 I don't know maybe you don't have been anything to 0:13:14.240 --> 0:13:15.040 do in two years. 0:13:15.280 --> 0:13:16.840 But our view is it's. 0:13:16.720 --> 0:13:20.520 Better to build a portfolio that has a variable maturity 0:13:20.600 --> 0:13:21.520 structure to it. 0:13:21.840 --> 0:13:24.120 We favor municipals. 0:13:23.360 --> 0:13:26.560 For taxable investors over treasuries, a little bit of a 0:13:26.559 --> 0:13:30.480 tactical allocation to some shorter treasuries just because short unis 0:13:30.480 --> 0:13:33.240 are so rich. But I would be in a muni 0:13:33.640 --> 0:13:37.440 portfolio much faster than I would start to build a 0:13:37.440 --> 0:13:38.479 treasury portfolio. 0:13:38.520 --> 0:13:41.520 Today you're preaching to the choir ax and say I'm bored. 0:13:41.240 --> 0:13:44.160 With munis, but apparently that's where I should be putting 0:13:44.200 --> 0:13:48.120 money to work. But talking about alex interesting riskier opportunities, 0:13:48.200 --> 0:13:50.280 how are you thinking about XUS investing. 0:13:52.440 --> 0:13:56.200 That's where we start to get excited, only because it 0:13:57.160 --> 0:14:01.040 that's the next right, US US large cap, US megacap, 0:14:01.200 --> 0:14:02.280 Max seven, et cetera. 0:14:02.640 --> 0:14:03.360 That's now. 0:14:03.440 --> 0:14:07.079 What's next is really our challenge that Bernstein investors look 0:14:07.160 --> 0:14:10.360 to us for advice on, and our view is next 0:14:10.600 --> 0:14:14.600 could be Europe. Next could be some part of emerging markets. 0:14:14.760 --> 0:14:16.120 I think when you look at Europe, you have to 0:14:16.120 --> 0:14:19.000 acknowledge that EPs growth there will not keep up with 0:14:19.040 --> 0:14:21.800 the US. So it's more of a valuation play and 0:14:21.960 --> 0:14:24.480 em you have to be okay with taking some macro 0:14:24.600 --> 0:14:26.920 risk of China. I think that the numbers out of 0:14:27.000 --> 0:14:30.080 China have started to slowly improve. 0:14:29.680 --> 0:14:31.440 But that's a long path out. 0:14:31.640 --> 0:14:33.560 So number one, you've got to be a long term investor, 0:14:33.720 --> 0:14:36.280 and number two, you've got to size it correctly, because 0:14:36.680 --> 0:14:39.160 even though we think it will work, it's going to 0:14:39.200 --> 0:14:40.760 have some volatility around it. 0:14:41.520 --> 0:14:45.000 So Alex at Burnstein Private Wealth, to what extent of 0:14:45.160 --> 0:14:46.960 do your clients come to you and say, I really 0:14:46.960 --> 0:14:50.680 want exposure to alternatives, whether it's hedge funds or private 0:14:50.680 --> 0:14:53.200 equity or private credit, And if so, what do you 0:14:53.200 --> 0:14:57.320 think is a reasonable allocation to alternative investments. 0:14:58.520 --> 0:15:02.000 Our investors have expres both a desire to invest in 0:15:02.040 --> 0:15:06.400 alternative investments, but even in larger numbers, they want to 0:15:06.400 --> 0:15:09.640 move away from public markets. I think the experience of 0:15:09.680 --> 0:15:14.040 the last few years twenty twenty COVID was really scary 0:15:14.080 --> 0:15:16.360 in public even though we ended up in a good place. 0:15:16.800 --> 0:15:20.200 Twenty one was terrific, but it never felt terrific. Twenty 0:15:20.200 --> 0:15:22.960 two is really hard. Twenty three was another year where 0:15:23.160 --> 0:15:24.640 at the end of the year you couldn't believe how 0:15:24.680 --> 0:15:26.800 much money you've made that year because it just didn't 0:15:26.840 --> 0:15:29.400 feel that way. So they're looking to get away from 0:15:29.440 --> 0:15:33.400 public market volatility, both equity and fixed income volatility by 0:15:33.400 --> 0:15:36.040 the way, So I think some of it is absolute 0:15:36.360 --> 0:15:39.840 attraction to alternatives, but a bigger chunk is this idea 0:15:39.840 --> 0:15:43.040 of how do I get out of the publics, And 0:15:43.120 --> 0:15:46.920 so we have been investing heavily in private equity, both 0:15:46.960 --> 0:15:51.560 primaries and secondaries, really excited about fresh capital right. 0:15:51.400 --> 0:15:53.400 Now getting put to work in real estate. 0:15:53.960 --> 0:15:55.720 One of the things I would say across the board 0:15:55.760 --> 0:15:59.280 in longer dated alternative investments is that you don't have 0:15:59.360 --> 0:16:04.720 this big flood of other big institutional LPs applying capital. 0:16:04.880 --> 0:16:07.880 There's been some reluctance because of the twenty twenty two 0:16:08.200 --> 0:16:11.760 public market experience and how these big LPs are trying 0:16:11.760 --> 0:16:14.560 to right size their liquid versus ill liquid. So they're 0:16:14.560 --> 0:16:16.920 taking a year off, maybe two. They've definitely hit the 0:16:16.920 --> 0:16:20.000 timeout button, and so we're able to step in. Other 0:16:20.040 --> 0:16:22.840 groups like US are able to step in and acquire 0:16:22.880 --> 0:16:25.120 assets at a much lower price because it isn't as 0:16:25.160 --> 0:16:26.359 heavily traffic. 0:16:26.480 --> 0:16:29.080 Alex To quickly touch on that, I cover equity, capital 0:16:29.120 --> 0:16:31.640 markets and IPOs. You're talking about the private markets and 0:16:31.680 --> 0:16:34.120 some of the issues for LPs and gps. Where do 0:16:34.160 --> 0:16:37.320 you see opportunities within the private market given the disconnect 0:16:37.360 --> 0:16:38.160 that you're talking about. 0:16:39.400 --> 0:16:41.200 I would first point to real estate. 0:16:41.320 --> 0:16:45.240 I think there's a number of real estate funds, big 0:16:45.360 --> 0:16:49.200 multi billion dollar funds that were raised ten twelve years 0:16:49.200 --> 0:16:52.720 ago that still won't assets they need to sell, whether 0:16:52.760 --> 0:16:56.360 they restructure in a continuation fund or they're looking to 0:16:56.400 --> 0:16:59.440 do off market secondary like transactions. I think you're going 0:16:59.480 --> 0:17:02.680 to see some significant deal flow there. You know, last 0:17:02.760 --> 0:17:07.119 year twenty twenty three was the lowest deal volume in 0:17:07.119 --> 0:17:09.680 commercial real estate and twenty five years yep. 0:17:09.800 --> 0:17:11.680 So we have to see the other side there. 0:17:12.200 --> 0:17:14.080 And then I think in private equity and venture capital, 0:17:14.119 --> 0:17:18.000 you're just not seeing the valuations that you had to 0:17:18.080 --> 0:17:21.080 pay three or four years ago. In those private markets, 0:17:21.119 --> 0:17:24.840 you're already seeing the lack of big capital investors. 0:17:24.840 --> 0:17:26.320 They're bringing valuations down. 0:17:26.480 --> 0:17:28.600 Alex great Stuff is always appreciate getting a few minutes 0:17:28.600 --> 0:17:30.840 of your times, Alex Chaloff, He's the CEO of Bernstein 0:17:30.920 --> 0:17:37.480 Private Well Management. So when I think about flailing around 0:17:37.480 --> 0:17:39.919 in the dark, I think at Vince Signorella, macro strategists 0:17:39.920 --> 0:17:44.080 for Bloomberg News The Master of working from home, Vince, 0:17:44.520 --> 0:17:46.840 what are the traders telling me out there? You talk 0:17:46.880 --> 0:17:48.919 to these guys and gals all the time. What are 0:17:48.960 --> 0:17:49.479 they telling you? 0:17:50.440 --> 0:17:53.760 Well, I think now that we're you know, realistically, we're 0:17:53.800 --> 0:17:56.600 pushing the rate cuts back now out to July. So 0:17:56.880 --> 0:17:59.160 every month or so, we seem to be pushing them 0:17:59.200 --> 0:18:02.800 further and further back. And you know, we're bumping up 0:18:02.840 --> 0:18:06.399 against the presidential election at the same time. You can't 0:18:06.520 --> 0:18:09.840 rule out that influence on power. Remember his interview with 0:18:10.840 --> 0:18:13.879 sixty Minutes. The big mic drop moment for him was 0:18:13.920 --> 0:18:17.600 to make sure that people understood that the independence of 0:18:17.600 --> 0:18:20.040 the Federal Reserve was parent and he's not going to 0:18:20.080 --> 0:18:23.640 want to play into politicians' hands, you know, basically trying 0:18:23.640 --> 0:18:26.399 to make him escapegoat as if he were picking, you know, 0:18:26.440 --> 0:18:29.080 a horse in the race, because he doesn't and won't. 0:18:29.640 --> 0:18:32.160 So if we get to July, and that's the first 0:18:32.240 --> 0:18:34.640 rate cut, and Bostic has mentioned that they're not going 0:18:34.680 --> 0:18:36.320 to be back to back, and I think he speaks 0:18:36.320 --> 0:18:40.200 for the committee. You're not going to see one in August, 0:18:40.280 --> 0:18:42.960 possibly even September. I don't see how you get three 0:18:43.040 --> 0:18:46.840 in and even more importantly, in all my years at 0:18:46.840 --> 0:18:49.160 watching the Fed, and it goes back to the late seventies, 0:18:49.400 --> 0:18:52.160 I can never remember a Fed cutting interest rates when 0:18:52.200 --> 0:18:55.639 the economy was growing, when inflation was either stagnant or 0:18:55.680 --> 0:18:57.000 ticking potentially. 0:18:56.560 --> 0:18:58.480 Higher, and jobs growth was strong. 0:18:59.480 --> 0:19:01.960 I realized there's a gap between where the FED funds 0:19:02.040 --> 0:19:06.040 rate is and where the inflation rate is. But that 0:19:06.080 --> 0:19:08.240 doesn't necessarily mean the Fed has to close that in 0:19:08.240 --> 0:19:11.600 the heartbeat because of the fear that that potentially turned. 0:19:11.760 --> 0:19:14.920 There's no reason to believe that that gap is going 0:19:14.960 --> 0:19:17.639 to remain at roughly the two percent spread that it 0:19:17.720 --> 0:19:18.280 is right now. 0:19:18.320 --> 0:19:20.439