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Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day

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Speaker 1: for insight from the best and economics, geopolitics, finance and investment.

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Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and

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Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app.

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Speaker 2: This is a joy.

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Speaker 1: Yesterday was humbling ability for everyone, no question about that,

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Speaker 1: and today well accept But today a recalibration year of

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Speaker 1: where we go in our optimism on the American experiment.

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Speaker 1: A few have been right, nobody like Neil duddat how

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Speaker 1: to Economics at Renaissance Macro over the last eighteen months

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Speaker 1: an absolute tewort of force that America economic might will prevail.

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Speaker 1: This morning, David Rosenberg writes of a tepidominal GDP. At

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Speaker 1: the same time, the tech analyst Dan ives Hit Webbush

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Speaker 1: and Joel Fish buying it truest go out two in

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Speaker 1: three years. I'm technical excellence of the Magnificent seven. Can

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Speaker 1: our technology lead continue the dota optimism on American economy?

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Speaker 3: That's a tough question, Tom, I mean, I hope so.

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Speaker 3: I mean, productivity is notoriously difficult to forecast. But if

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Speaker 3: productivity is picking up, which it has been over the

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Speaker 3: last couple of quarters, then it raises the you know,

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Speaker 3: the capacity for the economy grow without stoking inflation, and

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Speaker 3: that takes a lot of pressure.

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Speaker 2: Off the Fed. The last few months, you've been absolutely

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Speaker 2: locked in. You seem to have some kind of visibility

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Speaker 2: on what's happening here that some of the people are lacking.

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Speaker 2: What's helping you. What's the framework that you're using to

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Speaker 2: see things a little bit more clearly over the last

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Speaker 2: few months.

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Speaker 3: Well, I mean you had mentioned earlier that you know,

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Speaker 3: Powell uh sounded some sounded different a couple of weeks ago.

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Speaker 3: I mean, but you know, to me, the die has

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Speaker 3: been cast for this for for a little bit of

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Speaker 3: time now, I mean, and that's because inflation is slowing

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Speaker 3: more rapidly than they expect. I mean, I think the

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Speaker 3: Fed is following essentially a rules based framework where they're

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Speaker 3: taking changes in inflation and the unemployment rate and translating

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Speaker 3: that into expectations around the federal funds rate. And that's

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Speaker 3: basically what's happening. That's what they did yesterday. And so

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Speaker 3: you know, core inflation in November is likely to come

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Speaker 3: in barely one tenth of one percent month over month,

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Speaker 3: and that means that the momentum going into twenty twenty

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Speaker 3: four is quite weak. And so if they're revising down

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Speaker 3: inflation in December, which they did, and then a few

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Speaker 3: months later they're going to be revising down inflation again

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Speaker 3: in March, what do you expect expect them to do?

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Speaker 3: What I would push back on, John, is this notion

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Speaker 3: that this is because I mean, you know, you see

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Speaker 3: all this already. Oh the ten years broken below four percent,

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Speaker 3: that means a recession is happening. No, that's not what

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Speaker 3: this is about. This is about inflation coming in better

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Speaker 3: and the adjusting as a result, and that's ultimately a

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Speaker 3: good thing. And you know, I think it's going to,

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Speaker 3: you know, give the economy it a chance to continue growing.

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Speaker 3: And I think that's that's what's likely.

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Speaker 2: Well gets you around look on growth in just a moment.

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Speaker 2: Policymakers like to use the word if just to hedge

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Speaker 2: themselves if this continues, we might do this. You don't

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Speaker 2: think that if is that large? You think this is

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Speaker 2: already kind of baked in these right cuts are coming.

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Speaker 3: Well, I don't know that it'll be six because to me,

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Speaker 3: six feels like, you know, if there's a recession, six

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Speaker 3: wouldn't be enough, but if the economy is growing, six

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Speaker 3: feels like too many. Frankly, but I do. I don't

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Speaker 3: think it's much of an if about round inflation. I mean,

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Speaker 3: Powell talked earlier this year about a disinflationary process, and

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Speaker 3: I think that was a little bit premature to talk

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Speaker 3: about it. But now it really does feel like a

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Speaker 3: meaningful disinflationary process is underway, and we have continued moderation

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Speaker 3: in housing rental inflation coming. You know, the Terminal has

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Speaker 3: an article today about Manhattan rants going down year over year.

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Speaker 3: We also know that used car prices will continue to

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Speaker 3: deflate over the next several months, and that was actually

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Speaker 3: it popped in November. So and between that and you know,

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Speaker 3: core goods excluding cars, I mean there's continued downside there

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Speaker 3: as well, so I do. And the labor markets are

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Speaker 3: basically normalized. I mean, they're they're back into balance. So

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Speaker 3: I think you kind of go down the line, and

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Speaker 3: you know, to me, it suggests that we're going to

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Speaker 3: see continued disinflation over the next several quarters.

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Speaker 4: Jpewell did not want to really dig into the question

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Speaker 4: around financial conditions and the easing of which we've seen

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Speaker 4: over the past couple of weeks, but I'd love you

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Speaker 4: to weigh in on it. Do you have any concerns

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Speaker 4: that the easing and financial conditions will actually push inflation

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Speaker 4: in the other direction?

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Speaker 3: Well, I think that's a reason to expect there to

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Speaker 3: be a ceiling on how many cuts they'll end up doing.

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Speaker 3: But I don't think that they're going to be upset

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Speaker 3: about the easing of financial conditions in and of themselves.

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Speaker 3: I mean, if you think about the Fed's reaction function, right,

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Speaker 3: it's labor market, it's inflation, and then financial conditions. If

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Speaker 3: labor markets are in balance and inflation is slowing, why

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Speaker 3: would they be The markets are then reassessing the Fed's

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Speaker 3: interest rate paths, So why would they be upset about that?

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Speaker 4: Well, you've been really good about tracking homebuilders. For example,

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Speaker 4: if suddenly you start to see a reacceleration in the

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Speaker 4: home space, right, if you start to see people re

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Speaker 4: engaging with selling homes and being able to price up

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Speaker 4: some of these homes because mortgage rates are.

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Speaker 5: Lower, could that pose a problem? Right?

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Speaker 4: These are some of the questions that people have. So

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Speaker 4: I think I'm of still robust growth.

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Speaker 3: So Powell yesterday talked about the seesaw thing right where

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Speaker 3: we go from like one story like no landing, soft landing,

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Speaker 3: hard landing back to soft landing. And I just feel

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Speaker 3: like we need to get through this about of disinflation

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Speaker 3: first before we talk about what happens next. And I mean,

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Speaker 3: could I make a case for things may reaccelerate and

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Speaker 3: that could reignite inflation, and then the FED will have

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Speaker 3: to come back and undo the cuts that they put

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Speaker 3: in place in twenty twenty four. I mean, that's a

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Speaker 3: plausible scenario. You know, we're not going to have any

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Speaker 3: multi family construction really next year, and that could you know,

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Speaker 3: reignite inflation because there won't be enough housing supply. But

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Speaker 3: I do think the FED has to deal with the

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Speaker 3: issues that are in front of them, and right now,

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Speaker 3: the overwhelming issue is that inflation is slowing more rapidly

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Speaker 3: than expected. And for a central bank that believes that

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Speaker 3: neutral rates are two and a half percent, they're going

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Speaker 3: to be more cognizant and sensitive to the risk that

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Speaker 3: they overtightened, and so I think that's why they want

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Speaker 3: to get the cuts away first. It's not about you know,

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Speaker 3: I mean what my reaction function is. It's about what

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Speaker 3: their reaction function is. And that's what we're trying to get.

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Speaker 1: I want to go quickly here. The Neil Deta optimism

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Speaker 1: is much like the edge Yardeni optimism. He on Inequity

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Speaker 1: Call has a huge stock market out to Dow forty

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Speaker 1: seven thousand, SPX six thousand, you know, two three years out,

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Speaker 1: and he talks about the Roaring twenty twenties. There was

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Speaker 1: a Roaring twenties one hundred some years ago and it

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Speaker 1: didn't end. Well. Your optimism, how it different from the

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Speaker 1: effervescence the exuberance of an unstable roaring twenties.

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Speaker 3: Well, I would just say, I mean, if we do

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Speaker 3: have a roaring period of economic activity, I mean, it

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Speaker 3: does help that we we had a financial crisis in

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Speaker 3: two thousand and eight. We already had the big one,

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Speaker 3: and you know we have guardrails and we have well

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Speaker 3: we have the benefit of hindsight, right, I mean, you know,

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Speaker 3: one of the ways you avoided depression is by going

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Speaker 3: through on the first time and you know, so I

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Speaker 3: think that that's that's helpful.

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Speaker 2: What do they say, congratulations on a great quarter? Congratulations now, oh,

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Speaker 2: thank you, thank you, Sir nod'nswer of NISO's Macro.

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Speaker 1: At least saw some of US global investment strategist JP

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Speaker 1: Morgan Private Bank, and she has a wonderful image in

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Speaker 1: her note summing up the FED, the ECB, the Bank

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Speaker 1: of England and fourteen other central banks about investment strategy

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Speaker 1: into twenty twenty four. Somebody's got to land the plane.

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Speaker 1: After what we saw on the turbulence yesterday at two

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Speaker 1: o'clock and in that press conference, recalibrate this morning, how

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Speaker 1: are we going to land the plane given the instabilities

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Speaker 1: of the last fifteen hours.

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Speaker 6: Look, I think there is a distinction between what's going

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Speaker 6: on domestically in the United States and the position that

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Speaker 6: that puts the FED in too potentially cut in the

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Speaker 6: first half of next year, versus what we're seeing abroad

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Speaker 6: in England and in the broader euro region. You know,

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Speaker 6: it's no surprise to us that both the BOE and

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Speaker 6: the ECB stayed on hold, and we do think that

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Speaker 6: the ECB is probably still the most obvious candidate to

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Speaker 6: deliver the first cut simply in light of the economic

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Speaker 6: weakness that you're seeing.

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Speaker 4: This is a really interesting point, and it's frankly what

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Speaker 4: I'm sniffing out from markets that are not reacting to

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Speaker 4: this as I thought that they would. I would expect

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Speaker 4: the euro to actually strengthen dramatically on the heels of

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Speaker 4: this in response to a more hawkish ECB that many

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Speaker 4: people say, are you just saying that you don't believe them?

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Speaker 6: No, not necessarily, you know, I think the ECB has

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Speaker 6: to continue to kind of hold this hawkish posture, especially

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Speaker 6: given that wage growth hasn't necessarily rolled over in a

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Speaker 6: commencing way in Europe, but given the economic slow down

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Speaker 6: and maybe nascent signs of some sort of economic life

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Speaker 6: coming back, I think the ECB has to talk tough,

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Speaker 6: but we'll probably be the first to cut, maybe as

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Speaker 6: soon as the spring.

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Speaker 2: This was the conversation we had yesterday before we went

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Speaker 2: into chair and powe. If we got push back, how

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Speaker 2: credible would it be? Just feels like from the ECB

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Speaker 2: doesn't feel as credible might be given what we already

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Speaker 2: know about what's happening in the economy. Here's the market

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Speaker 2: question at least you're more bullish now than you were

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Speaker 2: yesterday morning after what you heard from Powe.

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Speaker 6: Sure, we were having a lot of conversations about this

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Speaker 6: on our floor yesterday. I think what we learned from

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Speaker 6: the FED is that we have to start entertaining our

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Speaker 6: bowl case a little bit more. But we came into

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Speaker 6: yesterday's decision on the front foot, and we've been encouraging

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Speaker 6: investors to add back to risk exposure. We have a

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Speaker 6: relatively bullish view on the S and P five hundred

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Speaker 6: for the year ahead, and I think this just kind

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Speaker 6: of underwrites our conviction in that call.

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Speaker 2: What's the bullcase bolcase is S.

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Speaker 6: And P five hundred ends next year five thousand, But

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Speaker 6: we'll see. I think that would probably dictate the FED

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Speaker 6: cutting before the second half of the year. But right

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Speaker 6: now our base case pencils and cuts in the second

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Speaker 6: half of the year and not yet.

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Speaker 1: So the Banner's Awesome Bosses Fortress Diamond calls five fodcast.

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Speaker 2: Yeah, not quite, I would say, isn't there a risk

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Speaker 2: we could be there in January based on what we're seeing?

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Speaker 6: How I think January feels a little aggressive. We still

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Speaker 6: have to see, you know, the earnings come through. We

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Speaker 6: are making this call that the earnings recession is likely

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Speaker 6: over and that we're going to see rolling earnings recoveries.

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Speaker 6: But let's get through the fourth quarter reporting season and

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Speaker 6: then look beyond to twenty twenty four US.

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Speaker 2: That sounds like equal white and not market cat whited SMP.

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Speaker 2: Is that right?

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Speaker 6: We do have conviction in making sure that you have

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Speaker 6: exposure to the other four hundred and ninety three names

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Speaker 6: in the index beyond the magnificent seven. But we're constructive

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Speaker 6: on the magnificent seven. I mean, these companies are projected

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Speaker 6: to grow earnings north of twenty percent in twenty twenty four,

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Speaker 6: and that is definitely an exposure that we're encouraging investors.

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Speaker 1: That's your conviction. When everybody gets out of cash, what's

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Speaker 1: going to happen? I want to We've never been here,

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Speaker 1: six trillion in cash, we get under five percent money

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Speaker 1: market fund, what happens?

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Speaker 3: Well?

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Speaker 6: I think you have to take into consideration that bonds

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Speaker 6: are back on the table, right. That to me means

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Speaker 6: that there is still a trade to step into some

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Speaker 6: duration and not necessarily just plow into the equity market.

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Speaker 6: I think some folks will remain a little reticent given

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Speaker 6: where valuations are today, but given the you know, improved

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Speaker 6: free cash flow generation of S and P five hundred

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Speaker 6: companies relative to ten years ago, we are comfortable with

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Speaker 6: today's valuations. We just don't think that that's going to

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Speaker 6: be what drives the upside into the next twelve months.

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Speaker 2: At least it's going to see in person. Thanks for

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Speaker 2: coming in that Jpmulgan private bank following the ACP decision.

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Speaker 1: These are absolutely extraordinary time. Let's get a European brief

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Speaker 1: on this with Aberdeen three Katrikavidian joining us this morning. Siri,

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Speaker 1: the divide here between the central banks, I believe I've

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Speaker 1: never seen. Do you perceive that, how alone is Jay

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Speaker 1: Powell versus Governor Bailey or what we're going to see

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Speaker 1: from Christine Lagard in a bit.

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Speaker 7: I think this really highlights is the differences across the

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Speaker 7: economies and the different challenges that each of these central

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Speaker 7: bankers are facing. So obviously we had a bit of

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Speaker 7: a pivot yesterday from the FED and that's really spilled

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Speaker 7: over into rates markets across these different regions. However, as

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Speaker 7: we've seen the Bank of England does face a very

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Speaker 7: different challenge. Inflation is less of an outlier that it

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Speaker 7: used to be. It is coming down at a steady pace,

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Speaker 7: but they still have some challenges if you look at

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Speaker 7: the core inflation and services inflation in particular services is

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Speaker 7: still running at six point six percent year on year,

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Speaker 7: So that's still a problem there for a Bank of

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Speaker 7: England which is trying to manage we GDP growth as

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Speaker 7: well as a stickier inflation picture then compared to other regions.

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Speaker 7: So hence there's no change in guidance, no changing statement,

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Speaker 7: and we still have a six to three vote split.

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Speaker 7: And I think that's a key communication point right there,

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Speaker 7: the fact that you.

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Speaker 4: Know we have that split, given that there is no

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Speaker 4: statement of economic projections, let's create our own. If they

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Speaker 4: did put out whether they thought that the economic growth

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Speaker 4: was going to be better or worse they previously expected,

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Speaker 4: what direction do you think it would go?

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Speaker 7: Well, I think what we've seen just in the recent data,

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Speaker 7: we had the October GDP which was a disappointment there

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Speaker 7: and I think that will be something that they would

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Speaker 7: definitely consider. If we look at the moving averages across

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Speaker 7: if we look through that contraction that we saw a

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Speaker 7: month or month for October that was across the board

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Speaker 7: for services, construction and manufacturing. But if we smooth that out,

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Speaker 7: it is we are looking at a flat three month

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Speaker 7: on three months, but there's a possibility tive a start

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Speaker 7: of a technical recession and recession like what we're expecting

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Speaker 7: is recession like conditions to persist throughout the first half

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Speaker 7: of next year. So really it's a difficult balancing act

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Speaker 7: for the Bank of England, but we do think that

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Speaker 7: they're more likely to hold on with this five point

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Speaker 7: two five percent and stay there for a few more months. Yet,

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Speaker 7: timing is obviously quite fluid and will depend on inflation

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Speaker 7: how fast inflation decelerates, But they might be one of

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Speaker 7: the later central banks to cut if we compare with

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Speaker 7: potentially ECB and the change in tone from the Fed.

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Speaker 4: Se how much does that benefit them in a sense,

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Speaker 4: given the fact that we are seeing the pound strengthen

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Speaker 4: that this actually could be a disinflationary if they do

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Speaker 4: diverge from the other central banks.

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Speaker 7: Yes, I think the move in the sterling will help

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Speaker 7: somewhat in terms of imported price impact, but really it

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Speaker 7: comes down to this wage inflation that's that's really going

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Speaker 7: to be key.

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Speaker 5: Now.

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Speaker 7: One good piece of news is that real wages are

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Speaker 7: a bit stronger because inflation has come down a bit,

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Speaker 7: so that should help boost or at least support consumers

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Speaker 7: to some extent. But nonetheless, the imbalances in the UK

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Speaker 7: labor market are still there. They've improved, but they're still

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Speaker 7: there and that's going to create that bumpy last mile

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Speaker 7: for the UK.

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Speaker 1: Three if we've got to run rate in the United

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Speaker 1: States of nominal GDP of four percent, anybody's guests, what

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Speaker 1: is your custamate a nominal GDP for the Bank of

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Speaker 1: England and for the ECB, what numbers are What of

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Speaker 1: those two different numbers this morning, what.

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Speaker 7: We have seen. I think we're going to see a

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Speaker 7: slow down there in terms of GDP growth, particularly for

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Speaker 7: the Euro Area. I think the challenge there is that

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Speaker 7: we've seen a much weaker inflation outlook than they've they've

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Speaker 7: actually projected, and I think that what we're projecting versus

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Speaker 7: what's happening versus what c beer projecting. I think that

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Speaker 7: challenge is what we're going to really see later on

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Speaker 7: today from from the ECB, whether they're you know, how

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Speaker 7: they address the fact that actual data has been weaker,

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Speaker 7: both inflation as well as the growth outlook is weakening,

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Speaker 7: so I think that could be quite important in terms

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Speaker 7: of what they say about the shift in timing. Obviously,

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Speaker 7: the markets have pulled forward the timing for the first

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Speaker 7: cut from the ECB, and we have as well. We've moved.

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Speaker 7: We were looking more mid year and now we're looking

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Speaker 7: for in March April, more likely April. So you know,

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Speaker 7: I think this is the kind of signaling that we

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Speaker 7: need to be focusing on in terms of what what

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Speaker 7: messages are coming out of the ECB later today and

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Speaker 7: again going forward for the for the UK as well,

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Speaker 7: it's going to be you know, that relative shift in

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Speaker 7: data that the UK will be will be focusing on

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Speaker 7: in the coming meetings.

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Speaker 2: Sorry, thank you, Sory goatcha guvnd of Appetite.

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Speaker 1: Stephanie Rod's had a very busy weekend scheduled cancel that

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Speaker 1: the chief economist at Wolf Research has to rewrite the view,

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Speaker 1: as she did last night in a sharp post FED note.

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Speaker 1: Let's go to your post FED note. What was the

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Speaker 1: biggest change in that note after the drama of two

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Speaker 1: o'clock yesterday.

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Speaker 5: I think the biggest change is that the FED is

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Speaker 5: less scared of stronger growth and they're now appreciating that

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Speaker 5: inflation's come down. Like they took up their growth numbers,

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Speaker 5: but inflation came down so much that they feel pretty

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Speaker 5: good about the backdrop. It said, so far, so good.

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Speaker 4: Is this FED still data dependent?

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Speaker 5: They're data dependent, but they're more inflation dependent than growth dependent.

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Speaker 5: I think they're recognizing that inflation can come down even

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Speaker 5: if growth remains fairly strong.

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Speaker 4: This, to me was the biggest change that basically this

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Speaker 4: is not going to be contingent on some sort of

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Speaker 4: deceleration in the economy that they are really leading into

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Speaker 4: the soft landing narrative. Do you have a more optimistic

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Speaker 4: view that they can achieve a soft landing after yesterday.

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Speaker 2: Than you had before?

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Speaker 5: Yeah, and I've been calling for a soft dish landing.

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Speaker 5: Now I think I just have more conviction in that

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Speaker 5: they can. The fact that they can cut rates even

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Speaker 5: sooner than our base case. Our base case was Q

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Speaker 5: three of next year heading into yesterday. We've pushed that

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Speaker 5: up to Q two, and that just makes the runway

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Speaker 5: even that much wider for the soft landing to happen.

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Speaker 4: Do you think that financial conditions don't matter? Were you

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Speaker 4: were you okay with how Chair Powell responded to that

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Speaker 4: question yesterday.

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Speaker 5: Yeah, he didn't. He didn't really talk about financial conditions

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Speaker 5: that much, and November he mentioned it thirteen times. This

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Speaker 5: was a big turnaround. I think he's just not that

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Speaker 5: scared with the way financial conditions have eased, because inflation

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Speaker 5: has come down, notably with the markets that where.

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Speaker 1: There are futures up twelve. I have been really I've

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Speaker 1: really failed at the core theme that I think that

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Speaker 1: was somewhat alluded to by the chairman yesterday. We're going

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Speaker 1: to go to Mike mckeere and a bit folks before

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Speaker 1: we get to Christine Legard and Frankfort. But Stephanie Roth,

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Speaker 1: you're quite good at this, which is interpretating what I

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Speaker 1: call the three ratio productivity dynamic of capital labor in

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Speaker 1: the pixie dust of American efficiency as well. What have

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Speaker 1: you learned to reaffirm better productivity in the last fifteen hours.

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Speaker 1: Do they have a confidence that we're more efficient, a

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Speaker 1: better run economy.

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Speaker 5: We have seen productivity pick up in the last couple quarters.

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Speaker 5: I don't know if we can bank on that continuing,

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Speaker 5: but I think there's real scope for that. The economy

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Speaker 5: has learned to operate with fewer workers than what the

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Speaker 5: pre COVID trend would suggest.

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Speaker 1: The standard idea is of you have ten years, you know,

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Speaker 1: we'll know in five years or whatever about productivity now,

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Speaker 1: But are you guestimating that we grossly underestimate not the

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Speaker 1: capital dynamic, the labor dynamic. And you know Alisa Torsten

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Speaker 1: Slock with that comment out today have more employed people

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Speaker 1: in the middle of the age bracket in America. But

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Speaker 1: is it really about the technology overlay that we're completely

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Speaker 1: underestimating even as we live it.

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Speaker 5: I think there's an element of that, but I think

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Speaker 5: the bigger story here is a labor supply. We've had

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Speaker 5: such strong labor supply this year that's helped the rebounds

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Speaker 5: the labor market. It was a combination of immigration and

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Speaker 5: female elberforce participating in.

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Speaker 1: Claudia Sah mentioned this yesterday with a Nobel Lauri at

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Speaker 1: Claudia Golden at Harvard and that the women coming back

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Speaker 1: into the labor force is jaw dropping.

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Speaker 4: If you are just joining us, just to repeat some

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Speaker 4: of these numbers because they are notable, I want to

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Speaker 4: just take a look. Initial jobless claims came in yet

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Speaker 4: again below the expectation. That is a good downward surprise,

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Speaker 4: two hundred and two thousand versus the expectation of two

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Speaker 4: hundred and twenty thousand retail sales month over month. The

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Speaker 4: control group came in zero point four percent versus the

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Speaker 4: expectation for zero point two percent. Zero point six percent

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Speaker 4: versus zero point two percent expected when you strip out

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Speaker 4: autos and gas, Stephanie, do you get a sense that

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Speaker 4: basically the consumer is not cracking at all, That basically

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Speaker 4: they still have money and the actual real wages going

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Speaker 4: up will continue to fuel the spending spree that has

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Speaker 4: underpinned a lot of the recovery.

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Speaker 5: Yeah, I think the consumer is doing just fine. I mean,

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Speaker 5: the one thing to highlight within the print is we

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Speaker 5: did get some downwards vision to the prior month, so

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Speaker 5: like if you smooth through it, it's a little bit

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Speaker 5: less strong than it seems. But yeah, the consumer seems fine.

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Speaker 5: You're starting to see some delinquencies at the most vulnerable spots,

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Speaker 5: but with rates coming down and conditions easing, maybe that's

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Speaker 5: the Maybe that's kind of the end of that.

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Speaker 4: What would you have to see to start to really

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Speaker 4: question the soft landing thesis? Where would the weakness come from?

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Speaker 4: Do you see it anywhere on the horizon that you're

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Speaker 4: watching and some of the incoming data.

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Speaker 5: I think there's two things to watch out for. One,

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Speaker 5: the labor market is that going to crack As long

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Speaker 5: as the consumers are employed, they're going to keep spending.

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Speaker 5: And then on the on some of these cracks that

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Speaker 5: are forming within within the consumer, that's just you know,

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Speaker 5: keeping keeping me looking quite closely. So some of the

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Speaker 5: delinquencies at the lower end or with the younger borrowers

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Speaker 5: by now pay later, that kind of thing that feels

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Speaker 5: very late cycle to me. But overall the consumer seems fine.

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Speaker 1: What's your run rate for GDP? All of us got

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Speaker 1: wrong third quarter? There was a third quarter quiet and

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Speaker 1: we got this shock optimistic number. We're going to reduce

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Speaker 1: that in the fourth quarter as well and get say

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Speaker 1: three percent GDP two point eight percent. Those are pretty

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Speaker 1: good numbers.

437
00:22:01,720 --> 00:22:03,680
Speaker 5: Yeah, I think it looks like it could be tracking

438
00:22:03,680 --> 00:22:04,679
Speaker 5: above two percent.

439
00:22:04,560 --> 00:22:06,560
Speaker 1: Above two coming, give me above three? Can we get

440
00:22:06,560 --> 00:22:07,359
Speaker 1: above three percent?

441
00:22:07,800 --> 00:22:09,560
Speaker 5: I don't think so. You're gonna have an inventory drag,

442
00:22:09,640 --> 00:22:10,560
Speaker 5: so I don't think so.

443
00:22:10,680 --> 00:22:12,840
Speaker 1: Okay, what about export imports? We got the you know,

444
00:22:12,960 --> 00:22:16,359
Speaker 1: the pricing on export and imports today, but on trade

445
00:22:16,760 --> 00:22:19,960
Speaker 1: to me. The wild card next year's China, And to me,

446
00:22:20,080 --> 00:22:23,600
Speaker 1: the great question is do we underestimate China once again

447
00:22:23,720 --> 00:22:27,919
Speaker 1: and the export import dynamic of America adds to GDP.

448
00:22:28,160 --> 00:22:28,840
Speaker 1: Is that possible?

449
00:22:29,119 --> 00:22:31,040
Speaker 5: I think trade could be a bit of a boost

450
00:22:31,119 --> 00:22:33,879
Speaker 5: next year. I don't think it'll be dramatically, So I

451
00:22:33,920 --> 00:22:35,600
Speaker 5: think the thing to think there's two things to think about.

452
00:22:35,600 --> 00:22:38,000
Speaker 5: One is are we going to end up with cross

453
00:22:38,000 --> 00:22:41,000
Speaker 5: the board import tariffs in twenty twenty five?

454
00:22:41,080 --> 00:22:41,200
Speaker 6: Is that?

455
00:22:41,359 --> 00:22:43,640
Speaker 5: Is that a real issue depending on how the political

456
00:22:43,720 --> 00:22:46,320
Speaker 5: cycle plays out. And then the second thing is everybody's

457
00:22:46,359 --> 00:22:49,080
Speaker 5: talking about reshoring, but there's not really that much signs

458
00:22:49,080 --> 00:22:51,080
Speaker 5: of it yet, so they're not really you know, we're

459
00:22:51,080 --> 00:22:53,040
Speaker 5: still importing disinflation. It's not as if we're all of

460
00:22:53,040 --> 00:22:55,080
Speaker 5: a sudden manufacturing all of these goods here and that's

461
00:22:55,119 --> 00:22:57,480
Speaker 5: going to create lots of goods inflation in the US.

462
00:22:57,640 --> 00:22:59,760
Speaker 4: Who do you think is more right the Fed projecting

463
00:22:59,800 --> 00:23:03,320
Speaker 4: out three rate cuts next year or the market pricing

464
00:23:03,359 --> 00:23:04,919
Speaker 4: out six rate cuts next.

465
00:23:04,840 --> 00:23:08,040
Speaker 5: Year the Fed unless we get a recession, which is

466
00:23:08,080 --> 00:23:08,720
Speaker 5: not my bease case.

467
00:23:09,000 --> 00:23:11,040
Speaker 4: So in other words, that that seems the most likely,

468
00:23:11,080 --> 00:23:14,320
Speaker 4: which is actually less than the market is currently expecting

469
00:23:14,600 --> 00:23:17,480
Speaker 4: and less sort of disinflationary than people are pricing in.

470
00:23:17,840 --> 00:23:20,120
Speaker 5: Yeah, but I think the one thing is the market's

471
00:23:20,160 --> 00:23:21,760
Speaker 5: not pricing the FED getting all the way down to

472
00:23:21,800 --> 00:23:23,400
Speaker 5: somewhere on two and a half to three percent, which

473
00:23:23,440 --> 00:23:25,280
Speaker 5: is where I think the FED will ultimately cut to.

474
00:23:25,400 --> 00:23:28,400
Speaker 5: So that's where the rest of the market could sort

475
00:23:28,440 --> 00:23:29,320
Speaker 5: of price too.

476
00:23:29,680 --> 00:23:31,399
Speaker 1: We have to turn to Franford. Thank you so much,

477
00:23:31,400 --> 00:23:33,760
Speaker 1: Stephanie Roth with it's just terrific summer here with the

478
00:23:33,760 --> 00:23:36,720
Speaker 1: Wolf Research publishing and that we can get that research

479
00:23:36,840 --> 00:23:41,439
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480
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481
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485
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Speaker 1: Tom Keen, and this is Bloomber