Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along
Speaker 1: with Jonathan Farrow and Lisa Abramowitz. Join us each day
Speaker 1: for insight from the best and economics, geopolitics, finance and investment.
Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and
Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,
Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app.
Speaker 2: This is a joy.
Speaker 1: Yesterday was humbling ability for everyone, no question about that,
Speaker 1: and today well accept But today a recalibration year of
Speaker 1: where we go in our optimism on the American experiment.
Speaker 1: A few have been right, nobody like Neil duddat how
Speaker 1: to Economics at Renaissance Macro over the last eighteen months
Speaker 1: an absolute tewort of force that America economic might will prevail.
Speaker 1: This morning, David Rosenberg writes of a tepidominal GDP. At
Speaker 1: the same time, the tech analyst Dan ives Hit Webbush
Speaker 1: and Joel Fish buying it truest go out two in
Speaker 1: three years. I'm technical excellence of the Magnificent seven. Can
Speaker 1: our technology lead continue the dota optimism on American economy?
Speaker 3: That's a tough question, Tom, I mean, I hope so.
Speaker 3: I mean, productivity is notoriously difficult to forecast. But if
Speaker 3: productivity is picking up, which it has been over the
Speaker 3: last couple of quarters, then it raises the you know,
Speaker 3: the capacity for the economy grow without stoking inflation, and
Speaker 3: that takes a lot of pressure.
Speaker 2: Off the Fed. The last few months, you've been absolutely
Speaker 2: locked in. You seem to have some kind of visibility
Speaker 2: on what's happening here that some of the people are lacking.
Speaker 2: What's helping you. What's the framework that you're using to
Speaker 2: see things a little bit more clearly over the last
Speaker 2: few months.
Speaker 3: Well, I mean you had mentioned earlier that you know,
Speaker 3: Powell uh sounded some sounded different a couple of weeks ago.
Speaker 3: I mean, but you know, to me, the die has
Speaker 3: been cast for this for for a little bit of
Speaker 3: time now, I mean, and that's because inflation is slowing
Speaker 3: more rapidly than they expect. I mean, I think the
Speaker 3: Fed is following essentially a rules based framework where they're
Speaker 3: taking changes in inflation and the unemployment rate and translating
Speaker 3: that into expectations around the federal funds rate. And that's
Speaker 3: basically what's happening. That's what they did yesterday. And so
Speaker 3: you know, core inflation in November is likely to come
Speaker 3: in barely one tenth of one percent month over month,
Speaker 3: and that means that the momentum going into twenty twenty
Speaker 3: four is quite weak. And so if they're revising down
Speaker 3: inflation in December, which they did, and then a few
Speaker 3: months later they're going to be revising down inflation again
Speaker 3: in March, what do you expect expect them to do?
Speaker 3: What I would push back on, John, is this notion
Speaker 3: that this is because I mean, you know, you see
Speaker 3: all this already. Oh the ten years broken below four percent,
Speaker 3: that means a recession is happening. No, that's not what
Speaker 3: this is about. This is about inflation coming in better
Speaker 3: and the adjusting as a result, and that's ultimately a
Speaker 3: good thing. And you know, I think it's going to,
Speaker 3: you know, give the economy it a chance to continue growing.
Speaker 3: And I think that's that's what's likely.
Speaker 2: Well gets you around look on growth in just a moment.
Speaker 2: Policymakers like to use the word if just to hedge
Speaker 2: themselves if this continues, we might do this. You don't
Speaker 2: think that if is that large? You think this is
Speaker 2: already kind of baked in these right cuts are coming.
Speaker 3: Well, I don't know that it'll be six because to me,
Speaker 3: six feels like, you know, if there's a recession, six
Speaker 3: wouldn't be enough, but if the economy is growing, six
Speaker 3: feels like too many. Frankly, but I do. I don't
Speaker 3: think it's much of an if about round inflation. I mean,
Speaker 3: Powell talked earlier this year about a disinflationary process, and
Speaker 3: I think that was a little bit premature to talk
Speaker 3: about it. But now it really does feel like a
Speaker 3: meaningful disinflationary process is underway, and we have continued moderation
Speaker 3: in housing rental inflation coming. You know, the Terminal has
Speaker 3: an article today about Manhattan rants going down year over year.
Speaker 3: We also know that used car prices will continue to
Speaker 3: deflate over the next several months, and that was actually
Speaker 3: it popped in November. So and between that and you know,
Speaker 3: core goods excluding cars, I mean there's continued downside there
Speaker 3: as well, so I do. And the labor markets are
Speaker 3: basically normalized. I mean, they're they're back into balance. So
Speaker 3: I think you kind of go down the line, and
Speaker 3: you know, to me, it suggests that we're going to
Speaker 3: see continued disinflation over the next several quarters.
Speaker 4: Jpewell did not want to really dig into the question
Speaker 4: around financial conditions and the easing of which we've seen
Speaker 4: over the past couple of weeks, but I'd love you
Speaker 4: to weigh in on it. Do you have any concerns
Speaker 4: that the easing and financial conditions will actually push inflation
Speaker 4: in the other direction?
Speaker 3: Well, I think that's a reason to expect there to
Speaker 3: be a ceiling on how many cuts they'll end up doing.
Speaker 3: But I don't think that they're going to be upset
Speaker 3: about the easing of financial conditions in and of themselves.
Speaker 3: I mean, if you think about the Fed's reaction function, right,
Speaker 3: it's labor market, it's inflation, and then financial conditions. If
Speaker 3: labor markets are in balance and inflation is slowing, why
Speaker 3: would they be The markets are then reassessing the Fed's
Speaker 3: interest rate paths, So why would they be upset about that?
Speaker 4: Well, you've been really good about tracking homebuilders. For example,
Speaker 4: if suddenly you start to see a reacceleration in the
Speaker 4: home space, right, if you start to see people re
Speaker 4: engaging with selling homes and being able to price up
Speaker 4: some of these homes because mortgage rates are.
Speaker 5: Lower, could that pose a problem? Right?
Speaker 4: These are some of the questions that people have. So
Speaker 4: I think I'm of still robust growth.
Speaker 3: So Powell yesterday talked about the seesaw thing right where
Speaker 3: we go from like one story like no landing, soft landing,
Speaker 3: hard landing back to soft landing. And I just feel
Speaker 3: like we need to get through this about of disinflation
Speaker 3: first before we talk about what happens next. And I mean,
Speaker 3: could I make a case for things may reaccelerate and
Speaker 3: that could reignite inflation, and then the FED will have
Speaker 3: to come back and undo the cuts that they put
Speaker 3: in place in twenty twenty four. I mean, that's a
Speaker 3: plausible scenario. You know, we're not going to have any
Speaker 3: multi family construction really next year, and that could you know,
Speaker 3: reignite inflation because there won't be enough housing supply. But
Speaker 3: I do think the FED has to deal with the
Speaker 3: issues that are in front of them, and right now,
Speaker 3: the overwhelming issue is that inflation is slowing more rapidly
Speaker 3: than expected. And for a central bank that believes that
Speaker 3: neutral rates are two and a half percent, they're going
Speaker 3: to be more cognizant and sensitive to the risk that
Speaker 3: they overtightened, and so I think that's why they want
Speaker 3: to get the cuts away first. It's not about you know,
Speaker 3: I mean what my reaction function is. It's about what
Speaker 3: their reaction function is. And that's what we're trying to get.
Speaker 1: I want to go quickly here. The Neil Deta optimism
Speaker 1: is much like the edge Yardeni optimism. He on Inequity
Speaker 1: Call has a huge stock market out to Dow forty
Speaker 1: seven thousand, SPX six thousand, you know, two three years out,
Speaker 1: and he talks about the Roaring twenty twenties. There was
Speaker 1: a Roaring twenties one hundred some years ago and it
Speaker 1: didn't end. Well. Your optimism, how it different from the
Speaker 1: effervescence the exuberance of an unstable roaring twenties.
Speaker 3: Well, I would just say, I mean, if we do
Speaker 3: have a roaring period of economic activity, I mean, it
Speaker 3: does help that we we had a financial crisis in
Speaker 3: two thousand and eight. We already had the big one,
Speaker 3: and you know we have guardrails and we have well
Speaker 3: we have the benefit of hindsight, right, I mean, you know,
Speaker 3: one of the ways you avoided depression is by going
Speaker 3: through on the first time and you know, so I
Speaker 3: think that that's that's helpful.
Speaker 2: What do they say, congratulations on a great quarter? Congratulations now, oh,
Speaker 2: thank you, thank you, Sir nod'nswer of NISO's Macro.
Speaker 1: At least saw some of US global investment strategist JP
Speaker 1: Morgan Private Bank, and she has a wonderful image in
Speaker 1: her note summing up the FED, the ECB, the Bank
Speaker 1: of England and fourteen other central banks about investment strategy
Speaker 1: into twenty twenty four. Somebody's got to land the plane.
Speaker 1: After what we saw on the turbulence yesterday at two
Speaker 1: o'clock and in that press conference, recalibrate this morning, how
Speaker 1: are we going to land the plane given the instabilities
Speaker 1: of the last fifteen hours.
Speaker 6: Look, I think there is a distinction between what's going
Speaker 6: on domestically in the United States and the position that
Speaker 6: that puts the FED in too potentially cut in the
Speaker 6: first half of next year, versus what we're seeing abroad
Speaker 6: in England and in the broader euro region. You know,
Speaker 6: it's no surprise to us that both the BOE and
Speaker 6: the ECB stayed on hold, and we do think that
Speaker 6: the ECB is probably still the most obvious candidate to
Speaker 6: deliver the first cut simply in light of the economic
Speaker 6: weakness that you're seeing.
Speaker 4: This is a really interesting point, and it's frankly what
Speaker 4: I'm sniffing out from markets that are not reacting to
Speaker 4: this as I thought that they would. I would expect
Speaker 4: the euro to actually strengthen dramatically on the heels of
Speaker 4: this in response to a more hawkish ECB that many
Speaker 4: people say, are you just saying that you don't believe them?
Speaker 6: No, not necessarily, you know, I think the ECB has
Speaker 6: to continue to kind of hold this hawkish posture, especially
Speaker 6: given that wage growth hasn't necessarily rolled over in a
Speaker 6: commencing way in Europe, but given the economic slow down
Speaker 6: and maybe nascent signs of some sort of economic life
Speaker 6: coming back, I think the ECB has to talk tough,
Speaker 6: but we'll probably be the first to cut, maybe as
Speaker 6: soon as the spring.
Speaker 2: This was the conversation we had yesterday before we went
Speaker 2: into chair and powe. If we got push back, how
Speaker 2: credible would it be? Just feels like from the ECB
Speaker 2: doesn't feel as credible might be given what we already
Speaker 2: know about what's happening in the economy. Here's the market
Speaker 2: question at least you're more bullish now than you were
Speaker 2: yesterday morning after what you heard from Powe.
Speaker 6: Sure, we were having a lot of conversations about this
Speaker 6: on our floor yesterday. I think what we learned from
Speaker 6: the FED is that we have to start entertaining our
Speaker 6: bowl case a little bit more. But we came into
Speaker 6: yesterday's decision on the front foot, and we've been encouraging
Speaker 6: investors to add back to risk exposure. We have a
Speaker 6: relatively bullish view on the S and P five hundred
Speaker 6: for the year ahead, and I think this just kind
Speaker 6: of underwrites our conviction in that call.
Speaker 2: What's the bullcase bolcase is S.
Speaker 6: And P five hundred ends next year five thousand, But
Speaker 6: we'll see. I think that would probably dictate the FED
Speaker 6: cutting before the second half of the year. But right
Speaker 6: now our base case pencils and cuts in the second
Speaker 6: half of the year and not yet.
Speaker 1: So the Banner's Awesome Bosses Fortress Diamond calls five fodcast.
Speaker 2: Yeah, not quite, I would say, isn't there a risk
Speaker 2: we could be there in January based on what we're seeing?
Speaker 6: How I think January feels a little aggressive. We still
Speaker 6: have to see, you know, the earnings come through. We
Speaker 6: are making this call that the earnings recession is likely
Speaker 6: over and that we're going to see rolling earnings recoveries.
Speaker 6: But let's get through the fourth quarter reporting season and
Speaker 6: then look beyond to twenty twenty four US.
Speaker 2: That sounds like equal white and not market cat whited SMP.
Speaker 2: Is that right?
Speaker 6: We do have conviction in making sure that you have
Speaker 6: exposure to the other four hundred and ninety three names
Speaker 6: in the index beyond the magnificent seven. But we're constructive
Speaker 6: on the magnificent seven. I mean, these companies are projected
Speaker 6: to grow earnings north of twenty percent in twenty twenty four,
Speaker 6: and that is definitely an exposure that we're encouraging investors.
Speaker 1: That's your conviction. When everybody gets out of cash, what's
Speaker 1: going to happen? I want to We've never been here,
Speaker 1: six trillion in cash, we get under five percent money
Speaker 1: market fund, what happens?
Speaker 3: Well?
Speaker 6: I think you have to take into consideration that bonds
Speaker 6: are back on the table, right. That to me means
Speaker 6: that there is still a trade to step into some
Speaker 6: duration and not necessarily just plow into the equity market.
Speaker 6: I think some folks will remain a little reticent given
Speaker 6: where valuations are today, but given the you know, improved
Speaker 6: free cash flow generation of S and P five hundred
Speaker 6: companies relative to ten years ago, we are comfortable with
Speaker 6: today's valuations. We just don't think that that's going to
Speaker 6: be what drives the upside into the next twelve months.
Speaker 2: At least it's going to see in person. Thanks for
Speaker 2: coming in that Jpmulgan private bank following the ACP decision.
Speaker 1: These are absolutely extraordinary time. Let's get a European brief
Speaker 1: on this with Aberdeen three Katrikavidian joining us this morning. Siri,
Speaker 1: the divide here between the central banks, I believe I've
Speaker 1: never seen. Do you perceive that, how alone is Jay
Speaker 1: Powell versus Governor Bailey or what we're going to see
Speaker 1: from Christine Lagard in a bit.
Speaker 7: I think this really highlights is the differences across the
Speaker 7: economies and the different challenges that each of these central
Speaker 7: bankers are facing. So obviously we had a bit of
Speaker 7: a pivot yesterday from the FED and that's really spilled
Speaker 7: over into rates markets across these different regions. However, as
Speaker 7: we've seen the Bank of England does face a very
Speaker 7: different challenge. Inflation is less of an outlier that it
Speaker 7: used to be. It is coming down at a steady pace,
Speaker 7: but they still have some challenges if you look at
Speaker 7: the core inflation and services inflation in particular services is
Speaker 7: still running at six point six percent year on year,
Speaker 7: So that's still a problem there for a Bank of
Speaker 7: England which is trying to manage we GDP growth as
Speaker 7: well as a stickier inflation picture then compared to other regions.
Speaker 7: So hence there's no change in guidance, no changing statement,
Speaker 7: and we still have a six to three vote split.
Speaker 7: And I think that's a key communication point right there,
Speaker 7: the fact that you.
Speaker 4: Know we have that split, given that there is no
Speaker 4: statement of economic projections, let's create our own. If they
Speaker 4: did put out whether they thought that the economic growth
Speaker 4: was going to be better or worse they previously expected,
Speaker 4: what direction do you think it would go?
Speaker 7: Well, I think what we've seen just in the recent data,
Speaker 7: we had the October GDP which was a disappointment there
Speaker 7: and I think that will be something that they would
Speaker 7: definitely consider. If we look at the moving averages across
Speaker 7: if we look through that contraction that we saw a
Speaker 7: month or month for October that was across the board
Speaker 7: for services, construction and manufacturing. But if we smooth that out,
Speaker 7: it is we are looking at a flat three month
Speaker 7: on three months, but there's a possibility tive a start
Speaker 7: of a technical recession and recession like what we're expecting
Speaker 7: is recession like conditions to persist throughout the first half
Speaker 7: of next year. So really it's a difficult balancing act
Speaker 7: for the Bank of England, but we do think that
Speaker 7: they're more likely to hold on with this five point
Speaker 7: two five percent and stay there for a few more months. Yet,
Speaker 7: timing is obviously quite fluid and will depend on inflation
Speaker 7: how fast inflation decelerates, But they might be one of
Speaker 7: the later central banks to cut if we compare with
Speaker 7: potentially ECB and the change in tone from the Fed.
Speaker 4: Se how much does that benefit them in a sense,
Speaker 4: given the fact that we are seeing the pound strengthen
Speaker 4: that this actually could be a disinflationary if they do
Speaker 4: diverge from the other central banks.
Speaker 7: Yes, I think the move in the sterling will help
Speaker 7: somewhat in terms of imported price impact, but really it
Speaker 7: comes down to this wage inflation that's that's really going
Speaker 7: to be key.
Speaker 5: Now.
Speaker 7: One good piece of news is that real wages are
Speaker 7: a bit stronger because inflation has come down a bit,
Speaker 7: so that should help boost or at least support consumers
Speaker 7: to some extent. But nonetheless, the imbalances in the UK
Speaker 7: labor market are still there. They've improved, but they're still
Speaker 7: there and that's going to create that bumpy last mile
Speaker 7: for the UK.
Speaker 1: Three if we've got to run rate in the United
Speaker 1: States of nominal GDP of four percent, anybody's guests, what
Speaker 1: is your custamate a nominal GDP for the Bank of
Speaker 1: England and for the ECB, what numbers are What of
Speaker 1: those two different numbers this morning, what.
Speaker 7: We have seen. I think we're going to see a
Speaker 7: slow down there in terms of GDP growth, particularly for
Speaker 7: the Euro Area. I think the challenge there is that
Speaker 7: we've seen a much weaker inflation outlook than they've they've
Speaker 7: actually projected, and I think that what we're projecting versus
Speaker 7: what's happening versus what c beer projecting. I think that
Speaker 7: challenge is what we're going to really see later on
Speaker 7: today from from the ECB, whether they're you know, how
Speaker 7: they address the fact that actual data has been weaker,
Speaker 7: both inflation as well as the growth outlook is weakening,
Speaker 7: so I think that could be quite important in terms
Speaker 7: of what they say about the shift in timing. Obviously,
Speaker 7: the markets have pulled forward the timing for the first
Speaker 7: cut from the ECB, and we have as well. We've moved.
Speaker 7: We were looking more mid year and now we're looking
Speaker 7: for in March April, more likely April. So you know,
Speaker 7: I think this is the kind of signaling that we
Speaker 7: need to be focusing on in terms of what what
Speaker 7: messages are coming out of the ECB later today and
Speaker 7: again going forward for the for the UK as well,
Speaker 7: it's going to be you know, that relative shift in
Speaker 7: data that the UK will be will be focusing on
Speaker 7: in the coming meetings.
Speaker 2: Sorry, thank you, Sory goatcha guvnd of Appetite.
Speaker 1: Stephanie Rod's had a very busy weekend scheduled cancel that
Speaker 1: the chief economist at Wolf Research has to rewrite the view,
Speaker 1: as she did last night in a sharp post FED note.
Speaker 1: Let's go to your post FED note. What was the
Speaker 1: biggest change in that note after the drama of two
Speaker 1: o'clock yesterday.
Speaker 5: I think the biggest change is that the FED is
Speaker 5: less scared of stronger growth and they're now appreciating that
Speaker 5: inflation's come down. Like they took up their growth numbers,
Speaker 5: but inflation came down so much that they feel pretty
Speaker 5: good about the backdrop. It said, so far, so good.
Speaker 4: Is this FED still data dependent?
Speaker 5: They're data dependent, but they're more inflation dependent than growth dependent.
Speaker 5: I think they're recognizing that inflation can come down even
Speaker 5: if growth remains fairly strong.
Speaker 4: This, to me was the biggest change that basically this
Speaker 4: is not going to be contingent on some sort of
Speaker 4: deceleration in the economy that they are really leading into
Speaker 4: the soft landing narrative. Do you have a more optimistic
Speaker 4: view that they can achieve a soft landing after yesterday.
Speaker 2: Than you had before?
Speaker 5: Yeah, and I've been calling for a soft dish landing.
Speaker 5: Now I think I just have more conviction in that
Speaker 5: they can. The fact that they can cut rates even
Speaker 5: sooner than our base case. Our base case was Q
Speaker 5: three of next year heading into yesterday. We've pushed that
Speaker 5: up to Q two, and that just makes the runway
Speaker 5: even that much wider for the soft landing to happen.
Speaker 4: Do you think that financial conditions don't matter? Were you
Speaker 4: were you okay with how Chair Powell responded to that
Speaker 4: question yesterday.
Speaker 5: Yeah, he didn't. He didn't really talk about financial conditions
Speaker 5: that much, and November he mentioned it thirteen times. This
Speaker 5: was a big turnaround. I think he's just not that
Speaker 5: scared with the way financial conditions have eased, because inflation
Speaker 5: has come down, notably with the markets that where.
Speaker 1: There are futures up twelve. I have been really I've
Speaker 1: really failed at the core theme that I think that
Speaker 1: was somewhat alluded to by the chairman yesterday. We're going
Speaker 1: to go to Mike mckeere and a bit folks before
Speaker 1: we get to Christine Legard and Frankfort. But Stephanie Roth,
Speaker 1: you're quite good at this, which is interpretating what I
Speaker 1: call the three ratio productivity dynamic of capital labor in
Speaker 1: the pixie dust of American efficiency as well. What have
Speaker 1: you learned to reaffirm better productivity in the last fifteen hours.
Speaker 1: Do they have a confidence that we're more efficient, a
Speaker 1: better run economy.
Speaker 5: We have seen productivity pick up in the last couple quarters.
Speaker 5: I don't know if we can bank on that continuing,
Speaker 5: but I think there's real scope for that. The economy
Speaker 5: has learned to operate with fewer workers than what the
Speaker 5: pre COVID trend would suggest.
Speaker 1: The standard idea is of you have ten years, you know,
Speaker 1: we'll know in five years or whatever about productivity now,
Speaker 1: But are you guestimating that we grossly underestimate not the
Speaker 1: capital dynamic, the labor dynamic. And you know Alisa Torsten
Speaker 1: Slock with that comment out today have more employed people
Speaker 1: in the middle of the age bracket in America. But
Speaker 1: is it really about the technology overlay that we're completely
Speaker 1: underestimating even as we live it.
Speaker 5: I think there's an element of that, but I think
Speaker 5: the bigger story here is a labor supply. We've had
Speaker 5: such strong labor supply this year that's helped the rebounds
Speaker 5: the labor market. It was a combination of immigration and
Speaker 5: female elberforce participating in.
Speaker 1: Claudia Sah mentioned this yesterday with a Nobel Lauri at
Speaker 1: Claudia Golden at Harvard and that the women coming back
Speaker 1: into the labor force is jaw dropping.
Speaker 4: If you are just joining us, just to repeat some
Speaker 4: of these numbers because they are notable, I want to
Speaker 4: just take a look. Initial jobless claims came in yet
Speaker 4: again below the expectation. That is a good downward surprise,
Speaker 4: two hundred and two thousand versus the expectation of two
Speaker 4: hundred and twenty thousand retail sales month over month. The
Speaker 4: control group came in zero point four percent versus the
Speaker 4: expectation for zero point two percent. Zero point six percent
Speaker 4: versus zero point two percent expected when you strip out
Speaker 4: autos and gas, Stephanie, do you get a sense that
Speaker 4: basically the consumer is not cracking at all, That basically
Speaker 4: they still have money and the actual real wages going
Speaker 4: up will continue to fuel the spending spree that has
Speaker 4: underpinned a lot of the recovery.
Speaker 5: Yeah, I think the consumer is doing just fine. I mean,
Speaker 5: the one thing to highlight within the print is we
Speaker 5: did get some downwards vision to the prior month, so
Speaker 5: like if you smooth through it, it's a little bit
Speaker 5: less strong than it seems. But yeah, the consumer seems fine.
Speaker 5: You're starting to see some delinquencies at the most vulnerable spots,
Speaker 5: but with rates coming down and conditions easing, maybe that's
Speaker 5: the Maybe that's kind of the end of that.
Speaker 4: What would you have to see to start to really
Speaker 4: question the soft landing thesis? Where would the weakness come from?
Speaker 4: Do you see it anywhere on the horizon that you're
Speaker 4: watching and some of the incoming data.
Speaker 5: I think there's two things to watch out for. One,
Speaker 5: the labor market is that going to crack As long
Speaker 5: as the consumers are employed, they're going to keep spending.
Speaker 5: And then on the on some of these cracks that
Speaker 5: are forming within within the consumer, that's just you know,
Speaker 5: keeping keeping me looking quite closely. So some of the
Speaker 5: delinquencies at the lower end or with the younger borrowers
Speaker 5: by now pay later, that kind of thing that feels
Speaker 5: very late cycle to me. But overall the consumer seems fine.
Speaker 1: What's your run rate for GDP? All of us got
Speaker 1: wrong third quarter? There was a third quarter quiet and
Speaker 1: we got this shock optimistic number. We're going to reduce
Speaker 1: that in the fourth quarter as well and get say
Speaker 1: three percent GDP two point eight percent. Those are pretty
Speaker 1: good numbers.
Speaker 5: Yeah, I think it looks like it could be tracking
Speaker 5: above two percent.
Speaker 1: Above two coming, give me above three? Can we get
Speaker 1: above three percent?
Speaker 5: I don't think so. You're gonna have an inventory drag,
Speaker 5: so I don't think so.
Speaker 1: Okay, what about export imports? We got the you know,
Speaker 1: the pricing on export and imports today, but on trade
Speaker 1: to me. The wild card next year's China, And to me,
Speaker 1: the great question is do we underestimate China once again
Speaker 1: and the export import dynamic of America adds to GDP.
Speaker 1: Is that possible?
Speaker 5: I think trade could be a bit of a boost
Speaker 5: next year. I don't think it'll be dramatically, So I
Speaker 5: think the thing to think there's two things to think about.
Speaker 5: One is are we going to end up with cross
Speaker 5: the board import tariffs in twenty twenty five?
Speaker 6: Is that?
Speaker 5: Is that a real issue depending on how the political
Speaker 5: cycle plays out. And then the second thing is everybody's
Speaker 5: talking about reshoring, but there's not really that much signs
Speaker 5: of it yet, so they're not really you know, we're
Speaker 5: still importing disinflation. It's not as if we're all of
Speaker 5: a sudden manufacturing all of these goods here and that's
Speaker 5: going to create lots of goods inflation in the US.
Speaker 4: Who do you think is more right the Fed projecting
Speaker 4: out three rate cuts next year or the market pricing
Speaker 4: out six rate cuts next.
Speaker 5: Year the Fed unless we get a recession, which is
Speaker 5: not my bease case.
Speaker 4: So in other words, that that seems the most likely,
Speaker 4: which is actually less than the market is currently expecting
Speaker 4: and less sort of disinflationary than people are pricing in.
Speaker 5: Yeah, but I think the one thing is the market's
Speaker 5: not pricing the FED getting all the way down to
Speaker 5: somewhere on two and a half to three percent, which
Speaker 5: is where I think the FED will ultimately cut to.
Speaker 5: So that's where the rest of the market could sort
Speaker 5: of price too.
Speaker 1: We have to turn to Franford. Thank you so much,
Speaker 1: Stephanie Roth with it's just terrific summer here with the
Speaker 1: Wolf Research publishing and that we can get that research
Speaker 1: from Wolf. Subscribe to the Bloomberg Surveillance podcast on Apple,
Speaker 1: Spotify and anywhere else you get your podcasts. Listen live
Speaker 1: every weekday starting at seven am Eastern on Bloomberg dot com,
Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business App.
Speaker 1: You can watch us live on Bloomberg Television and always
Speaker 1: on the Bloomberg Turn No, No, thanks for listening. I'm
Speaker 1: Tom Keen, and this is Bloomber