WEBVTT - Traders Look to Jackson Hole For Hint on Fed Direction 0:00:02.480 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.760 --> 0:00:13.560 This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis 0:00:13.560 --> 0:00:16.279 along with Doug Krisner. Join us each day for the 0:00:16.320 --> 0:00:19.720 stories making news and moving markets in the Asia Pacific. 0:00:19.920 --> 0:00:22.360 You can subscribe to the show anywhere you get your 0:00:22.360 --> 0:00:26.280 podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and 0:00:26.360 --> 0:00:30.480 the Bloomberg Business app. Showing us now on the program, 0:00:30.600 --> 0:00:35.840 Frank Benzimra, head of Asia Equity Strategy at Associate General. Frank, 0:00:36.120 --> 0:00:38.239 thanks very much for joining us. I just wanted to 0:00:38.440 --> 0:00:41.280 ask you about Jackson Holetz. Part of the big week, 0:00:41.320 --> 0:00:44.839 We've got a lot going on. We'll have continued trading 0:00:44.920 --> 0:00:47.919 after the big moves we've seen, both to the downside 0:00:47.960 --> 0:00:50.919 and the upside. Jerome Powell will be speaking about the 0:00:51.560 --> 0:00:55.480 economic outlooks, so that'll be way up there on people's list. 0:00:55.480 --> 0:00:58.080 The Bank of England Governor Andrew Bailey will also be 0:00:58.640 --> 0:01:01.120 making an appearance on Friday in Philip Lane. The chief 0:01:01.120 --> 0:01:05.400 economists at the ECB speaking a day later. Will it 0:01:05.440 --> 0:01:09.080 be kind of a consistent message that we hear. Are 0:01:09.120 --> 0:01:11.400 you expecting a lot of divergent talk? 0:01:12.640 --> 0:01:15.840 Well, I think probably the most important is going to 0:01:15.880 --> 0:01:19.640 be to be Jackson Hall after the recent volatilities that 0:01:19.720 --> 0:01:21.640 we had in the in the market. The thing is 0:01:21.640 --> 0:01:24.600 after we are expecting to see more of the long 0:01:24.680 --> 0:01:27.560 term issue and being being discussed. I think the theme 0:01:27.600 --> 0:01:31.640 is a transmission of monetary policy and how effective it is. 0:01:31.680 --> 0:01:34.119 But of course we are going to look for some 0:01:34.200 --> 0:01:36.800 clue on the on the short term, so I think 0:01:36.840 --> 0:01:40.039 that's that's going to be to be very very important. 0:01:40.560 --> 0:01:45.520 What the data we've seen recently are more arguing for 0:01:45.760 --> 0:01:52.280 a twenty five basics cut in in September, but that's 0:01:52.400 --> 0:01:55.240 obviously something that we need to that we need to follow. 0:01:56.000 --> 0:01:59.280 And how do Asian markets look positioned here at the moment. 0:02:00.200 --> 0:02:04.600 Well, you have really three types of market and you 0:02:04.640 --> 0:02:08.520 have Japan, China and the rest of Asia and Japanese 0:02:08.639 --> 0:02:11.400 super interesting and it has rebounded by more than twenty 0:02:11.400 --> 0:02:16.639 percent since in the law of the market with financials 0:02:16.760 --> 0:02:19.799 more than twenty five twenty five percent. What is interesting 0:02:19.880 --> 0:02:24.680 is that we are seeing the net position on the 0:02:24.720 --> 0:02:27.800 on the end. Now the market is becoming net longer, 0:02:28.200 --> 0:02:30.840 but still we are seeing some download pressure on the end. 0:02:30.880 --> 0:02:34.519 So it means that some carriage trade are elsewhere, and 0:02:35.960 --> 0:02:39.200 we think that it makes a lot of sense to 0:02:39.280 --> 0:02:44.320 go more domestic on that. On that market, China is 0:02:44.680 --> 0:02:47.520 very much in the earning season at the moment, which 0:02:47.560 --> 0:02:53.000 is not great, not terrible, but not great. And then 0:02:53.040 --> 0:02:56.640 you have the rest of Asia where you have this 0:02:58.400 --> 0:03:02.200 divergence between take on the one hand and the more 0:03:02.280 --> 0:03:05.720 domestic fem and here, as in the case of Japan, 0:03:06.320 --> 0:03:09.600 it's going to be probably a good idea to look 0:03:09.639 --> 0:03:12.080 more at what's happening on the domestic part of the 0:03:12.200 --> 0:03:12.799 of the market. 0:03:13.400 --> 0:03:17.120 Let's focus on China for the moment. China apparently is 0:03:17.160 --> 0:03:20.519 putting private sector policy on the front burner. This is 0:03:20.560 --> 0:03:22.880 what we heard from Premier Lee Chang at the end 0:03:22.880 --> 0:03:25.440 of the week telling the cabinet that more has to 0:03:25.520 --> 0:03:28.880 be done to boost domestic demand. It's just talk. We've 0:03:28.880 --> 0:03:30.919 heard a lot of talk. There's work this. 0:03:30.960 --> 0:03:35.040 Time, yes, that's indeed there has been a lot of 0:03:35.120 --> 0:03:38.760 discussion about that, and again in the in the polit Bureau, 0:03:39.320 --> 0:03:46.080 the latest the latest polit Bureau. I think the only 0:03:47.960 --> 0:03:50.600 element which can be a little bit more comforting when 0:03:50.640 --> 0:03:55.120 it comes to domestic consumption and the domestic economies. We 0:03:55.320 --> 0:03:59.240 start to see some bottoming in the housing, sales and construction, 0:04:00.280 --> 0:04:04.600 but in terms of what the government is going to 0:04:04.680 --> 0:04:09.080 do to boost consumptions, but it really remains to be 0:04:09.280 --> 0:04:11.800 to be seen because what we are seeing is still 0:04:12.560 --> 0:04:17.520 it's the greatest focus is on manufacturing and on and 0:04:17.560 --> 0:04:22.320 on building some advanced manufacturing industry. 0:04:22.400 --> 0:04:25.479 We saw some uneven performance in the earnings of ten 0:04:25.560 --> 0:04:28.240 Cents and Ali Baba. We did close out the week 0:04:28.320 --> 0:04:31.479 pretty strongly for both of those names, but there was 0:04:31.520 --> 0:04:36.160 a little bit of uncertainty about the earnings. In ten 0:04:36.240 --> 0:04:39.160 Cents case, the gaming looked pretty pretty good, but some 0:04:39.200 --> 0:04:41.719 of the other areas of business not so much. And 0:04:41.760 --> 0:04:44.800 Ali Baba is still struggling a little bit with overall sales. 0:04:45.240 --> 0:04:47.480 I don't know if you can talk about individual names, 0:04:47.520 --> 0:04:51.160 but are some of the former star performers in Asia 0:04:51.279 --> 0:04:52.719 about ready to get a turn again. 0:04:53.960 --> 0:04:57.480 Yeah, well, I'm not going to talk about some single names, 0:04:57.680 --> 0:05:04.200 but just just a couple of observation as the earnings 0:05:03.960 --> 0:05:07.720 on China fit Tech a mess. China, for instance, the 0:05:07.760 --> 0:05:12.640 earnings pature has not grown for the last ten years 0:05:12.680 --> 0:05:14.960 and it has even declined over the last over the 0:05:15.000 --> 0:05:18.600 last three years, which means that you have some expectations 0:05:18.600 --> 0:05:22.840 which are not very not very ambitious, so you don't 0:05:22.839 --> 0:05:27.279 have a lot of expectation when the earning season is starting. 0:05:27.800 --> 0:05:32.240 So when we see something which is a little bit 0:05:32.240 --> 0:05:35.920 about this slow expectation, so the market tends to take 0:05:35.960 --> 0:05:39.240 it to take it positively. And when it comes more 0:05:39.320 --> 0:05:42.280 specifically to the to the Internet platform and to the 0:05:42.279 --> 0:05:50.080 big Internet Internet names, it's rather recomforting to see that 0:05:51.120 --> 0:05:53.200 we have some sign of life. And so you were 0:05:53.200 --> 0:05:57.520 mantaining the gaming industry, so in some more consumer oriented 0:05:57.600 --> 0:05:59.760 industry we start to see some turn around and that's 0:06:00.400 --> 0:06:02.160 I think this is something which is in line with 0:06:02.279 --> 0:06:05.680 what we had in the previous quarter and it is 0:06:05.800 --> 0:06:07.080 extending into this quarter. 0:06:07.920 --> 0:06:11.560 Yeah, fighting really strong resistance from at least three fronts. 0:06:11.600 --> 0:06:15.560 I mean, one, you can say policy has been pretty restrictive. Secondly, 0:06:15.600 --> 0:06:18.800 there's massive competition in China now, something we didn't have 0:06:18.839 --> 0:06:21.880 as much of going back a number of years, particularly 0:06:22.040 --> 0:06:26.479 those companies we talked about earlier. And then also you 0:06:26.560 --> 0:06:30.919 have basically a weak economy, so there's a lot of 0:06:30.960 --> 0:06:32.600 marks against them. 0:06:33.560 --> 0:06:39.080 Yes, so we have the big picture is that you 0:06:39.400 --> 0:06:46.080 still have some defleationary pressure on the economy. One thought 0:06:46.200 --> 0:06:49.039 is coming from the housing market, and the other part 0:06:49.120 --> 0:06:53.160 is coming from this very intense competition that you are mentioning, 0:06:53.960 --> 0:07:00.720 with over capacity being the result of it. So they're 0:07:01.120 --> 0:07:04.560 just a couple of things. And to say here, the 0:07:04.600 --> 0:07:10.680 first one is we are seeing export booming and the 0:07:10.720 --> 0:07:16.160 structure of the export is also changing towards emerging economies, 0:07:16.680 --> 0:07:22.040 and this is something that is a factor of support. 0:07:22.720 --> 0:07:26.680 And then as I was mentioning, we start to see 0:07:26.760 --> 0:07:31.520 some very timid sign of bottoming in the economy in 0:07:31.760 --> 0:07:37.000 the housing market. So one question now after the latest 0:07:37.080 --> 0:07:39.560 daya whether we are going to reach the five percent 0:07:39.600 --> 0:07:43.000 target that the government has set for the GDPSS here 0:07:43.480 --> 0:07:47.800 and this is where you could have some expectation of 0:07:48.040 --> 0:07:51.200 further support if we are not reaching it. 0:07:51.960 --> 0:07:54.120 All right, Frank, thanks very much taking out the time 0:07:54.160 --> 0:07:58.040 to be with us. Frank Benzimra, head of Asia Equity Strategy, 0:07:58.480 --> 0:08:10.680 Associated General, I'm Brian Curtis along with Paul Allen, and 0:08:10.800 --> 0:08:14.480 joining us now is Steve Sosnick, chief strategist at Interactive 0:08:14.480 --> 0:08:17.520 Brokers for a look at market. Steve, always great to 0:08:17.560 --> 0:08:20.440 have you on the program just to give our audience 0:08:20.600 --> 0:08:23.720 kind of an overview of how you're feeling about what 0:08:23.720 --> 0:08:26.720 we've seen in markets over the past month. What makes 0:08:26.840 --> 0:08:31.640 more sense to mister Steve Sosnick a Vicset fifty or 0:08:31.680 --> 0:08:33.400 a Vicset fifteen. 0:08:34.600 --> 0:08:39.080 Good morning, Brian, Well, I mean, fifteen is more sensible 0:08:39.120 --> 0:08:42.040 than fifty. But I don't think that's particularly sensible either. 0:08:42.760 --> 0:08:44.839 I think the way that we you know, obviously, the 0:08:45.520 --> 0:08:50.120 fifty print was the result of several the overcrowded trades 0:08:50.160 --> 0:08:53.640 converging at once. The carry trade, the dispersion trade where 0:08:53.640 --> 0:08:57.480 people were shorting index ball and buying individual equity vall, 0:08:58.480 --> 0:09:01.120 along with a few other mishaps, all combined that morning 0:09:01.160 --> 0:09:03.199 to give you the crazy VIX print. But I think 0:09:03.240 --> 0:09:06.160 the fact that we've gone, we flipped from you know, 0:09:06.240 --> 0:09:11.000 get me protection asap to protection who needs protection? There's 0:09:11.000 --> 0:09:13.080 nothing coming in the next thirty days, which is really 0:09:13.080 --> 0:09:17.040 what a fifteen vix is telling you, is not correct either. 0:09:17.080 --> 0:09:17.640 I don't think. 0:09:19.040 --> 0:09:21.720 Yeah, it's interesting, isn't it. We got the yen knocking 0:09:21.760 --> 0:09:23.760 on the door of one forty eight again. The NIKA 0:09:23.840 --> 0:09:26.960 had an amazing week last week. Are we getting set 0:09:27.040 --> 0:09:29.640 up for a sequel of the craziness of a couple 0:09:29.679 --> 0:09:30.200 of weeks ago. 0:09:31.280 --> 0:09:35.960 It's hard to say, Paul, because you know, the size 0:09:35.960 --> 0:09:38.320 of the carry trade is pretty much a guess. You know, 0:09:38.360 --> 0:09:40.719 a JP Morgan said it was seventy five percent on. 0:09:40.880 --> 0:09:44.680 Others have said fifty percent done. It's really quite opaque, 0:09:44.760 --> 0:09:48.240 so we don't know the extent to which the carry 0:09:48.240 --> 0:09:50.400 trade exists, although I do get the sense that people 0:09:50.400 --> 0:09:53.200 were putting it right back on this week, you know, 0:09:53.240 --> 0:09:56.360 at least certainly buying US tech stocks with their bar 0:09:56.480 --> 0:09:58.760 at the end, so you know, yes, we could be 0:09:58.760 --> 0:10:01.880 setting up for a rerun. And especially I think, you know, 0:10:01.920 --> 0:10:05.400 the the idea that nothing can happen in a couple 0:10:05.440 --> 0:10:07.880 of week period where you have Powell giving a very 0:10:07.880 --> 0:10:11.680 consequential speech, a Nvidio earnings next week does seem a 0:10:11.720 --> 0:10:15.920 little bit risk, you know, risk tolerant, maybe more than 0:10:15.920 --> 0:10:16.400 we should be. 0:10:17.400 --> 0:10:20.439 It seems like we've had a lot of these really 0:10:20.480 --> 0:10:25.440 big market shocks over the past decade or so. I 0:10:25.480 --> 0:10:28.240 know that generally speaking, you know, when you look at markets, 0:10:28.240 --> 0:10:30.440 you can say, well, you know, things are not really 0:10:30.480 --> 0:10:34.000 as bad as sometimes markets suggest, and things are not 0:10:34.120 --> 0:10:37.120 as good as they sometimes suggest. But it is a 0:10:37.120 --> 0:10:38.840 little bit curious. I think we had a pretty good 0:10:38.880 --> 0:10:43.080 piece on the terminal over the weekend about about these shocks. 0:10:43.559 --> 0:10:45.800 Do you think it's greater than before, and if so, 0:10:45.840 --> 0:10:46.559 what's causing it? 0:10:47.720 --> 0:10:49.599 I actually don't think right now we're seeing that in 0:10:49.679 --> 0:10:52.240 many great shocks. That's why I think for lack of 0:10:52.240 --> 0:10:54.199 a better order was so shocking, you know, a couple 0:10:54.200 --> 0:10:57.360 of weeks ago, because we really haven't you know, we 0:10:57.400 --> 0:10:59.480 didn't have a two percent down day on the S 0:10:59.559 --> 0:11:02.080 and P five hundred until about a week or two ago. 0:11:02.320 --> 0:11:04.440 You know, it happened. I think the week prior to 0:11:04.480 --> 0:11:06.520 Monday too, you know, it was like three weeks ago. 0:11:06.720 --> 0:11:09.120 But we hadn't had one since December of twenty two, 0:11:09.960 --> 0:11:12.559 so we've gone a long time without any real shocks, 0:11:12.840 --> 0:11:15.440 at least in the stock market. You know. The part 0:11:15.480 --> 0:11:17.959 that's a little interesting to me is the amount of 0:11:18.040 --> 0:11:20.880 volatility that you see in the bond market. Certainly some 0:11:20.920 --> 0:11:24.480 of very big moves, even in two year notes, but 0:11:24.559 --> 0:11:28.760 yet somehow Normally, when you can't price safe assets, you 0:11:28.800 --> 0:11:31.920 shouldn't be able to price risky assets. But right now, people, 0:11:32.080 --> 0:11:34.839 I think it's really just you know, fomo drive in 0:11:34.880 --> 0:11:37.000 the fomo and momentum. If they're going up, people are 0:11:37.000 --> 0:11:38.760 going to buy them, and it doesn't take much to 0:11:38.760 --> 0:11:40.800 get them to go up. And I think that's kind 0:11:40.840 --> 0:11:43.600 of why the blow ups seem bigger than they are, 0:11:43.679 --> 0:11:46.000 because we quite frankly, we haven't had them. We're not 0:11:46.160 --> 0:11:47.240 used to them. 0:11:47.920 --> 0:11:51.240 How about pricing in the Fed's next move, because we've 0:11:51.240 --> 0:11:53.839 got less than one hundred basis points of cuts priced 0:11:53.880 --> 0:11:55.400 in for the rest of the year, but that's still 0:11:55.440 --> 0:11:58.560 a cup at every remaining meeting that we've gone. Is 0:11:58.559 --> 0:12:00.880 that realistic or is the getting a bit of hit 0:12:00.920 --> 0:12:01.680 of itself again? 0:12:03.120 --> 0:12:05.240 Yeah, the market's been ahead of its The market's been 0:12:05.240 --> 0:12:07.559 ahead of the Fed the entire year. Right, we came 0:12:07.600 --> 0:12:09.360 into the year at six to seven rate cuts. We're 0:12:09.360 --> 0:12:11.720 still waiting for our first And it's funny because I 0:12:11.760 --> 0:12:15.080 went back and looked at the twenty twenty two Jackson 0:12:15.120 --> 0:12:19.160 Hole conference, which which you know, really was pretty nasty 0:12:19.200 --> 0:12:21.880 for the markets, and the talk then was the market 0:12:21.920 --> 0:12:24.840 was waiting for the FED to pivot, which obviously they 0:12:24.840 --> 0:12:28.360 still haven't pivoted. But this just tells you. And so 0:12:28.520 --> 0:12:32.600 I think my concern is that Powell comes out and says, look, 0:12:32.600 --> 0:12:34.679 I told you, I told you people to expect ray 0:12:34.760 --> 0:12:38.520 cuts in September. You're right, but the data isn't there 0:12:38.559 --> 0:12:40.320 to say that we're going to go to fifty. The 0:12:40.400 --> 0:12:42.280 data isn't there to say that we're going to cut 0:12:42.280 --> 0:12:44.719 every meeting. We'll give you an adjustment cut, and we're 0:12:44.760 --> 0:12:47.360 going to start to go, and we'll go slowly unless 0:12:47.400 --> 0:12:50.880 the data dictates otherwise. And the market may just like 0:12:51.000 --> 0:12:53.560 the idea of oh oh, you mean there's a possibility. 0:12:53.840 --> 0:12:56.600 But when you think about that, if the data dictates otherwise, 0:12:56.679 --> 0:12:59.000 it means that the economy is not particularly friendly to 0:12:59.000 --> 0:13:02.080 stocks at that point. So it's my risk going into 0:13:02.080 --> 0:13:02.520 this week. 0:13:02.880 --> 0:13:06.040 Yeah, A reference made to to when J. Powell spoke 0:13:06.080 --> 0:13:08.439 for only eight minutes and said you're going to feel 0:13:08.440 --> 0:13:13.240 some pain. Is there any chance that this time he says, hey, 0:13:13.720 --> 0:13:15.400 you're going to feel some glee. 0:13:16.880 --> 0:13:19.240 I don't think that's in his playbook. I do think 0:13:19.280 --> 0:13:22.040 the market now, I do think see one of the 0:13:22.040 --> 0:13:23.720 things I've always think when we have these feed meetings 0:13:23.800 --> 0:13:26.240 is he sort of goldilocks, like, you know, not too hot, 0:13:26.360 --> 0:13:29.280 not too cold, and the market definitely if he says, 0:13:29.360 --> 0:13:32.560 you know, we're not likely to cut rates, but we might. 0:13:32.760 --> 0:13:35.319 The market here as well, we might cut rates. So 0:13:35.520 --> 0:13:38.959 the difference is at Jackson Hole, where he controls the message. 0:13:38.960 --> 0:13:41.320 It's not a back and forth with reporters, and I 0:13:41.360 --> 0:13:44.120 think he's got a genuinely good rapport with most of 0:13:44.160 --> 0:13:47.760 the reporters. If he wants to tell a sterner message, 0:13:47.840 --> 0:13:49.840 this is the one time he can actually do so, 0:13:50.679 --> 0:13:52.960 because there's really no back and forth to it. It's 0:13:53.000 --> 0:13:54.840 just I'm going to read. I'm going to read what 0:13:54.920 --> 0:13:57.120 I wrote, and you're gonna take it and we'll see 0:13:57.160 --> 0:13:59.160 what he says. I don't know that he's in the 0:13:59.200 --> 0:14:03.400 mood to bearticularly accommodative sounding, because if you look at 0:14:03.400 --> 0:14:07.680 what markets are doing, you know, fixed income equities, whatever, 0:14:07.960 --> 0:14:10.720 it's not like we need a ton of stimulus right now. 0:14:10.920 --> 0:14:13.240 We seem to be doing fine with what we have 0:14:13.880 --> 0:14:14.480 at the moment. 0:14:15.880 --> 0:14:18.160 Yeah, there's other data to support that as well. I 0:14:18.160 --> 0:14:22.160 mean the Bloomberg this morning. We've got California import data 0:14:22.160 --> 0:14:25.720 that's looking pretty strong. Goldman's kind of cirsation risk, you know, 0:14:26.240 --> 0:14:28.560 right's excessively restrictive right now. 0:14:29.520 --> 0:14:32.080 I don't think so, although I do think the FED 0:14:32.120 --> 0:14:34.440 has to be quite vigilant of it, because I do 0:14:34.480 --> 0:14:37.560 think there is there is certainly the possibility, if not 0:14:37.600 --> 0:14:41.040 the probability, that we could slip into recession. A lot 0:14:41.080 --> 0:14:44.960 of the data is softening. But you know, again the Fed, 0:14:46.120 --> 0:14:48.360 it has more control over the amount of money flowing 0:14:48.400 --> 0:14:51.400 around the system that it does necessarily the economy itself. 0:14:51.840 --> 0:14:55.800 And certainly in terms of liquidity, the Fed, you know, 0:14:56.320 --> 0:14:58.480 they've got to be looking around and saying, there's certainly 0:14:58.520 --> 0:15:01.400 ample liquidity even with the rate structure that we have 0:15:01.560 --> 0:15:02.120 these days. 0:15:03.000 --> 0:15:05.160 So it would seem to be then that the jobs 0:15:05.200 --> 0:15:08.520 report coming up, the September of sixth jobs report would 0:15:08.520 --> 0:15:11.520 be considerably more important than a lot of what we've 0:15:11.520 --> 0:15:12.320 seen of late. 0:15:12.920 --> 0:15:17.800 Absolutely, because I think, you know, the disinflationary story I 0:15:17.840 --> 0:15:20.000 think is here, and you know, to the extent that 0:15:20.040 --> 0:15:22.720 the Fed really is going to you know, they've indicated 0:15:22.760 --> 0:15:25.040 that they don't need to wait exactly till two percent, 0:15:25.120 --> 0:15:26.920 and you know, so we could argue certainly that this 0:15:27.040 --> 0:15:30.240 is why we might see it. You know, we're likely 0:15:30.280 --> 0:15:34.800 to see a cut in September, but the degree to 0:15:34.880 --> 0:15:40.080 which the job market tells that story, you know, first 0:15:40.080 --> 0:15:42.120 week is first Friday in September is going to be 0:15:42.120 --> 0:15:44.840 a big one because you know, we saw that slowing 0:15:45.560 --> 0:15:48.560 in you know, in the August report, the July numbers. 0:15:49.160 --> 0:15:50.720 Let's see what it says in August, because there were 0:15:50.760 --> 0:15:53.560 a lot of economists saying that the temporary factors, even 0:15:53.600 --> 0:15:55.560 though the FED kind of pooh pooed them, there was 0:15:55.600 --> 0:15:59.440 some temporary factors relating to some hurricanes and stuff that 0:15:59.440 --> 0:16:01.280 that messed up up the numbers a little bit, maybe 0:16:01.360 --> 0:16:02.400 weaker than they seemed. 0:16:02.720 --> 0:16:05.640 Okay, Steve, out of time, but a great session, Thank 0:16:05.680 --> 0:16:09.560 you very much, Steve Soasnik, chief strategist at Interactive Brokers 0:16:15.960 --> 0:16:19.920 through Jamalik Partner at NetBoot Capital, we take a closer 0:16:19.960 --> 0:16:21.600 look at markets here and bore we had a good 0:16:21.640 --> 0:16:24.440 week last week. Who it was the data? I think 0:16:24.440 --> 0:16:28.040 that calmed a lot of frayed nerves, retail sales data 0:16:28.040 --> 0:16:31.600 and the jobless claims. And it has some forecasters, for 0:16:31.640 --> 0:16:37.080 instance Goldman Sachs in lowering their recession risk levels. Others 0:16:37.120 --> 0:16:39.160 maybe think it's a little too soon for that. How 0:16:39.240 --> 0:16:42.280 much more data would you need to see, or maybe 0:16:42.560 --> 0:16:45.600 would the markets need to see to be reassured that 0:16:45.640 --> 0:16:47.160 the economy is on solid footing. 0:16:48.240 --> 0:16:51.120 It really depends what data the FED needs to see, 0:16:51.200 --> 0:16:54.720 right and the signal that the FED sends to the markets, 0:16:55.440 --> 0:16:58.120 and the FED really has two goals is you know, 0:16:58.240 --> 0:17:02.720 unemployment and inflation. Right, we have an unemployment number coming 0:17:02.720 --> 0:17:04.880 out in the first week of September, and I think 0:17:04.880 --> 0:17:06.600 that's the critical number for the FED. 0:17:07.200 --> 0:17:07.800 The FED is. 0:17:07.760 --> 0:17:10.280 Trying to manage, on one hand, the risk of recession, 0:17:10.600 --> 0:17:14.240 which seemingly is not high right now. Q two real 0:17:14.280 --> 0:17:16.919 GDP growth came in very strong at two point four percent, 0:17:17.480 --> 0:17:19.680 So the FED is trying to manage the risk of 0:17:19.760 --> 0:17:24.879 recession against rising unemployment. And so the important data that 0:17:25.080 --> 0:17:26.760 I think the FED is going to be looking out 0:17:26.800 --> 0:17:29.760 for is the unemployment number, and I think that's going 0:17:29.840 --> 0:17:32.560 to determine what the FED does, which in turn determines 0:17:32.600 --> 0:17:33.639 how the market moves. 0:17:34.000 --> 0:17:37.040 So what you're saying is this September sixth jobs report 0:17:37.200 --> 0:17:41.240 is pretty important, maybe considerably more important than most of 0:17:41.240 --> 0:17:42.120 what we've seen of late. 0:17:43.280 --> 0:17:45.720 I think so because some of the other things we've seen. 0:17:45.760 --> 0:17:49.000 For example, we've seen strong earnings, but despite that, we 0:17:49.080 --> 0:17:52.480 had the market y when we had the unemployment number. 0:17:52.520 --> 0:17:55.520 So the market seems to be focused more on unemployment 0:17:55.600 --> 0:17:58.520 as unemployment and inflation as opposed to earnings. 0:17:59.720 --> 0:18:02.560 Yeah, so I guess it's a combination of what the 0:18:02.600 --> 0:18:06.240 market expects to hear from japwell and what the FED 0:18:06.359 --> 0:18:09.760 needs to see that everybody will be kind of edgy over. 0:18:09.880 --> 0:18:12.240 In some ways, I think the better data took a 0:18:12.280 --> 0:18:14.880 little pressure off of Jypowell because you had that big 0:18:14.920 --> 0:18:18.600 market sell off and a lot of fears of unemployment 0:18:18.680 --> 0:18:21.439 running to the upside and such in the market was 0:18:21.480 --> 0:18:24.439 pretty negative, and he probably would have felt at least 0:18:25.119 --> 0:18:30.080 slightly incentivized to hint that rate cuts are coming. Now 0:18:30.240 --> 0:18:32.520 perhaps he can be a little more nuanced, don't you think. 0:18:33.800 --> 0:18:35.840 Yes, I agree with you. He has a little bit 0:18:35.840 --> 0:18:38.800 more leviate than he would have otherwise, and I think 0:18:38.800 --> 0:18:42.760 he's going to continue to be dubbish, but point towards data. 0:18:43.400 --> 0:18:45.880 The one thing, though, I think with retail sales coming 0:18:45.920 --> 0:18:49.560 in higher than expected, that really is an opportunity for 0:18:49.640 --> 0:18:53.800 investors because of the bifurcation we're seeing within retail, meaning 0:18:53.840 --> 0:18:56.959 the overall retail numbers was strong, but there are pockets 0:18:57.359 --> 0:19:01.879 like credit card delinquencies going up, like brands like Starbucks 0:19:01.880 --> 0:19:06.320 and Amazon that are more retail sensitive reporting weaker earnings 0:19:06.480 --> 0:19:09.760 versus brands like Walmart doing very well. So I think 0:19:09.920 --> 0:19:14.880 underlying that retail data, Brian, there is opportunity for good 0:19:14.920 --> 0:19:17.919 stock picking as there's a lot of dispersion underneath that 0:19:18.040 --> 0:19:19.240 overall retail number. 0:19:19.560 --> 0:19:21.560 Yeah. In fact, it's been a really good year so 0:19:21.720 --> 0:19:25.240 far for stock picking. One last question on the FED 0:19:25.400 --> 0:19:28.000 and Jerome Palell. I mean, do you think if he 0:19:28.040 --> 0:19:30.159 does not, because we ran a story on this actually 0:19:30.200 --> 0:19:32.919 included some comments that well, if he doesn't hint at 0:19:33.040 --> 0:19:36.000 rate cuts, you're going to likely see another market sell up. 0:19:36.119 --> 0:19:38.040 Are you in that camp or do you think that 0:19:38.760 --> 0:19:43.720 the market out there that you know, they're sort of 0:19:43.760 --> 0:19:46.120 in a position where they feel as though they can 0:19:46.200 --> 0:19:46.800 be patient. 0:19:49.680 --> 0:19:51.560 No, I don't think the market wants to be patient. 0:19:51.560 --> 0:19:52.000 I think the. 0:19:51.960 --> 0:19:54.679 Market so you embrace the sell off idea. Then if 0:19:54.680 --> 0:19:55.960 he doesn't hint, yes. 0:19:56.040 --> 0:19:58.480 Yeah, I think the market is looking for at least 0:19:58.560 --> 0:20:01.280 some kind of positive or it the neutral news that 0:20:01.320 --> 0:20:04.560 he's going to continue on the same path of being 0:20:04.640 --> 0:20:08.040 devision watching for data because the issue right now is 0:20:08.040 --> 0:20:10.800 there's so much uncertainty amongst investors and as you will 0:20:10.880 --> 0:20:15.320 now Brian August, you know there's lower trading volumes. Lots 0:20:15.320 --> 0:20:18.040 of people are on vacation, So the lower trading volumes 0:20:18.160 --> 0:20:22.240 combined with this uncertainty, is leading to very large market 0:20:22.280 --> 0:20:25.880 moves in market votility and policies that so I think 0:20:26.560 --> 0:20:29.040 I think he's going to stay neutral, just slightly positive, 0:20:29.920 --> 0:20:31.879 hoping for a calm market reaction. 0:20:32.600 --> 0:20:35.119 Well, you can understand how the market would be frustrated 0:20:35.160 --> 0:20:37.239 with this because you have the FED funds rate at 0:20:37.240 --> 0:20:41.160 five and three eight percent that was geared at inflation 0:20:41.200 --> 0:20:43.600 at nine percent. Now you've got inflation at three percent, 0:20:44.080 --> 0:20:48.760 so at least x amount of the cutting that ultimately comes, 0:20:48.800 --> 0:20:53.240 it's just calibration, right, It's not saving the economy, don't 0:20:53.280 --> 0:20:53.679 you think so? 0:20:54.680 --> 0:20:55.000 True? 0:20:55.240 --> 0:20:55.640 True? 0:20:55.800 --> 0:20:57.920 I do think though investors have been spoilt in the 0:20:58.000 --> 0:21:01.560 last decade, Brian, because yes, is not frustrated. But if 0:21:01.600 --> 0:21:04.639 you look at where markets are, we're still fifteen percent 0:21:05.160 --> 0:21:07.040 for the year, given that we were up twenty five 0:21:07.040 --> 0:21:09.920 percent last year, right, so there is actually no good 0:21:09.960 --> 0:21:13.240 reason for investors to be frustrated with either the stock 0:21:13.280 --> 0:21:16.560 market or with the Fed. And if you step back 0:21:16.560 --> 0:21:18.680 and think about where we were two or three years ago, 0:21:19.600 --> 0:21:21.760 not a lot of people believed that the Fed would 0:21:21.800 --> 0:21:24.240 be able to pull this off in terms of managing 0:21:24.320 --> 0:21:28.920 recession and guiding rates and unemployment. But so far, so good. 0:21:29.280 --> 0:21:32.480 Oh yeah, they'll get huge kdos if they do pull 0:21:32.480 --> 0:21:34.960 off a soft landing. So let's go a couple of 0:21:34.960 --> 0:21:40.360 other different directions. Here, are investors, in your view, actively 0:21:40.520 --> 0:21:43.840 playing the election or keeping it at arm's length. 0:21:45.840 --> 0:21:48.080 It's too early, i would say, to be actively playing 0:21:48.119 --> 0:21:52.639 the election, but investors are definitely starting to think about 0:21:52.680 --> 0:21:56.920 the what if scenarios. The outcome of the election still 0:21:56.960 --> 0:22:00.719 remains unclear and we are still a few away. These 0:22:00.760 --> 0:22:04.399 things can change pretty quickly. You know, the possibility of 0:22:04.560 --> 0:22:07.119 US tariffs I think is the big one, depending on 0:22:07.240 --> 0:22:11.240 election results. And as you know, for emerging markets, that's 0:22:11.320 --> 0:22:15.879