1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,520 Speaker 2: Terminal and the Bloomberg Business App. Andrew Honhorst of City 10 00:00:37,560 --> 00:00:39,400 Speaker 2: has got a different idea on things. He's looking for 11 00:00:39,440 --> 00:00:42,800 Speaker 2: one twenty and a very different unemployment rate. And Andrew 12 00:00:42,880 --> 00:00:45,319 Speaker 2: joins us now for more. Andrew go mornig. Let's start 13 00:00:45,360 --> 00:00:47,960 Speaker 2: with unemployment. You think that's the bigger issue. What's your call? 14 00:00:48,320 --> 00:00:49,640 Speaker 3: I think that's a more important issue. 15 00:00:49,640 --> 00:00:52,600 Speaker 4: We're calling for four point four percent on the unemployment rate, 16 00:00:52,680 --> 00:00:55,160 Speaker 4: which is not as big a mover as it sounds like. 17 00:00:55,360 --> 00:00:57,440 Speaker 4: And this is maybe the silliness of what we're doing here, 18 00:00:57,600 --> 00:00:59,520 Speaker 4: but I have to get into the hundreds of a 19 00:00:59,560 --> 00:01:02,520 Speaker 4: percentage point on the unemployment rate. We're at four point 20 00:01:02,560 --> 00:01:07,399 Speaker 4: two four percent unrounded right now, So that means if 21 00:01:07,400 --> 00:01:09,120 Speaker 4: we just move up by a little bit more than 22 00:01:09,120 --> 00:01:11,360 Speaker 4: a tenth, right, a tenth and one hundredth, then you're 23 00:01:11,440 --> 00:01:12,280 Speaker 4: up at four point four. 24 00:01:12,640 --> 00:01:16,160 Speaker 1: Why are you not dissuaded from your more bearish outlook 25 00:01:16,280 --> 00:01:18,120 Speaker 1: on the employment market when you see things like the 26 00:01:18,200 --> 00:01:20,200 Speaker 1: Jolt State of the job opening stata that come in 27 00:01:20,560 --> 00:01:23,800 Speaker 1: hotter than expected, with actually the inflationary read through of 28 00:01:23,840 --> 00:01:26,679 Speaker 1: ism coming in at the hottest level since twenty twenty three. 29 00:01:26,880 --> 00:01:28,720 Speaker 4: Yeah, I think when you look at some of this data, 30 00:01:28,760 --> 00:01:31,560 Speaker 4: and this is the issue we're all dealing with, economists, 31 00:01:31,560 --> 00:01:35,120 Speaker 4: the market, the FED, there's so much noise in the data, 32 00:01:35,720 --> 00:01:39,119 Speaker 4: and there are different details of the data you can 33 00:01:39,200 --> 00:01:41,560 Speaker 4: look at and tell different stories. So the Jolts report 34 00:01:41,600 --> 00:01:42,959 Speaker 4: is a great example of that. If you look at 35 00:01:43,000 --> 00:01:45,959 Speaker 4: the level of job openings, that's stabilized at a higher 36 00:01:46,040 --> 00:01:48,000 Speaker 4: level than where we thought it would have stabilized at, 37 00:01:48,200 --> 00:01:50,280 Speaker 4: So that looks quite healthy. If you look at what 38 00:01:50,320 --> 00:01:53,200 Speaker 4: people are doing, which I think are the more relevant 39 00:01:53,240 --> 00:01:56,200 Speaker 4: statistics in that report, you see layoffs are low, so 40 00:01:56,240 --> 00:01:58,760 Speaker 4: that's very good news for the job market, but you 41 00:01:58,840 --> 00:02:01,640 Speaker 4: also see that the high rate is quite low. And 42 00:02:01,640 --> 00:02:04,120 Speaker 4: that actually surprised us to the downside. Yesterday, that got 43 00:02:04,120 --> 00:02:06,600 Speaker 4: a lot less attention. It was low in October. October, 44 00:02:06,680 --> 00:02:09,080 Speaker 4: we know we had the strikes, we had hurricanes, but 45 00:02:09,120 --> 00:02:12,600 Speaker 4: then in November it actually continued to move lower. 46 00:02:13,280 --> 00:02:14,320 Speaker 3: You look at the quit rate. 47 00:02:14,360 --> 00:02:16,840 Speaker 4: Are people feeling comfortable quitting their jobs? 48 00:02:16,840 --> 00:02:18,840 Speaker 3: And this is kind of goes back to what you were. 49 00:02:18,720 --> 00:02:21,679 Speaker 4: Talking about with companies bringing workers back five days a week. 50 00:02:21,960 --> 00:02:24,760 Speaker 4: People are not feeling as comfortable now that they can 51 00:02:24,800 --> 00:02:26,600 Speaker 4: find a new job if they leave their job. So 52 00:02:26,680 --> 00:02:29,320 Speaker 4: those are the kinds of signs of softness that we're 53 00:02:29,320 --> 00:02:31,080 Speaker 4: seeing in the data that we think are going to 54 00:02:31,120 --> 00:02:34,600 Speaker 4: continue to feed through and lead to a higher unemployment rate. 55 00:02:34,720 --> 00:02:34,960 Speaker 3: Yeah. 56 00:02:35,120 --> 00:02:36,799 Speaker 1: Just talking about the quits rate that was one point 57 00:02:36,880 --> 00:02:38,760 Speaker 1: nine percent. It was tied with the lowest rate going 58 00:02:38,800 --> 00:02:41,600 Speaker 1: back to twenty twenty, talking about that DYNAMICEM I just 59 00:02:41,680 --> 00:02:44,440 Speaker 1: wonder how offsides do you think this market is. How 60 00:02:44,520 --> 00:02:46,600 Speaker 1: much pushback you get, and what you say to people 61 00:02:46,600 --> 00:02:49,120 Speaker 1: who say you've been out of consensus for a while. 62 00:02:49,400 --> 00:02:52,400 Speaker 1: The data has been surprising to the upside. Why aren't 63 00:02:52,400 --> 00:02:53,160 Speaker 1: you capitulating? 64 00:02:53,400 --> 00:02:55,400 Speaker 4: Yeah, so, I mean if you look at how much 65 00:02:55,440 --> 00:02:58,760 Speaker 4: we've moved it's really been incredible over the last six months, 66 00:02:58,800 --> 00:03:02,040 Speaker 4: over the last three months. In September, after we had 67 00:03:02,120 --> 00:03:04,960 Speaker 4: the week jobs report and the FED was cutting fifty 68 00:03:04,960 --> 00:03:07,240 Speaker 4: bases points and the FED was quite worried about unemployment 69 00:03:07,240 --> 00:03:09,440 Speaker 4: picking up. Then we have had a run of better 70 00:03:09,520 --> 00:03:13,160 Speaker 4: data since then. We're trying to look at the underlying 71 00:03:13,400 --> 00:03:17,360 Speaker 4: trends and not kind of change the view every month 72 00:03:17,440 --> 00:03:20,080 Speaker 4: based on where an individual data point is coming in. 73 00:03:20,760 --> 00:03:23,160 Speaker 3: And I think and I don't blame the market. 74 00:03:22,840 --> 00:03:25,080 Speaker 4: Because I think, like I was saying, there's been a 75 00:03:25,080 --> 00:03:27,280 Speaker 4: lot of noise in the data. The FED is reacting 76 00:03:27,320 --> 00:03:29,679 Speaker 4: to that noise in the data. So that means we've 77 00:03:29,680 --> 00:03:31,760 Speaker 4: had ten year treasure heels that have been all over 78 00:03:31,760 --> 00:03:33,520 Speaker 4: the place. We've had two year treasure heelds that have 79 00:03:33,560 --> 00:03:35,720 Speaker 4: been all over the place. I think we're just going 80 00:03:35,760 --> 00:03:38,760 Speaker 4: through a phase now where we've seen some better numbers. 81 00:03:39,320 --> 00:03:42,640 Speaker 4: That unemployment rate at four point two four percent, It 82 00:03:42,680 --> 00:03:44,920 Speaker 4: would be four point six percent if not for the 83 00:03:44,960 --> 00:03:48,280 Speaker 4: participation rate dropping, and I think we'd be in a 84 00:03:48,400 --> 00:03:51,400 Speaker 4: very different discussion right we'd be having a different discussion 85 00:03:51,480 --> 00:03:53,120 Speaker 4: right now if we were at four point six percent. 86 00:03:53,240 --> 00:03:55,560 Speaker 3: So it just shows how quickly the narrative can change. 87 00:03:55,920 --> 00:03:58,400 Speaker 5: What would you maybe change your mind January twentieth, is 88 00:03:58,480 --> 00:04:02,080 Speaker 5: the president elects immigration policies that he's talking about going 89 00:04:02,120 --> 00:04:03,840 Speaker 5: to mean a tighter labor marking. 90 00:04:04,120 --> 00:04:06,240 Speaker 4: So this is part of the issue with trying to 91 00:04:06,280 --> 00:04:09,120 Speaker 4: do a forecast here, is that these policies do matter 92 00:04:09,280 --> 00:04:11,280 Speaker 4: quite a bit. That's why the market is moving so 93 00:04:11,400 --> 00:04:13,720 Speaker 4: much on each of these headlines. And we'll continue to move. 94 00:04:14,040 --> 00:04:16,360 Speaker 4: And it's not necessarily January twenty if when everything is 95 00:04:16,400 --> 00:04:18,960 Speaker 4: going to be answered, because yes, we probably should get 96 00:04:19,000 --> 00:04:23,120 Speaker 4: some answers on immigration. I'm really interested to know what 97 00:04:23,120 --> 00:04:26,640 Speaker 4: does this reconciliation package look like. What's in this fiscal bill. 98 00:04:27,040 --> 00:04:29,960 Speaker 4: If it's just extending existing tax cuts, that's not a 99 00:04:30,000 --> 00:04:32,799 Speaker 4: big new fiscal stimulus to the economy, that's just extending 100 00:04:32,800 --> 00:04:36,120 Speaker 4: what's already there. If we're getting no tax on overtime 101 00:04:36,200 --> 00:04:39,320 Speaker 4: pay and these other kinds of things that could push 102 00:04:39,440 --> 00:04:42,320 Speaker 4: the deficit higher, then that is more stimulus. 103 00:04:42,360 --> 00:04:44,600 Speaker 3: That would change the FEDS view, That would change my view. 104 00:04:44,960 --> 00:04:47,359 Speaker 2: Let's see what happens just quickly in about fifteen seconds, 105 00:04:47,400 --> 00:04:49,239 Speaker 2: if you can. If we get four point four percent 106 00:04:49,279 --> 00:04:51,960 Speaker 2: this Friday one twenty, is that sufficient to cut right 107 00:04:52,000 --> 00:04:52,839 Speaker 2: to the end of this month. 108 00:04:53,640 --> 00:04:55,719 Speaker 4: I think they may still pause. Even in that event, 109 00:04:55,720 --> 00:04:57,680 Speaker 4: I think they have to see something In addition to that. 110 00:04:57,720 --> 00:05:00,320 Speaker 4: It probably sets them up to continue cutting later this year. 111 00:05:00,440 --> 00:05:03,960 Speaker 4: But they've really signaled towards this pause in January. 112 00:05:03,560 --> 00:05:05,520 Speaker 2: My Schumacher of Wells Fargo saying that if we get 113 00:05:05,560 --> 00:05:07,360 Speaker 2: that four point four percent that Andrew and the team 114 00:05:07,400 --> 00:05:09,880 Speaker 2: are looking for, it would be ugly and we'd see 115 00:05:09,920 --> 00:05:13,760 Speaker 2: the tenure yield falling twenty basis points. In that scenario, 116 00:05:13,839 --> 00:05:15,920 Speaker 2: We've had a big move in the other direction over 117 00:05:15,960 --> 00:05:18,000 Speaker 2: the past few months. Andrew, it's going to see us, sir, 118 00:05:18,000 --> 00:05:30,360 Speaker 2: Thank you, Andrew. Homenhoorst there a city. Let's turn back 119 00:05:30,400 --> 00:05:33,880 Speaker 2: to politics. Republicans in Congress gearing up to negotiate an 120 00:05:33,880 --> 00:05:37,279 Speaker 2: extension of Donald Trump's twenty seventeen tax cuts. A group 121 00:05:37,320 --> 00:05:40,000 Speaker 2: of House Republicans we're invited to meet with Trump this 122 00:05:40,040 --> 00:05:42,599 Speaker 2: weekend at marri Laco and are expected to push to 123 00:05:42,640 --> 00:05:46,320 Speaker 2: include an expansion of salt tax deductions in Congress's upcoming 124 00:05:46,400 --> 00:05:48,560 Speaker 2: package and place to say that joining us now is 125 00:05:48,600 --> 00:05:51,680 Speaker 2: one of those House Republicans. Congressman Michael Awler of New 126 00:05:51,760 --> 00:05:54,360 Speaker 2: York Congressman fantastic to catch up with you once again, sir, 127 00:05:54,760 --> 00:05:56,920 Speaker 2: I just want to know, from your perspective, how many 128 00:05:56,920 --> 00:05:59,160 Speaker 2: friends you have outside of New York in the House 129 00:05:59,200 --> 00:06:01,360 Speaker 2: that would be on board with the stafford. 130 00:06:02,640 --> 00:06:04,520 Speaker 6: A lot more than people realize. 131 00:06:04,920 --> 00:06:08,599 Speaker 7: Obviously, New York, New Jersey, and California three of the 132 00:06:08,800 --> 00:06:14,080 Speaker 7: high tax states where this has most acutely impacted. Certainly 133 00:06:14,760 --> 00:06:18,920 Speaker 7: we have a coalition, and given our small majority in 134 00:06:18,960 --> 00:06:24,039 Speaker 7: the House, it's certainly a powerful coalition. But there's other 135 00:06:24,080 --> 00:06:28,480 Speaker 7: states and members across the country in which you know, 136 00:06:28,560 --> 00:06:32,160 Speaker 7: over the last seven years they've seen their own taxes 137 00:06:32,320 --> 00:06:37,840 Speaker 7: rise up against that ten thousand dollars cap. So quietly 138 00:06:37,920 --> 00:06:40,960 Speaker 7: there's a few more members than people would realize, but 139 00:06:41,000 --> 00:06:45,400 Speaker 7: would realize. Look, the cap consalt was a pay for 140 00:06:45,400 --> 00:06:48,200 Speaker 7: for the twenty seventeen tax Cuts in Jobs Act. 141 00:06:48,360 --> 00:06:49,000 Speaker 6: That's it. 142 00:06:49,000 --> 00:06:51,200 Speaker 7: It was used as a pay for to pay for 143 00:06:51,279 --> 00:06:56,400 Speaker 7: other provisions within the tax bill. The ten thousand dollars 144 00:06:56,400 --> 00:07:01,599 Speaker 7: cap is woefully insufficient. It's had a negative impact on 145 00:07:01,720 --> 00:07:05,479 Speaker 7: states like New York. Now we can get into how 146 00:07:05,560 --> 00:07:09,560 Speaker 7: New York excessively spends. They've increased their state budget by 147 00:07:09,600 --> 00:07:13,720 Speaker 7: sixty one billion dollars in the last four years, for instance, that. 148 00:07:13,640 --> 00:07:14,600 Speaker 6: Needs to change. 149 00:07:15,280 --> 00:07:18,640 Speaker 7: But taxpayers should not be penalized by living in a 150 00:07:18,840 --> 00:07:19,760 Speaker 7: eye tax state. 151 00:07:19,960 --> 00:07:21,320 Speaker 6: This is double taxation. 152 00:07:22,280 --> 00:07:24,600 Speaker 7: And for those of my colleagues that say this is 153 00:07:24,680 --> 00:07:28,920 Speaker 7: somehow a subsidy, the fact is New York contributes more 154 00:07:28,920 --> 00:07:32,840 Speaker 7: to the federal government than it receives, and more than 155 00:07:32,920 --> 00:07:37,840 Speaker 7: some of these states in which my colleagues will claim 156 00:07:37,880 --> 00:07:41,240 Speaker 7: that they don't want their taxpayers subsidizing New York. 157 00:07:41,360 --> 00:07:43,480 Speaker 6: But the reality is it's the other way around. 158 00:07:43,560 --> 00:07:46,160 Speaker 5: Congressman, you certainly don't have a friend, though, and someone 159 00:07:46,360 --> 00:07:49,320 Speaker 5: like Lindsey Graham, the center of South Carolina, who said, 160 00:07:49,320 --> 00:07:52,400 Speaker 5: why should I from South Carolina pay for what's going 161 00:07:52,440 --> 00:07:54,600 Speaker 5: on in some of these blue states? And he's pushing 162 00:07:54,680 --> 00:07:58,840 Speaker 5: for this one big sorry for the two bill approach 163 00:07:59,000 --> 00:08:00,920 Speaker 5: because he doesn't want to talk about taxes. He thinks 164 00:08:00,960 --> 00:08:03,040 Speaker 5: it's going to take too long, and he doesn't, frankly 165 00:08:03,080 --> 00:08:05,600 Speaker 5: want to sign up for salt. How are you going 166 00:08:05,600 --> 00:08:08,040 Speaker 5: to convince the president this weekend that you should do 167 00:08:08,080 --> 00:08:10,120 Speaker 5: one bill together and make sure salts included. 168 00:08:11,280 --> 00:08:14,080 Speaker 7: Well, Respectfully, South Carolina is one of those states that 169 00:08:15,000 --> 00:08:19,320 Speaker 7: gets more back, certainly percentage wise, than New York does. 170 00:08:19,400 --> 00:08:22,600 Speaker 7: So you know, if we want to talk about subsidies, 171 00:08:22,640 --> 00:08:25,560 Speaker 7: we can go chapter and burst through everybody's subsidies that 172 00:08:25,600 --> 00:08:26,120 Speaker 7: they get. 173 00:08:26,760 --> 00:08:29,280 Speaker 6: Look with respect to one versus too. 174 00:08:29,320 --> 00:08:32,600 Speaker 7: The President has already made clear he is moving forward 175 00:08:32,720 --> 00:08:37,880 Speaker 7: on one big bill. We need to deal with taxes, 176 00:08:38,360 --> 00:08:44,560 Speaker 7: the border, energy debt, among other issues. And the fact is, 177 00:08:44,640 --> 00:08:48,280 Speaker 7: given our small margin in the House, we're going to 178 00:08:48,360 --> 00:08:53,080 Speaker 7: need everybody's vote and everybody on board. Two track bills 179 00:08:53,840 --> 00:08:57,040 Speaker 7: are going to make that harder. So while it may 180 00:08:57,080 --> 00:09:01,120 Speaker 7: take a little bit more time to get one bill negotiated, 181 00:09:02,080 --> 00:09:04,800 Speaker 7: it is necessary if we're going to get all of 182 00:09:04,840 --> 00:09:08,079 Speaker 7: these issues addressed. And I think the President understands that. 183 00:09:08,280 --> 00:09:11,800 Speaker 7: I think that's why the President made clear last week 184 00:09:12,600 --> 00:09:15,600 Speaker 7: one bill, and that's how we are proceeding forward in 185 00:09:15,679 --> 00:09:21,000 Speaker 7: the House. And look, ultimately, our Senate and House Republican 186 00:09:21,040 --> 00:09:24,240 Speaker 7: majorities are going to have to work together. Nobody's going 187 00:09:24,280 --> 00:09:27,280 Speaker 7: to get everything they want out of this. There's going 188 00:09:27,320 --> 00:09:29,920 Speaker 7: to have to be a good faith negotiation if we 189 00:09:30,080 --> 00:09:33,840 Speaker 7: had any chance of passing a reconciliation bill. 190 00:09:34,480 --> 00:09:37,240 Speaker 5: I was one of those individuals who watched your festivus 191 00:09:37,320 --> 00:09:40,199 Speaker 5: airing of grievances during the Christmas week and you did 192 00:09:40,200 --> 00:09:43,400 Speaker 5: a little bit of a wink at your potential future 193 00:09:43,559 --> 00:09:46,640 Speaker 5: maybe becoming the governor of New York to make sure 194 00:09:46,720 --> 00:09:49,440 Speaker 5: you could potentially go down that path, do you need 195 00:09:49,480 --> 00:09:51,640 Speaker 5: to secure a higher salt tax break. 196 00:09:53,280 --> 00:09:56,720 Speaker 7: Look, regardless of whether or not I run for governor, 197 00:09:56,880 --> 00:10:00,280 Speaker 7: this was a promise of mine, and it's said top 198 00:10:00,280 --> 00:10:02,880 Speaker 7: priority for my district. I represent one of the highest 199 00:10:02,920 --> 00:10:06,800 Speaker 7: tax districts in the country, inclusive of Westchester and Rockland 200 00:10:06,800 --> 00:10:10,679 Speaker 7: Counties number one and number two highest property tax counties 201 00:10:10,679 --> 00:10:14,760 Speaker 7: in America. So this is critically important to lift the 202 00:10:14,800 --> 00:10:21,080 Speaker 7: cap on salt. Ten thousand dollars is woefully insufficient. And 203 00:10:21,600 --> 00:10:23,480 Speaker 7: you know this is something that I said I would 204 00:10:23,520 --> 00:10:26,200 Speaker 7: deliver on, and we're going to as part of this 205 00:10:26,320 --> 00:10:31,200 Speaker 7: reconciliation bill. Long term for New York, this is critical. 206 00:10:31,280 --> 00:10:34,480 Speaker 7: We lead the nation in out migration. Our tax base 207 00:10:34,640 --> 00:10:38,800 Speaker 7: is eroding, in large part because of the disastrous policies 208 00:10:38,800 --> 00:10:42,679 Speaker 7: of Kathy Hochel and Albany Democrats. One party rule in 209 00:10:42,720 --> 00:10:46,280 Speaker 7: Albany has been an abject disaster, whether you're talking about 210 00:10:46,280 --> 00:10:50,040 Speaker 7: the affordability crisis or public safety. People being burned alive 211 00:10:50,120 --> 00:10:54,120 Speaker 7: on subways, pushed in front of oncoming subway trains. Kathy 212 00:10:54,200 --> 00:10:57,600 Speaker 7: Hochl now scamming New Yorkers out of twenty five hundred 213 00:10:57,679 --> 00:11:02,000 Speaker 7: dollars a year for the privilege of driving to work 214 00:11:02,240 --> 00:11:05,440 Speaker 7: while spending billions of dollars of taxpayer money on free 215 00:11:05,520 --> 00:11:10,559 Speaker 7: thousand clothing, food, education, and healthcare for illegal immigrants. New 216 00:11:10,640 --> 00:11:13,600 Speaker 7: York needs change, there's no question about that. But from 217 00:11:13,640 --> 00:11:16,720 Speaker 7: a federal perspective, we should not be penalizing New York 218 00:11:16,760 --> 00:11:20,960 Speaker 7: taxpayers because of the disastrous decisions of Cappy Local and 219 00:11:21,000 --> 00:11:22,040 Speaker 7: Albany Democrats. 220 00:11:22,080 --> 00:11:23,560 Speaker 5: And just to be clear, when it comes to the 221 00:11:23,600 --> 00:11:25,800 Speaker 5: salt cap, how high are you looking for it to 222 00:11:25,840 --> 00:11:26,320 Speaker 5: be raised? 223 00:11:27,400 --> 00:11:32,520 Speaker 7: Look, I've introduced legislation, you know, my marriage Penalty Elimination 224 00:11:32,679 --> 00:11:36,560 Speaker 7: Bill reintroduced to raise it to one hundred thousand dollars 225 00:11:36,559 --> 00:11:39,760 Speaker 7: for individuals two hundred thousand dollars for married couples. 226 00:11:40,120 --> 00:11:41,520 Speaker 6: This is going to be a negotiation. 227 00:11:42,520 --> 00:11:45,079 Speaker 7: My colleagues and I are looking forward to sitting down 228 00:11:45,240 --> 00:11:49,640 Speaker 7: with the President having a discussion about it, hearing obviously 229 00:11:49,679 --> 00:11:52,680 Speaker 7: what his priorities are as part of the tax bill, 230 00:11:53,360 --> 00:11:56,400 Speaker 7: and working to a consensus. At the end of the day, 231 00:11:57,360 --> 00:12:01,599 Speaker 7: my objective is to provide tax really to hardworking Americans. 232 00:12:01,920 --> 00:12:05,520 Speaker 7: It's incumbent upon everybody to negotiate in good faith because 233 00:12:05,520 --> 00:12:08,480 Speaker 7: here's the reality. If we do not pass a tax 234 00:12:08,520 --> 00:12:12,880 Speaker 7: bill number one, salt comes back unlimited, but it is 235 00:12:12,920 --> 00:12:16,679 Speaker 7: accompanied by the largest tax increase in American history. So 236 00:12:16,720 --> 00:12:20,760 Speaker 7: it is important that we actually negotiate a fair tax 237 00:12:20,840 --> 00:12:24,200 Speaker 7: deal for the American people in August. 238 00:12:24,240 --> 00:12:25,040 Speaker 3: I just want to end on this. 239 00:12:25,160 --> 00:12:27,000 Speaker 5: You are one of these individuals that wrote a letter 240 00:12:27,040 --> 00:12:30,280 Speaker 5: to the Speaker talking about that you didn't want the 241 00:12:30,360 --> 00:12:32,920 Speaker 5: repeal of energy tax credits with the IRA. This is 242 00:12:32,960 --> 00:12:35,000 Speaker 5: something that president like Donald Trump wants. Are you going 243 00:12:35,040 --> 00:12:38,040 Speaker 5: to be trying to assuage him of your view over 244 00:12:38,080 --> 00:12:39,120 Speaker 5: this weekend in mar Lago. 245 00:12:40,920 --> 00:12:45,520 Speaker 7: Look, many provisions for the IRA absolutely need to be repealed. 246 00:12:45,840 --> 00:12:48,120 Speaker 7: What we signed on to a letter is that we 247 00:12:48,120 --> 00:12:51,079 Speaker 7: were not going to just sign off on a wholesale repeal. 248 00:12:51,120 --> 00:12:54,040 Speaker 7: There needed to be a discussion and again a negotiation. 249 00:12:54,880 --> 00:13:00,720 Speaker 7: Companies make decisions based on tax provisions and they need certainty. 250 00:13:00,760 --> 00:13:03,960 Speaker 7: And there's already been significant investment, including in New York, 251 00:13:04,720 --> 00:13:08,720 Speaker 7: based on some of these energy tax credits, and so 252 00:13:08,760 --> 00:13:11,559 Speaker 7: we want to make sure that any changes are done 253 00:13:11,920 --> 00:13:16,520 Speaker 7: smartly and not just wholesale repeal. So that'll be part 254 00:13:16,520 --> 00:13:20,319 Speaker 7: of the discussion and conversation as we move forward. And 255 00:13:21,120 --> 00:13:24,040 Speaker 7: you know, again, I think the key here is to 256 00:13:24,200 --> 00:13:28,720 Speaker 7: come up with a reconciliation bill that increases domestic production 257 00:13:28,840 --> 00:13:34,160 Speaker 7: of energy, ensures the American people have a good, smart 258 00:13:34,240 --> 00:13:39,080 Speaker 7: tax bill to reduce their taxes, reduce the cost of 259 00:13:39,160 --> 00:13:43,199 Speaker 7: living here in the US, and ultimately secures our border. 260 00:13:43,320 --> 00:13:45,760 Speaker 7: It's a lot of a lot of important issues that 261 00:13:45,840 --> 00:13:50,000 Speaker 7: have to be included in this reconciliation bill. It's going 262 00:13:50,040 --> 00:13:54,720 Speaker 7: to require negotiation, and it's going to ultimately require every 263 00:13:54,800 --> 00:13:56,920 Speaker 7: Republican supporting the final product. 264 00:13:57,040 --> 00:14:00,120 Speaker 2: A Congressman as we speak, Bonyotza climbing. And we've we've 265 00:14:00,120 --> 00:14:02,520 Speaker 2: seen quite a significant move since September when the Federal 266 00:14:02,520 --> 00:14:05,480 Speaker 2: reserves standing it's right cutting effort. We've moved one hundred 267 00:14:05,559 --> 00:14:08,079 Speaker 2: basis points. And I certainly don't expect you to follow 268 00:14:08,080 --> 00:14:10,439 Speaker 2: the ins and outs of fixed income on any given day, 269 00:14:10,480 --> 00:14:13,239 Speaker 2: but I wonder whether you and your colleagues are sensitive 270 00:14:13,520 --> 00:14:15,240 Speaker 2: to some of the pressure that is starting to build 271 00:14:15,520 --> 00:14:16,720 Speaker 2: in the US dept market. 272 00:14:18,440 --> 00:14:23,240 Speaker 7: No question, Look, our debt at thirty six trillion dollars 273 00:14:23,280 --> 00:14:28,400 Speaker 7: total and counting, is a major problem, and this is 274 00:14:28,440 --> 00:14:31,800 Speaker 7: something that everybody in the Republican Conference is in agreement on. 275 00:14:32,040 --> 00:14:35,560 Speaker 7: We have to tackle our debt. We have to reduce 276 00:14:35,640 --> 00:14:40,760 Speaker 7: our deficit spending. We have to right size the federal government. 277 00:14:41,400 --> 00:14:46,640 Speaker 7: Spending is out of control. Joe Biden's disastrous first two 278 00:14:46,720 --> 00:14:51,360 Speaker 7: years gave us record inflation. It despite the cost of living, 279 00:14:52,200 --> 00:14:54,440 Speaker 7: and we have to unwind a. 280 00:14:54,400 --> 00:14:54,960 Speaker 6: Lot of this. 281 00:14:55,400 --> 00:14:57,480 Speaker 7: You look at a state like New York, it is 282 00:14:57,640 --> 00:15:01,480 Speaker 7: floundering because of some of the economic pressures. 283 00:15:02,120 --> 00:15:03,040 Speaker 6: And just think about this. 284 00:15:03,560 --> 00:15:08,440 Speaker 7: The MTA has more debt than eighty percent of the 285 00:15:08,480 --> 00:15:12,520 Speaker 7: states in the country. So debt is a major problem. 286 00:15:12,600 --> 00:15:16,320 Speaker 7: It's something that we have to deal with across the board. 287 00:15:16,960 --> 00:15:21,560 Speaker 7: We cannot continue to print and borrow money at the 288 00:15:21,640 --> 00:15:22,440 Speaker 7: levels that we have. 289 00:15:22,680 --> 00:15:25,440 Speaker 2: Do you think we can afford to extend CCJA, which 290 00:15:25,480 --> 00:15:27,680 Speaker 2: baseline is something like four to five trillion? Do you 291 00:15:27,760 --> 00:15:29,800 Speaker 2: think we can afford to include an expansion of cell 292 00:15:29,920 --> 00:15:32,680 Speaker 2: tax deductions? In Congressman, I wouldn't push back against anything 293 00:15:32,760 --> 00:15:35,040 Speaker 2: you said about the effort that needs to take place. 294 00:15:35,080 --> 00:15:37,560 Speaker 2: I swear I'm just wondering how much fiscal space you 295 00:15:37,600 --> 00:15:40,040 Speaker 2: and your colleagues believe we actually have at the moment. 296 00:15:40,800 --> 00:15:45,400 Speaker 7: Look, tax policy is critical to economic growth, but it's 297 00:15:45,440 --> 00:15:49,480 Speaker 7: one part. We need to increase domestic production of energy, 298 00:15:49,760 --> 00:15:54,280 Speaker 7: which will help generate more revenues. Energy policy is also critical, 299 00:15:54,360 --> 00:15:58,720 Speaker 7: not just domestically for cost, but for national security. You 300 00:15:58,760 --> 00:16:02,680 Speaker 7: were talking obviously about the threats to Europe from Russia. 301 00:16:02,880 --> 00:16:07,400 Speaker 7: Europe is still buying gas from Russia. It's idiotic. It 302 00:16:07,560 --> 00:16:10,720 Speaker 7: makes no sense that they're helping fund the very war 303 00:16:10,800 --> 00:16:14,320 Speaker 7: they're trying to stop. So there is a lot that 304 00:16:14,400 --> 00:16:19,080 Speaker 7: has to be done here, including reigning in federal spending. Obviously, 305 00:16:19,440 --> 00:16:22,160 Speaker 7: as we work through the tax cuts, we will look 306 00:16:22,240 --> 00:16:26,800 Speaker 7: to help offset some of the cost through spending reduction. 307 00:16:27,000 --> 00:16:30,120 Speaker 7: So this is going to be a comprehensive approach to 308 00:16:30,280 --> 00:16:32,600 Speaker 7: how we right size the American economy. 309 00:16:32,880 --> 00:16:34,120 Speaker 6: I do think it's possible. 310 00:16:34,240 --> 00:16:36,200 Speaker 7: It's going to be one of the most critical things 311 00:16:36,240 --> 00:16:40,480 Speaker 7: any of us ever do in our careers in government, 312 00:16:41,120 --> 00:16:43,440 Speaker 7: and so we all have to be committed to the 313 00:16:43,480 --> 00:16:44,479 Speaker 7: final cause. 314 00:16:44,240 --> 00:16:46,120 Speaker 2: Here, and we're certainly looking forward to continue in the 315 00:16:46,120 --> 00:16:48,880 Speaker 2: conversation with you, sir, in your current capacity and maybe 316 00:16:48,880 --> 00:16:51,160 Speaker 2: in the future. Is the next government of the Great 317 00:16:51,160 --> 00:16:53,880 Speaker 2: State of New York. Mike Laondad Congressman. Thank you, sir, 318 00:16:53,960 --> 00:17:06,639 Speaker 2: appreciate it. We begin this side with stock steady investors 319 00:17:06,640 --> 00:17:09,320 Speaker 2: taking stock of an equity and bond market sell off 320 00:17:09,320 --> 00:17:11,320 Speaker 2: in the last twenty four hours. Mike Wilson and Morgan 321 00:17:11,359 --> 00:17:14,600 Speaker 2: Stanley saying equities are right sensitive once again, which is 322 00:17:14,600 --> 00:17:17,680 Speaker 2: another reason to stick with quality. Rates are the most 323 00:17:17,720 --> 00:17:21,000 Speaker 2: important variable to watch in early twenty five. Mike joins 324 00:17:21,040 --> 00:17:23,480 Speaker 2: us now for more. Mike Wilson, Good morning, Happy New Year, 325 00:17:23,520 --> 00:17:25,320 Speaker 2: Good morning John. It's going to see you, sir. Let's 326 00:17:25,320 --> 00:17:27,400 Speaker 2: start with the bond market and the importance of it. 327 00:17:27,480 --> 00:17:29,959 Speaker 2: What is driving these yeld hire and how important is 328 00:17:30,000 --> 00:17:31,840 Speaker 2: the why to the equity market. 329 00:17:32,119 --> 00:17:33,080 Speaker 3: Yeah, that's the right question. 330 00:17:33,160 --> 00:17:35,000 Speaker 8: It's not just rates are going up, but why are 331 00:17:35,040 --> 00:17:37,080 Speaker 8: they going up? I think Lisa mentioned a few things 332 00:17:37,080 --> 00:17:39,000 Speaker 8: that are driving in an our view, which is some 333 00:17:39,080 --> 00:17:42,200 Speaker 8: of the fiscal sustainability questions. We have a new administration 334 00:17:42,280 --> 00:17:45,000 Speaker 8: and while it is the second version of Trump, it's 335 00:17:45,000 --> 00:17:47,320 Speaker 8: still uncertain, right, It's a new administration. There's a lot 336 00:17:47,320 --> 00:17:50,040 Speaker 8: of new cabinet members we just don't know. And usually 337 00:17:50,080 --> 00:17:53,359 Speaker 8: the first the first quarter after a new president and 338 00:17:53,440 --> 00:17:56,359 Speaker 8: new administration comes in, the markets typically don't do that well, right, 339 00:17:56,359 --> 00:17:58,520 Speaker 8: we rally into the election, have a relief, and then 340 00:17:58,560 --> 00:18:00,440 Speaker 8: we have these variables that we don't know. So the 341 00:18:01,160 --> 00:18:03,000 Speaker 8: main risk that we talked about a month ago was 342 00:18:03,040 --> 00:18:06,159 Speaker 8: probably US dollar strength and rates, and that was always 343 00:18:06,160 --> 00:18:08,000 Speaker 8: our view going into the election that Trump would be 344 00:18:08,040 --> 00:18:10,680 Speaker 8: good for stocks and probably not as good for bonds, 345 00:18:10,840 --> 00:18:12,679 Speaker 8: and that's exactly what's playing out. So we had this 346 00:18:12,720 --> 00:18:15,360 Speaker 8: euphoria around the election. We're getting a pullback on that. 347 00:18:15,400 --> 00:18:17,439 Speaker 8: There's two things that are driving rates now. I think 348 00:18:17,480 --> 00:18:20,600 Speaker 8: it's more about inflation and physical sustainability than it is 349 00:18:20,680 --> 00:18:22,960 Speaker 8: about growth, and that's the key, and that's why the 350 00:18:23,119 --> 00:18:26,760 Speaker 8: rate sensitivity now matters. For equity multiples. We tracked this closely, right, 351 00:18:26,760 --> 00:18:30,680 Speaker 8: The correlation between multiples and rates flipped negative again when 352 00:18:30,720 --> 00:18:33,199 Speaker 8: we crossed over four point five percent, almost exactly what 353 00:18:33,240 --> 00:18:35,760 Speaker 8: we thought because that's what we experienced last year in April, 354 00:18:36,080 --> 00:18:38,760 Speaker 8: so it makes perfect sense. So this is the issue. 355 00:18:39,160 --> 00:18:40,879 Speaker 8: We don't know how it's going to resolve itself. But 356 00:18:41,000 --> 00:18:43,680 Speaker 8: until this does resolve itself in a favorable way, meaning 357 00:18:43,760 --> 00:18:46,760 Speaker 8: rates go back below four point five percent and term 358 00:18:46,760 --> 00:18:49,159 Speaker 8: premium comes down, right, that's the other part of the variable. 359 00:18:49,240 --> 00:18:51,920 Speaker 8: So term premiums up seventy seven to eighty basis points 360 00:18:51,920 --> 00:18:54,760 Speaker 8: somewhere net range. That's a massive move, I mean in 361 00:18:54,800 --> 00:18:57,200 Speaker 8: a very short period of time. So I'm actually surprised 362 00:18:57,200 --> 00:19:00,240 Speaker 8: that multiple seven come down more. Okay, Now, part is 363 00:19:00,280 --> 00:19:02,879 Speaker 8: because the high quality stocks are where people are crowding 364 00:19:02,880 --> 00:19:05,800 Speaker 8: into still, not only in the US but globally, and 365 00:19:05,840 --> 00:19:08,160 Speaker 8: that's probably keeping the S and P multiple a little 366 00:19:08,200 --> 00:19:11,400 Speaker 8: higher than it would be normally. But this persists, multiples 367 00:19:11,440 --> 00:19:12,240 Speaker 8: are going to come in more. 368 00:19:12,560 --> 00:19:15,400 Speaker 2: That mix is toxic for risk ampetsite. The way you've 369 00:19:15,440 --> 00:19:17,680 Speaker 2: laid out things, we have Tolston slock and you'll see 370 00:19:17,760 --> 00:19:20,240 Speaker 2: yesterday from Apollo who raised the risk of a repeat 371 00:19:20,280 --> 00:19:22,800 Speaker 2: of twenty twenty two. Would you share that fear a 372 00:19:22,880 --> 00:19:25,240 Speaker 2: year in which stocks and bonds do poorly? 373 00:19:25,400 --> 00:19:26,880 Speaker 8: Yeah, I think that's I think that's fair. I only 374 00:19:27,000 --> 00:19:28,840 Speaker 8: I mean nearly a severe. I mean the Fed's not 375 00:19:28,920 --> 00:19:30,720 Speaker 8: raising rates. I mean in twenty twenty two, I mean 376 00:19:30,800 --> 00:19:33,160 Speaker 8: they raise rates four hundred basis points and that's not happening. 377 00:19:33,200 --> 00:19:35,520 Speaker 8: So I think that's a little extreme to say that, 378 00:19:35,600 --> 00:19:37,760 Speaker 8: you know, bonds are not going to sell out that much. Okay, 379 00:19:37,760 --> 00:19:40,199 Speaker 8: that's point number one. Point number two though, is that 380 00:19:40,680 --> 00:19:44,600 Speaker 8: multiples are much higher coming into this year than they were, 381 00:19:44,640 --> 00:19:47,600 Speaker 8: say in twenty twenty two, relative to where bond yields are, 382 00:19:47,640 --> 00:19:49,800 Speaker 8: So in other words, I've been surprised. I think a 383 00:19:49,800 --> 00:19:52,080 Speaker 8: lot of people have been surprised that multiples have gotten 384 00:19:52,119 --> 00:19:54,800 Speaker 8: this high in the face of rates at four four 385 00:19:54,800 --> 00:19:56,200 Speaker 8: and a half five percent, I mean, that's where we've 386 00:19:56,200 --> 00:19:58,240 Speaker 8: been from the last year. That's probably been the single 387 00:19:58,280 --> 00:20:01,800 Speaker 8: biggest miss by any most people, then multiples could be 388 00:20:01,800 --> 00:20:04,080 Speaker 8: this high. So you have more give, i think, and 389 00:20:04,160 --> 00:20:06,439 Speaker 8: multiples to come down even if rates just stay in 390 00:20:06,480 --> 00:20:08,399 Speaker 8: this range. They don't have to go up hundred basis 391 00:20:08,400 --> 00:20:10,960 Speaker 8: points for multiples to come in ten percent. And that's 392 00:20:10,960 --> 00:20:12,560 Speaker 8: what we're trying to figure out. So what do you 393 00:20:12,600 --> 00:20:14,359 Speaker 8: do in that environment where you still stay at the 394 00:20:14,400 --> 00:20:16,960 Speaker 8: quality curve? Okay, that's typically what works. And if you 395 00:20:17,000 --> 00:20:18,480 Speaker 8: look at what happened by the way in the fall, 396 00:20:18,720 --> 00:20:22,680 Speaker 8: the low quality stocks absolutely when bonkers, So that has 397 00:20:22,760 --> 00:20:24,480 Speaker 8: to come out of the market. That's where we would 398 00:20:24,480 --> 00:20:27,720 Speaker 8: be most concerned or most kind of area we'd be 399 00:20:27,760 --> 00:20:30,280 Speaker 8: most avoiding for the next sort of three to six months. 400 00:20:30,320 --> 00:20:33,199 Speaker 1: What's interesting to me is how much the narrative has 401 00:20:33,240 --> 00:20:36,040 Speaker 1: shifted around which area of the equity market is most 402 00:20:36,080 --> 00:20:38,640 Speaker 1: rate sensitive. At one time, it was considered the high 403 00:20:38,640 --> 00:20:42,600 Speaker 1: flying tech stocks that would be really hit hard. Now 404 00:20:42,640 --> 00:20:44,800 Speaker 1: you're talking about actually some of the rest of the 405 00:20:44,840 --> 00:20:46,560 Speaker 1: index that you think you're going to have to come in. 406 00:20:46,960 --> 00:20:49,480 Speaker 1: Is that how you'd frame it that? Essentially, tech stocks 407 00:20:49,480 --> 00:20:51,480 Speaker 1: are not nearly as rate sensitive as a lot of 408 00:20:51,480 --> 00:20:52,960 Speaker 1: people used to think they were. 409 00:20:53,320 --> 00:20:56,800 Speaker 8: Well, let's be clear, not all tech stocks are created equal. Okay, 410 00:20:56,520 --> 00:21:00,879 Speaker 8: so we're you got to separate the ten magical stocks 411 00:21:00,880 --> 00:21:03,000 Speaker 8: whatever you want to call them, versus everybody else. If 412 00:21:03,000 --> 00:21:05,040 Speaker 8: you look at the average tech stock, right, you look 413 00:21:05,080 --> 00:21:08,400 Speaker 8: at the equal weighted Tech index, it's been lousy, right, 414 00:21:08,440 --> 00:21:11,560 Speaker 8: it hasn't performed that well relative to the overall market. 415 00:21:11,640 --> 00:21:12,680 Speaker 6: Looks like the average stock. 416 00:21:13,080 --> 00:21:16,639 Speaker 8: So once again, you know, we're talking about monopolies here, Okay, 417 00:21:16,720 --> 00:21:20,320 Speaker 8: monopoly businesses, high quality businesses, and it's not just tech stocks, right, 418 00:21:20,320 --> 00:21:22,720 Speaker 8: there's just about thirty forty fIF types of these businesses. 419 00:21:22,920 --> 00:21:26,760 Speaker 8: They will typically hold up until growth becomes a serious problem. 420 00:21:26,760 --> 00:21:28,159 Speaker 8: Like that's not where we are right now. We're not 421 00:21:28,200 --> 00:21:30,520 Speaker 8: in a recession. We're not in a situation where growth 422 00:21:30,560 --> 00:21:32,360 Speaker 8: is going to really disappoint like it did in twenty 423 00:21:32,440 --> 00:21:34,280 Speaker 8: twenty two. That was the big difference I think in 424 00:21:34,280 --> 00:21:36,199 Speaker 8: twenty two versus today is at twenty two, we had 425 00:21:36,200 --> 00:21:39,239 Speaker 8: a massive earnings recession. Okay, I mean it led by 426 00:21:39,280 --> 00:21:41,960 Speaker 8: the magnificent seven. By the way, that's not what we're 427 00:21:42,240 --> 00:21:45,160 Speaker 8: forecasting right now. So that's what probably keeps a bid 428 00:21:45,240 --> 00:21:47,320 Speaker 8: into some of the higher quality parts of the market. 429 00:21:47,560 --> 00:21:47,720 Speaker 3: Now. 430 00:21:47,880 --> 00:21:50,040 Speaker 8: Having said that, if we go through five percent and 431 00:21:50,160 --> 00:21:52,879 Speaker 8: term premium continues to go, yeah, the exposure and the 432 00:21:52,880 --> 00:21:55,520 Speaker 8: equity market is in that space and those stocks will 433 00:21:55,560 --> 00:21:58,040 Speaker 8: eventually get clipped the hardest. But that's not We're not 434 00:21:58,119 --> 00:21:59,359 Speaker 8: quite at that threshold yet. 435 00:22:00,119 --> 00:22:03,720 Speaker 1: Mentioning Dorson Slock a number of other guests yesterday, we're 436 00:22:03,720 --> 00:22:05,960 Speaker 1: talking about how important it is to have an increasing 437 00:22:06,000 --> 00:22:08,840 Speaker 1: allocation to cash at a time when there is going 438 00:22:08,880 --> 00:22:10,600 Speaker 1: to be a lot of volatility and there is great 439 00:22:10,680 --> 00:22:15,200 Speaker 1: uncertainty about rate sensitivity as well as fiscal policy in Washington, 440 00:22:15,240 --> 00:22:15,440 Speaker 1: d C. 441 00:22:15,600 --> 00:22:17,320 Speaker 3: Do you agree with that cash. 442 00:22:17,040 --> 00:22:17,600 Speaker 6: Is great right now? 443 00:22:17,640 --> 00:22:20,080 Speaker 8: I mean you're getting a really good real return, you 444 00:22:20,119 --> 00:22:22,440 Speaker 8: have no duration risks, Like what's wrong with cash doesn't 445 00:22:22,440 --> 00:22:25,399 Speaker 8: mean you have forty percent cash, but like we're still 446 00:22:25,560 --> 00:22:28,639 Speaker 8: very much short duration right. So when I say cash, 447 00:22:28,680 --> 00:22:30,600 Speaker 8: it's like two years an in. I mean, that's a 448 00:22:30,680 --> 00:22:32,480 Speaker 8: cash management. By the way, that's what most clients have 449 00:22:32,520 --> 00:22:34,919 Speaker 8: been doing, you know, having a barbell of kind of 450 00:22:34,920 --> 00:22:37,840 Speaker 8: your equity portfolio, your risk assets, and then within your 451 00:22:37,840 --> 00:22:41,160 Speaker 8: fixed thinking portfolio, they've basically shortened their duration. So that's 452 00:22:41,240 --> 00:22:44,159 Speaker 8: essentially where how people are positioned cash heavy and then 453 00:22:44,160 --> 00:22:46,359 Speaker 8: maybe taking a little more risk in their equity portfolio. 454 00:22:46,760 --> 00:22:49,280 Speaker 8: That's not that barbells work quite well, and I don't 455 00:22:49,280 --> 00:22:50,280 Speaker 8: see why that's going to change. 456 00:22:50,320 --> 00:22:52,560 Speaker 5: You said, one thing that's different now than in twenty 457 00:22:52,600 --> 00:22:55,080 Speaker 5: twenty two was the Fed was raising rates. We just 458 00:22:55,080 --> 00:22:56,879 Speaker 5: had Adam Posen on who thinks that Defen's going to 459 00:22:56,920 --> 00:22:59,119 Speaker 5: be forced to raise rates this year though, because of 460 00:22:59,160 --> 00:23:02,120 Speaker 5: what's going on policies in Washington, c and sticky inflation. 461 00:23:02,480 --> 00:23:04,600 Speaker 5: Do you think there's no chance at the FED raises 462 00:23:04,680 --> 00:23:05,280 Speaker 5: rates this year? 463 00:23:05,440 --> 00:23:07,080 Speaker 8: No, of course there's a chance. I mean, I mean, 464 00:23:07,320 --> 00:23:10,000 Speaker 8: I mean, I it' cent our house call. But if 465 00:23:10,080 --> 00:23:12,760 Speaker 8: things continue to move in this direction, and it's let's say, 466 00:23:12,840 --> 00:23:14,840 Speaker 8: let's say we get an oil risk, you know, to 467 00:23:14,880 --> 00:23:16,880 Speaker 8: the upside. Oil's kind of making a move right now, 468 00:23:17,080 --> 00:23:19,080 Speaker 8: I mean, that could cause the FED to raise rates 469 00:23:19,119 --> 00:23:21,399 Speaker 8: twenty five basis points. But even if we say that, okay, 470 00:23:21,440 --> 00:23:23,840 Speaker 8: we're not raising four hundred basis points, that I'm very 471 00:23:23,880 --> 00:23:26,959 Speaker 8: comfortable saying the chance that is zero. So that's how 472 00:23:26,960 --> 00:23:28,840 Speaker 8: I think it's different than twenty twenty two. In that sense, 473 00:23:28,880 --> 00:23:30,880 Speaker 8: I don't think there's as much a downside for rates, 474 00:23:31,240 --> 00:23:33,600 Speaker 8: but that doesn't mean there could be, you know, ten 475 00:23:34,560 --> 00:23:37,240 Speaker 8: ten percent downside for many stocks just if rates stay. 476 00:23:37,080 --> 00:23:37,720 Speaker 3: At this level. 477 00:23:37,960 --> 00:23:40,040 Speaker 5: It's only the second week of twenty twenty five and 478 00:23:40,040 --> 00:23:45,120 Speaker 5: already we've had multiple narratives on fiscal expansion, on tariffs. 479 00:23:45,440 --> 00:23:47,720 Speaker 5: What's one thing you would love to have clarity on 480 00:23:47,840 --> 00:23:49,600 Speaker 5: to understand the market this year? 481 00:23:49,880 --> 00:23:52,399 Speaker 8: Well, I think clearly tariffs is going to be the 482 00:23:52,400 --> 00:23:55,000 Speaker 8: one that is the most that's for equity investors, that's 483 00:23:55,040 --> 00:23:56,720 Speaker 8: going to be the biggest focus because that can affect 484 00:23:56,760 --> 00:24:00,359 Speaker 8: earnings probably the most severely. In growth right immigrant, I 485 00:24:00,359 --> 00:24:03,320 Speaker 8: think is going to be a kind of a push 486 00:24:03,359 --> 00:24:05,600 Speaker 8: and take. And I think the other one is taxes. 487 00:24:05,960 --> 00:24:07,960 Speaker 8: Are they going to try to get more tax cuts 488 00:24:07,960 --> 00:24:09,359 Speaker 8: through are they just going to try to extend the 489 00:24:09,400 --> 00:24:12,320 Speaker 8: existing tax cuts or you know, the current tax law, 490 00:24:12,840 --> 00:24:15,280 Speaker 8: and that will affect. I think that will affect race. 491 00:24:15,359 --> 00:24:18,199 Speaker 8: So it's really terriffs and taxes. I don't think we're 492 00:24:18,240 --> 00:24:19,840 Speaker 8: going to know about taxes for quite a while. I 493 00:24:19,880 --> 00:24:21,399 Speaker 8: think tariffs we're going to know quite a bit in 494 00:24:21,400 --> 00:24:23,399 Speaker 8: the next month or two. And we've said this for 495 00:24:23,440 --> 00:24:24,760 Speaker 8: a while, we said, I think we think the first 496 00:24:24,800 --> 00:24:26,639 Speaker 8: half is going to be is going to be choppy. Okay, 497 00:24:26,920 --> 00:24:29,320 Speaker 8: second half if things, if they can execute in all 498 00:24:29,359 --> 00:24:31,159 Speaker 8: these policies and we can kind of get to a 499 00:24:31,160 --> 00:24:33,440 Speaker 8: point where the markets get comfortable with this, the second 500 00:24:33,440 --> 00:24:35,480 Speaker 8: half of the year could be much much better for equities. 501 00:24:35,720 --> 00:24:37,920 Speaker 1: What do you like? Where are the opportunities? And there's 502 00:24:37,960 --> 00:24:40,720 Speaker 1: hiding out in quality stocks, But is there anything that's 503 00:24:40,720 --> 00:24:41,760 Speaker 1: getting you actually excited? 504 00:24:41,960 --> 00:24:44,280 Speaker 8: Well, I think the area we've been most wellish is financials. 505 00:24:44,359 --> 00:24:46,080 Speaker 8: I do think that's an area where there's it seems 506 00:24:46,119 --> 00:24:48,679 Speaker 8: to be a lot of a coalition around deregulation. There 507 00:24:48,720 --> 00:24:50,240 Speaker 8: is pent up demand for M and A, there's pent 508 00:24:50,320 --> 00:24:52,959 Speaker 8: up demand for other capital market activities. So I do 509 00:24:53,000 --> 00:24:54,920 Speaker 8: think financial is an area we continue to think there's 510 00:24:55,000 --> 00:24:55,600 Speaker 8: value there, and. 511 00:24:55,520 --> 00:24:56,680 Speaker 6: That's that's a global call. 512 00:24:56,880 --> 00:24:59,840 Speaker 8: The second one is probably energy and commodities and materials, 513 00:25:00,200 --> 00:25:02,680 Speaker 8: these parts of the market that we can't do. All 514 00:25:02,720 --> 00:25:05,240 Speaker 8: these things everybody wants to do, like build data centers, 515 00:25:05,240 --> 00:25:08,080 Speaker 8: you know, add you know, add infrastructure, you know, robotics 516 00:25:08,119 --> 00:25:10,600 Speaker 8: and all these things. You need materials, you need energy 517 00:25:10,640 --> 00:25:12,159 Speaker 8: for that. So I think those are areas that have 518 00:25:12,200 --> 00:25:15,640 Speaker 8: been underlooked, overlooked by the market, underappreciated by the market, 519 00:25:15,920 --> 00:25:17,560 Speaker 8: that could be quite interesting this year. 520 00:25:17,760 --> 00:25:19,520 Speaker 2: Mike, got to see you enjoyed the night to start 521 00:25:19,600 --> 00:25:22,040 Speaker 2: the week as well, My Wilson that Morgan Stanley, thank you. 522 00:25:23,000 --> 00:25:26,560 Speaker 2: This is the Bloomberg Sevenance podcast, bringing you the best 523 00:25:26,600 --> 00:25:30,160 Speaker 2: in markets, economics, angiopolitics. You can watch the show live 524 00:25:30,240 --> 00:25:33,240 Speaker 2: on bloomblog TV weekday mornings from six am to nine 525 00:25:33,320 --> 00:25:37,040 Speaker 2: am Eastern. 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