Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordernt. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business App. I'm very pleased to
Speaker 2: say that joining us now is the Bank for America
Speaker 2: Chare CEO, Brian moynihan. Brian, of course in London, we're
Speaker 2: here in New York. You're actually in our home and
Speaker 2: we're in yours. So thank you, sir for making that happen. Brian,
Speaker 2: Let's get to this leadership shake up because we've got
Speaker 2: a lot to talk about. Eight lines of business, two
Speaker 2: very prominent individuals in this bank, at this institution. How
Speaker 2: do you and the team plan to split up responsibilities.
Speaker 3: Well, it's good to talk to you both, and thank
Speaker 3: you for coming.
Speaker 4: To our great corporate headquarters.
Speaker 3: Hope that they're treating you nicely out there. Look, this
Speaker 3: is a recognition of three teammates, said Dean and Jim
Speaker 3: and Alistair, and they contributed to they made to our
Speaker 3: company and helping bringing Jim and Dean to help me
Speaker 3: leverage across the businesses.
Speaker 4: And there's a lot of initiatives we.
Speaker 3: Conduct across the company, our growth work streams, our operational.
Speaker 4: Excellence, our.
Speaker 3: AI initiatives and things, and I've asked them to come
Speaker 3: help me. Meanwhile, it also frees up space for that
Speaker 3: talent group. And you're talking to a lot of today
Speaker 3: what's Lindsay or Eric or Wendy and others that continue
Speaker 3: to drive those eight businesses for us and own the
Speaker 3: business and own the responsibility for P and L.
Speaker 4: And there's a lot of talent that levels.
Speaker 3: So the idea is to bring them to help leverage
Speaker 3: my time, leverage a company's time, leverage a company wide initiatives,
Speaker 3: and then let that talent that drives those businesses keep
Speaker 3: making great progress.
Speaker 2: Brian, there is an obvious I have some comfortable questions.
Speaker 2: Some people might have responded to this and just thought,
Speaker 2: is Brian's setting up for six session or is this
Speaker 2: just about change and how the companies.
Speaker 4: Run well long term.
Speaker 3: We have one of the duties that I and the
Speaker 3: whole management team owes the board of directors as a
Speaker 3: series of candidates that have the experience to run this
Speaker 3: company over time. I'm not going anywhere in the short term,
Speaker 3: but in the medium term. But it takes a while
Speaker 3: to set that up and get people used to the
Speaker 3: size and scale this company. So you all report all
Speaker 3: those ins and outs of succession, but the reality.
Speaker 4: Is we're a team and we're driving forward.
Speaker 3: There's a lot of talent teammates and the board will
Speaker 3: have to make a decision someday based on the facts
Speaker 3: and circumstances at the time.
Speaker 5: Brian, you talk about some of the new initiatives and
Speaker 5: looking forward to the bank, the Dean and the gym
Speaker 5: that will be of the future partnering together. I'm wondering
Speaker 5: what you're hoping they can accomplish, whether it's the AI
Speaker 5: initiatives or beyond, what kind of projects you're hoping that
Speaker 5: they will spearhead.
Speaker 3: Well, we have a lot of things going For the
Speaker 3: last six last year, we've been working on some work
Speaker 3: streams to help drive expense sufficiency and implementation new technologies
Speaker 3: and at the same time drive growth. How we take
Speaker 3: risk and continue to look at our risk parameters and
Speaker 3: so what I'm asking them is to and they've helped
Speaker 3: drive those well, they've been doing our old jobs and
Speaker 3: I've said, come do this full time and that'll give
Speaker 3: us more leverage across the platform. Our company has a
Speaker 3: great reach we have, you know, we're all over the
Speaker 3: globe and Bernie Men's and the team here and out
Speaker 3: of London run all the.
Speaker 4: International businesses for us.
Speaker 3: We're in a lot of countries, a lot of teammates
Speaker 3: around the world. We just announced a thousand more teammates
Speaker 3: that we're building out here in UK and they can
Speaker 3: help the company drive that and put the key to
Speaker 3: the top of big company of guards is to work
Speaker 3: the seams, work the business connections. And so Jimmy this
Speaker 3: capabilities as he works for the Wealth Management Group and
Speaker 3: Lindsay and Eric on the clients that we have, especially
Speaker 3: in the high you know, the hirer end clients that
Speaker 3: he has relationships with who are hedge fund operators and
Speaker 3: things like that. So there's a lot of inities, but
Speaker 3: it's it's really about revenue growth, organic revenue growth and
Speaker 3: expense efficiency and also thinking through how technology applies. It
Speaker 3: just gives me more power at the top of the
Speaker 3: house to join us. And these teammates have done a
Speaker 3: great job.
Speaker 2: I imagine it's going to be united. From the investor
Speaker 2: day in November, the first one in some fifteen years,
Speaker 2: you mentioned the CFO now Executive vice president Alistair Borthwick
Speaker 2: said this, the most important thing from our perspective is
Speaker 2: we feel like we've got an opportunity to close a
Speaker 2: relative value gap. Brian, can we talk about that relative
Speaker 2: value gap? Where do you think that comes from? What
Speaker 2: is it that you think perhaps investors don't fully understand.
Speaker 3: Well, as you look at the company, you have a
Speaker 3: greater granted growth engine. So we'll do a million new
Speaker 3: checking households, and our average checking.
Speaker 4: Balances are three times four times industry norm and we're
Speaker 4: building that up.
Speaker 3: What we're trying to showcase is what Bank of America
Speaker 3: is is an organic growth machine on a very steady
Speaker 3: compounding basis. So if you look at the projection for
Speaker 3: our earnings growth rates by the street, they're faster than
Speaker 3: the average company as the balance reprices and things go on.
Speaker 3: But trying to showcase is to put on the table
Speaker 3: basically the metrics that we run this company by across
Speaker 3: the eight lines of business and how they work together,
Speaker 3: and then the international piece, and then AI and some
Speaker 3: of the other things we work on the payments business,
Speaker 3: which is embedded in the lines of business but is
Speaker 3: a separate business.
Speaker 4: It really showed three things.
Speaker 3: We have a competitive position that no one else has
Speaker 3: where you know, we just announced yesterday with the largest
Speaker 3: small business Lenner. We have a competitive growth rate in
Speaker 3: the organic growth that's there.
Speaker 4: And then because of.
Speaker 3: Our the dynamics are a NII lift which it will
Speaker 3: be growing as we've told people six to seven percent
Speaker 3: this year. You're going to see the EPs KEYP kicking
Speaker 3: in and the operating leverage come into the business and
Speaker 3: the return on tandem common equity keeps moving up.
Speaker 4: And that's that's when we lay up.
Speaker 3: But gears off that good core or granted growth with
Speaker 3: the right risk that we drive.
Speaker 4: This company by.
Speaker 5: Brian as John is just mentioning this is the first
Speaker 5: and fifteen years, why now what changed for you? And
Speaker 5: is this going to be a new annual thing?
Speaker 3: You know, I think we have thirty five Analystic covers.
Speaker 3: We spend time at all the conferences we spend time individually,
Speaker 3: but think about putting on a table to know where
Speaker 3: the company stands right now. As we see after the
Speaker 3: pandemic and after the interest rate changes and after inflation
Speaker 3: fights and all that stuff, we see that people putting
Speaker 3: on a table where we are in organic growth and
Speaker 3: how it works together is critical, and I think, yeah,
Speaker 3: you should expect us to do it more often.
Speaker 4: You know, we have a lot of connectivity to the people.
Speaker 3: Actually own our stock and talk to them all the time,
Speaker 3: but this is a chance to sort of lay it
Speaker 3: all out so they can see it together and to
Speaker 3: look at some of these initiatis are unique, like our
Speaker 3: employee Banking Investment Initiative, our continuum, our Marril Edge through
Speaker 3: Merrill Lynch and a private bank, and the ability for
Speaker 3: us to take a customer literally from the first bank
Speaker 3: account their entire life, no matter what happens to them.
Speaker 3: On an individual side, or a small business for me
Speaker 3: today that becomes the largest company world, or an individual
Speaker 3: trader that builds up that capability and becomes a hedge
Speaker 3: fund manager. The idea of these continuums and things like
Speaker 3: that are really important, and so we hope to put
Speaker 3: that on a table and make sure people see it,
Speaker 3: and then we'd annually update it, but sort of put
Speaker 3: a baseline on the table.
Speaker 5: So, Brian, it seems like you're moving toward a greater
Speaker 5: degree of transparency or at least availability at a time
Speaker 5: where the President is talking about potentially moving from a
Speaker 5: quarterly reporting system from public companies to a six month
Speaker 5: reporting season, do you think that that would be helpful
Speaker 5: for you as a business manager if you had to
Speaker 5: report less frequently in terms of filing.
Speaker 3: Yeah, At the end of the day, we run the
Speaker 3: company along the principal's responsible growth and how we run it,
Speaker 3: so it won't change how we run the company, may
Speaker 3: change how often we have to talk about it, and inherently,
Speaker 3: if you do two times a year versus four times
Speaker 3: a year, you'd save some money and some effort. But
Speaker 3: my guess is our investors are going to demand from
Speaker 3: us more constant reporting. So we'll see it all play out.
Speaker 3: It's an issue that was talked about over the last
Speaker 3: several years. If it's going to get done, it has
Speaker 3: to be done the right way. So it remains in
Speaker 3: place and we look forward to what comes out of
Speaker 3: the SEC and the process. But on the other hand,
Speaker 3: we are very transparent what we do. We put a
Speaker 3: lot of information out there, things like our digital capabilities
Speaker 3: that no one else reports on quite frankly, and again
Speaker 3: with the investor Day, we'll be able to show that
Speaker 3: and really challenge people say, look, if this is what's
Speaker 3: going on. If you've taken a company at three hundred
Speaker 3: thousand people fifteen years ago that has two hundred and
Speaker 3: twelve thousand people today and applied that technology, you just
Speaker 3: think as we start to apply AI more fully, we
Speaker 3: already have Erica three billion customer interactions, but as that
Speaker 3: applies more fully, you'll see the ability for us to
Speaker 3: continue to manage the headcount and the company well while
Speaker 3: the revenue keeps growing. And so I think we'll report
Speaker 3: on that more often than every six months, is my guests.
Speaker 3: Based on the demand of our investors.
Speaker 2: Lisa, I imagined some CEOs might welcome this. Yes, even
Speaker 2: if some investors done, they.
Speaker 5: Might welcome this, but will they be allowed to actually
Speaker 5: follow it by their investors?
Speaker 6: And that I think is what Brian is alluding to.
Speaker 2: I think investors will demand much more transparency. Brian, I
Speaker 2: want to talk about an initiative close to your heart.
Speaker 2: The news that we got about fifteen twenty five minutes
Speaker 2: ago that you're increasing the minimum wage to twenty five
Speaker 2: dollars per hour. I remember a very early conversation with you,
Speaker 2: and this is something you're very proud of. This has
Speaker 2: gone up from say fifteen several years ago. Can you
Speaker 2: talk to us about why you've maintained this commitment to
Speaker 2: drive in the minimum wage higher at Banks for America.
Speaker 4: Sure, so, let me set two things up.
Speaker 3: One over the course of today and tomorrow and yesterday,
Speaker 3: we've announced a series of insues.
Speaker 4: One is to locate one thousand.
Speaker 3: New teammates in the UK that will work in our
Speaker 3: operations group, and that was announced by Bernie and Tom Scrivener.
Speaker 3: The second one is torease to commit to our military
Speaker 3: hiring at Bank of America ten thousand military veterans over
Speaker 3: the next five years.
Speaker 4: We've done this from time.
Speaker 3: We have about twenty thousand working to increase that. Another
Speaker 3: is to increase eight thousand people from community colleges to
Speaker 3: print an opportunity at Bank of America to further the
Speaker 3: career and get into skills based training. That's a doubling
Speaker 3: or tripling of what we do today. And then we're
Speaker 3: the seventy five branches that we're deploying and the teammates there.
Speaker 4: And the third piece is the minimum wage.
Speaker 3: And so we started on a travel a number of
Speaker 3: years ago with a view that to be we want
Speaker 3: teammates to come to Bank America with a career mindset,
Speaker 3: so join us. So today we're announcing twenty five dollars
Speaker 3: an hour, which is fifty thousand dollars for a starting
Speaker 3: salary across the country and hire in some places where
Speaker 3: the prevailing wages are higher. Obviously, but what that gives
Speaker 3: a teammate a chance to join our company, spend their
Speaker 3: whole career here, and support their families. So not only
Speaker 3: is it the twenty five dollars an hour minimum starting wage,
Speaker 3: it's the benefit structure, which is a full four and
Speaker 3: K match, a full benefit costs that we for the
Speaker 3: teammates in the brackets of twenty five dollars an hour.
Speaker 3: We basically dropped their premium coverage and healthcare in twenty
Speaker 3: twelve from five hundred dollars a month to two hundred
Speaker 3: and fifty dollars a months.
Speaker 4: Our family have.
Speaker 3: Never raised it to provide great health care forum and
Speaker 3: then our childcare benefits, so it's a package. So where's
Speaker 3: that payback for the investor. Where that pays back to
Speaker 3: the investor is the turnover rate. And when we started
Speaker 3: this program in the high volume operations groups and the
Speaker 3: branches was twenty percent. It's now down to basically tennis percenter.
Speaker 4: So even below that.
Speaker 3: That stability in that career mindset allows us to do a
Speaker 3: much better job for our clients. And what you've seen
Speaker 3: is the attrition in the term teammates has gone down.
Speaker 3: You've seen the attrition the customer's gone down, and you've
Speaker 3: seen our customer scores dramatically improve over the last fifteen
Speaker 3: years due to this relentless pursuit to be a career employer.
Speaker 3: So yes, we're very proud of twenty five dollars an hour,
Speaker 3: but there's an economic benefit for the shareholder and there's
Speaker 3: a great position for the teammate at the same time.
Speaker 2: Brian, I wonder also what it says about the situation
Speaker 2: the current environment. It's very strange that we're going into
Speaker 2: this decision with the Federal Reserve talking about twenty five
Speaker 2: fifty basis points of rate cuts and maybe more. Your
Speaker 2: team has talked consistently throughout this morning about the amount
Speaker 2: of resilience they see in the US economy. Payhikes like
Speaker 2: this aren't the kind of things you would typically see
Speaker 2: in a recession. What's your sense of just how tight
Speaker 2: a week loose this labor market actually is right now?
Speaker 3: Well, I think if you think of twenty three summer,
Speaker 3: you know, the great resignation, it was very tight, then
Speaker 3: it loosened up, and it's more imbalanced now. So our
Speaker 3: turn of rate in our company is running about eight percent.
Speaker 3: It even in places like tech programmers, of which we
Speaker 3: have thirty forty thousand of them, we're running in double
Speaker 3: digits is now and three four percent. And what that
Speaker 3: shows you the bin in the markets different, which then
Speaker 3: shows you people being more careful at headcount. And you
Speaker 3: heard some of my colleagues talk to you about that.
Speaker 4: So I think the.
Speaker 3: Unemployment rate is still low, but I think businesses are
Speaker 3: being much more careful in management a headcount for.
Speaker 4: A number of reasons.
Speaker 3: One is to get by understanding how all the policies
Speaker 3: are coming at and fit together. I'm talking about US
Speaker 3: businesses mainly, and then secondly, they're also making sure that
Speaker 3: they're careful. And I heard some of my colleagues talk
Speaker 3: to you about this earlier. As you think about this
Speaker 3: application of technology, we know what this does. We have
Speaker 3: half as many people work in the consumer business, and
Speaker 3: did we did a decade decade plus ago. We have
Speaker 3: half as many people working operations. We know that as
Speaker 3: these technologies could apply to our legal department, our account
Speaker 3: our finance department under alistair, our risk department, teammates. We
Speaker 3: know that if we manage the headcount carefully, we will
Speaker 3: do it. So we look at headcount very carefully and say,
Speaker 3: don't hire people unless you really need them, not because
Speaker 3: we're trying to save money, because frankly, from a human
Speaker 3: management capabilities, we don't want to have people who won't.
Speaker 4: Be able to have a career here.
Speaker 3: So we just hired two thousand plus kids from school,
Speaker 3: so we brought in all those new talent. We'll hire
Speaker 3: these ten thousand veterans, we'll hire these eight thousand people
Speaker 3: from community college. But each month we get the right
Speaker 3: to make a decision on whether we're going to hire
Speaker 3: about thirteen to fifteen hundred people.
Speaker 4: And we're just managing that very carefully.
Speaker 3: So I think we're an example of what's going on
Speaker 3: to broad a labor market.
Speaker 4: You heard Wendy and.
Speaker 3: My colleagues talk about it. All the companies are trying
Speaker 3: to manage us and make sure they get the headcount
Speaker 3: right because that is a major expense for a lot
Speaker 3: of firms.
Speaker 5: Brian, about a year ago you were talking to us
Speaker 5: about the ramifications of AI and the explosion of efficiency,
Speaker 5: and you said that you think that headcount could remain
Speaker 5: about the same at the bank even as the business
Speaker 5: continue to expand, just in total size. I'm wondering if
Speaker 5: that's shifted, if you still see that as the natural
Speaker 5: progression of the relationship between the adoption of machine based
Speaker 5: learning and the relationship to your headcount.
Speaker 3: So there are two things that one, I think the
Speaker 3: time we were talking, we are probably closer two hundred
Speaker 3: and sixteen seventeen thousand people or two hundred thirteen thousand,
Speaker 3: So I think we'll be managing this down.
Speaker 4: But remember, at the same.
Speaker 3: Time we're managing out through operational excellence and efficiencies of
Speaker 3: applied technology. We are now we are deploying, so we're
Speaker 3: adding when he's added commercial bankers and all the markets
Speaker 3: and sharing a team added business bankers and all the markets,
Speaker 3: and Katie and Lindsay and Eric adding financial advisors and
Speaker 3: private bankers. So we're adding front end people, sales traders,
Speaker 3: et cetera. To keep building out our capabilities, and so
Speaker 3: there's a reinvestment going on. The key to that is
Speaker 3: really to read a eploying people and reskilling them. So
Speaker 3: when we bring these two thousand plus teammates and who
Speaker 3: just joined us in the last month and a half,
Speaker 3: we have to be more mindful about training them along
Speaker 3: multiple dimensions than we might have been two or three
Speaker 3: years ago. So I think, yes, I think ultimately the
Speaker 3: human being content of our work product would probably come down,
Speaker 3: but if we manage it right, it'll be flat to
Speaker 3: the same amount of people, maybe down a little bit,
Speaker 3: but all paid more and all being applied to the
Speaker 3: highest value tasks where frankly, the machines can't do the work.
Speaker 4: And that's the important thing.
Speaker 3: We know these We know what this AI can do
Speaker 3: in today's world. Erica has been out there for seven years,
Speaker 3: three billion customer interactions, twenty million customers using.
Speaker 4: It all the time. We see what it could do.
Speaker 3: We took that and put it in our commercial business
Speaker 3: We took that and put it in our internal process.
Speaker 3: We got other models to help in Jimmy DeMar's business
Speaker 3: in terms of a thing called optimists and things like that.
Speaker 3: There's a lot of out there, but what you're learning
Speaker 3: is is still augmented intelligence and that will be what's
Speaker 3: driving the near term efficiency. So yes, I think the
Speaker 3: headcount management is one of the core tasks that managers
Speaker 3: have to take.
Speaker 5: Seriously, I'm just wondering, Brian, as you train all of
Speaker 5: these new students, how do you make sure that they
Speaker 5: stay with you and don't go to some of your
Speaker 5: brethren across the way in the private asset sphere.
Speaker 3: Well, we provide them a good opportunity and look, they
Speaker 3: can go other places, but we've been able to retain enough.
Speaker 3: We're completely happy and look even for our clients.
Speaker 4: Frankly, if they.
Speaker 3: Hire our teammates, it's not the worst thing that happens
Speaker 3: in all our businesses. But the roality is is that
Speaker 3: we want these teammates to have a career mindset. In October,
Speaker 3: I'll celebrate our teammates have been with our company fifty years,
Speaker 3: fifty five years, sixty years, et cetera. And you hear
Speaker 3: their stories and their stories of I joined this company,
Speaker 3: I worked in a summer internship, I came may even.
Speaker 4: Work part time during college.
Speaker 3: I became a full time employee and I started doing
Speaker 3: this and now I do that. And those are wonderful stories,
Speaker 3: and we have them tell those stories to our teammates
Speaker 3: to show you that you can have a long term
Speaker 3: career at a company like ours. And that's what we
Speaker 3: want our teammates to come in with. They may not
Speaker 3: stay in trading or investment banking or corporate banking, but
Speaker 3: they'll have long term capabilities here.
Speaker 4: And you've seen that.
Speaker 3: Even top of house Alistair was a capital market sead
Speaker 3: and now he's the CFO, and so that goes on
Speaker 3: throughout the company.
Speaker 2: They swear an oath of allegiance, yes exactly, and you
Speaker 2: see them lining up this morning.
Speaker 7: That gave in before they come.
Speaker 5: In, I promise on my capushino, which is very good.
Speaker 2: By the way, Brian, I want to talk about the
Speaker 2: main fan that takes place later on this afternoon.
Speaker 7: I'm not going to ask for your guests.
Speaker 2: I know how much you respect the team behind me
Speaker 2: and some of the official forecast of the bank. I
Speaker 2: once to understand from your perspective, looking across the eight
Speaker 2: lines of business, whether you see an economy market activity
Speaker 2: that demands of rate cut from this Furer reserve.
Speaker 3: Well, you've had the benefit of all our experts, and
Speaker 3: we have the talent of extremely talented research team, and
Speaker 3: you also have some online of business teammates talk about
Speaker 3: what they see out there. I think you have to
Speaker 3: back up if you're if you think about last year
Speaker 3: this time, the projected growth rates for our team was
Speaker 3: probably one hundred basis points higher than it is today
Speaker 3: for twenty five and so that acceleration of growth, the
Speaker 3: prediction that was largely based.
Speaker 4: On a couple of things.
Speaker 3: One, rates would stay higher because inflation was kicking in,
Speaker 3: the impact of the uncertain terrorist et cetera, et cetera,
Speaker 3: all that's coming through the system now, so you're seeing
Speaker 3: some certainty fall into place on this. And I think
Speaker 3: also inflation was coming down. And I think so the
Speaker 3: tension the FED has to deal with, and you've been
Speaker 3: picking out it all day, is a tension between a
Speaker 3: higher inflation rate and ultimately where FED funds could settle
Speaker 3: in at And so whether they do twenty five basis
Speaker 3: points today or fifty people have to keep in mind
Speaker 3: the growth rate in economy was brought down and now.
Speaker 4: It's starting to go back up.
Speaker 3: So next year is predicted to be better this year
Speaker 3: and the year after is better than that. So you
Speaker 3: hear teammates talk about the economy growing back out, and
Speaker 3: that then means we're on the other side of it,
Speaker 3: And so the FED has to adjust to the inflat picture.
Speaker 3: As it got more in control. They can come down.
Speaker 3: They came down to one hundred basis points already. It
Speaker 3: can keep coming down, but they've got to be very
Speaker 3: mindful of the inflation side. And so I think when
Speaker 3: the people get in the room and they see the data,
Speaker 3: they have to think it through.
Speaker 4: The big newsance that you're referenced.
Speaker 3: Early was the labor market's gotten softer, so that gave
Speaker 3: them concerns. So I think, you know, the market believes
Speaker 3: and our teammates believe the cut rates, but I think
Speaker 3: the key for people is acceleration and growth and will
Speaker 3: growth reaccelerate. Our teammates seeing that we're seeing consumer spending
Speaker 3: strong and all those things which would indicate we'd see
Speaker 3: the acceleration next year is better than this year. Unemployment
Speaker 3: is not expected to go up a lot, even though
Speaker 3: the employement picture may be softer. But the most important
Speaker 3: thing is the long term interest rate scenario people projecting
Speaker 3: is a more normal rate environment that we saw before
Speaker 3: the financial crisis, say three percent plus or minds on
Speaker 3: the FEDS fund rate of four to four and a
Speaker 3: half percent or so, on a tenure rate, and a
Speaker 3: curve that's not inverted, that's normalized between that. The important
Speaker 3: thing is to get back to more of a normal environment,
Speaker 3: frankly with maybe a little higher in fla because a
Speaker 3: great debate about two percent is something you can get.
Speaker 3: Lots of experts talk about a little higher inflation, a
Speaker 3: little faster growth, and then frankly that'll help with some
Speaker 3: of the debt carry and other things going on in
Speaker 3: the US economy.
Speaker 5: Brian, it sounds like next year you see the bigger
Speaker 5: risk as potentially a surprising a bout of inflation and
Speaker 5: some sort of downturn.
Speaker 6: Is that correct?
Speaker 3: Well, I think the question is is how do you
Speaker 3: tolerate the inflation and temp the nature of it, what's
Speaker 3: come from. But you know, and I think that's the tension.
Speaker 3: All this I think is next year, as you get
Speaker 3: to the second quarter. As these policies are now in
Speaker 3: place and are behind us, are you going to see
Speaker 3: the acceleration and growth and where our businesses get start best,
Speaker 3: even faster if you listen. I think if you ask
Speaker 3: Wendy about it, she would tell you her commercial customers
Speaker 3: that have lines of credit are still borrowing less as
Speaker 3: a percentage of their availability than they did. It's sort
Speaker 3: of the seventeen eighteen nineteen timeframe where rates have been
Speaker 3: have been moved up and the economy is growing, and
Speaker 3: so why is that It probably not seemed quite the opportunity,
Speaker 3: and so they're trying to sort this all out, and well,
Speaker 3: you know, I've got the benefit in the honor of
Speaker 3: leading company, has this talented team behind us, and all
Speaker 3: the talent and money we spend on research and everything.
Speaker 3: If I'm running a company that the three of us
Speaker 3: owned and it was a manufacturing company, I got to
Speaker 3: figure out all myself that tends to hold people back.
Speaker 3: So that would be the case for acceleration. And then
Speaker 3: the question is if rate stay a little higher and
Speaker 3: the growth is hired, that's not a bad place for
Speaker 3: the America to be.
Speaker 2: Brian, just before you go, what is to sneak this
Speaker 2: in one final question, Whose door do I need to
Speaker 2: knock for World Cup tickets?
Speaker 7: Who makes that happen here?
Speaker 4: Well, you missed.
Speaker 3: You didn't bring David Tyree on, who's doing all our
Speaker 3: marketing and work, and so he's the guy that's got
Speaker 3: control of the tickets video has a great job.
Speaker 4: Or is look our relationship with FIFA. You know we
Speaker 4: did the you had.
Speaker 3: The Club World Cup, which was sort of the warm
Speaker 3: up and next year and you'll see us accelerate our efforts.
Speaker 3: We have great capabilities for our clients. But most importantly,
Speaker 3: this is a chance for America to showcase football soccer
Speaker 3: as we call it. It's a case for these cities
Speaker 3: that are hosting to put on a great show. And
Speaker 3: I think I can see the enthusiasm building.
Speaker 4: And you're not the first person that ask for take us, John,
Speaker 4: stay with us.
Speaker 2: More Bloomberg Surveillance coming up after this. Savita Subramani, the
Speaker 2: head of US Equity and Quantitative Strategy, right in the
Speaker 2: following It is difficult to be outright bearish on risk
Speaker 2: assets with signs of profits continuing to accelerate alongside a
Speaker 2: FED that is more likely to ease than hold short rates.
Speaker 2: Savita plus Jill Carey Hall, the head of US Small
Speaker 2: and midcapt strategy at Bank for America, joined us Now
Speaker 2: for more guys going to see you both.
Speaker 7: Great to be Thanks for being here, Savita.
Speaker 2: I want to start with you a central message of
Speaker 2: your research for a long long time. Never underestimate the
Speaker 2: resilience of corporate America.
Speaker 6: That's right.
Speaker 2: Is that a mistake? People have made it too many
Speaker 2: times this year so far.
Speaker 6: Yeah.
Speaker 8: I think we even made it after Liberation Day and
Speaker 8: thinking that, you know, we were going to see companies
Speaker 8: not being able to guide, not being able to navigate
Speaker 8: this really complicated environment. And what we saw is corporates
Speaker 8: handling this with a plum and essentially they continued to
Speaker 8: guide on earnings. We saw no paucity of information. We
Speaker 8: heard a lot of companies talk about their teriff mitigation tactics,
Speaker 8: which I think was interesting because they've seen this before,
Speaker 8: they went through this in twenty eighteen. Obviously this is
Speaker 8: a little bit more extreme, but companies know how to manage.
Speaker 8: They just need a plan, and I think that was
Speaker 8: what we were hardened to see.
Speaker 2: It's all to have this conversation about twenty five or
Speaker 2: fifty from the Federal Reserve. At the same time, the
Speaker 2: equity market is close to all time highs, and you
Speaker 2: and the team here at Bank for America are essentially
Speaker 2: forecast to get acceleration and earnings for twenty twenty six.
Speaker 7: Can you make that make sense to people I'm listening to.
Speaker 8: This, Well, yeah, we're actually forecasting a slight deceleration but
Speaker 8: broadening out of earnings. And what I think is really
Speaker 8: noteworthy and what investors need to pay attention to, is
Speaker 8: the idea that the four ninety three is actually back
Speaker 8: in the black. These are companies that are making money,
Speaker 8: so it's not just tech all the time, which has
Speaker 8: been the story for the last few years. I think
Speaker 8: what's also interesting is that tech companies are spending, and
Speaker 8: they're spending on everything.
Speaker 6: They're spending on power grid.
Speaker 8: Which is actually positive for overall economic growth, it's positive
Speaker 8: for commodities, and I think that's the message we're giving
Speaker 8: investors today. What's really thwarted broadening this year, I think,
Speaker 8: is just this bomb of tariff uncertainty that was dropped
Speaker 8: on April second, and we're at a point where clarity
Speaker 8: has improved vastly around that, and that issue.
Speaker 5: Not just the four hundred ninety three the two thousand,
Speaker 5: and I am wondering jail. We have seen a complete
Speaker 5: outperformance from the Russels two thousand of late, and you
Speaker 5: actually increased your expectations for some of these companies after
Speaker 5: being pretty sour on them earlier this year, especially after
Speaker 5: Jackson Hull. How much is this entirely predicated on what
Speaker 5: the FED does rather than what Savita is talking about,
Speaker 5: which all sounds lovely, but it's been in effect for
Speaker 5: quite a while.
Speaker 1: Right Well, I think the FED has certainly been the biggest,
Speaker 1: one of the biggest drivers of the Russell two thousand
Speaker 1: over the last year or two. Some of the biggest
Speaker 1: rallies and sell offs we've seen have been around FED
Speaker 1: expectations or data that feeds into that.
Speaker 6: So I think, you know, the expectation of.
Speaker 1: Cuts coming is certainly more positive for the Russell and
Speaker 1: should lead it to outperform near term.
Speaker 6: But I think.
Speaker 1: Also what investors have been focused on, perhaps more so
Speaker 1: than usual, has been the profits backdrop. Because a year
Speaker 1: ago everyone was expecting that by mid twenty twenty four
Speaker 1: small caps would have come out of their profits recession,
Speaker 1: that earnings would have broadened out and been outpacing large caps,
Speaker 1: and that just kept getting kicked out and kicked out,
Speaker 1: and we finally saw small caps come out of the
Speaker 1: profits recession. This earning season, we saw a big beat
Speaker 1: by these companies. We saw much better guidance, So that's
Speaker 1: been a positive sign. I mean, the sales data, the
Speaker 1: top line growth was a bit more lackluster relative to
Speaker 1: large caps, So that's something to pay attention to as
Speaker 1: we go into the next earning season. But the fact
Speaker 1: that profitability is finally recovering and speaks to that broadening
Speaker 1: out of earnings is a positive.
Speaker 5: Is the pop on the heels of a potential fed
Speaker 5: rate cut because of just simply evaluation story that lower
Speaker 5: benchmark rates make it more attractive on a relative basis,
Speaker 5: or is it that actually they will borrow more, that
Speaker 5: they can do more that they aren't doing now, whether
Speaker 5: it's engage in M and A, whether it's engaged in acquisitions,
Speaker 5: whether it's engaging in hiring plans.
Speaker 6: Right, I think it's a bit of all of that.
Speaker 1: I think, but for small cap companies, they have a
Speaker 1: lot of debt, much more than large caps do. They
Speaker 1: have a lot of refinancing risk, they have a lot
Speaker 1: of debt that's coming due over the next five years,
Speaker 1: so there's a big focus on their interest costs at
Speaker 1: a time when their earnings have already been struggling for
Speaker 1: several years now in this profits recession. So you know,
Speaker 1: the FED is likely a bigger driver than usual given
Speaker 1: that focus, given their leverage.
Speaker 6: Profiles right now.
Speaker 1: So combine that with some of the positive positives we're
Speaker 1: seeing on the profits backdrop, and I think that's a
Speaker 1: positive near term. Now, the sustainability of the rally, I
Speaker 1: think will depend on you know, revisions, those top line trends,
Speaker 1: the manufacturing recovery. Small caps tend to be very sensitive
Speaker 1: to the ISM manufacturing indicator, which has struggled to get
Speaker 1: back above fifty. So a lot of these factors will
Speaker 1: be what we're watching to see how sustainable this rally
Speaker 1: in small caps could be.
Speaker 2: We had a guess to come on the program a
Speaker 2: few weeks ago that said to Lisa, can you name
Speaker 2: a company on the Russell two thousand? Very few people can.
Speaker 2: When they buy the Russell, what are they buying? What's
Speaker 2: the concentration risk around say, small caps relative to Saveda's
Speaker 2: world large caps in the s and P five hundred.
Speaker 1: Right, Well, there's some sector skews, certainly in terms of
Speaker 1: more biotech. There's a lot more non profitable, non earner
Speaker 1: type of companies within the index, whether it be in biotech,
Speaker 1: small caps, software, regional banks, reach. There are some of
Speaker 1: these areas that are bigger within the Russell. But I
Speaker 1: think what's important is that there are still risks to
Speaker 1: the index. There are a lot of like I said,
Speaker 1: nonprofitable companies that's elevated versus history. So I also think
Speaker 1: it's a very good environment to pick stocks within the index.
Speaker 1: Our analysts here cover over nine hundred small and MidCap
Speaker 1: US stocks, So you know, amid all of these uncertainties,
Speaker 1: whether it's tariffs, whether it's how sustainable is this profit's recovery,
Speaker 1: if you can focus on companies that you know have
Speaker 1: better earnings, revisions, have stronger margins. There are a lot
Speaker 1: of beaten down stocks within the Russell, and small caps
Speaker 1: overall are trading at these big relative discounts to larger companies.
Speaker 1: So it is a good environment for stock selection, and
Speaker 1: we've seen the interest there. We saw a big uptick
Speaker 1: in attendance at our recent Smidcap conference. We've seen investors
Speaker 1: buying small cap stocks this year.
Speaker 5: Well, when you brought it out, this sort of complicated
Speaker 5: backdrop goes to cdda recent change or both of you
Speaker 5: at recent change. In the outlook ahead, you only see
Speaker 5: a six percent gain from here until twelve months out
Speaker 5: until the same time next year to a better seven thousand.
Speaker 5: That's far below where a lot of other people are.
Speaker 5: Why not hire, especially given the expectation for earnings growth
Speaker 5: to truly reaccelerate.
Speaker 8: Well, I mean, here's the here's the problem. The ballast
Speaker 8: of the S and P five hundred has been tech,
Speaker 8: and tech earnings are slated to decelerate. I mean, these
Speaker 8: companies are really big. It's harder to grow as fast.
Speaker 8: These are companies that are spending more money on CAPEC
Speaker 8: so they're returning a little bit less capital than they
Speaker 8: used to doing less buyback. So I think that's the
Speaker 8: other side of the story is the theme around AI,
Speaker 8: and I think what we would need to see a
Speaker 8: much higher return and even a positive surprise and earnings
Speaker 8: at an index level is continued AI monetization, big surprises
Speaker 8: akin to what we saw in the second quarter, And
Speaker 8: it's harder and harder to forecast that as we move
Speaker 8: forward and these companies get bigger and we're more deeper
Speaker 8: into ai monetization cycle. So our analysts are bullish, but
Speaker 8: we are still seeing a deceleration in that area of
Speaker 8: the market. And then the other kind of simple fact
Speaker 8: that we all know is the market tends to anticipate
Speaker 8: earnings recoveries. We've seen some great returns this year. I
Speaker 8: think that's in anticipation of what's to come. And you know,
Speaker 8: typically in the best earnings years for the S and
Speaker 8: P five hundred, the market actually posts kind of you
Speaker 8: know mech returns. So I don't know if we're going
Speaker 8: to see another blockbuster year of returns, but I do
Speaker 8: think that earnings are going to broaden out and that's
Speaker 8: going to be an exciting story.
Speaker 2: Given the focus today anticipating the federal serve decision, how
Speaker 2: relevant is that to your world?
Speaker 8: Look, I mean, I know everyone is obsessed with the Fed,
Speaker 8: but I think that long rates are much more important
Speaker 8: for equities. And we've talked about this, so you know,
Speaker 8: short rates have actually done very little to stemy large
Speaker 8: cap company performance because their balance sheets are healthy, they
Speaker 8: have less floating rate risk, they learn their less during
Speaker 8: the financial crisis and really managed their debt risk. So
Speaker 8: I think the long end is more important. And here's
Speaker 8: where it gets complicated. If the Fed is cutting but
Speaker 8: inflation has not been you know, sufficiently managed, I think
Speaker 8: that's the that's the risk. It's the long end, you know,
Speaker 8: absent yield curve control. The long end, I think is
Speaker 8: is really you know, potentially more dramatic for the S
Speaker 8: and P.
Speaker 6: So that's what we're watching.
Speaker 2: Is that something you're focused on, the risk of a
Speaker 2: repeat of what we saw last year when the Federal
Speaker 2: Reserve cut interest rates and the long end actually sold
Speaker 2: off and yours rose.
Speaker 7: But I think about one hundred basis points.
Speaker 8: Yeah, we had a real steepening. I mean, I think
Speaker 8: that's good for certain sectors and bad for others. One
Speaker 8: reason we're overweight financials, you know, energy some of the
Speaker 8: more inflation positive sectors that are geared to inflation, those
Speaker 8: are sectors that can do well in that environment. As
Speaker 8: long as this is not a disorderly increase in the
Speaker 8: long end, which is what you know we all worry about,
Speaker 8: especially on this desk.
Speaker 2: The good news is so far through September, stay with
Speaker 2: us more Bloomberg surveillance coming up after this, let's keep
Speaker 2: it on the federal reserve. Sticking with the economy, the
Speaker 2: senior US economists here at Bank for America Securities with
Speaker 2: this to say, another cut in October maybe on the
Speaker 2: table if the labor market were to weaken significantly further,
Speaker 2: but it isn't our base case. A DT joint us
Speaker 2: now for more at each and.
Speaker 4: Monk, good morning, Thank you for having me.
Speaker 7: Thank you for having us.
Speaker 2: Twenty five bases point cut expected later on this afternoon.
Speaker 2: How much guidance can they provide beyond just that?
Speaker 9: I think that's going to be the key question. What
Speaker 9: does the dark blot show? So our base case is
Speaker 9: that the dark blood medion will show only fifty basis
Speaker 9: points of cuts this year, so another twenty five potentially
Speaker 9: in December.
Speaker 7: And the reason we think that it.
Speaker 9: Will only be fifty rather than seventy five is that
Speaker 9: if you look at the macro forecasts from the June
Speaker 9: SEP they've actually aged remarkably well. Unemployment is on track
Speaker 9: to meet their forecast, so as inflation and growth, if anything,
Speaker 9: will come in a little bit stronger. Obviously, you've already
Speaker 9: heard a lot about the risks of reacceleration here.
Speaker 4: So given that, and.
Speaker 9: Given that the dot plot medium almost showed one cut
Speaker 9: back in June, even a little bit of a dubbish
Speaker 9: move would still probably keep it at two.
Speaker 5: You talk about a dubvish move, there's a question about
Speaker 5: the actual cut or the signal going forward, not just
Speaker 5: the signal and number of rate cuts. But something Mark
Speaker 5: Cabanni or colleague talked about earlier was the idea of
Speaker 5: the third mandate, the idea of keeping rates moderate over
Speaker 5: a longer period of time as one of the three
Speaker 5: pillars of the federals or if that were adopted, how
Speaker 5: much would that change your outlook as an economist.
Speaker 9: So moderate is not a clearly defined term, So we'll
Speaker 9: have to see if going forward, potentially different group of
Speaker 9: people at the FED have a different have a more
Speaker 9: specific definition of moderate. But for now, what I see
Speaker 9: is an eon me that's probably pretty close to the
Speaker 9: neutral rate. You look at where stocks are, you look
Speaker 9: at the fact that productivity might be picking up, and
Speaker 9: I don't think there is a clear case here that
Speaker 9: the economy is screaming for rate cuts.
Speaker 5: If that's the case, why is an inflation more of
Speaker 5: a concern, Why aren't we seeing that baked into market
Speaker 5: expectations just a bit more so, you are.
Speaker 9: Actually seeing inflation fixings showing a little bit of a
Speaker 9: pickup in inflation. Our core view has been that it's
Speaker 9: not just about trade policy, it's also about underlying inflation,
Speaker 9: and underlying inflation for US is stuck around two and
Speaker 9: a half percent, and we think it'll remain that way
Speaker 9: going forward, which is why even as the tariff effects
Speaker 9: roll off next year, we only have the core PC
Speaker 9: going down to two point six percent.
Speaker 2: There was quite a difference between July chair pal and
Speaker 2: Jackson holl chair pal, and understand it was a big
Speaker 2: payroll report in between, but it was a difference in
Speaker 2: approach and how we anchored his view around the labor
Speaker 2: market that got my attention. He anchored his view around
Speaker 2: the labor market, around the unemployment right in July, and
Speaker 2: then we got to Jackson Holl and clearly he was
Speaker 2: spoot by a step down in payrolls growth. You've been
Speaker 2: focused on measures of slack and now traditionally that's something
Speaker 2: the feder Reserve monetary policy makers would be focused on too.
Speaker 2: Have you seen a significant deterioration in measures of slack
Speaker 2: alongside this monster step down we've seen in payrolls growth.
Speaker 9: So what Powell said in July, which was viewed as
Speaker 9: very hawkish by markets, was that even if payrold growth
Speaker 9: is zero, if the unemployment rate isn't increasing, then that's
Speaker 9: where break even is and the FED doesn't really need
Speaker 9: to be concerned about that.
Speaker 4: And what we wrote at the.
Speaker 9: Time was it's one thing to say it, and it's
Speaker 9: another thing to walk the talk when you actually see
Speaker 9: the data and that number, that two hundred and fifty
Speaker 9: eight thousand downward revision, I think.
Speaker 4: It's spooked the FED.
Speaker 9: And yes, there's been some deterioration and signs of labor slack.
Speaker 9: You can look at the ratio of vacancies to unemployed workers,
Speaker 9: you can look at the labor market differential from the
Speaker 9: conference board. All of those are showing some increase in slack,
Speaker 9: but it's been relatively modern.
Speaker 7: Spook them into one.
Speaker 2: I think that's what we're wrestling with today, to a
Speaker 2: twenty five basis point risk management decision, or spoke them
Speaker 2: into We need to come out and convey to market
Speaker 2: participants today that this is the journey back towards neutral
Speaker 2: and We think neutral is around three, and we're looking
Speaker 2: to get there quickly.
Speaker 9: The Committee is going to be divided on that question,
Speaker 9: and the key question that will hat to answered today
Speaker 9: is where does powel land. Is he on the side
Speaker 9: of we need to do a little bit, but we
Speaker 9: don't need to do a lot, or is he on
Speaker 9: the side of we need to go all the way
Speaker 9: back to neutral. We're in the first camp, but we'll
Speaker 9: learn more today.
Speaker 5: How much are you going to take true signal from
Speaker 5: whatever Governor Myron has to say? How much is he
Speaker 5: the new loadstar in some ways of the committee in
Speaker 5: twenty twenty six, if not today.
Speaker 9: I think it'll depend on how much the committee changes
Speaker 9: next year. That's still an open question. We don't know
Speaker 9: how many seats will be available on the board, we
Speaker 9: don't know how much turnover potentially they'll be amongst the
Speaker 9: regional presidents, So that's I would say, very much an
Speaker 9: open question. But for this meeting, we know that Governor
Speaker 9: Myron will.
Speaker 7: Be an outlier stay with us.
Speaker 2: More Bloomberg surveillance coming up after this. I'm pleased to say.
Speaker 2: They were joined by Bank of America's newly appointed co president,
Speaker 2: Jim Demard, Jim's good to see you.
Speaker 4: Great to see you.
Speaker 2: Is it Jim or Jimmy? I'm always confused. Brian called
Speaker 2: you Jimmy. You can call me whatever you were gone
Speaker 2: with Jim either either's either's a more than an except Jimmy. Congratulations, congratulates,
Speaker 2: Thanks very much, appreciate. It's fantastic to get some time
Speaker 2: with you. I want to shout by talking about markets
Speaker 2: before we talk about the operations stuff. I've lost count
Speaker 2: of how many quarters that you've seen growth in the
Speaker 2: market's unit?
Speaker 7: What are we on now?
Speaker 10: Thirteen as of the lasts of the second quarter earnings
Speaker 10: are coming soon.
Speaker 4: We have to wait till those come out.
Speaker 10: But you know, we indicated at the Barclays conference last
Speaker 10: week and when Brian's woke before, you know, in single
Speaker 10: digits for the market. So knock on wood, we should
Speaker 10: be u we should be at fourteen.
Speaker 7: Where's that growth coming from? And just how crazy? See
Speaker 7: was the start a Q two yeah, twenty five?
Speaker 4: Yeah.
Speaker 10: I think for us it's been a story of having
Speaker 10: the additional financial resources to help clients execute one on
Speaker 10: what they want to execute because markets have grown considerably
Speaker 10: in size and market value, and taking a step back
Speaker 10: from that. For us, our equities business, it's been a
Speaker 10: huge focus for us the past four years, investments in
Speaker 10: you know, financial resources plus people plus technology, and then
Speaker 10: you know, within the thick kind of sector, if you will,
Speaker 10: the rates business has been a place where we haven't
Speaker 10: done as well as we think we can, and we've
Speaker 10: seen it turn around there as well.
Speaker 5: Maybe the FED will help you out, especially today.
Speaker 10: A lot of anticipation, as you mentioned, you know, great
Speaker 10: deal of variance in terms of not necessarily this meeting
Speaker 10: but you know with the next six to ten months
Speaker 10: brings us.
Speaker 5: John alluded to it, and I think it's a really
Speaker 5: important point. There's a tension between this push for the
Speaker 5: FED to ease financial conditions given the fact that financial conditions,
Speaker 5: at least you could probably tell us what other people
Speaker 5: have told us, seem pretty easy. Yes, they seem like
Speaker 5: pretty flowing and people can go out more money if
Speaker 5: they need to.
Speaker 7: Can you square that circle for us?
Speaker 10: You know, I think what we've done a very poor
Speaker 10: job of is talking about financial conditions based on size
Speaker 10: of companies or you know, individuals themselves. We've broken it down,
Speaker 10: you know, you had Liz on this morning. We're talking
Speaker 10: about small business and what's going on there, you know,
Speaker 10: smaller businesses and on the lower end of the economic
Speaker 10: kind of scale, if you will. For individuals, they're more
Speaker 10: sensitive to short term rates in floating rates. So yeah,
Speaker 10: if you're a large corporation, you've been you've had you know,
Speaker 10: easy access to the markets have been very favorable. You issued,
Speaker 10: you know, you refinanced that back in twenty twenty one,
Speaker 10: and you locked in some very low rates. Homeowners did
Speaker 10: the same, you know, mortgage rates were below you know,
Speaker 10: three percent. And again if you were you know, if
Speaker 10: you're a smaller business and you relied on floating rate
Speaker 10: det and you don't have access to the broader capital markets,
Speaker 10: this will be a relief. So I think, I think
Speaker 10: that's a story that people should focus.
Speaker 5: So I guess another way of saying this is when
Speaker 5: the Fed started hiking rates, people are surprised at the
Speaker 5: economy can just tumble into recession. Are we going to
Speaker 5: be surprised by if the Fed cuts rates how little
Speaker 5: it helps boost growth or do you think that it
Speaker 5: will boost growth substantially, that we will see m and
Speaker 5: a pick back up, that we will see borrowing increase
Speaker 5: even more.
Speaker 10: I think we're going to have to again bifurcate it
Speaker 10: and take a look at different parts of the economy
Speaker 10: and see who's benefiting. But your partner, you know, point
Speaker 10: on MNA and activity. For all the pessimism and climbing
Speaker 10: the wall of worry, I don't you know, there's a
Speaker 10: lot of activity happening across a lot of sectors, whether
Speaker 10: it's you know, tech, energy, utilities, power, you know, data,
Speaker 10: financial services. We just saw you know, in M and
Speaker 10: A activity and you know there's more discussions on that.
Speaker 4: Healthcare, I don't know.
Speaker 10: Equity prices are high, credits how suficed, and people and
Speaker 10: companies are making money.
Speaker 2: So where on earth are we going? The Fed's about
Speaker 2: to reduce the whole thing. How are you thinking about things?
Speaker 2: You've seen so many cycles?
Speaker 4: What is this?
Speaker 7: What is this moment? Very spooed period.
Speaker 10: It's a very different one, that's for sure. There's some
Speaker 10: information we put out recently that showed when the FED
Speaker 10: is cut almost every I think it's been every single time,
Speaker 10: and I don't remember the exact number, but into a
Speaker 10: strong kind of equity market, we continue to get a
Speaker 10: rally for the next twelve months.
Speaker 4: So that's there.
Speaker 7: At least, But can I just push this point.
Speaker 2: I want to understand from your perspective, whether it's something
Speaker 2: more than that, whether some kind of great misallocation of
Speaker 2: resources is building care. I can't think of many times
Speaker 2: where I've met investors who are incredibly aggressive about the
Speaker 2: capex spend of a handful of companies. Yes, it's sent
Speaker 2: the equity markets to all time highs, and the Federal
Speaker 2: Reserve again is about to come out later on this
Speaker 2: afternoon and duce the whole thing by even more potentially.
Speaker 7: I understand what they're responding to. It's the payroll story.
Speaker 2: I want to understand the consequences from a market perspective,
Speaker 2: just how dicey things might get further down the road.
Speaker 10: Again, I think you, I think we have to see
Speaker 10: a considerable drop in longer term rates to really get
Speaker 10: that traditional impact. You know, we had an inverted curve
Speaker 10: for an extended period of time, which everybody indicated should
Speaker 10: should indicate a weakening economy, which we which we didn't see.
Speaker 10: Into your earlier question, I don't think we ever had
Speaker 10: in history fiscal and monetary possible policy at odds.
Speaker 4: And that's what we had.
Speaker 10: I mean, everybody talked about, well rates are four hundred
Speaker 10: basis points. Well, you know, we also had the largest
Speaker 10: spend by the federal government, you know, in history, not
Speaker 10: only an absolute dollars, but as a percentage of the economy.
Speaker 4: So the policies weren't aligned.
Speaker 10: That's a that's a We talked about it a bit,
Speaker 10: then you know, two years later, three years later, we're
Speaker 10: talking less about it. But I think it's going to
Speaker 10: be you know, is this going to be inflation area.
Speaker 10: I think people have to also think about fiscal policy
Speaker 10: and what's going to happen there relative to what the
Speaker 10: monetary policy is.
Speaker 5: There's also the idea of doria, which se quite a
Speaker 5: bit and that's one reason why people have been very
Speaker 5: optimistic banking space. Does that allow you to take more
Speaker 5: risk and compete more significantly, say with some of the
Speaker 5: private asset managers that have really made more headway into
Speaker 5: the space. Yeah.
Speaker 10: I think for us on the and for the industry
Speaker 10: on regulation, it's more about clarity, which is one of
Speaker 10: the things that you know, we've talked about a great bit,
Speaker 10: whether it's stress testing, some things on slr G, SIB,
Speaker 10: you know, those are all things that I think play
Speaker 10: an important role in regulation, you know, in a safe environment,
Speaker 10: but you know a lot of questions around where they
Speaker 10: uh too restrictive and you know, countpounding as opposed to
Speaker 10: kind of catching the bubble from or the balloon from
Speaker 10: squeezing out in another direction, I.
Speaker 4: Think one of the one of the and the broader economy.
Speaker 10: I think there's a lot of regulation that's occurred that
Speaker 10: we're less familiar with because we're not in that environment.
Speaker 10: But if you go across the country in many industries,
Speaker 10: the excitement is around less regulation there. I think it's
Speaker 10: going to be less about us, quite frankly, and more
Speaker 10: about for the broader economy.
Speaker 5: I wonder how much we keep talking about the dollar
Speaker 5: as the backdrop here and how much it's been weakening.
Speaker 5: And I wonder for you, as the head of capital
Speaker 5: market is the co president of a bank that has
Speaker 5: America in its name, how much more difficult it is
Speaker 5: for you to compete globally at a time where there's
Speaker 5: a real question about US policy, about the dollar and
Speaker 5: about what the relationship is going to be.
Speaker 10: Yeah, it's certainly, you know, it's certainly a topic meaning
Speaker 10: the dollar. You know, we're a global business, Yes we are.
Speaker 10: You know, we are Bank of America. We have a
Speaker 10: dominant position in the US. We've grown our you know,
Speaker 10: international business, which I didn't highlight what we're talking about
Speaker 10: areas of growth, but international is a focus for us,
Speaker 10: not expanding beyond where we are, but just being more
Speaker 10: meaningful in the in the regions that we are. And
Speaker 10: you know, we just look at it and say, we
Speaker 10: have global capabilities and you know we can, we can
Speaker 10: transact and you know, where house risk where we need
Speaker 10: to you know, for clients one of the big I
Speaker 10: think misunderstandings or or where it's not thought through enough.
Speaker 10: It's going to take some considerable time for this to occur.
Speaker 10: You know, we're looking at you know, weakness and dollars
Speaker 10: ten percent, fifteen percent versus you know, versus its peak.
Speaker 10: We're still the largest capital markets to invest in.
Speaker 4: And you just have to keep that in mind.
Speaker 2: I want to finish by talking about you. Yeah, you've
Speaker 2: had a pretty ti remit for quite a while.
Speaker 4: Yeah.
Speaker 2: Are you excited about the prospect of stretching your legs
Speaker 2: a little bit having a look at other business lines?
Speaker 4: Yeah?
Speaker 10: I mean, you know, I've been in the market's business
Speaker 10: thirty five years in different capacity. But I've always had
Speaker 10: interaction across the firm, whether it's been investment banking or
Speaker 10: corporate banking or whatever it may be. And I think
Speaker 10: if you take a look at you know, these areas
Speaker 10: of where there's Brian talked about organic growth and where
Speaker 10: we can do it, I think there's there's some considerable
Speaker 10: opportunity for us to be more consistent in our delivery.
Speaker 10: You know, we did it in the markets business. Try
Speaker 10: I tried to de emphasize Fick versus equities and think
Speaker 10: about markets and how we how we can deliver for clients.
Speaker 10: And I just view this as an expansion you know
Speaker 10: of that and trying to help everybody bring that to
Speaker 10: fruition because you know, ideas are great, execution is everything.
Speaker 7: Does that mean spending less time with these guys, They're
Speaker 7: going to miss you.
Speaker 10: I'm going to miss it. I've said, I'm a trading
Speaker 10: floor for thirty five years. Yeah, you know, it's a
Speaker 10: great thing. It's been a great experience. It's given me
Speaker 10: a lot of opportunity. We have a lot of talented
Speaker 10: people that you know, as I said in the meeting
Speaker 10: we had earlier in the week, you know, I know
Speaker 10: everybody's saying congratulations. Now the next question is what about me,
Speaker 10: which is for everybody else in the room, what does
Speaker 10: this mean for me? And you know, we're gonna be
Speaker 10: making those decisions over the next couple of weeks. But
Speaker 10: we're pretty excited about it. Team's pretty excited about it,
Speaker 10: and response has been very good.
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