1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul Sweene. You, 2 00:00:05,360 --> 00:00:07,680 Speaker 1: along with my co host Lisa Brahma wits each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor, find a Bloomberg Penil podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:21,760 Speaker 1: at Bloomberg dot com. Today is FED Day. Two o'clock 8 00:00:21,760 --> 00:00:24,320 Speaker 1: will get those statement from the FED and two thirty 9 00:00:24,360 --> 00:00:27,360 Speaker 1: a press conference with Chairman j Pale. So we are 10 00:00:27,640 --> 00:00:30,080 Speaker 1: very fortunate right now to have our next guest to 11 00:00:30,240 --> 00:00:33,360 Speaker 1: help us preview what we might hear. Danielle di Martino Booth. 12 00:00:33,400 --> 00:00:36,800 Speaker 1: She's a CEO and Director of Intelligence at Quill Intelligence, 13 00:00:36,840 --> 00:00:40,159 Speaker 1: former advisor at the Dallas Federal Reserve, and a Bloomberg 14 00:00:40,159 --> 00:00:42,479 Speaker 1: opinion columnist. Danielle, thanks so much for joining us here 15 00:00:42,520 --> 00:00:45,480 Speaker 1: in our Bloomberg and Actor Broker studio. So FED Day today, 16 00:00:45,520 --> 00:00:48,600 Speaker 1: and as Lisa was suggesting, how do you think the 17 00:00:48,680 --> 00:00:52,280 Speaker 1: FED chairman will address maybe one of the newer uncertainties 18 00:00:52,280 --> 00:00:55,240 Speaker 1: in the marketplace, which is the coronavirus. How do you 19 00:00:55,240 --> 00:00:59,520 Speaker 1: think Mr Powell will react? To that. Well, he probably 20 00:00:59,520 --> 00:01:01,760 Speaker 1: won't be a front and say that the insurance premium 21 00:01:01,760 --> 00:01:04,960 Speaker 1: has gone up on global risks um, but he might 22 00:01:05,000 --> 00:01:07,560 Speaker 1: tow the same type of line and say that in 23 00:01:07,640 --> 00:01:10,399 Speaker 1: order to maintain the economic expansion, the FED is going 24 00:01:10,480 --> 00:01:13,480 Speaker 1: to do whatever he needs to do, including any kind 25 00:01:13,480 --> 00:01:16,840 Speaker 1: of global economic disruptions that are brought on kind of 26 00:01:16,840 --> 00:01:19,200 Speaker 1: the same line that he was using with reference to 27 00:01:19,200 --> 00:01:21,039 Speaker 1: the trade war. He's just going to pick it up 28 00:01:21,080 --> 00:01:23,479 Speaker 1: and assign it to the coronavirus. Alright, So let's take 29 00:01:23,480 --> 00:01:25,600 Speaker 1: it out of J. Palell's at mouth and let's talk 30 00:01:25,640 --> 00:01:30,600 Speaker 1: about what the potential economic impact is on the United States. 31 00:01:30,640 --> 00:01:33,880 Speaker 1: We're seeing, for example, Starbucks closing down more than two 32 00:01:33,920 --> 00:01:37,759 Speaker 1: thousand stores in China in response to this, Apple said 33 00:01:37,760 --> 00:01:39,640 Speaker 1: that they could take a material hit. They're looking at 34 00:01:39,640 --> 00:01:43,040 Speaker 1: ways to divert their supply chain away from the Wuhan area. 35 00:01:43,880 --> 00:01:47,440 Speaker 1: Do you think that markets are under pricing the potential 36 00:01:47,520 --> 00:01:51,120 Speaker 1: impact on the US economy from the coronavirus has spread, 37 00:01:51,160 --> 00:01:55,400 Speaker 1: in particular with how much's defecting the China economy. Yeah, 38 00:01:55,400 --> 00:01:58,120 Speaker 1: And I think that you actually hit on the critical 39 00:01:58,120 --> 00:02:01,520 Speaker 1: element here, right, because Chinese, the Chinese economy is quadrupled 40 00:02:01,520 --> 00:02:04,040 Speaker 1: in size in terms of its global footprint. It's now 41 00:02:04,080 --> 00:02:07,320 Speaker 1: sixteen percent of global GDP compared to four percent back 42 00:02:07,560 --> 00:02:10,880 Speaker 1: when Stars broke. And now it is not a link, 43 00:02:11,000 --> 00:02:13,720 Speaker 1: it is the link in the global supply chain. We've 44 00:02:13,800 --> 00:02:16,320 Speaker 1: learned this the hard way throughout the trade war years. 45 00:02:16,680 --> 00:02:19,560 Speaker 1: And I speak with Leland Miller, he's a friend of 46 00:02:19,560 --> 00:02:21,960 Speaker 1: the show's China Beije book. You know. He points out 47 00:02:22,040 --> 00:02:24,639 Speaker 1: that the virus is in every single province, so this 48 00:02:24,720 --> 00:02:28,880 Speaker 1: is not isolated to one province that is the seventh 49 00:02:29,240 --> 00:02:34,240 Speaker 1: largest um because Bloomberg actually ranks all of the supply chains, 50 00:02:34,240 --> 00:02:36,000 Speaker 1: and over the weekend had a great story out. Bloomberg 51 00:02:36,040 --> 00:02:39,239 Speaker 1: had a great story out that said, the UN is 52 00:02:39,320 --> 00:02:41,440 Speaker 1: number seven in the country. But right now you've got 53 00:02:41,440 --> 00:02:44,240 Speaker 1: a lot more than that being affected in the Chinese economy, 54 00:02:44,480 --> 00:02:49,000 Speaker 1: and it will have blowback effects first in Germany and 55 00:02:49,040 --> 00:02:51,760 Speaker 1: then back here in the United States. I mean, given 56 00:02:51,760 --> 00:02:54,040 Speaker 1: what we learned, I'm not sure you know the the 57 00:02:54,040 --> 00:02:56,720 Speaker 1: analogy for Stars. I'm not sure how strong it is 58 00:02:56,800 --> 00:02:59,400 Speaker 1: or tenuels it is. Is there a sense of a 59 00:02:59,480 --> 00:03:04,000 Speaker 1: lag time when we start seeing some of the Chinese 60 00:03:04,000 --> 00:03:06,360 Speaker 1: issues bleeding out into some of the economic data across 61 00:03:06,400 --> 00:03:09,560 Speaker 1: the globe. What are you looking for? So it's really 62 00:03:09,600 --> 00:03:14,320 Speaker 1: difficult to say because I mean, obviously markets are completely 63 00:03:14,360 --> 00:03:18,440 Speaker 1: disregarding this. But I am no scientists, and I cannot 64 00:03:18,480 --> 00:03:21,280 Speaker 1: tell you how bad this is going to get um 65 00:03:21,320 --> 00:03:23,680 Speaker 1: because you're starting to have cases crop up in countries 66 00:03:23,720 --> 00:03:27,640 Speaker 1: where the person has not visited China. So it's for me, 67 00:03:27,720 --> 00:03:30,799 Speaker 1: it's a gigantic unknown. I saw a few charts out 68 00:03:30,840 --> 00:03:32,600 Speaker 1: of the cell side today and it shows kind of 69 00:03:32,600 --> 00:03:36,800 Speaker 1: a huge v V shaped recovery that retail sales in 70 00:03:36,880 --> 00:03:38,520 Speaker 1: China are going to take this big hit and come 71 00:03:38,600 --> 00:03:42,120 Speaker 1: roaring right. I'm not I'm I'm just not buying it 72 00:03:42,440 --> 00:03:46,640 Speaker 1: because like brought in capital for example, they feed casts 73 00:03:47,120 --> 00:03:49,880 Speaker 1: the freight index that's followed so closely. Now. They came 74 00:03:49,880 --> 00:03:52,080 Speaker 1: out with fresh data this morning that showed that they're 75 00:03:52,120 --> 00:03:54,760 Speaker 1: leading indicator of leading indicators, which is Shanghai air freight. 76 00:03:54,880 --> 00:03:58,920 Speaker 1: Air freight contracted you over year again prior to this 77 00:03:59,120 --> 00:04:04,120 Speaker 1: virus outbreak. So it's still less is less is less 78 00:04:04,160 --> 00:04:08,040 Speaker 1: bad is good? But you're kicking the global reflation trade 79 00:04:08,120 --> 00:04:10,960 Speaker 1: before it quite reflated. Well, okay, this is the key 80 00:04:11,040 --> 00:04:14,360 Speaker 1: question here. How much are people using the coronavirus as 81 00:04:14,400 --> 00:04:17,640 Speaker 1: an excuse to sell at a time when they're a 82 00:04:17,680 --> 00:04:20,240 Speaker 1: little bit wary of whether this reflation trade is actually 83 00:04:20,240 --> 00:04:22,040 Speaker 1: taking off. And I wonder if there is sort of 84 00:04:22,080 --> 00:04:26,080 Speaker 1: a a different story being told by bonds and stocks 85 00:04:26,120 --> 00:04:28,720 Speaker 1: given the rally that we're seeing in treasuries, do you 86 00:04:28,760 --> 00:04:31,600 Speaker 1: think that that sort of foretells a weaker economy that's 87 00:04:31,640 --> 00:04:34,760 Speaker 1: being priced in the next Look. Absolutely, it's in a 88 00:04:34,800 --> 00:04:38,320 Speaker 1: matter of three trading days, we've gone from being inverted 89 00:04:38,760 --> 00:04:41,560 Speaker 1: on the three month five year two days later, three months, 90 00:04:41,560 --> 00:04:45,360 Speaker 1: seven year today, three month, ten years, five basis points away. 91 00:04:45,400 --> 00:04:48,680 Speaker 1: I mean, j Pal just spent over four billion dollars 92 00:04:48,720 --> 00:04:51,640 Speaker 1: to uninvert the yield curve, and the bond market is 93 00:04:51,680 --> 00:04:54,800 Speaker 1: telling him, and pending home sales are telling him both. 94 00:04:55,080 --> 00:04:58,120 Speaker 1: And the auto sector in the United States and really 95 00:04:58,160 --> 00:05:01,200 Speaker 1: messy earnings out of Detroit. And by the way, we're 96 00:05:01,200 --> 00:05:05,200 Speaker 1: all ignoring Bowing because they did they had kitchen sink earnings. 97 00:05:05,800 --> 00:05:08,760 Speaker 1: The industrial recession in the United States is not over 98 00:05:09,240 --> 00:05:12,640 Speaker 1: period end, and the yield curve is telling j Pal 99 00:05:12,960 --> 00:05:14,760 Speaker 1: that not only do they want him to move out 100 00:05:14,760 --> 00:05:17,840 Speaker 1: to cupe on purchases and away from treasury bills, which 101 00:05:17,839 --> 00:05:21,080 Speaker 1: is Lele Brainerd's that's her, that's her blueprint, that's the framework, 102 00:05:21,320 --> 00:05:23,640 Speaker 1: go out to twelve months first, out to twenty four 103 00:05:23,680 --> 00:05:26,160 Speaker 1: months later and then put the cap on. But it's 104 00:05:26,200 --> 00:05:28,559 Speaker 1: also telling j Pal that it wants a rate cut, 105 00:05:28,920 --> 00:05:31,120 Speaker 1: and that's where he does not want to go. And 106 00:05:31,160 --> 00:05:34,080 Speaker 1: just to sort of put the bow on Bowing, they 107 00:05:34,120 --> 00:05:36,440 Speaker 1: did put the kitchen sink out there. They were they're 108 00:05:36,520 --> 00:05:38,480 Speaker 1: doing well and uh in trading at least when you 109 00:05:38,480 --> 00:05:41,040 Speaker 1: look at their stock price. And meanwhile they're borrowing tons 110 00:05:41,040 --> 00:05:44,040 Speaker 1: of money with the letter demand for that Bowing loan 111 00:05:44,120 --> 00:05:46,480 Speaker 1: that we've been reporting on for the past few weeks 112 00:05:46,480 --> 00:05:49,000 Speaker 1: growing to fourteen billion dollars. People eager to lend to 113 00:05:49,080 --> 00:05:52,000 Speaker 1: this company, calling Molly Smith, where are you? It's just 114 00:05:52,080 --> 00:05:55,080 Speaker 1: amazing well, and we can get into the duopoly and 115 00:05:55,120 --> 00:05:57,800 Speaker 1: this sort of question of whether the governance was less 116 00:05:57,800 --> 00:06:00,800 Speaker 1: strict as a result of their mark a position, but 117 00:06:00,839 --> 00:06:04,279 Speaker 1: that unfortunately have to be another conversation. Danielle Dmartino Booth 118 00:06:04,279 --> 00:06:08,240 Speaker 1: always chief executive officer and chief strategist for Quill Intelligence, 119 00:06:08,279 --> 00:06:11,680 Speaker 1: former advisor to the Dallas Federal Reserve, and a Bloomberg 120 00:06:11,680 --> 00:06:24,719 Speaker 1: Opinion columnist, certainly leading the charge has been Apple after 121 00:06:24,720 --> 00:06:27,719 Speaker 1: they're better than expected earnings, showing that the iPhone is 122 00:06:27,920 --> 00:06:32,680 Speaker 1: still strong, it's still dominant, producing profits that are to 123 00:06:32,760 --> 00:06:35,719 Speaker 1: be envied around the world. Frankly, uh, and not to 124 00:06:35,720 --> 00:06:38,359 Speaker 1: mention a cash pile of two hundred and seven billion dollars. 125 00:06:38,440 --> 00:06:41,320 Speaker 1: David Garretty joining US now chief market strategist for laid 126 00:06:41,400 --> 00:06:44,000 Speaker 1: Law and Company and a partner at bt Block. David, 127 00:06:44,040 --> 00:06:46,080 Speaker 1: thank you so much for being here. What was like 128 00:06:46,320 --> 00:06:50,200 Speaker 1: the sort of most interesting aspect of Apple's earnings to 129 00:06:50,279 --> 00:06:53,040 Speaker 1: you in terms of the guidance for the March quarter, 130 00:06:53,080 --> 00:06:56,240 Speaker 1: which was showing the revenue range of sixty three to 131 00:06:56,320 --> 00:07:00,479 Speaker 1: sixty seven billion dollars, indicating their own uncertainty with respect 132 00:07:00,480 --> 00:07:04,320 Speaker 1: to the impact in China of essentially the quarantine, which 133 00:07:04,360 --> 00:07:08,039 Speaker 1: it certainly is immobilizing the population there and certainly keeping 134 00:07:08,040 --> 00:07:11,080 Speaker 1: people away from Apple stores, where they've cut back a 135 00:07:11,120 --> 00:07:14,280 Speaker 1: number of ships of shifts and actually um closed a 136 00:07:14,320 --> 00:07:17,680 Speaker 1: number of locations. UM. But I think overall, if we 137 00:07:17,760 --> 00:07:20,880 Speaker 1: have to look at um, Apple is abell Weather for 138 00:07:20,920 --> 00:07:23,800 Speaker 1: the tech sector, to the extent that Apple has pretty 139 00:07:23,840 --> 00:07:25,800 Speaker 1: much sort of seemed so hard to have dodged the 140 00:07:25,800 --> 00:07:30,920 Speaker 1: bullet from the Wuhans Stars, Contagion, Uh certainly some of 141 00:07:30,920 --> 00:07:38,000 Speaker 1: the names we're looking at elsewhere Facebook after the close today, UM, Twitter, Google, Alphabet, Amazon, 142 00:07:38,680 --> 00:07:41,560 Speaker 1: We we think that you know, the Paul from China 143 00:07:42,200 --> 00:07:44,440 Speaker 1: isn't necessarily in the cast itself so wide. We look 144 00:07:44,480 --> 00:07:47,000 Speaker 1: as if we've had fairly decent results in the US, 145 00:07:47,000 --> 00:07:50,040 Speaker 1: certainly with respect to going back to Apple, their iPhone 146 00:07:50,040 --> 00:07:54,800 Speaker 1: eleven a strong introduction, returning to growth in that category. 147 00:07:55,400 --> 00:07:58,080 Speaker 1: We have seen global smartphone shipments and decline in two 148 00:07:58,080 --> 00:08:00,720 Speaker 1: thousand nineteen down I think about three percent. That was 149 00:08:00,760 --> 00:08:05,160 Speaker 1: a first for that market. But looking forward um to 150 00:08:05,200 --> 00:08:09,040 Speaker 1: say one, we're going to have the role out increasingly 151 00:08:09,200 --> 00:08:13,280 Speaker 1: of five G cellular communications networks. Apple will have a 152 00:08:13,320 --> 00:08:17,000 Speaker 1: five G enabled phone coming out later this year. This 153 00:08:17,200 --> 00:08:20,640 Speaker 1: arguably is going to be a significant product transition, not 154 00:08:20,720 --> 00:08:24,360 Speaker 1: just for Apple, but for the tech sector as a whole. 155 00:08:24,440 --> 00:08:26,840 Speaker 1: So the Apple, I guess the services revenue came in 156 00:08:26,880 --> 00:08:29,440 Speaker 1: a little bit weaker than expected. Is that an area 157 00:08:29,480 --> 00:08:31,120 Speaker 1: of concern for you? Given that that a lot of 158 00:08:31,160 --> 00:08:33,840 Speaker 1: investors feel like that's going to be the longer term 159 00:08:34,000 --> 00:08:38,480 Speaker 1: growth driver for this company. Certainly, looking at Apple's success 160 00:08:38,760 --> 00:08:44,199 Speaker 1: in growing the subscriber base for the Apple UM services operations. 161 00:08:44,400 --> 00:08:48,800 Speaker 1: They ended the year at what fordin eighty million subscribers, 162 00:08:48,800 --> 00:08:51,240 Speaker 1: at a third from three sixty million a year ago, 163 00:08:51,280 --> 00:08:55,400 Speaker 1: and their target is six million by the end of Granted, 164 00:08:55,440 --> 00:09:01,320 Speaker 1: you know, thirty three growth in growth in people might say, well, 165 00:09:01,360 --> 00:09:04,360 Speaker 1: things are gonna slow. My argument here more is that 166 00:09:04,400 --> 00:09:07,160 Speaker 1: this is going to be the base of customers off 167 00:09:07,240 --> 00:09:11,000 Speaker 1: which Apple is going to be driving increasingly larger amounts 168 00:09:11,040 --> 00:09:13,640 Speaker 1: of recurring, high margin revenue, which I think is going 169 00:09:13,679 --> 00:09:15,680 Speaker 1: to be important for the valuation which they do. That 170 00:09:15,800 --> 00:09:19,560 Speaker 1: there are two hundred and seven billion dollars of cash. 171 00:09:19,960 --> 00:09:24,559 Speaker 1: Clearly there's always going to be arguments made with regards 172 00:09:24,600 --> 00:09:27,760 Speaker 1: to UM what do they do around you know, continuing 173 00:09:27,800 --> 00:09:30,440 Speaker 1: to buy back their stock, But certainly there's temptation as 174 00:09:30,480 --> 00:09:33,000 Speaker 1: far as acquisitions are concerned, and we think certainly if 175 00:09:33,040 --> 00:09:37,280 Speaker 1: you look at the Disney Plus streaming service that's out there, uh, 176 00:09:37,280 --> 00:09:40,040 Speaker 1: you know, does Apple take this opportunity to come in 177 00:09:40,679 --> 00:09:44,480 Speaker 1: uh and possibly enhance their own abilities by looking I 178 00:09:44,520 --> 00:09:48,400 Speaker 1: know people have talked about Netflix for ages UM. You know, 179 00:09:48,720 --> 00:09:51,319 Speaker 1: there are a number of possibilities and obviously having two 180 00:09:51,400 --> 00:09:55,240 Speaker 1: hundred billion dollars in loose change Um, you know, isn't 181 00:09:55,240 --> 00:09:58,320 Speaker 1: such a bad place to be stocks essentially doubled over 182 00:09:58,440 --> 00:10:02,599 Speaker 1: last twelve months? Are you evaluation concerns yet? How do 183 00:10:02,600 --> 00:10:05,280 Speaker 1: you think about the evaluation of the stock? I mean, 184 00:10:05,440 --> 00:10:09,000 Speaker 1: certainly people who have raised the concerns. You know, is 185 00:10:09,040 --> 00:10:12,720 Speaker 1: a trillion dollar evaluation sort of a ceiling? Uh? You know, 186 00:10:12,840 --> 00:10:15,680 Speaker 1: is it possible for public companies to go above and 187 00:10:15,720 --> 00:10:18,680 Speaker 1: beyond that? Um? I don't necessarily want to try and 188 00:10:18,720 --> 00:10:22,680 Speaker 1: minimize or or the other way around. I'm not trying 189 00:10:22,720 --> 00:10:25,839 Speaker 1: to exaggerate perhaps the importance of five G but and 190 00:10:25,960 --> 00:10:27,840 Speaker 1: the rollout, but I think that this is going to 191 00:10:27,880 --> 00:10:30,080 Speaker 1: be something quite significant in terms of the range of 192 00:10:30,120 --> 00:10:33,000 Speaker 1: services that this might open up. So we're at a 193 00:10:33,040 --> 00:10:36,320 Speaker 1: point in time analytically where we need to look forward 194 00:10:36,480 --> 00:10:40,439 Speaker 1: and and see what are the potential new revenue streams 195 00:10:40,480 --> 00:10:43,000 Speaker 1: that might be gotten as a result of having this 196 00:10:43,120 --> 00:10:46,640 Speaker 1: greater bandwidth and the ability to move larger amounts of 197 00:10:46,720 --> 00:10:49,520 Speaker 1: data faster. All right, let's look ahead, because we're getting 198 00:10:49,520 --> 00:10:52,960 Speaker 1: Facebook reporting earnings after the ballot, Amazon reporting earnings tomorrow 199 00:10:53,000 --> 00:10:56,679 Speaker 1: after the bell, and I'm wondering with Facebook in particular, 200 00:10:56,760 --> 00:11:01,000 Speaker 1: the shares up nearly two percent today, How concerned. Are 201 00:11:01,080 --> 00:11:04,360 Speaker 1: you about the political liability? No, Senator war in his 202 00:11:04,440 --> 00:11:06,800 Speaker 1: job voting Facebook yet again, and they're sort of the 203 00:11:06,880 --> 00:11:11,680 Speaker 1: immediate crosshairs of some potential regulatory oversight. Yeah, I believe 204 00:11:11,760 --> 00:11:14,640 Speaker 1: that we've commented, you know, previously, we've said certainly that 205 00:11:14,800 --> 00:11:19,439 Speaker 1: as regards UM social media companies, Facebook in particular, in 206 00:11:19,520 --> 00:11:23,640 Speaker 1: the regulatory cross hairs. UM. The issue is that most 207 00:11:23,640 --> 00:11:28,480 Speaker 1: likely significant regulation may not necessarily be seen until after 208 00:11:28,520 --> 00:11:32,679 Speaker 1: we get past the presidential election, which, if one wanted 209 00:11:32,720 --> 00:11:35,480 Speaker 1: to be cynical, one would say that given the amount 210 00:11:35,520 --> 00:11:38,400 Speaker 1: of money that's being put into social media around the 211 00:11:38,440 --> 00:11:42,920 Speaker 1: general election, that certainly argues positively in the margin near 212 00:11:43,080 --> 00:11:48,480 Speaker 1: term for Facebook perhaps as a stock. UM. However, you know, 213 00:11:48,559 --> 00:11:51,400 Speaker 1: does that make it merely a trade? And to the 214 00:11:51,440 --> 00:11:55,800 Speaker 1: extent if the prospects become clearer as we go into November, 215 00:11:55,880 --> 00:11:58,959 Speaker 1: you know, would you necessarily want to fade Facebook going 216 00:11:59,000 --> 00:12:01,520 Speaker 1: into the general election? That might be a very short 217 00:12:01,640 --> 00:12:05,120 Speaker 1: term trading call against the longer term perspective that clearly 218 00:12:05,400 --> 00:12:07,360 Speaker 1: is going to be more negative. There were some other 219 00:12:07,400 --> 00:12:11,040 Speaker 1: elements apart from President Um Senator Warren Um. There had 220 00:12:11,080 --> 00:12:13,640 Speaker 1: been hearings held in the House. I think over the 221 00:12:13,679 --> 00:12:16,920 Speaker 1: last two weeks just talking from smaller technology companies of 222 00:12:16,960 --> 00:12:19,480 Speaker 1: what it's been like to go up and compete against 223 00:12:19,520 --> 00:12:22,760 Speaker 1: these larger companies, whether it's a Facebook or an Amazon 224 00:12:22,960 --> 00:12:26,360 Speaker 1: or others, which argues that within the tech sector, the 225 00:12:26,360 --> 00:12:29,240 Speaker 1: prospects of regulation become more significant as we go past 226 00:12:29,280 --> 00:12:32,760 Speaker 1: the general election, So is where the hammer comes down. 227 00:12:33,120 --> 00:12:36,080 Speaker 1: So assuming that it kind of plays out as you think, 228 00:12:36,160 --> 00:12:38,280 Speaker 1: these tech names are still going to be the drivers 229 00:12:38,440 --> 00:12:41,000 Speaker 1: for the overall market like we've seen them in you know, 230 00:12:41,000 --> 00:12:42,560 Speaker 1: in the year's past, and we've been talking about now 231 00:12:42,679 --> 00:12:45,360 Speaker 1: maybe rotate into some maybe more cyclical names or things 232 00:12:45,400 --> 00:12:48,800 Speaker 1: like that. UM. In terms of sort of stepping back 233 00:12:48,880 --> 00:12:53,000 Speaker 1: and looking at things more broadly, UM, you know, the 234 00:12:53,040 --> 00:12:57,120 Speaker 1: things that drive the drive GDP growth, it's population growth 235 00:12:57,120 --> 00:13:00,640 Speaker 1: and productivity growth UM two thousand nineteen, the United States, 236 00:13:00,679 --> 00:13:04,080 Speaker 1: our population growth was zero point. We had forty two 237 00:13:04,120 --> 00:13:07,959 Speaker 1: states where the population actually declined. We look globally Japan, 238 00:13:08,480 --> 00:13:11,800 Speaker 1: uh death rate exceeds birth rate, which is essentially the 239 00:13:11,880 --> 00:13:15,160 Speaker 1: formula for declining population growth. If we're going to have 240 00:13:15,240 --> 00:13:17,560 Speaker 1: GDP growth, this is going to have to rely upon 241 00:13:17,559 --> 00:13:23,480 Speaker 1: productivity growth, which argues for disruptive technology innovation, I would 242 00:13:23,559 --> 00:13:26,640 Speaker 1: argue against that backdrop. You know, this move towards five G. 243 00:13:27,160 --> 00:13:29,600 Speaker 1: You know it has many facets in terms of what 244 00:13:29,640 --> 00:13:33,960 Speaker 1: this might do around productivity growth. So if technology remains 245 00:13:33,960 --> 00:13:37,760 Speaker 1: significant from the standpoint of economic development, I would argue 246 00:13:37,760 --> 00:13:41,840 Speaker 1: it still will maintain significance in terms of investors positioning. 247 00:13:42,600 --> 00:13:44,920 Speaker 1: David Garritty, thank you so much for being with us today. 248 00:13:44,960 --> 00:13:48,120 Speaker 1: I really appreciate. David Garrity, chief market strategist for laid 249 00:13:48,200 --> 00:14:01,280 Speaker 1: Law and Company, also a partner at bt Block Consensus Trade. 250 00:14:01,320 --> 00:14:05,360 Speaker 1: Heading into among them was that the dollar would weaken 251 00:14:05,600 --> 00:14:09,800 Speaker 1: and that emerging market corencies would outperform. So far, that 252 00:14:09,880 --> 00:14:11,760 Speaker 1: has not panned out quite the opposite. In fact, you've 253 00:14:11,760 --> 00:14:14,040 Speaker 1: seen dollar strength and emerging currencies are currently at the 254 00:14:14,080 --> 00:14:17,760 Speaker 1: weakest versus the dollar since December twenty five. This according 255 00:14:17,800 --> 00:14:20,520 Speaker 1: to the ms c I index data on the Bloomberg 256 00:14:20,640 --> 00:14:22,800 Speaker 1: And I'm wondering how long this could persist. At Al 257 00:14:22,880 --> 00:14:25,960 Speaker 1: HUSSAINI joining us here senior interest rates and Currencies analysts 258 00:14:26,160 --> 00:14:28,760 Speaker 1: for Columbia Thread Needle Investments, and I you know, this 259 00:14:28,960 --> 00:14:33,120 Speaker 1: just really is a conundrum with the coronavirus. Is the 260 00:14:33,200 --> 00:14:36,320 Speaker 1: reversal in this consensus trade, something that has legs for 261 00:14:36,440 --> 00:14:38,920 Speaker 1: the rest of the year, or is this a budding 262 00:14:38,960 --> 00:14:43,400 Speaker 1: opportunity heading into the rest it Yeah, thanks, well, well 263 00:14:43,440 --> 00:14:46,160 Speaker 1: I think it's it's early days, let's be fair. But 264 00:14:46,320 --> 00:14:49,040 Speaker 1: to the extent that two things happened into the end 265 00:14:49,080 --> 00:14:51,840 Speaker 1: of last year. First, MFX was one of the worst 266 00:14:51,880 --> 00:14:56,680 Speaker 1: performing asset classes, so look relatively relatively cheap, particularly versus 267 00:14:56,720 --> 00:15:00,640 Speaker 1: other pockets of risk. And Second, the recovery in in 268 00:15:00,840 --> 00:15:03,640 Speaker 1: data that we saw globally, at least the nascent recovery 269 00:15:03,760 --> 00:15:06,720 Speaker 1: and into the end of last year was in Asian 270 00:15:06,800 --> 00:15:11,360 Speaker 1: p m I data uh and and really the cementing 271 00:15:11,400 --> 00:15:14,600 Speaker 1: of the Phase one agreement gave it a lot of impetus. 272 00:15:14,760 --> 00:15:18,000 Speaker 1: So we saw the remanby start to react positively and 273 00:15:18,040 --> 00:15:21,080 Speaker 1: then lead high baying e m f X into the 274 00:15:21,160 --> 00:15:23,680 Speaker 1: beginning of the year. UM, all of that's been beaten 275 00:15:23,680 --> 00:15:28,040 Speaker 1: out now. Obviously, the fundamental risk here is that what's 276 00:15:28,080 --> 00:15:31,120 Speaker 1: happening in China and potentially a slowdown in China spills 277 00:15:31,160 --> 00:15:34,920 Speaker 1: over into broader Asia in the first half of this year. UM. 278 00:15:34,960 --> 00:15:38,120 Speaker 1: And then a broader reassessment of risk, which is you 279 00:15:38,160 --> 00:15:40,440 Speaker 1: know we're seeing happen right now, you know US drisuries 280 00:15:40,480 --> 00:15:44,560 Speaker 1: back at one six UM very early stages. But if 281 00:15:44,600 --> 00:15:47,360 Speaker 1: we do see a broader reassessment of risk E mf X, 282 00:15:47,400 --> 00:15:52,280 Speaker 1: will again UH look as as relatively unattractive. Is there 283 00:15:52,320 --> 00:15:55,000 Speaker 1: are there any pockets of opportunities out there, I'm assuming 284 00:15:55,040 --> 00:15:57,880 Speaker 1: we're going to steer clear of Asia, perhaps, Yeah, I 285 00:15:57,920 --> 00:16:02,560 Speaker 1: think interesting a couple of UH relatively high yielding names. 286 00:16:03,080 --> 00:16:06,640 Speaker 1: They're relatively closed economies where the fundamentals are good, particularly 287 00:16:06,680 --> 00:16:09,840 Speaker 1: from a fiscal and external account perspective. Russia is a 288 00:16:09,880 --> 00:16:12,200 Speaker 1: great example that stands out, and the ruble has been 289 00:16:12,800 --> 00:16:15,080 Speaker 1: um in in in the eye of of of the 290 00:16:15,120 --> 00:16:19,000 Speaker 1: weakness here. UM do stand out as places where there's value. 291 00:16:19,440 --> 00:16:21,800 Speaker 1: Let's take the flip side of that, South Africa, where 292 00:16:21,840 --> 00:16:24,760 Speaker 1: fundamentals are weakening. We're weakening into the end of last year. 293 00:16:24,840 --> 00:16:28,120 Speaker 1: The currency looked rich last year, UH, and now we 294 00:16:28,160 --> 00:16:30,680 Speaker 1: have a high beta em currency that that's going to 295 00:16:30,760 --> 00:16:34,080 Speaker 1: leave the sell off, so that currency looks particularly vulnerable. 296 00:16:34,440 --> 00:16:38,359 Speaker 1: I'm looking right now also at the yield curve flattening 297 00:16:38,360 --> 00:16:41,600 Speaker 1: that we've seen. I mean, it's basically every consensus trade 298 00:16:41,720 --> 00:16:45,320 Speaker 1: is getting hit really hard in January, and I'm trying 299 00:16:45,360 --> 00:16:47,320 Speaker 1: to think you know, given the fact that you guys 300 00:16:47,360 --> 00:16:50,120 Speaker 1: oversee almost four hundreds and seventy billion dollars at least 301 00:16:50,160 --> 00:16:52,440 Speaker 1: that was as of September, Given the fact that you 302 00:16:52,480 --> 00:16:55,520 Speaker 1: deal with hundreds of different institutions and get their read 303 00:16:55,680 --> 00:16:58,600 Speaker 1: on what's going on, do people have a sense that 304 00:16:58,680 --> 00:17:01,160 Speaker 1: this is just a bad January or do they have 305 00:17:01,160 --> 00:17:05,280 Speaker 1: a sense that perhaps their assumptions for the year are 306 00:17:05,320 --> 00:17:09,760 Speaker 1: inaccurate too early, there's not been a real wholesale reassessment 307 00:17:09,760 --> 00:17:12,359 Speaker 1: when it comes to risk in particular, I think especially 308 00:17:12,400 --> 00:17:14,960 Speaker 1: if you look at you know, growth expectations for the US, 309 00:17:15,040 --> 00:17:18,520 Speaker 1: earnings expectations for the yes, they really haven't moved uh 310 00:17:18,680 --> 00:17:22,600 Speaker 1: and in fact, what could it be um early days? 311 00:17:22,840 --> 00:17:25,239 Speaker 1: And again I tend to think, you know, particularly when 312 00:17:25,280 --> 00:17:28,439 Speaker 1: it comes to you know, markets like equities, you know, 313 00:17:28,520 --> 00:17:30,800 Speaker 1: people sell first and then build a narrative around that 314 00:17:30,880 --> 00:17:36,240 Speaker 1: later valuations are on the rich side. Going into the 315 00:17:36,240 --> 00:17:39,640 Speaker 1: beginning of this year, we did not see value, for example, 316 00:17:39,680 --> 00:17:42,919 Speaker 1: in places like high yield UH and and now that 317 00:17:42,920 --> 00:17:44,959 Speaker 1: that there's been a bit of a sell off, some 318 00:17:45,040 --> 00:17:46,760 Speaker 1: of those sectors are starting to look a little bit 319 00:17:46,800 --> 00:17:49,040 Speaker 1: more attractive. But again, in the grand scheme of things, 320 00:17:49,080 --> 00:17:53,000 Speaker 1: that we take a step back, credit spreads are pretty compressed. 321 00:17:53,520 --> 00:17:56,680 Speaker 1: Treasury yields are you know, one, one six. Uh. It's 322 00:17:56,800 --> 00:18:00,000 Speaker 1: very consistent with an economy that's slowing, and it's very 323 00:18:00,000 --> 00:18:03,240 Speaker 1: system with an economy that needs significant amounts of stimulus 324 00:18:03,280 --> 00:18:06,640 Speaker 1: just to stay where it is, not to slow further. Uh. 325 00:18:06,640 --> 00:18:08,119 Speaker 1: And and that's where we are. And that's not an 326 00:18:08,200 --> 00:18:09,879 Speaker 1: environment where you you really want to stick your neck 327 00:18:09,880 --> 00:18:11,760 Speaker 1: out when it comes to risk. So at every time 328 00:18:11,760 --> 00:18:15,720 Speaker 1: we chat with a currency strategist, trader, investor, I always 329 00:18:15,760 --> 00:18:17,720 Speaker 1: have to ask the question, is there a bearer case 330 00:18:17,920 --> 00:18:20,840 Speaker 1: for the dollar? I think so, And I think the 331 00:18:20,920 --> 00:18:23,359 Speaker 1: bear case was starting to form at the beginning of 332 00:18:23,359 --> 00:18:25,080 Speaker 1: the year, and and and it went something like this, 333 00:18:25,240 --> 00:18:29,560 Speaker 1: look to the extent that we've seen a significant bid 334 00:18:29,560 --> 00:18:31,680 Speaker 1: for the dollar, a safe haven bid for the dollar. 335 00:18:31,920 --> 00:18:35,480 Speaker 1: It came from two points. First, US growth was superior 336 00:18:35,520 --> 00:18:38,720 Speaker 1: to that of Europe, and second, US rates were seeking 337 00:18:38,720 --> 00:18:40,840 Speaker 1: afinitely higher. So is it was a positive carry trade 338 00:18:42,640 --> 00:18:46,159 Speaker 1: with the Phase one deal, with US data starting to 339 00:18:46,640 --> 00:18:49,760 Speaker 1: stabilize and European data starting to actually outperform. If you 340 00:18:49,800 --> 00:18:52,119 Speaker 1: look in the surprise in the sease, European data is 341 00:18:52,080 --> 00:18:55,040 Speaker 1: surprised to the upside significantly faster than than U S 342 00:18:55,119 --> 00:18:58,040 Speaker 1: DAD in the last six months. UH. There was a 343 00:18:58,080 --> 00:19:01,119 Speaker 1: case that that those flows would reverse in Europe's favor. 344 00:19:01,720 --> 00:19:05,280 Speaker 1: UH from an asset flow perspective as well, European assets 345 00:19:05,320 --> 00:19:07,800 Speaker 1: relatively cheap to to the U S when it comes 346 00:19:07,800 --> 00:19:09,720 Speaker 1: to when it comes to risk, and so some of 347 00:19:09,720 --> 00:19:12,600 Speaker 1: the flows could have potentially reversed. All of that has 348 00:19:12,640 --> 00:19:14,920 Speaker 1: taken a back seat, in part because it was a 349 00:19:14,920 --> 00:19:17,280 Speaker 1: consensus position at the beginning of the year and it's 350 00:19:17,320 --> 00:19:21,080 Speaker 1: really getting beaten out. You said that because hy yield 351 00:19:21,119 --> 00:19:23,120 Speaker 1: has come off a but you didn't like hy yield 352 00:19:23,119 --> 00:19:26,680 Speaker 1: heading into UH. It has sold off a bit in 353 00:19:26,760 --> 00:19:29,720 Speaker 1: the past few sessions. At what point would it be 354 00:19:29,880 --> 00:19:35,120 Speaker 1: enough for you to see opportunity? UM. You know, obviously 355 00:19:35,520 --> 00:19:38,560 Speaker 1: the interesting thing about HW yield is the sector level 356 00:19:38,600 --> 00:19:40,920 Speaker 1: of corporate level work, right, you have to get into 357 00:19:40,960 --> 00:19:44,119 Speaker 1: the individual bonds at an index level. If you just 358 00:19:44,160 --> 00:19:47,199 Speaker 1: look at you know, like HID the highl td S index, 359 00:19:47,640 --> 00:19:51,399 Speaker 1: it's it's it's very early. Obviously to the extent that 360 00:19:51,440 --> 00:19:53,680 Speaker 1: we were short. We're covering someone that short as it 361 00:19:53,760 --> 00:19:56,560 Speaker 1: sells off, but we're not really going going along at 362 00:19:56,560 --> 00:20:00,000 Speaker 1: the stage. How about pounds Sterling brexits. You know, we're 363 00:20:00,080 --> 00:20:02,720 Speaker 1: getting to the point where it's gonna UK is gonna 364 00:20:02,760 --> 00:20:05,520 Speaker 1: come out of Brexit. Then you'll start the long work 365 00:20:05,560 --> 00:20:07,760 Speaker 1: of actually doing trade deals and things like that. What 366 00:20:07,840 --> 00:20:09,840 Speaker 1: is your thoughts on sterling right here? It's around one 367 00:20:09,840 --> 00:20:12,919 Speaker 1: thirty right now. Pretty pretty vulnerable, you know, in in 368 00:20:13,040 --> 00:20:16,320 Speaker 1: part because we did a really good job of pricing 369 00:20:16,359 --> 00:20:21,040 Speaker 1: in UM the reduction and uncertainty that that that followed 370 00:20:21,040 --> 00:20:23,560 Speaker 1: the election last year. We priced that in pretty aggressively 371 00:20:23,640 --> 00:20:27,240 Speaker 1: last year. UM. And what we have now is is 372 00:20:27,520 --> 00:20:30,040 Speaker 1: a new catalyst in the form of the Bank of England. 373 00:20:30,400 --> 00:20:33,000 Speaker 1: We'll find out tomorrow, but but clearly there's been a 374 00:20:33,040 --> 00:20:37,200 Speaker 1: shift the threshold in terms of the accumulation of data 375 00:20:37,400 --> 00:20:39,800 Speaker 1: weak data in the course of last year has now 376 00:20:39,880 --> 00:20:44,040 Speaker 1: reached the threshold where a cut or potential shallow easing 377 00:20:44,040 --> 00:20:46,800 Speaker 1: cycle is on the table for them. Uh. They're behind 378 00:20:46,840 --> 00:20:49,560 Speaker 1: the curve relative to the ECB and and and the Fed. 379 00:20:50,240 --> 00:20:54,040 Speaker 1: Uh and that could really damage damage Sterling's prospect. One 380 00:20:54,040 --> 00:20:57,080 Speaker 1: thing that you said earlier that this market needs a 381 00:20:57,119 --> 00:21:00,760 Speaker 1: substantial amount of central banks stimulus to keep it going. 382 00:21:01,200 --> 00:21:02,719 Speaker 1: What do you think that means for the FED as 383 00:21:02,760 --> 00:21:05,760 Speaker 1: we await J Powell's testimony today, or not testimony, but 384 00:21:05,880 --> 00:21:10,000 Speaker 1: his press conference at two thirty pm Eastern. Well, look, 385 00:21:10,000 --> 00:21:12,800 Speaker 1: the FED is going to be on hold. They've telegraphed 386 00:21:12,800 --> 00:21:14,800 Speaker 1: that pretty well. It's been priced by the markets. In fact, 387 00:21:14,880 --> 00:21:16,760 Speaker 1: we have easing now in the curve through the end 388 00:21:16,800 --> 00:21:18,560 Speaker 1: of of the year. There's not a lot of heavy 389 00:21:18,600 --> 00:21:21,359 Speaker 1: lifting to do there. I think we're the the challenges 390 00:21:21,480 --> 00:21:24,560 Speaker 1: really communicating at the moment with respect of its balance 391 00:21:24,600 --> 00:21:27,600 Speaker 1: sheet um. One of the narratives in the market is 392 00:21:27,640 --> 00:21:30,440 Speaker 1: because the FED is engaged in rebo and buying tea bills, 393 00:21:30,480 --> 00:21:36,679 Speaker 1: the balance sheet is optically growing and that's stimulating risk UM. 394 00:21:35,760 --> 00:21:39,399 Speaker 1: I personally, I'm not convinced that that's the case, but 395 00:21:39,640 --> 00:21:42,879 Speaker 1: a lot of market participants buy into that view, and 396 00:21:42,960 --> 00:21:45,880 Speaker 1: from the Fed's perspective, it presents a challenge because these 397 00:21:45,880 --> 00:21:49,919 Speaker 1: operations will presumably seize at some point this year and 398 00:21:49,920 --> 00:21:52,199 Speaker 1: then the balance sheet just start to shrink. Explaining that 399 00:21:52,280 --> 00:21:54,480 Speaker 1: is going to be challenging it all who say any 400 00:21:54,480 --> 00:21:56,160 Speaker 1: thanks so much for joining us. It is a senior 401 00:21:56,200 --> 00:21:59,200 Speaker 1: interest rate and currency analysts for Columbia thread Needle Investments 402 00:21:59,280 --> 00:22:12,520 Speaker 1: joining us here in our broken active Broker's Studio. The 403 00:22:12,560 --> 00:22:16,600 Speaker 1: spread of the coronavirus has dominated world markets, although less 404 00:22:16,640 --> 00:22:20,560 Speaker 1: so in the United States. A key question facing markets, 405 00:22:20,640 --> 00:22:24,320 Speaker 1: especially considering that the consensus heading into was that the 406 00:22:24,359 --> 00:22:28,239 Speaker 1: world economy would outperform the US economy this year in 407 00:22:28,320 --> 00:22:32,800 Speaker 1: terms of growth. Does the spread of the coronavirus potentially 408 00:22:32,920 --> 00:22:37,480 Speaker 1: threatened that and potentially indicate that world growth is going 409 00:22:37,520 --> 00:22:41,480 Speaker 1: too slow substantially while the US remains more immune joining 410 00:22:41,520 --> 00:22:43,600 Speaker 1: US now I'm so pleased to say. Stephanie Flanders, senior 411 00:22:43,640 --> 00:22:47,240 Speaker 1: executive editor for Bloomberg Economics and former advisor to US 412 00:22:47,280 --> 00:22:51,800 Speaker 1: Treasury Secretary Larry Summers. Stephanie, do you think that the 413 00:22:51,920 --> 00:22:56,960 Speaker 1: concept of world growth outperforming the US is threatened based 414 00:22:57,000 --> 00:22:59,360 Speaker 1: on what we're seeing by the spread of the coronavirus. 415 00:22:59,440 --> 00:23:02,280 Speaker 1: I think it pends. I mean, we're obviously looking at 416 00:23:03,040 --> 00:23:06,520 Speaker 1: cut in potentially the Q one or Q two growth 417 00:23:06,560 --> 00:23:09,040 Speaker 1: forecast for China and some of the other parts of 418 00:23:09,280 --> 00:23:12,200 Speaker 1: particularly Asia, where you're seeing the most impact in terms 419 00:23:12,240 --> 00:23:16,600 Speaker 1: of people not going to work, shops being closed, etcetera, etcetera. 420 00:23:16,920 --> 00:23:19,320 Speaker 1: I think the basic story we had at the beginning 421 00:23:19,320 --> 00:23:23,240 Speaker 1: of the year, which was around the world kind of 422 00:23:23,280 --> 00:23:25,280 Speaker 1: getting better a bit more than the US, the US 423 00:23:25,320 --> 00:23:27,720 Speaker 1: seeing slower growth this year and the rest of the 424 00:23:27,720 --> 00:23:30,400 Speaker 1: world actually coming out a bit out of the slow 425 00:23:30,440 --> 00:23:32,879 Speaker 1: spot it had last year. I think that basic story 426 00:23:33,000 --> 00:23:35,560 Speaker 1: is still there. But obviously one reason why the markets 427 00:23:35,560 --> 00:23:38,080 Speaker 1: are nervous is that we don't yet know quite how 428 00:23:38,119 --> 00:23:39,760 Speaker 1: big a deal this is going to be. And that's 429 00:23:39,760 --> 00:23:43,199 Speaker 1: obviously gonna we'll keep debating that over the next few months, Stephanite. 430 00:23:43,240 --> 00:23:46,200 Speaker 1: We've seen or some reporting and some signs some data 431 00:23:46,280 --> 00:23:52,240 Speaker 1: suggesting that Europe has seen some stabilization in their economics. Outlook, 432 00:23:52,280 --> 00:23:53,399 Speaker 1: are you seeing that as well in the day to 433 00:23:53,480 --> 00:23:54,840 Speaker 1: you look at yeah, and if you look at that, 434 00:23:54,960 --> 00:23:56,880 Speaker 1: we even saw with some German data in the last 435 00:23:56,920 --> 00:23:58,320 Speaker 1: week or so, and we're going to at the end 436 00:23:58,359 --> 00:23:59,840 Speaker 1: of the week we'll get even a better sense because 437 00:23:59,840 --> 00:24:01,879 Speaker 1: we've got some GDP numbers coming from quite a lot 438 00:24:01,880 --> 00:24:04,160 Speaker 1: of the key Eurozone economies. But I would say that's 439 00:24:04,240 --> 00:24:06,240 Speaker 1: right that we were sort of we were taken aback 440 00:24:06,280 --> 00:24:10,600 Speaker 1: by the speed of the downturn in Germany, particularly last year. 441 00:24:10,840 --> 00:24:13,159 Speaker 1: But now we're seeing activity come back a bit, You're 442 00:24:13,200 --> 00:24:16,880 Speaker 1: seeing wages pick up. It's still, you know, the yardstick 443 00:24:16,920 --> 00:24:19,280 Speaker 1: is always pretty low when it comes to the Eurozone. 444 00:24:19,320 --> 00:24:21,520 Speaker 1: You know, you got to interviewed the German finance minister 445 00:24:21,600 --> 00:24:23,000 Speaker 1: and he was happy on a day where there was 446 00:24:23,119 --> 00:24:26,200 Speaker 1: zero percent GDP growth because it was potentially negative. So 447 00:24:26,440 --> 00:24:27,960 Speaker 1: I think it's not the kind of growth that the 448 00:24:28,040 --> 00:24:30,160 Speaker 1: people in the US would be happy with, but it's 449 00:24:30,160 --> 00:24:33,120 Speaker 1: certainly looking better. The momentum is they're compared to last year. 450 00:24:33,280 --> 00:24:35,920 Speaker 1: The FED meets and has been meeting in Washington. The 451 00:24:35,920 --> 00:24:39,439 Speaker 1: press conference later today at two pm, two thirty pm, 452 00:24:39,440 --> 00:24:43,159 Speaker 1: two pm is the statement release? Well, street time, what 453 00:24:43,240 --> 00:24:48,040 Speaker 1: are you expecting them to say with respect to exogenous risks, 454 00:24:48,119 --> 00:24:50,639 Speaker 1: among them the coronavirus. Well, it's interesting. I mean that 455 00:24:50,880 --> 00:24:53,240 Speaker 1: is a sort of boilerplate statement in part of their 456 00:24:53,240 --> 00:24:57,000 Speaker 1: statement where they talk about external developments. And I suspect 457 00:24:57,119 --> 00:24:59,679 Speaker 1: that the assumption is that the virus will not be 458 00:24:59,760 --> 00:25:03,520 Speaker 1: men shouldn't specifically, but it's obviously is potentially included in that. 459 00:25:03,560 --> 00:25:06,040 Speaker 1: And I bet the first question, or one of the 460 00:25:06,080 --> 00:25:09,119 Speaker 1: first questions to J. Pow will be how are you 461 00:25:09,160 --> 00:25:11,160 Speaker 1: thinking about the virus? And so we'll hear a bit 462 00:25:11,200 --> 00:25:13,920 Speaker 1: more about their thinking. But it has not it has 463 00:25:13,960 --> 00:25:15,800 Speaker 1: not come to the point where you would say this 464 00:25:15,880 --> 00:25:19,080 Speaker 1: is something they're going to respond explicit to explicitly too, 465 00:25:19,080 --> 00:25:20,879 Speaker 1: in the way that maybe they would have responded to 466 00:25:21,200 --> 00:25:24,879 Speaker 1: worries about China in the past. So, Stephanie, this Federal 467 00:25:24,920 --> 00:25:27,679 Speaker 1: Reserve has described it stuff as data dependent. Do you 468 00:25:27,680 --> 00:25:30,439 Speaker 1: think the data supports them kind of sitting on the 469 00:25:30,480 --> 00:25:33,040 Speaker 1: sidelines for the next couple of quarters. I mean, if 470 00:25:33,040 --> 00:25:35,360 Speaker 1: you look at the futures market, that not really looking 471 00:25:35,400 --> 00:25:37,800 Speaker 1: for a rate cut or maybe sometime later in the year. Yeah, 472 00:25:37,840 --> 00:25:40,480 Speaker 1: And I think he's indicated that he thinks that's a 473 00:25:40,480 --> 00:25:42,679 Speaker 1: bit premature to be a suit to be counting on 474 00:25:42,720 --> 00:25:44,480 Speaker 1: that rate cut over the course of this year. But 475 00:25:44,480 --> 00:25:47,280 Speaker 1: there's certainly there's no expectation of a rate cut in 476 00:25:47,320 --> 00:25:50,280 Speaker 1: the first half. And I suspect we will hear that 477 00:25:50,320 --> 00:25:52,520 Speaker 1: phrase again. You know, the good place. We are in 478 00:25:52,560 --> 00:25:55,240 Speaker 1: a good place. The US economy is in a good place. 479 00:25:55,400 --> 00:25:58,000 Speaker 1: There's not been a big shift in the data relative 480 00:25:58,080 --> 00:26:01,720 Speaker 1: to the Fed's expectations since the last meeting, and in fact, 481 00:26:01,800 --> 00:26:03,879 Speaker 1: a lot of the action, as far as there is 482 00:26:03,920 --> 00:26:06,080 Speaker 1: any action coming out of this meeting, is going to 483 00:26:06,080 --> 00:26:08,919 Speaker 1: be more about that what's the FED doing to increase 484 00:26:09,200 --> 00:26:11,320 Speaker 1: reserves and how far is it going to go on 485 00:26:11,400 --> 00:26:14,399 Speaker 1: increasing the balance sheet. You've now seen that significant run up, 486 00:26:14,880 --> 00:26:17,840 Speaker 1: in effect a big injection of liquidity to respond to 487 00:26:17,840 --> 00:26:19,720 Speaker 1: that problem in the repo market that we saw a 488 00:26:19,720 --> 00:26:22,680 Speaker 1: few months ago. Some debate about whether that's quantity of 489 00:26:22,760 --> 00:26:25,400 Speaker 1: easing not quantity of using, lots of sort of philosophical 490 00:26:25,480 --> 00:26:27,919 Speaker 1: arguments about that in the markets. But I suspect if 491 00:26:27,960 --> 00:26:30,280 Speaker 1: there's any fire out of this press conference, it will 492 00:26:30,320 --> 00:26:33,159 Speaker 1: be in j Pal's response to questions on that the 493 00:26:33,200 --> 00:26:36,160 Speaker 1: future path of the balance sheet, how much more can 494 00:26:36,200 --> 00:26:38,320 Speaker 1: the market expect to get on that? I want to 495 00:26:38,359 --> 00:26:41,720 Speaker 1: focus on this gap between the Fed saying that there 496 00:26:41,720 --> 00:26:45,639 Speaker 1: on hold for the remainder of markets that are calling 497 00:26:45,680 --> 00:26:48,520 Speaker 1: their bluff, and saying we are expecting at least one 498 00:26:48,600 --> 00:26:50,720 Speaker 1: rate cut this year because that's what's being priced into 499 00:26:50,760 --> 00:26:53,840 Speaker 1: the market. Over the past decade, the market has been 500 00:26:53,920 --> 00:26:56,959 Speaker 1: right or perhaps has job boned the Fed into action 501 00:26:57,080 --> 00:27:01,560 Speaker 1: on numerous occasions, as an example of what happens when 502 00:27:01,600 --> 00:27:03,120 Speaker 1: they don't when when they don't get what they want, 503 00:27:03,560 --> 00:27:05,520 Speaker 1: do you expect that that's that's basically what's going to 504 00:27:05,560 --> 00:27:07,040 Speaker 1: happen this time? And I think there's a number of 505 00:27:07,040 --> 00:27:09,240 Speaker 1: ways you can read those that the forward pricing, because 506 00:27:09,400 --> 00:27:12,760 Speaker 1: you could argue that a lot of people that that 507 00:27:12,760 --> 00:27:16,480 Speaker 1: that that sort of average expectation actually encompasses two things. 508 00:27:16,560 --> 00:27:19,840 Speaker 1: It encompasses, you know, a reasonably high chance of no 509 00:27:20,000 --> 00:27:22,520 Speaker 1: movement from the FED plus a chance that if they 510 00:27:22,560 --> 00:27:24,480 Speaker 1: do move, they're going to move quite a lot. You know, 511 00:27:24,520 --> 00:27:26,800 Speaker 1: they have made clear because we don't have very much AMMO. 512 00:27:27,400 --> 00:27:29,720 Speaker 1: If we see a problem, we're going to respond might 513 00:27:29,760 --> 00:27:31,320 Speaker 1: be more than we would have done in the past, 514 00:27:31,320 --> 00:27:33,200 Speaker 1: maybe sooner than we would have done in the past. 515 00:27:33,600 --> 00:27:36,160 Speaker 1: If you think that that if something goes wrong this year, 516 00:27:36,480 --> 00:27:38,760 Speaker 1: that they would actually respond with a half point, not 517 00:27:38,880 --> 00:27:42,240 Speaker 1: a quarter point, or even more than that in response 518 00:27:42,240 --> 00:27:44,840 Speaker 1: to a slowdown, then if you average out the sort 519 00:27:44,840 --> 00:27:47,360 Speaker 1: of you know, say a thirty percent possibility of that 520 00:27:47,840 --> 00:27:50,440 Speaker 1: with then you can get if you look at that market. 521 00:27:50,480 --> 00:27:52,960 Speaker 1: I mean, obviously the numbers are rough, but I think 522 00:27:53,000 --> 00:27:55,440 Speaker 1: that is there's still if you ask a lot of 523 00:27:55,440 --> 00:27:58,160 Speaker 1: people in the markets, I'm not sure what you're seeing 524 00:27:58,160 --> 00:28:00,760 Speaker 1: in the pricing is that that is what they expect. 525 00:28:00,880 --> 00:28:04,360 Speaker 1: It's the average of two different scenarios. Stephanie Flanders, thanks 526 00:28:04,359 --> 00:28:06,479 Speaker 1: so much for joining us. We appreciate you joining us here. 527 00:28:06,520 --> 00:28:10,280 Speaker 1: Stephanie Flanders, Senior Executive Editor for Economics ahead of Bloomberg Economics, 528 00:28:10,920 --> 00:28:12,920 Speaker 1: based in London, but joining us here in our Bloomberg 529 00:28:12,920 --> 00:28:15,320 Speaker 1: Interactive Broker Studio went ennivers Seas in town. Look forward 530 00:28:15,320 --> 00:28:17,520 Speaker 1: to having her. Thanks for listening to the Bloomberg p 531 00:28:17,760 --> 00:28:20,320 Speaker 1: L podcast. You can subscribe and listen to interviews at 532 00:28:20,320 --> 00:28:24,040 Speaker 1: Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney. 533 00:28:24,080 --> 00:28:26,959 Speaker 1: I'm on Twitter at pt Sweeney. I'm Lisa Abramloyd's I'm 534 00:28:26,960 --> 00:28:29,840 Speaker 1: on Twitter at Lisa Abram woyds One. Before the podcast, 535 00:28:29,880 --> 00:28:32,480 Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio