1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,360 Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:37,200 Speaker 2: Bloomberg Terminal and the Bloomberg Business app at Beginning this hour, 10 00:00:37,400 --> 00:00:39,639 Speaker 2: with stocksin chin KaiA looking to snap a two day 11 00:00:39,680 --> 00:00:42,800 Speaker 2: losing streak, market's whipsword by tariff headlines are leading to 12 00:00:42,840 --> 00:00:46,440 Speaker 2: several downgrades for US sancreities. From Goldman, from City and 13 00:00:46,479 --> 00:00:50,600 Speaker 2: from HSBC. Join Gus now from HSBC, Max Ketner, Max, 14 00:00:50,640 --> 00:00:53,040 Speaker 2: Welcome back to the program, Sir, The facts have changed. 15 00:00:53,120 --> 00:00:55,200 Speaker 2: Talked to me about how the outlook might have changed 16 00:00:55,200 --> 00:00:55,640 Speaker 2: as well. 17 00:00:56,920 --> 00:00:59,840 Speaker 3: Yeah, Look, I think we're still tactically quite cautious on equities. 18 00:01:00,040 --> 00:01:02,800 Speaker 3: We're all, particularly of course in the US. We've just 19 00:01:02,840 --> 00:01:04,400 Speaker 3: put out a note this morning. I think this is 20 00:01:04,440 --> 00:01:06,920 Speaker 3: the kind of time where you need to update your 21 00:01:06,959 --> 00:01:10,039 Speaker 3: framework your indicators pretty much on an hourly basis, because 22 00:01:10,319 --> 00:01:13,320 Speaker 3: like you guys were just discussing, of course, even yesterday, 23 00:01:13,400 --> 00:01:16,280 Speaker 3: things were changing pretty much three times during the day. 24 00:01:16,720 --> 00:01:18,880 Speaker 3: So when we look at our indicators at the moment, 25 00:01:18,959 --> 00:01:22,720 Speaker 3: particularly from a systematic perspective, of course, yes, there has 26 00:01:22,800 --> 00:01:26,119 Speaker 3: been quite a bit of systematic selling. But what we're 27 00:01:26,160 --> 00:01:29,280 Speaker 3: not yet seeing is this sort of final puke. So 28 00:01:29,280 --> 00:01:33,319 Speaker 3: when we look, for example, our momentum and slash CTA indicators, 29 00:01:33,600 --> 00:01:36,720 Speaker 3: they are bearish. They flipped from maximum bullish to bearish, 30 00:01:36,760 --> 00:01:40,640 Speaker 3: but they're only at sort of medium bearish levels until now. 31 00:01:40,760 --> 00:01:43,200 Speaker 3: So we need, I think, for us to be comfortable 32 00:01:43,240 --> 00:01:45,200 Speaker 3: to go back in and to buy the DIP, I 33 00:01:45,240 --> 00:01:47,200 Speaker 3: think we need a bit more sort of a puke 34 00:01:47,319 --> 00:01:51,040 Speaker 3: moment inequities to really say, right, this is the all clear. Now, 35 00:01:51,160 --> 00:01:54,360 Speaker 3: positioning is clear enough, systematics have sold enough, and of 36 00:01:54,400 --> 00:01:58,040 Speaker 3: course from a fundamental perspective, what's changed in the outlook. 37 00:01:58,120 --> 00:02:01,000 Speaker 3: So the stuff that you were alluding to is, you know, 38 00:02:01,000 --> 00:02:03,160 Speaker 3: we were all thinking there is some sort of put 39 00:02:03,200 --> 00:02:06,720 Speaker 3: from the new US administration. With that absent it is 40 00:02:06,760 --> 00:02:08,799 Speaker 3: down to the FED put. But of course with data 41 00:02:09,000 --> 00:02:11,960 Speaker 3: let's say like yesterday, like the jolt data, all services 42 00:02:11,960 --> 00:02:15,320 Speaker 3: of isms or payrolls still pretty pretty okay. You know, 43 00:02:15,360 --> 00:02:17,560 Speaker 3: in a normal environment, that would be really bootish for 44 00:02:17,600 --> 00:02:21,080 Speaker 3: equities and for risk assets overall. For the current environment, however, 45 00:02:21,360 --> 00:02:24,320 Speaker 3: it just puts the FED put even further away. Remember 46 00:02:24,400 --> 00:02:27,239 Speaker 3: what Powell was saying on Friday, We're in no hurry 47 00:02:27,280 --> 00:02:29,400 Speaker 3: at all to do anything in rates. So what we 48 00:02:29,440 --> 00:02:31,520 Speaker 3: would need is the FIT to give some kind of 49 00:02:31,600 --> 00:02:35,760 Speaker 3: not to tightening financial conditions, that they're monitoring market developments 50 00:02:35,840 --> 00:02:38,160 Speaker 3: something like that. But as they said on Friday, I 51 00:02:38,160 --> 00:02:40,000 Speaker 3: think we're still quite a bit of way off. 52 00:02:40,000 --> 00:02:41,960 Speaker 2: There max a lot to unpack there. Let's start with 53 00:02:41,960 --> 00:02:45,840 Speaker 2: the technical term puke. What does the cathartic puke look like? 54 00:02:46,160 --> 00:02:48,000 Speaker 2: We had a ten percent decline at one point in 55 00:02:48,080 --> 00:02:50,280 Speaker 2: yesterday's session, so entered correction territory. 56 00:02:50,320 --> 00:02:52,359 Speaker 4: Briefly, If it's not that, what is it? 57 00:02:53,760 --> 00:02:55,760 Speaker 3: I think what we need to see is broader based. 58 00:02:56,080 --> 00:02:59,560 Speaker 3: Even on Monday, right breadth actually wasn't that bad. It 59 00:02:59,600 --> 00:03:02,080 Speaker 3: wasn't like it was all five hundred stocks going down. 60 00:03:02,240 --> 00:03:05,440 Speaker 3: It was still pretty sort of focused and pretty concentrated 61 00:03:05,480 --> 00:03:08,160 Speaker 3: on some certain sectors, and the high multiple sectors. I 62 00:03:08,160 --> 00:03:10,080 Speaker 3: think what you would want to see is sort of 63 00:03:10,200 --> 00:03:13,320 Speaker 3: the final broad based puke where it's not just you know, 64 00:03:13,440 --> 00:03:16,040 Speaker 3: tech and the high multiple stuff that gets hammered, but 65 00:03:16,360 --> 00:03:19,239 Speaker 3: really the broader market where perhaps even the equal weighted 66 00:03:19,360 --> 00:03:23,200 Speaker 3: SMP underperforms the cap weighted SMP. What you would want 67 00:03:23,240 --> 00:03:26,360 Speaker 3: to see is that spilling over into credit spreads as well, 68 00:03:26,440 --> 00:03:30,160 Speaker 3: right where we haven't really seen a disorderly widening as well, 69 00:03:30,240 --> 00:03:32,959 Speaker 3: and maybe even spilling over into other equity markets where 70 00:03:32,960 --> 00:03:35,240 Speaker 3: then people say, you know what, so far we've been 71 00:03:35,280 --> 00:03:38,120 Speaker 3: hinding out in European equities. We've been you know, thinking 72 00:03:38,120 --> 00:03:41,080 Speaker 3: that this is a completely different story. But now we're 73 00:03:41,160 --> 00:03:44,480 Speaker 3: really playing US for recession fears, and that should spill 74 00:03:44,520 --> 00:03:47,440 Speaker 3: over in to global equity markets once we've got that. 75 00:03:47,560 --> 00:03:50,760 Speaker 3: I think that is then sort of the final puke. 76 00:03:50,800 --> 00:03:53,480 Speaker 3: And another queue to watch perhaps is the momentum factor. 77 00:03:53,520 --> 00:03:56,560 Speaker 3: When we look, of course in US momentum, that momentum 78 00:03:56,560 --> 00:03:59,840 Speaker 3: factor has been absolutely slaughter the last three four weeks. 79 00:04:00,240 --> 00:04:02,200 Speaker 3: Any kind of bottoming there, any kind of a sign 80 00:04:02,240 --> 00:04:04,520 Speaker 3: of a reversal there, I think is another sign where 81 00:04:04,560 --> 00:04:05,520 Speaker 3: we can start buying. 82 00:04:05,280 --> 00:04:07,200 Speaker 5: The dep I think this conversation needs a bit of 83 00:04:07,200 --> 00:04:10,280 Speaker 5: antacid and Max. I am curious about whether we're talking 84 00:04:10,320 --> 00:04:14,160 Speaker 5: about sort of the market equivalent of the economic debate 85 00:04:14,200 --> 00:04:17,240 Speaker 5: here of whether we're pricing in stagflation or pricing in 86 00:04:17,920 --> 00:04:20,559 Speaker 5: something more like a recession, and that is something Julia 87 00:04:20,839 --> 00:04:23,919 Speaker 5: Emmanuel was talking about, what are we pricing in currently? 88 00:04:23,960 --> 00:04:26,960 Speaker 5: What would you take more seriously right now at a 89 00:04:27,000 --> 00:04:29,200 Speaker 5: time where there are a lot of anxieties, but there 90 00:04:29,240 --> 00:04:31,760 Speaker 5: still are people who are hopeful that we could emerge 91 00:04:31,760 --> 00:04:32,000 Speaker 5: from this. 92 00:04:33,480 --> 00:04:36,800 Speaker 3: I think stagflation fears were about a month ago, right 93 00:04:36,880 --> 00:04:41,000 Speaker 3: That was basically when we had January CPI particularly underlying 94 00:04:41,040 --> 00:04:43,799 Speaker 3: inflation much much higher than a lot of people, including 95 00:04:43,839 --> 00:04:47,119 Speaker 3: myself expected, where you know, super core inflation was really 96 00:04:47,120 --> 00:04:49,560 Speaker 3: coming in quite a bit hotter, and that really was 97 00:04:49,560 --> 00:04:50,159 Speaker 3: a month ago. 98 00:04:50,240 --> 00:04:53,320 Speaker 4: When we look at the last three weeks, the amount. 99 00:04:53,000 --> 00:04:56,320 Speaker 3: Of selling that we've seen in cyclicals versus defensives, particularly 100 00:04:56,360 --> 00:04:59,719 Speaker 3: in the US, the amount of decoupling between US cyclical 101 00:04:59,760 --> 00:05:04,000 Speaker 3: def against European cyclical defensives, or really rest of worlds 102 00:05:04,000 --> 00:05:08,000 Speaker 3: cyclical against defensive performance clearly tells us what the market 103 00:05:08,040 --> 00:05:10,840 Speaker 3: is playing now in particularly the last week and a 104 00:05:10,839 --> 00:05:14,200 Speaker 3: half is increasingly recession fears, so we are I think 105 00:05:14,240 --> 00:05:16,360 Speaker 3: we are getting closer to the point where you want 106 00:05:16,360 --> 00:05:19,480 Speaker 3: to start buying that correction. We're not just quite there 107 00:05:19,600 --> 00:05:22,080 Speaker 3: yet because I think, again, it would be different if 108 00:05:22,080 --> 00:05:25,080 Speaker 3: it was just the high multiple stuff, but we're starting 109 00:05:25,120 --> 00:05:27,960 Speaker 3: to see that spill over into other parts of the market. 110 00:05:28,000 --> 00:05:28,800 Speaker 4: It's just not. 111 00:05:28,800 --> 00:05:31,520 Speaker 3: Quite there yet where we can really sound the all 112 00:05:31,640 --> 00:05:34,760 Speaker 3: clear on the systematic positioning unwind being completely over. 113 00:05:35,000 --> 00:05:37,960 Speaker 5: This is a complicated story. It's not just about recession 114 00:05:38,320 --> 00:05:40,680 Speaker 5: and recession fears in the US. It's also about relative 115 00:05:40,760 --> 00:05:43,560 Speaker 5: valuation and the fact that suddenly there is an alternative 116 00:05:43,640 --> 00:05:45,960 Speaker 5: and the idea that Europe looks brighter, especially with the 117 00:05:46,000 --> 00:05:49,000 Speaker 5: likelihood of some sort of fiscal package being passed. How 118 00:05:49,080 --> 00:05:50,680 Speaker 5: much do you lean into that and how much do 119 00:05:50,720 --> 00:05:52,039 Speaker 5: you say what a lot of people have sat on 120 00:05:52,040 --> 00:05:53,800 Speaker 5: this show over the past couple of days, which is 121 00:05:54,040 --> 00:05:58,040 Speaker 5: that's looking pretty expensive, looking pretty bad, that's already over. 122 00:05:59,760 --> 00:06:02,120 Speaker 3: I mean, for one, what is amazing is think if 123 00:06:02,200 --> 00:06:04,240 Speaker 3: two months ago, if at the beginning of January, just 124 00:06:04,279 --> 00:06:07,440 Speaker 3: before inaugration, if we had said I think German small 125 00:06:07,480 --> 00:06:10,560 Speaker 3: in mid camps or European small and midcaps are the 126 00:06:11,080 --> 00:06:14,640 Speaker 3: quote relative save Haven in global equity land. I think 127 00:06:14,680 --> 00:06:16,479 Speaker 3: you guys would have thrown me out of this room 128 00:06:16,520 --> 00:06:18,559 Speaker 3: now and would have sent maybe don't come back again. 129 00:06:18,880 --> 00:06:21,239 Speaker 3: So it is quite funny how things have changed only 130 00:06:21,320 --> 00:06:24,120 Speaker 3: within a couple of weeks. I do agree with you 131 00:06:24,240 --> 00:06:26,599 Speaker 3: it is perhaps the Dacks is not the right place 132 00:06:26,640 --> 00:06:28,880 Speaker 3: maybe anymore. I think it's perhaps in Europe really the 133 00:06:28,920 --> 00:06:32,560 Speaker 3: small in midcamps that should benefit the most from perhaps 134 00:06:32,560 --> 00:06:36,080 Speaker 3: you know that the fiscal package in Germany getting over 135 00:06:36,120 --> 00:06:39,240 Speaker 3: the line. Also perhaps any potential kind of positive news 136 00:06:39,279 --> 00:06:43,080 Speaker 3: around Russia, Ukraine. All of that is really particularly beneficial 137 00:06:43,080 --> 00:06:45,599 Speaker 3: for the smaller in midcaps, but also for other parts 138 00:06:45,640 --> 00:06:47,120 Speaker 3: of the market. We look at China, I think the 139 00:06:47,240 --> 00:06:50,200 Speaker 3: China Internet that ags tech trade, that still has some 140 00:06:50,320 --> 00:06:52,960 Speaker 3: room to left. So it's not like we have to 141 00:06:53,080 --> 00:06:56,400 Speaker 3: throw in the towel on equities entirely, right. It is 142 00:06:56,520 --> 00:06:59,920 Speaker 3: so far mainly a US story. And I think in Europe, yeah, 143 00:07:00,080 --> 00:07:02,279 Speaker 3: find the higher euro, the stronger euro, I think is 144 00:07:02,320 --> 00:07:05,120 Speaker 3: starting to get felt in the larger caps, particularly in 145 00:07:05,160 --> 00:07:07,840 Speaker 3: the German equities, given that they you know, basically get 146 00:07:07,880 --> 00:07:10,680 Speaker 3: generate only or less than twenty percent of their revenues 147 00:07:10,960 --> 00:07:14,160 Speaker 3: outside of or inside of Germany and about eighty percent 148 00:07:14,240 --> 00:07:17,280 Speaker 3: outside of Germany. So the stronger euro will start awagh 149 00:07:17,320 --> 00:07:20,280 Speaker 3: on the performers there, But the smaller and midcaps, I 150 00:07:20,280 --> 00:07:22,080 Speaker 3: think really the ones that you want to look at. 151 00:07:22,240 --> 00:07:24,600 Speaker 3: Also the banks, right, we can look at European banks. 152 00:07:24,640 --> 00:07:27,680 Speaker 3: Still really good European insurance, So there's a lot of 153 00:07:27,680 --> 00:07:30,520 Speaker 3: stuff even within Europe also from a sector perspective under 154 00:07:30,520 --> 00:07:32,040 Speaker 3: the hood that is worth looking at. 155 00:07:32,200 --> 00:07:34,720 Speaker 1: Max an incredible twenty four hours for Europe, potentially one 156 00:07:34,720 --> 00:07:37,880 Speaker 1: step closer to peace on the continent. At the same time, 157 00:07:37,920 --> 00:07:40,880 Speaker 1: you wake up and you see these retaliatory countermeasures to 158 00:07:41,080 --> 00:07:44,320 Speaker 1: US tariffs, what narrative do you think will prevail? 159 00:07:45,960 --> 00:07:48,880 Speaker 3: Look, I think the narrative clearly for the US is 160 00:07:48,880 --> 00:07:51,560 Speaker 3: is that that put from or that we thought was 161 00:07:51,600 --> 00:07:55,000 Speaker 3: there from the US administration, either the strike price is 162 00:07:55,200 --> 00:07:58,400 Speaker 3: much further away, or maybe that put doesn't even exist 163 00:07:58,480 --> 00:08:00,560 Speaker 3: because they want to force in the fit. So I 164 00:08:00,600 --> 00:08:03,720 Speaker 3: think that narrative, particularly for you as risk assets, and 165 00:08:03,760 --> 00:08:06,520 Speaker 3: frankly at some point also for globally for risk assets 166 00:08:06,560 --> 00:08:09,400 Speaker 3: more broadly, will really prevail on the next couple of weeks, 167 00:08:09,400 --> 00:08:13,080 Speaker 3: because ultimately, for a sustained you know, for a sustained 168 00:08:13,120 --> 00:08:16,120 Speaker 3: reversal higher. We will need to see some kind of 169 00:08:16,160 --> 00:08:18,560 Speaker 3: not from the FED to say, Okay, you know what, 170 00:08:18,680 --> 00:08:22,400 Speaker 3: we are monitoring financial conditions, we are monitoring market developments. 171 00:08:22,680 --> 00:08:25,520 Speaker 3: And let's remember that was actually already enough in the 172 00:08:25,560 --> 00:08:29,200 Speaker 3: December twenty eighteen January twenty nineteen episode. You know, they 173 00:08:29,200 --> 00:08:32,000 Speaker 3: were starting to cut rates only in July twenty nineteen, 174 00:08:32,160 --> 00:08:35,160 Speaker 3: but in January already had that bullish reversal because all 175 00:08:35,160 --> 00:08:37,560 Speaker 3: the FED had to do is to say, well, financial 176 00:08:37,600 --> 00:08:41,319 Speaker 3: conditions are quote notably tighter than they were in September. 177 00:08:41,320 --> 00:08:42,160 Speaker 4: That's all they had to do. 178 00:08:42,200 --> 00:08:45,520 Speaker 3: They only had to say notably tighter, and already markets 179 00:08:45,520 --> 00:08:47,240 Speaker 3: were saying that's the FED put that's it. 180 00:08:47,280 --> 00:08:47,800 Speaker 4: So we're not. 181 00:08:47,760 --> 00:08:50,040 Speaker 3: Talking QE, we're not talking emergency rate cuts. 182 00:08:50,160 --> 00:08:51,439 Speaker 4: What I'm talking about. 183 00:08:51,360 --> 00:08:53,560 Speaker 3: Is literally just like a verbal not from the FED 184 00:08:53,640 --> 00:08:55,720 Speaker 3: that we need and that already I think from a 185 00:08:55,760 --> 00:08:59,240 Speaker 3: fundamental perspective, would then change that narrative that we've just 186 00:08:59,280 --> 00:08:59,960 Speaker 3: been talking about. 187 00:09:00,080 --> 00:09:02,360 Speaker 2: A Max appreciate it. Thanks for the update. Max Canada 188 00:09:02,400 --> 00:09:14,360 Speaker 2: there of HSBC. On the equity market, Let's talk about 189 00:09:14,360 --> 00:09:16,320 Speaker 2: some of the stock moves we've seen in the past 190 00:09:16,360 --> 00:09:18,840 Speaker 2: twenty four hours we can in consumer demand, leading to 191 00:09:18,840 --> 00:09:21,679 Speaker 2: a sell off in airline stocks downta, spooking investors after 192 00:09:21,760 --> 00:09:25,000 Speaker 2: kind of its profit forecast in half. Chila Colu of 193 00:09:25,080 --> 00:09:27,839 Speaker 2: Jeffreyes joins US now for more chili. Good morning in rain, 194 00:09:27,920 --> 00:09:30,560 Speaker 2: big changes. What did you see what you were tracking 195 00:09:30,679 --> 00:09:33,000 Speaker 2: in the last month or so, what's happened with these airlines. 196 00:09:33,760 --> 00:09:36,160 Speaker 6: We have a data series that tracks airline traffic on 197 00:09:36,240 --> 00:09:40,200 Speaker 6: apps and folks pre booking, so that data fell off 198 00:09:40,240 --> 00:09:43,520 Speaker 6: about ten percent over the last three months, so trailing 199 00:09:43,520 --> 00:09:45,520 Speaker 6: three months, but the three weeks really fell off. It 200 00:09:45,600 --> 00:09:48,240 Speaker 6: hit the lowest cost carriers the most. So back to 201 00:09:48,440 --> 00:09:50,559 Speaker 6: Ann Marie's point, it's in the heartland and where we're 202 00:09:50,559 --> 00:09:54,760 Speaker 6: seeing the demand fall off. But Delta signaled a fifty 203 00:09:54,800 --> 00:09:57,600 Speaker 6: percent revenue cut. They guided Q one seven to nine percent, 204 00:09:57,920 --> 00:09:59,480 Speaker 6: then they cut it to up three to four. So 205 00:09:59,600 --> 00:10:03,479 Speaker 6: still positive. As Ed Bastian said, we're not in recession territory. 206 00:10:03,720 --> 00:10:05,880 Speaker 6: But January and February, which is the last time we 207 00:10:05,880 --> 00:10:08,920 Speaker 6: heard from them about three weeks ago, was positive growth, 208 00:10:09,200 --> 00:10:11,679 Speaker 6: and so that means the last three weeks really decelerated. 209 00:10:11,720 --> 00:10:13,720 Speaker 6: So Q two is going to be very important because 210 00:10:13,760 --> 00:10:15,640 Speaker 6: it's about forty percent of airline earnings. 211 00:10:15,800 --> 00:10:18,760 Speaker 5: As we strip out some of the motivating reasons for 212 00:10:18,840 --> 00:10:21,920 Speaker 5: why we saw such a deceleration in demand, can you 213 00:10:22,080 --> 00:10:26,600 Speaker 5: track the fall off in airline ticket purchases to some 214 00:10:26,679 --> 00:10:28,280 Speaker 5: of the safety issues that were raised? 215 00:10:28,920 --> 00:10:31,760 Speaker 6: That was cited by both American and Delta yesterday, But 216 00:10:31,800 --> 00:10:33,559 Speaker 6: it was across the board, and that's what I think 217 00:10:33,720 --> 00:10:36,200 Speaker 6: startled so many folks. It was Delta close in bookings, 218 00:10:36,240 --> 00:10:39,520 Speaker 6: so people book airfares closer to when they're actually going 219 00:10:39,559 --> 00:10:41,959 Speaker 6: to travel. It was also corporate demands off, and we've 220 00:10:42,000 --> 00:10:44,880 Speaker 6: seen that in bizjet utilization data as well for February. 221 00:10:45,360 --> 00:10:49,120 Speaker 6: And then third it was a demand across government, which 222 00:10:49,240 --> 00:10:51,719 Speaker 6: United has about four percent of asms and American has 223 00:10:51,720 --> 00:10:53,160 Speaker 6: one point five, So it was. 224 00:10:53,160 --> 00:10:54,000 Speaker 4: Across the board. 225 00:10:54,000 --> 00:10:58,960 Speaker 6: It was Trump's policy's doge really impacting government employees, corporates 226 00:10:59,000 --> 00:11:02,559 Speaker 6: slowing down, and then you know just leisure demand slowing 227 00:11:02,559 --> 00:11:03,000 Speaker 6: as well. 228 00:11:03,080 --> 00:11:06,920 Speaker 5: We heard from Delta that they plan to cut capacity 229 00:11:07,160 --> 00:11:10,520 Speaker 5: to meet slower demand heading into the summer. What does 230 00:11:10,559 --> 00:11:13,679 Speaker 5: that indicate to you about just how temporary this is, 231 00:11:13,920 --> 00:11:17,079 Speaker 5: or if potentially some of the airlines are preparing for 232 00:11:17,160 --> 00:11:19,000 Speaker 5: this fall off to continue for a longer period of 233 00:11:19,000 --> 00:11:22,160 Speaker 5: time and hoping to increase prices to compensate for it. 234 00:11:22,360 --> 00:11:25,080 Speaker 6: I think domestically in the US market, capacity is already 235 00:11:25,160 --> 00:11:26,959 Speaker 6: very tight. That was the story of the first half 236 00:11:27,000 --> 00:11:30,280 Speaker 6: of last year. Capacity grew six to seven percent, and 237 00:11:30,320 --> 00:11:32,640 Speaker 6: then we exited the year about flat and the data 238 00:11:32,920 --> 00:11:36,240 Speaker 6: TSA volumes are flat year over year, but so is capacity. 239 00:11:36,440 --> 00:11:40,400 Speaker 6: So capacity is already fairly tight. So that's a soft 240 00:11:40,440 --> 00:11:43,400 Speaker 6: comment from Delta to make. To cut capacity, we have 241 00:11:43,440 --> 00:11:45,280 Speaker 6: to see demand come in, and I think the next 242 00:11:45,559 --> 00:11:47,400 Speaker 6: four to six weeks is going to be very critical 243 00:11:47,440 --> 00:11:49,160 Speaker 6: to see how the US consumer is going to react. 244 00:11:49,160 --> 00:11:50,720 Speaker 1: Where does the demand come in. I think we were 245 00:11:50,720 --> 00:11:53,360 Speaker 1: all struck around this table yesterday when a headline dump 246 00:11:53,440 --> 00:11:57,400 Speaker 1: that dropped that United said fifty percent drop in government travel. 247 00:11:57,679 --> 00:11:59,000 Speaker 1: Who fills that void? 248 00:11:59,320 --> 00:12:01,480 Speaker 6: It's hard, I mean, it's a small percentage of asms. 249 00:12:01,520 --> 00:12:04,440 Speaker 6: But then Delta also cited corporate demand across the board. 250 00:12:04,440 --> 00:12:07,640 Speaker 6: Airspace and defense was of course the sector cited as 251 00:12:07,679 --> 00:12:10,280 Speaker 6: well as leisures, so it wasn't only one thing, and 252 00:12:10,320 --> 00:12:14,240 Speaker 6: I think that's what is more concerning about the reads. 253 00:12:14,240 --> 00:12:17,600 Speaker 6: But again it's early and so that could change if 254 00:12:17,600 --> 00:12:19,439 Speaker 6: the SMP goes up for the next four weeks, I'm 255 00:12:19,440 --> 00:12:21,560 Speaker 6: sure people will start booking travel again. So it's all 256 00:12:21,559 --> 00:12:22,640 Speaker 6: based on market sentiment. 257 00:12:22,760 --> 00:12:25,480 Speaker 1: What's more challenging domestic travel right now or international? 258 00:12:25,920 --> 00:12:28,920 Speaker 6: Domestic is more challenging. Domestic has always been because you 259 00:12:28,920 --> 00:12:32,600 Speaker 6: have low cost carriers and so they priced down. You 260 00:12:32,640 --> 00:12:36,400 Speaker 6: see tickets from Spirit other low cost carriers for very cheap. 261 00:12:36,760 --> 00:12:39,560 Speaker 6: International is still very positive, and the good news is 262 00:12:39,840 --> 00:12:42,040 Speaker 6: eight three fifties and seven eight sevens are very slow 263 00:12:42,080 --> 00:12:44,760 Speaker 6: on the deliveries, so we're not seeing a lot of 264 00:12:44,760 --> 00:12:47,520 Speaker 6: capacity come into the market. In BacT, that market's very constrained. 265 00:12:47,640 --> 00:12:50,080 Speaker 2: You suggested it's sequity market dependent. I might suggest it's 266 00:12:50,120 --> 00:12:52,400 Speaker 2: dose dependent. If I'm a federal worker this year, I'm 267 00:12:52,400 --> 00:12:54,840 Speaker 2: not traveling. If I've booked a vacation, I'm canceling it. 268 00:12:55,240 --> 00:12:56,760 Speaker 2: If you've got to raise a family at the moment 269 00:12:56,760 --> 00:12:59,240 Speaker 2: and you're dependent on the federal government fearr annual salary, 270 00:12:59,400 --> 00:13:01,440 Speaker 2: I'd be very very nervous abound the rest of the year. 271 00:13:01,720 --> 00:13:03,760 Speaker 2: How is that showing up in the numbers already? 272 00:13:04,280 --> 00:13:06,079 Speaker 6: It's a small percentage of the market, but I think 273 00:13:06,160 --> 00:13:09,839 Speaker 6: DOJE in general, the headlines covering defense stocks is it's 274 00:13:09,960 --> 00:13:12,800 Speaker 6: what's scariest, some of the headlines they put out are 275 00:13:12,800 --> 00:13:15,240 Speaker 6: not actually the reality of what they're cutting. So again 276 00:13:15,240 --> 00:13:18,000 Speaker 6: it's going back to the uncertainty of a big headline, 277 00:13:18,040 --> 00:13:20,200 Speaker 6: and the reality suppose is that what are. 278 00:13:20,080 --> 00:13:24,160 Speaker 4: They actually countsinc When it comes to defense, it's. 279 00:13:24,040 --> 00:13:27,600 Speaker 6: Interesting to me because I thought they would go after larger, 280 00:13:27,720 --> 00:13:32,120 Speaker 6: more bureaucratic issues, but instead they're going after it services contractors, 281 00:13:32,559 --> 00:13:35,400 Speaker 6: which the six public ones we cover comprise about three 282 00:13:35,440 --> 00:13:37,959 Speaker 6: of the largest defense programs, So I thought they would 283 00:13:38,000 --> 00:13:40,800 Speaker 6: eliminate more waste, but they seem to be cutting very 284 00:13:40,880 --> 00:13:44,079 Speaker 6: quickly and very abruptly, so without any precision, which I 285 00:13:44,120 --> 00:13:45,839 Speaker 6: think creates problems as well. 286 00:13:46,080 --> 00:13:47,839 Speaker 5: How much of the story is this? And I ask 287 00:13:47,960 --> 00:13:51,200 Speaker 5: this because yesterday I saw some comments out there like 288 00:13:51,360 --> 00:13:54,600 Speaker 5: if government spending was the main pillar of support for 289 00:13:54,640 --> 00:13:57,600 Speaker 5: the US consumer, then we had a pretty weak consumer 290 00:13:57,760 --> 00:13:59,760 Speaker 5: aside from some of the stimulus that was really in 291 00:14:00,080 --> 00:14:03,400 Speaker 5: to donch the government. Can you talk about what we've 292 00:14:03,440 --> 00:14:06,200 Speaker 5: seen in terms of consumer spending habits leading up to 293 00:14:06,240 --> 00:14:09,080 Speaker 5: this and then in the aftermath, and just how connected 294 00:14:09,080 --> 00:14:11,920 Speaker 5: to the federal spending it is versus the overall tote. 295 00:14:11,920 --> 00:14:13,880 Speaker 5: I know it's hard to parse out, but it kind 296 00:14:13,920 --> 00:14:15,600 Speaker 5: of gives a sense of where we're coming from. 297 00:14:15,720 --> 00:14:17,840 Speaker 6: I think is the government employees. If you're a government 298 00:14:17,880 --> 00:14:19,920 Speaker 6: and employee, you're probably not traveling. But again, that's such 299 00:14:19,920 --> 00:14:22,360 Speaker 6: a small percentage of the market, and some of the 300 00:14:22,360 --> 00:14:26,000 Speaker 6: agencies were cutting from they've already had trouble recruiting and 301 00:14:26,080 --> 00:14:29,400 Speaker 6: we've just gone back to pre pandemic levels six years later. 302 00:14:29,720 --> 00:14:32,840 Speaker 6: So I think it's very problematic just cutting abruptly. And 303 00:14:33,280 --> 00:14:36,080 Speaker 6: I do think the airline cuts go back to consumer 304 00:14:36,160 --> 00:14:40,160 Speaker 6: sentiment on the overall market. As we've all seen our 305 00:14:40,200 --> 00:14:41,120 Speaker 6: stock prices have. 306 00:14:41,440 --> 00:14:42,200 Speaker 4: What's your favorite name? 307 00:14:42,240 --> 00:14:44,720 Speaker 6: This morning, I'm going to go I'm going to actually 308 00:14:44,720 --> 00:14:47,160 Speaker 6: pitch Boeing. I really like Boeing. I think outside the 309 00:14:47,240 --> 00:14:50,760 Speaker 6: Arrapad lines, the Macro, we haven't delivered a single plane 310 00:14:50,760 --> 00:14:53,960 Speaker 6: in six years. The skyline is over sold, and I 311 00:14:54,000 --> 00:14:57,360 Speaker 6: think investors have capitulated on just demand. They think we're 312 00:14:57,360 --> 00:14:59,840 Speaker 6: going to see demand destruction because the market's often for 313 00:14:59,840 --> 00:15:02,000 Speaker 6: the the last three weeks. But I think everybody's still 314 00:15:02,040 --> 00:15:03,600 Speaker 6: waiting for their plan and it's not going to get 315 00:15:03,600 --> 00:15:04,040 Speaker 6: out of line. 316 00:15:04,080 --> 00:15:06,040 Speaker 2: So should I appreciate it? It's good to get off 317 00:15:06,080 --> 00:15:08,080 Speaker 2: to Spade with you. Thank you, Sulda Cary. There of 318 00:15:08,160 --> 00:15:20,880 Speaker 2: Jeffreeson joining us now is David Kelly of JP Morkan 319 00:15:20,920 --> 00:15:24,440 Speaker 2: Asset Management. David, that's some good news going into next week. 320 00:15:24,480 --> 00:15:26,880 Speaker 2: How much comfort will this bring the Federal Reserve? 321 00:15:28,880 --> 00:15:29,560 Speaker 4: Only a little. 322 00:15:29,680 --> 00:15:31,280 Speaker 7: I mean, if you look at the number of stage 323 00:15:31,320 --> 00:15:35,040 Speaker 7: just scanning them, we saw a four percent decline airline affairs, 324 00:15:35,520 --> 00:15:37,080 Speaker 7: which is probably you know, that affects some of the 325 00:15:37,160 --> 00:15:39,120 Speaker 7: things that the airlines are saying to us about some 326 00:15:39,160 --> 00:15:41,920 Speaker 7: weakening and demand. But I really think that the Federal 327 00:15:41,960 --> 00:15:45,120 Speaker 7: Reserve is in a very difficult position here. Until we 328 00:15:45,160 --> 00:15:48,240 Speaker 7: have some clarity on tariffs, they don't know how much 329 00:15:48,280 --> 00:15:50,120 Speaker 7: of an inflation kick we're going to get from tariffs 330 00:15:50,160 --> 00:15:53,520 Speaker 7: this year, and until we've got some clarity on the budget, 331 00:15:53,520 --> 00:15:55,320 Speaker 7: they don't know how much physical stimulus is going to 332 00:15:55,320 --> 00:15:57,640 Speaker 7: be kicked in next year. So I still think they'll 333 00:15:57,680 --> 00:16:03,200 Speaker 7: probably wait and see next week. This economy is beginning 334 00:16:03,200 --> 00:16:05,720 Speaker 7: to look like it needs or will you justifies a 335 00:16:05,800 --> 00:16:08,360 Speaker 7: rate cut, and I do think we'll probably end up 336 00:16:08,400 --> 00:16:09,680 Speaker 7: with more than one rate cut this year. I think 337 00:16:09,720 --> 00:16:11,840 Speaker 7: we may end up with a sequence of rate cuts. 338 00:16:11,880 --> 00:16:13,680 Speaker 7: But I think it's just too early for the Federal 339 00:16:13,680 --> 00:16:16,800 Speaker 7: Reserve to make a decision given the uncertainty about policy. 340 00:16:16,960 --> 00:16:19,160 Speaker 5: What's fascinating to me is a reaction of markets, David, 341 00:16:19,200 --> 00:16:21,160 Speaker 5: the idea that you're seeing a bigger reaction right now 342 00:16:21,200 --> 00:16:24,120 Speaker 5: and equities in your bonds. This idea that maybe the 343 00:16:24,160 --> 00:16:27,320 Speaker 5: Fed put could come back into play and support valuations 344 00:16:27,360 --> 00:16:29,680 Speaker 5: even amid policy uncertainty. 345 00:16:30,200 --> 00:16:30,840 Speaker 4: Do you buy that? 346 00:16:31,040 --> 00:16:34,320 Speaker 5: Is that something that you think is a correct thesis? 347 00:16:35,040 --> 00:16:36,960 Speaker 7: Well, I think that there's some other things on the 348 00:16:36,960 --> 00:16:39,520 Speaker 7: bond market's mind here. I mean one of them is 349 00:16:39,840 --> 00:16:41,480 Speaker 7: that if you look at the numbers that the CBO 350 00:16:41,560 --> 00:16:44,040 Speaker 7: put out yesterday on the budget depthsit so far this year, 351 00:16:44,280 --> 00:16:46,280 Speaker 7: it looks like we're going to crack two trillion dollars 352 00:16:46,280 --> 00:16:48,840 Speaker 7: this year, and we've got a massive budget deficit. And 353 00:16:48,880 --> 00:16:51,960 Speaker 7: the weaker the economy gets, the more likely it is 354 00:16:51,960 --> 00:16:54,240 Speaker 7: that we're going to see even more fiscal stimulus kick 355 00:16:54,280 --> 00:16:57,560 Speaker 7: in next year. So we've got a deteriorating situation, a 356 00:16:57,600 --> 00:17:00,840 Speaker 7: fiscal situation here, and sow economic growth and tariffs will 357 00:17:00,840 --> 00:17:04,800 Speaker 7: only make it worse. So that may be supporting real 358 00:17:04,880 --> 00:17:08,480 Speaker 7: yels here, even if inflation backs off a bit on 359 00:17:09,480 --> 00:17:12,000 Speaker 7: weaken economic growth next year, So I think there's more 360 00:17:12,040 --> 00:17:16,000 Speaker 7: than just inflation and the FED on the bond market's mind. 361 00:17:16,080 --> 00:17:18,160 Speaker 5: Which is also part of the reason why the FED 362 00:17:18,240 --> 00:17:20,840 Speaker 5: might have a hard time just embracing this data and 363 00:17:20,880 --> 00:17:23,919 Speaker 5: then signaling next week that they plan to cut rates 364 00:17:24,080 --> 00:17:26,920 Speaker 5: sooner than maybe they expected. David, what do they need 365 00:17:26,960 --> 00:17:29,800 Speaker 5: to see to have confidence in the forward trajectory given 366 00:17:29,800 --> 00:17:32,159 Speaker 5: that this is backward moving and we have policy that 367 00:17:32,280 --> 00:17:34,439 Speaker 5: is pushing companies to act in real time. 368 00:17:35,520 --> 00:17:38,440 Speaker 7: Yeah, I think the most important thing would be a 369 00:17:38,480 --> 00:17:41,800 Speaker 7: sort of a final story on tariffs for this year 370 00:17:41,840 --> 00:17:44,400 Speaker 7: and for the next few years. We know obviously, as 371 00:17:44,440 --> 00:17:47,719 Speaker 7: an economist, I believe that zero tariffs are the correct policy. 372 00:17:47,960 --> 00:17:52,439 Speaker 7: I think that's a fairly traditional conservative perspective. But some 373 00:17:52,560 --> 00:17:55,840 Speaker 7: clarity on that is vital for them to figure out, 374 00:17:56,080 --> 00:17:58,879 Speaker 7: you know, how is how's the economy going to evolve? 375 00:17:58,880 --> 00:18:00,800 Speaker 7: I mean, what the FED has said very clearly two 376 00:18:00,880 --> 00:18:03,320 Speaker 7: days after the election, j Palell said, we're not going 377 00:18:03,359 --> 00:18:05,000 Speaker 7: to assume, We're not going to guess, and we're not 378 00:18:05,040 --> 00:18:07,800 Speaker 7: going to speculate. But they'd have to assume guests and 379 00:18:07,800 --> 00:18:10,800 Speaker 7: speculate if they move policy right now, and that's what 380 00:18:10,840 --> 00:18:14,000 Speaker 7: they're trying to avoid so that the administration and Congress 381 00:18:14,040 --> 00:18:17,240 Speaker 7: really need to figure out what the policy playing field 382 00:18:17,280 --> 00:18:18,840 Speaker 7: is going to be over the next few years, then 383 00:18:18,880 --> 00:18:21,119 Speaker 7: the Pederal Reserve can try to make some decisions. 384 00:18:21,280 --> 00:18:23,959 Speaker 2: David Kelly if JP Morgan Accent Management, David, thank you. 385 00:18:24,040 --> 00:18:27,119 Speaker 2: The Federal Reserve meeting a week away, David really painted 386 00:18:27,119 --> 00:18:29,440 Speaker 2: a picture of what a tricky position this Federal Reserve 387 00:18:29,520 --> 00:18:31,159 Speaker 2: is going to be in a week from today. It 388 00:18:31,200 --> 00:18:33,399 Speaker 2: could have been trickier without a data point like the 389 00:18:33,400 --> 00:18:34,320 Speaker 2: one we just got. 390 00:18:34,440 --> 00:18:36,520 Speaker 5: At least they don't have runaway inflation of the idea, 391 00:18:36,560 --> 00:18:39,560 Speaker 5: they're coming into a potential inflationary shock. I'll be at 392 00:18:39,600 --> 00:18:43,400 Speaker 5: a one time price adjustment. There is some sense of disinflation. 393 00:18:43,840 --> 00:18:45,720 Speaker 5: That said, the fact that if you do have a 394 00:18:45,720 --> 00:18:49,199 Speaker 5: weakening economy that that could lead to more fiscal stimulus 395 00:18:49,400 --> 00:18:52,960 Speaker 5: makes it very complicated for bond investors, let alone just 396 00:18:53,000 --> 00:18:53,359 Speaker 5: the FED. 397 00:18:53,480 --> 00:18:55,240 Speaker 2: If you are just joining us, welcome to the program. 398 00:18:55,320 --> 00:18:59,240 Speaker 2: Moments ago, a small downside surprise on CPI headline month 399 00:18:59,280 --> 00:19:02,760 Speaker 2: over month zero point two percent the estimate zero point three. 400 00:19:03,119 --> 00:19:05,840 Speaker 2: Stripping out food and energy zero point two percent, the 401 00:19:05,960 --> 00:19:08,920 Speaker 2: estimate zero point three. To discuss this and a whole 402 00:19:08,960 --> 00:19:12,399 Speaker 2: lot more joining us. Nas Mohammad, Aaron of Queen's College, Cambridge. Mhammed, 403 00:19:12,400 --> 00:19:14,600 Speaker 2: Welcome back to the program sir, good to catch up 404 00:19:14,600 --> 00:19:16,960 Speaker 2: with you. Important data point. How does this change things 405 00:19:17,119 --> 00:19:17,560 Speaker 2: if at all? 406 00:19:19,119 --> 00:19:21,200 Speaker 8: So if you talk to economists, I'll tell you looking 407 00:19:21,359 --> 00:19:25,640 Speaker 8: back it's good news. Looking forward, there's very little information 408 00:19:25,800 --> 00:19:29,399 Speaker 8: content because of what David just said. What you've been 409 00:19:29,440 --> 00:19:33,200 Speaker 8: discussing all day is we don't know what to pass 410 00:19:33,320 --> 00:19:37,919 Speaker 8: through of expected and actual tariffs will be. So that's 411 00:19:37,960 --> 00:19:42,000 Speaker 8: where the economists are. For those in the market having 412 00:19:42,119 --> 00:19:46,000 Speaker 8: been disappointed on the Trump put, this is better news 413 00:19:46,119 --> 00:19:48,800 Speaker 8: on the Fed put, and I think that's why you're 414 00:19:48,800 --> 00:19:51,800 Speaker 8: getting such a strong reaction on the equity side. 415 00:19:52,040 --> 00:19:54,359 Speaker 2: There's been so much confusion Mhammad about tariffs in the 416 00:19:54,400 --> 00:19:57,520 Speaker 2: past twenty four hours or so. US several hats, one 417 00:19:57,560 --> 00:19:59,840 Speaker 2: of which is you've been a business leader for many, 418 00:20:00,040 --> 00:20:02,760 Speaker 2: many years, and I think you made the important distinction 419 00:20:03,160 --> 00:20:05,440 Speaker 2: when we had the boom of inflation. You made the 420 00:20:05,520 --> 00:20:07,520 Speaker 2: point that this was not going to be transitory because 421 00:20:07,560 --> 00:20:10,400 Speaker 2: of what you saw at the corporate level, how companies 422 00:20:10,440 --> 00:20:13,000 Speaker 2: were acting and how they were responding given the threat 423 00:20:13,000 --> 00:20:14,720 Speaker 2: of higher tower is still to come. What do you 424 00:20:14,800 --> 00:20:17,240 Speaker 2: see now from companies and what does it indicate to 425 00:20:17,320 --> 00:20:19,720 Speaker 2: you about what data might look like in months and 426 00:20:19,800 --> 00:20:20,400 Speaker 2: quarters to come. 427 00:20:22,240 --> 00:20:24,960 Speaker 8: So two things are obvious to me, John. One is 428 00:20:25,040 --> 00:20:27,760 Speaker 8: that companies have gone into a wake and see attitude 429 00:20:28,160 --> 00:20:33,240 Speaker 8: and understandly so, especially if you're multinational, you need clarity. 430 00:20:33,600 --> 00:20:37,080 Speaker 8: So you're postponing decisions because you don't want to make 431 00:20:37,119 --> 00:20:39,560 Speaker 8: a decision that ends up being a big mistake because 432 00:20:39,560 --> 00:20:42,200 Speaker 8: the world has changed on you. So we are seeing 433 00:20:42,800 --> 00:20:46,680 Speaker 8: business activities slow down. The second thing we're seeing is 434 00:20:46,760 --> 00:20:53,080 Speaker 8: people are much more ready to pull the trigger on 435 00:20:53,240 --> 00:20:56,000 Speaker 8: price increases than they were in twenty twenty one twenty 436 00:20:56,040 --> 00:21:00,160 Speaker 8: twenty two. So if these tariffs stick, and if if 437 00:21:00,200 --> 00:21:04,960 Speaker 8: we get more did for tat trade issues and things 438 00:21:05,040 --> 00:21:08,359 Speaker 8: like that, then they pass through to prices will be 439 00:21:09,200 --> 00:21:11,200 Speaker 8: quick and it will come at a time when demand 440 00:21:11,280 --> 00:21:14,320 Speaker 8: is softening. So then you bring the third issue, which 441 00:21:14,320 --> 00:21:18,720 Speaker 8: is a consumer. The consumer is hesitant already. I take 442 00:21:18,800 --> 00:21:21,000 Speaker 8: seriously what you've been saying, all of you saying about 443 00:21:21,040 --> 00:21:23,920 Speaker 8: what's happening to airline, what you're hearing from different retailers. 444 00:21:25,200 --> 00:21:29,800 Speaker 8: There's been risk aversion clarity on the sense of the household. 445 00:21:29,840 --> 00:21:33,200 Speaker 8: So put all that together, John, it is a weight 446 00:21:33,280 --> 00:21:36,879 Speaker 8: and see economy that cannot absorb much of a price hit. 447 00:21:37,280 --> 00:21:39,600 Speaker 1: Is it an economy that can potentially enter recessions? 448 00:21:39,640 --> 00:21:43,720 Speaker 8: Here, Muhammad, my probability is twenty five to thirty percent. 449 00:21:43,960 --> 00:21:46,800 Speaker 8: It was ten percent at the beginning of the year, 450 00:21:46,920 --> 00:21:49,760 Speaker 8: so there's been quite quite a big change. Why isn't 451 00:21:49,760 --> 00:21:51,840 Speaker 8: it higher Because it's a lot good happening in the 452 00:21:51,960 --> 00:21:56,120 Speaker 8: US economy as well. But if we get a prolongation 453 00:21:56,320 --> 00:21:59,639 Speaker 8: of policy uncertainty, then that probability will go up. 454 00:22:00,359 --> 00:22:03,200 Speaker 5: There's a question about the response from central banks globally, Mohammed. 455 00:22:03,240 --> 00:22:06,520 Speaker 5: If you do have this environment where inflationary pressures are 456 00:22:06,560 --> 00:22:08,399 Speaker 5: going to be stickier at the same time that you 457 00:22:08,520 --> 00:22:11,400 Speaker 5: have slow in growth. Christine Laguard called it an era 458 00:22:11,560 --> 00:22:13,959 Speaker 5: of shock and saying that maintaining stability in a new 459 00:22:14,040 --> 00:22:17,280 Speaker 5: era will be a formidable task. If the central banks 460 00:22:17,320 --> 00:22:20,880 Speaker 5: around the world had to choose what's worse allowing inflation 461 00:22:21,119 --> 00:22:23,160 Speaker 5: to be a little bit hotter but trying to help 462 00:22:23,280 --> 00:22:27,600 Speaker 5: growth or suppressing inflation at the risk of not rescuing 463 00:22:27,680 --> 00:22:29,439 Speaker 5: growth and allowing it to continue to plummet. 464 00:22:30,920 --> 00:22:33,520 Speaker 8: So for both Europe and the US, it is the former, 465 00:22:35,119 --> 00:22:39,200 Speaker 8: these economies can get to stall speed pretty quickly. We 466 00:22:39,280 --> 00:22:43,800 Speaker 8: don't want that because the damage that that creates is significant. 467 00:22:44,440 --> 00:22:49,320 Speaker 8: So tolerating slightly higher inflation would be the better choice 468 00:22:49,400 --> 00:22:52,840 Speaker 8: the way you framed it. But Lisa, remember these are 469 00:22:52,960 --> 00:22:57,360 Speaker 8: central banks that made a huge mistake, and they may 470 00:22:57,440 --> 00:23:00,960 Speaker 8: be much more sensitive to inflation than than we would 471 00:23:01,000 --> 00:23:03,960 Speaker 8: be given the mistakes they made. 472 00:23:04,240 --> 00:23:07,639 Speaker 5: The idea of transitory and not maybe responding to it 473 00:23:08,000 --> 00:23:10,879 Speaker 5: in a way that maybe they should have. I'm just 474 00:23:11,000 --> 00:23:12,680 Speaker 5: wondering if let's say they did take what you just 475 00:23:12,680 --> 00:23:15,159 Speaker 5: said seriously and they did say, look, we're going to 476 00:23:15,200 --> 00:23:17,359 Speaker 5: have to just tolerate higher inflation for longer and we 477 00:23:17,440 --> 00:23:21,000 Speaker 5: really need to address slower growth, how many times would 478 00:23:21,000 --> 00:23:23,200 Speaker 5: you expect them to have to cut this year in 479 00:23:23,400 --> 00:23:26,560 Speaker 5: order to offset some of the uncertainty and frankly, the 480 00:23:26,880 --> 00:23:29,240 Speaker 5: consumer demand destruction that we're seeing in real time. 481 00:23:30,600 --> 00:23:33,320 Speaker 8: So to be clear, if two percent was really the 482 00:23:33,480 --> 00:23:37,640 Speaker 8: operative inflation target, we wouldn't be speculating on how many 483 00:23:37,720 --> 00:23:40,920 Speaker 8: cuts would be speculating on the timing of the hike 484 00:23:41,600 --> 00:23:44,080 Speaker 8: because the data has sold for quite a long time, 485 00:23:45,000 --> 00:23:48,080 Speaker 8: but because most people believe that two percent is a 486 00:23:48,600 --> 00:23:53,480 Speaker 8: medium term to long term target, there is speculation and 487 00:23:53,520 --> 00:23:56,280 Speaker 8: how many cuts. I'm in the one camp. I think, 488 00:23:57,520 --> 00:24:00,320 Speaker 8: given what we know today, we get one now if 489 00:24:00,440 --> 00:24:05,640 Speaker 8: the tarrier tensions persist and did for TAT get worse. 490 00:24:05,680 --> 00:24:08,280 Speaker 8: I mean, at some point yesterday with Canada, we were 491 00:24:08,320 --> 00:24:12,800 Speaker 8: near tipping points and that would have forced a FED 492 00:24:13,280 --> 00:24:16,840 Speaker 8: to revisit what is thinking right now about weight cuts. 493 00:24:17,200 --> 00:24:20,160 Speaker 8: So it really depends where this trade war goes. 494 00:24:20,560 --> 00:24:24,119 Speaker 2: Lisa Muhammed, I want to revisit one of your best calls. 495 00:24:24,760 --> 00:24:27,639 Speaker 2: You are probably one of the best risk managers that 496 00:24:27,720 --> 00:24:29,920 Speaker 2: I know, that's for sure. I want to talk about 497 00:24:29,960 --> 00:24:33,960 Speaker 2: February nineteenth, February nineteenth all time highs, and not the 498 00:24:34,040 --> 00:24:36,960 Speaker 2: February nineteenth all time high of twenty twenty five. The 499 00:24:37,040 --> 00:24:40,440 Speaker 2: February nineteenth all time high of twenty twenty and I 500 00:24:40,480 --> 00:24:42,320 Speaker 2: remember you came out around that time and you said, 501 00:24:42,359 --> 00:24:45,800 Speaker 2: don't buy this now. The equity market is corrected in 502 00:24:45,920 --> 00:24:48,080 Speaker 2: twenty twenty five ten percent from the all time highs 503 00:24:48,119 --> 00:24:50,239 Speaker 2: of February nineteen, but it's quite a parallel to think 504 00:24:50,280 --> 00:24:53,320 Speaker 2: about those two dates. Muhammed, what would your approach be 505 00:24:53,440 --> 00:24:57,199 Speaker 2: to markets now and equity specifically, So. 506 00:24:57,240 --> 00:24:59,840 Speaker 8: I'm asked this all the time. John, I was asked 507 00:25:00,000 --> 00:25:03,399 Speaker 8: this morning by someone here in the college, is it 508 00:25:03,520 --> 00:25:06,800 Speaker 8: time to buy? It's very tempting to buy because with 509 00:25:06,960 --> 00:25:09,840 Speaker 8: ten percent off on the SMP, with thirteen to fourteen 510 00:25:09,880 --> 00:25:16,520 Speaker 8: percent off on the Nasdaq. I respond very simply, what 511 00:25:16,800 --> 00:25:19,400 Speaker 8: mistake can you not afford to make? You know, most 512 00:25:19,480 --> 00:25:23,520 Speaker 8: mistakes in the investment world are forgivable over time, and 513 00:25:23,640 --> 00:25:26,560 Speaker 8: that's a great thing about the investment world. If you 514 00:25:26,680 --> 00:25:28,760 Speaker 8: bet on something that the faults, that's a different issue. 515 00:25:29,240 --> 00:25:33,720 Speaker 8: So investors need to understand how much tolerance DoD they 516 00:25:33,760 --> 00:25:36,680 Speaker 8: have for short term mistakes and how much tolerance should 517 00:25:36,680 --> 00:25:39,720 Speaker 8: they have for volatility, because the probability of both these 518 00:25:39,760 --> 00:25:41,760 Speaker 8: things has gotten a lot higher than it was at 519 00:25:41,800 --> 00:25:42,480 Speaker 8: the beginnion of the year. 520 00:25:42,800 --> 00:25:44,720 Speaker 4: Muhammed, I appreciate your time. You one of the best. 521 00:25:44,840 --> 00:25:46,159 Speaker 2: Thanks for catching up with it's a good friend of 522 00:25:46,200 --> 00:25:48,440 Speaker 2: this program, a good friend of ours. Mohammed al Aaron 523 00:25:48,480 --> 00:25:52,520 Speaker 2: of Queens College, Cambridge. This is the Bloomberg Survenmans podcast, 524 00:25:52,680 --> 00:25:56,240 Speaker 2: bringing you the best in markets, economics, and gie politics. 525 00:25:56,520 --> 00:25:59,000 Speaker 2: You can watch the show live on Bloomberg TV weekday 526 00:25:59,040 --> 00:26:02,240 Speaker 2: mornings from six am to nine am Eastern. Subscribe to 527 00:26:02,320 --> 00:26:05,480 Speaker 2: the podcast on Apple, Spotify or anywhere else you listen, 528 00:26:05,800 --> 00:26:08,400 Speaker 2: and as always, on the Bloomberg Terminal and the Bloomberg 529 00:26:08,440 --> 00:26:09,000 Speaker 2: Business app.