1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg surveillance podcast. I'm Tom Keane. Along

2
00:00:09,200 --> 00:00:13,200
Speaker 1: with Jonathan Ferrill and Lisa Brownwitz Jailee, we bring you

3
00:00:13,280 --> 00:00:18,600
Speaker 1: insight from the best and economics, finance, investment and international relations.

4
00:00:18,960 --> 00:00:24,000
Speaker 1: Find Bloomberg surveillance on Apple podcast, soundcloud, Bloomberg Dot Com and,

5
00:00:24,079 --> 00:00:30,440
Speaker 1: of course, on the Bloomberg terminal. Joining us now David stops,

6
00:00:30,440 --> 00:00:34,040
Speaker 1: globe ahead across asset thematic strategy at JP Morgan Private Bank. David,

7
00:00:34,080 --> 00:00:35,960
Speaker 1: good to catch up with you, sir. Let's start here.

8
00:00:36,000 --> 00:00:38,080
Speaker 1: Can you give me one good reason to be bullish

9
00:00:38,159 --> 00:00:40,839
Speaker 1: right now? Well, John, I think if you're going to

10
00:00:41,040 --> 00:00:42,680
Speaker 1: meet the bullish case, I think you're going to look

11
00:00:42,680 --> 00:00:47,400
Speaker 1: at the resilience of domestic consumer spending in parts of

12
00:00:47,400 --> 00:00:49,159
Speaker 1: the Western world. I think you're also going to look

13
00:00:49,200 --> 00:00:52,840
Speaker 1: at how much tightening has been priced in and and

14
00:00:52,920 --> 00:00:58,600
Speaker 1: indeed expectations of recession you're broadening across across Wall Street.

15
00:00:58,960 --> 00:01:01,280
Speaker 1: But I think bullish is not that we're going to

16
00:01:01,320 --> 00:01:04,200
Speaker 1: see the kind of boom conditions we saw last year.

17
00:01:04,240 --> 00:01:08,040
Speaker 1: Bullish would be a soft landing, a pretty soggy your

18
00:01:08,120 --> 00:01:10,880
Speaker 1: economy next next year, but one that avoids a recession

19
00:01:10,959 --> 00:01:12,840
Speaker 1: and avoids a major door down and earning. That's a

20
00:01:12,920 --> 00:01:14,840
Speaker 1: bullish as you can get. I think right now. That's

21
00:01:14,880 --> 00:01:17,160
Speaker 1: not exactly a ren endorsement of risk as it's David,

22
00:01:17,200 --> 00:01:19,320
Speaker 1: I do wonder, especially at a time when Tina is

23
00:01:19,400 --> 00:01:22,520
Speaker 1: dead right, there is an alternative and it is cash,

24
00:01:22,720 --> 00:01:25,560
Speaker 1: it is short term instruments that are actually yielding something

25
00:01:26,120 --> 00:01:28,200
Speaker 1: on inflation adjusted terms for the first time in a

26
00:01:28,360 --> 00:01:31,920
Speaker 1: long time, is there any justification not to just hide

27
00:01:31,959 --> 00:01:35,360
Speaker 1: out some of these instruments, collect the income and wait

28
00:01:35,400 --> 00:01:39,840
Speaker 1: for a better, more clear entry? Well, we're absolutely recommending

29
00:01:39,880 --> 00:01:43,120
Speaker 1: parts of the Fixed Income Universe at this point. As

30
00:01:43,160 --> 00:01:45,360
Speaker 1: you as you rightly say, a lot of value is

31
00:01:45,400 --> 00:01:47,800
Speaker 1: being created both at the short and long end. As

32
00:01:48,040 --> 00:01:51,320
Speaker 1: as you were thinking the Intro, the ten years, at three,

33
00:01:51,400 --> 00:01:54,120
Speaker 1: three fifty. We would be buyers of that in in

34
00:01:54,200 --> 00:01:56,640
Speaker 1: portfolios that don't have any duration right now. We see

35
00:01:56,640 --> 00:01:59,640
Speaker 1: a lot of value in preferreds as well. So there's

36
00:01:59,640 --> 00:02:03,160
Speaker 1: plenty of ways to meet your financial goals if you

37
00:02:03,200 --> 00:02:06,600
Speaker 1: want a mid single digit return without taking a lot

38
00:02:06,640 --> 00:02:08,320
Speaker 1: of exerty risk. And it's maybe the first time you

39
00:02:08,320 --> 00:02:11,040
Speaker 1: could say that in in a long, long time, given

40
00:02:11,080 --> 00:02:14,480
Speaker 1: the lower for longer era that we've been on interest

41
00:02:14,560 --> 00:02:16,919
Speaker 1: rates also. least, I think that. I think that you've

42
00:02:16,960 --> 00:02:20,400
Speaker 1: really seen still some value be created in the structural

43
00:02:21,320 --> 00:02:24,160
Speaker 1: in the structural changes that we see in the economy

44
00:02:24,200 --> 00:02:28,320
Speaker 1: going to be going for clean energy, Fintech, genetic trapy,

45
00:02:28,400 --> 00:02:32,440
Speaker 1: some tremendous but value there in factors and themes that

46
00:02:32,440 --> 00:02:35,720
Speaker 1: are going to be huge drivers of our society going forward. David,

47
00:02:35,720 --> 00:02:37,120
Speaker 1: I just want you to elaborate a little bit. You

48
00:02:37,160 --> 00:02:39,840
Speaker 1: said that you would be buyers of ten year treasuries

49
00:02:39,919 --> 00:02:42,280
Speaker 1: at three and a half percent. Do you think that

50
00:02:42,360 --> 00:02:45,320
Speaker 1: this is the new peak and that basically, they cannot

51
00:02:45,480 --> 00:02:49,520
Speaker 1: continue to lose more value yields up further? Oh No,

52
00:02:49,560 --> 00:02:52,720
Speaker 1: we never we'd never say that definitively, but we just

53
00:02:52,760 --> 00:02:55,720
Speaker 1: think that parts of the Fixed Income Space Right now

54
00:02:55,800 --> 00:02:58,120
Speaker 1: have asymmetry about them. If you do go into a

55
00:02:58,160 --> 00:03:01,519
Speaker 1: recession next year, we would fact your bond deals to

56
00:03:01,600 --> 00:03:04,760
Speaker 1: fall significantly and we think that the potential returns and

57
00:03:04,760 --> 00:03:08,360
Speaker 1: that scenario are now greater than the losses you may

58
00:03:08,400 --> 00:03:11,440
Speaker 1: get if if bond deals continue to drift higher. So look,

59
00:03:11,840 --> 00:03:14,160
Speaker 1: there's absolutely not a risk free trade right now, but

60
00:03:14,240 --> 00:03:17,680
Speaker 1: a lot of our client's portfolios have very, very short

61
00:03:17,720 --> 00:03:21,440
Speaker 1: to Anneel duration and clients have been waiting to leg

62
00:03:21,520 --> 00:03:25,919
Speaker 1: in tow better yields over over the mediums, longer term. Well,

63
00:03:25,919 --> 00:03:28,400
Speaker 1: now here they are and I think, for for the

64
00:03:28,480 --> 00:03:32,280
Speaker 1: right portfolio for clients looking Um you for for that

65
00:03:32,360 --> 00:03:35,520
Speaker 1: yield and for that stable return. Treasuries now are an

66
00:03:35,520 --> 00:03:37,000
Speaker 1: option in the way, as you said, that they had

67
00:03:37,000 --> 00:03:39,600
Speaker 1: not been in the previous decond thank you. There was

68
00:03:39,640 --> 00:03:46,920
Speaker 1: stubbs there of JP Morgan Private Bank. Dana Peterson joins

69
00:03:47,000 --> 00:03:49,920
Speaker 1: us now. Chief economists at the Conference Board. Dana, can

70
00:03:49,960 --> 00:03:52,480
Speaker 1: you tell us how bad things are in this economy,

71
00:03:52,640 --> 00:03:56,200
Speaker 1: because the data we're still getting signals resilience. You see

72
00:03:56,240 --> 00:04:00,360
Speaker 1: the same thing? Sure, we're definitely seeing resil into the

73
00:04:00,440 --> 00:04:03,800
Speaker 1: U S economy. The labor markets still strong. Jobless claims

74
00:04:03,800 --> 00:04:06,080
Speaker 1: have been coming off. The adults data tell us that

75
00:04:06,120 --> 00:04:08,080
Speaker 1: there's still a lot of job openings. When we look

76
00:04:08,120 --> 00:04:11,240
Speaker 1: at GDP tracking for the third quarter, maybe we'll have

77
00:04:11,360 --> 00:04:15,560
Speaker 1: something just slightly north of zero. Certainly consumers did spend

78
00:04:15,720 --> 00:04:19,600
Speaker 1: in August. Spending was up two tenths of a percentage

79
00:04:19,600 --> 00:04:22,760
Speaker 1: point in real terms, and also the trade outlook is

80
00:04:22,800 --> 00:04:26,120
Speaker 1: looking a little bit better. With all that, we think

81
00:04:26,160 --> 00:04:28,640
Speaker 1: that the Fed is it's a it's a great opportunity

82
00:04:28,640 --> 00:04:31,360
Speaker 1: for the Fed to continue to raise interest rates to

83
00:04:31,400 --> 00:04:36,240
Speaker 1: tackle really elevated inflation. Okay, so to go to John's point,

84
00:04:36,320 --> 00:04:39,200
Speaker 1: is consumer resilience good or bad? You're saying it's a

85
00:04:39,200 --> 00:04:41,800
Speaker 1: good opportunity for the Fed to raise rates, which other

86
00:04:41,800 --> 00:04:47,279
Speaker 1: people would say is bad for the economy longer term. Well,

87
00:04:47,320 --> 00:04:50,880
Speaker 1: I mean the thing is that inflation is is really bad. Right.

88
00:04:50,960 --> 00:04:53,640
Speaker 1: So the headline inflation for the C P I only

89
00:04:53,680 --> 00:04:56,200
Speaker 1: tick down the eight point three percent. Meanwhile the corps

90
00:04:56,480 --> 00:04:59,320
Speaker 1: moved outward to six point three percent. A lot of

91
00:04:59,320 --> 00:05:03,440
Speaker 1: the drivers, our food and shelter costs, basics for consumers.

92
00:05:03,440 --> 00:05:06,720
Speaker 1: So that's really negative for the consumer and certainly the

93
00:05:06,920 --> 00:05:10,840
Speaker 1: roads their incomes. And so it's definitely not a good

94
00:05:10,880 --> 00:05:13,880
Speaker 1: thing if you have high inflation, but certainly it is

95
00:05:13,880 --> 00:05:16,680
Speaker 1: a good thing if consumers are able to still weather

96
00:05:16,800 --> 00:05:22,440
Speaker 1: higher interest rate hikes. Certainly that weighs on housing uh purchases,

97
00:05:22,520 --> 00:05:25,919
Speaker 1: but nonetheless it's still a good thing overall for the economy.

98
00:05:26,200 --> 00:05:28,720
Speaker 1: Do you have a sense of how quickly we're going

99
00:05:28,760 --> 00:05:31,120
Speaker 1: to see the effects of the rate rises that we've

100
00:05:31,120 --> 00:05:33,839
Speaker 1: already seen, of quantitative tightening that has yet to really happen,

101
00:05:33,920 --> 00:05:36,560
Speaker 1: but ostensibly will happen at some point in the near future.

102
00:05:36,800 --> 00:05:40,640
Speaker 1: How long does it take before it hits the economy? Well,

103
00:05:40,680 --> 00:05:42,880
Speaker 1: I mean the thing is that it's really difficult to know.

104
00:05:43,000 --> 00:05:45,560
Speaker 1: I mean back a long time ago we would say, well,

105
00:05:45,600 --> 00:05:48,120
Speaker 1: it takes twelve to eighteen months for any fat actions

106
00:05:48,160 --> 00:05:50,520
Speaker 1: to really feed through. But we're already seeing that fat

107
00:05:50,560 --> 00:05:53,800
Speaker 1: actions are having an impact on the housing market Um

108
00:05:53,839 --> 00:05:56,480
Speaker 1: and that's certainly a positive for the FT in terms

109
00:05:56,480 --> 00:06:00,120
Speaker 1: of it's it's addressing inflation. So you're getting at these

110
00:06:00,160 --> 00:06:03,760
Speaker 1: asset prices, even though the Fed is not target asset prices,

111
00:06:03,760 --> 00:06:07,080
Speaker 1: but certainly in terms of the consumer price index is

112
00:06:07,120 --> 00:06:09,599
Speaker 1: the Fed still, you know, really needs to do the

113
00:06:09,640 --> 00:06:12,480
Speaker 1: work now and we should probably start seeing the effects

114
00:06:12,560 --> 00:06:16,000
Speaker 1: later on next year. We're thinking that, uh, core and fleet,

115
00:06:16,040 --> 00:06:18,799
Speaker 1: well key inflation gauges, probably won't return to two percent

116
00:06:18,839 --> 00:06:23,600
Speaker 1: until very early Dana, every single piece of research we've

117
00:06:23,600 --> 00:06:25,520
Speaker 1: had basically over the last week has been a bank

118
00:06:25,600 --> 00:06:29,799
Speaker 1: somewhere on Wall Street upgrading their terminal rate view. Goldman

119
00:06:29,880 --> 00:06:31,720
Speaker 1: the latest they look for four to fourth point to

120
00:06:31,960 --> 00:06:34,480
Speaker 1: five by year ended twenty two, and maybe higher than

121
00:06:34,520 --> 00:06:37,400
Speaker 1: that by the time we get through three DNA. The

122
00:06:37,480 --> 00:06:40,040
Speaker 1: number one pushback, the LESA gets, that I get, the

123
00:06:40,040 --> 00:06:42,600
Speaker 1: Tom gets, is that we can't live with four percent rates,

124
00:06:42,800 --> 00:06:44,680
Speaker 1: that this economy just can't live with it, that the

125
00:06:44,680 --> 00:06:48,120
Speaker 1: debt piles is too high the sovereign and the Treasury Na.

126
00:06:48,160 --> 00:06:50,159
Speaker 1: Do you agree with that? What's the constructive view on

127
00:06:50,240 --> 00:06:52,640
Speaker 1: why we can live with a four or four point

128
00:06:52,640 --> 00:06:55,960
Speaker 1: five percent fed funds rate? Well, I mean, first of

129
00:06:55,960 --> 00:06:57,839
Speaker 1: all I want to say the Conference Board came out

130
00:06:57,880 --> 00:07:01,960
Speaker 1: really early with that call for or interest rate topping

131
00:07:01,960 --> 00:07:04,560
Speaker 1: out at four percent and we've even been saying it

132
00:07:04,600 --> 00:07:08,280
Speaker 1: could be even higher. Inflation doesn't really move and it

133
00:07:08,440 --> 00:07:12,000
Speaker 1: remain sticky. But I think the Agus economy can and certainly,

134
00:07:12,520 --> 00:07:16,560
Speaker 1: when you think about Um what policy makers have been saying,

135
00:07:16,560 --> 00:07:18,480
Speaker 1: they're saying, look, you know we're in for a bit

136
00:07:18,480 --> 00:07:20,960
Speaker 1: of pain, which I think is code for a recession,

137
00:07:21,040 --> 00:07:24,360
Speaker 1: a mild, maybe brief recession. And certainly when you look

138
00:07:24,400 --> 00:07:27,640
Speaker 1: at the labor markets, that's still super strong. It's going

139
00:07:27,680 --> 00:07:30,800
Speaker 1: to remain uh, pretty robust, especially given the fact that

140
00:07:30,840 --> 00:07:32,960
Speaker 1: you have labor shortages and so that means there's still

141
00:07:33,000 --> 00:07:35,840
Speaker 1: going to be some hiring and not a cratering in

142
00:07:35,840 --> 00:07:38,320
Speaker 1: the labor market. I think with all of that, yes,

143
00:07:38,640 --> 00:07:41,200
Speaker 1: the US economy is going to have to endure a

144
00:07:41,200 --> 00:07:44,280
Speaker 1: period of elevated interest rates in order to tackle inflation.

145
00:07:44,520 --> 00:07:48,280
Speaker 1: Inflation is the worst problem here. So, Dana, that's going

146
00:07:48,320 --> 00:07:50,920
Speaker 1: to lead to higher unemployment by design, and we've been

147
00:07:50,960 --> 00:07:53,520
Speaker 1: talking about this. How much higher, I mean, do we

148
00:07:53,560 --> 00:07:57,200
Speaker 1: see a commensurate increase in your expectations for the unemployment

149
00:07:57,280 --> 00:07:59,720
Speaker 1: rate with every increase that we hear? To John's point

150
00:07:59,760 --> 00:08:02,480
Speaker 1: from all street about the Fed funds rate and where

151
00:08:02,520 --> 00:08:06,160
Speaker 1: we end up? We think with our forecasts of the

152
00:08:06,200 --> 00:08:08,760
Speaker 1: four percent fed funds rate, we think the unemployment rate

153
00:08:08,800 --> 00:08:12,240
Speaker 1: will probably arise to four percent even still. Les's incredibly

154
00:08:12,320 --> 00:08:14,400
Speaker 1: low Um and even if we go into four and

155
00:08:14,400 --> 00:08:16,320
Speaker 1: a half, go to four and a half percent, that's

156
00:08:16,360 --> 00:08:20,000
Speaker 1: probably around the neutral rate Um, and so that suggests

157
00:08:20,040 --> 00:08:22,360
Speaker 1: we still have a very strong labor market. We're not

158
00:08:22,440 --> 00:08:26,320
Speaker 1: expecting to see five and six percent unemployment here. This

159
00:08:26,400 --> 00:08:28,880
Speaker 1: is a very different labor market. We didn't have shortages

160
00:08:29,440 --> 00:08:32,439
Speaker 1: ten twenty years ago. We do now and that's really

161
00:08:32,480 --> 00:08:36,040
Speaker 1: going to help, uh, I think, keep the labor market

162
00:08:36,080 --> 00:08:42,559
Speaker 1: from worsening relative to the overall economy. Is it instructive

163
00:08:42,600 --> 00:08:44,600
Speaker 1: for us to look at averages here when we talk

164
00:08:44,640 --> 00:08:47,400
Speaker 1: about the labor market, when we talk about how well

165
00:08:47,760 --> 00:08:51,040
Speaker 1: different households can weather this, especially because you're talking about,

166
00:08:51,360 --> 00:08:53,920
Speaker 1: you know, half of the income in the United States

167
00:08:54,000 --> 00:08:56,440
Speaker 1: driven by households that earn more than a hundred thousand dollars,

168
00:08:56,440 --> 00:08:58,240
Speaker 1: is put out there by Morgan Stanley. Most of them

169
00:08:58,280 --> 00:09:01,920
Speaker 1: own their own homes, either outright or else with mortgage

170
00:09:01,960 --> 00:09:04,360
Speaker 1: rates that were locked in lower, at very low rates.

171
00:09:04,800 --> 00:09:07,280
Speaker 1: The rest of the economy, the rest of the households

172
00:09:07,320 --> 00:09:10,280
Speaker 1: are really struggling, both because they've got lower income and

173
00:09:10,320 --> 00:09:13,199
Speaker 1: because they have, if not fixed costs, but pay rents

174
00:09:13,400 --> 00:09:15,800
Speaker 1: and have to deal with the increase there. How do

175
00:09:15,840 --> 00:09:18,400
Speaker 1: you gauge that out at a time where we're looking

176
00:09:18,400 --> 00:09:22,360
Speaker 1: at averages to determine policy? Well, it's interesting when you

177
00:09:22,400 --> 00:09:26,240
Speaker 1: look at certainly wage gains, the folks who have gained

178
00:09:26,240 --> 00:09:29,600
Speaker 1: the most in terms of wage gains, the next last

179
00:09:29,760 --> 00:09:31,719
Speaker 1: over the last couple of years, have been people on

180
00:09:31,760 --> 00:09:33,960
Speaker 1: the lower end of the income spectrum, also people who

181
00:09:33,960 --> 00:09:36,880
Speaker 1: have been quitting, also people work in those in person

182
00:09:37,000 --> 00:09:40,320
Speaker 1: services types of jobs that tend to have lower wages

183
00:09:40,320 --> 00:09:42,640
Speaker 1: in general. Those are the people who have seen the

184
00:09:42,640 --> 00:09:46,520
Speaker 1: biggest gains and wages, and so it's I mean, we

185
00:09:46,600 --> 00:09:49,160
Speaker 1: certainly should look at the granular data, but it's not

186
00:09:49,200 --> 00:09:51,640
Speaker 1: necessarily the case that, you know, folks at the lower

187
00:09:51,720 --> 00:09:53,640
Speaker 1: end of the spectrum have been losing out here. They've

188
00:09:53,640 --> 00:09:58,360
Speaker 1: actually been gaining by quitting and also through the very

189
00:09:58,400 --> 00:10:01,760
Speaker 1: aggressive tactics that pleas have been using to attract labor,

190
00:10:01,880 --> 00:10:05,760
Speaker 1: especially for things for businesses like restaurants and hotels and

191
00:10:05,800 --> 00:10:10,120
Speaker 1: manufacturing and transportation, which tend to have folks on the

192
00:10:10,120 --> 00:10:12,440
Speaker 1: lower end of the income spectrum. At least. The credit

193
00:10:12,520 --> 00:10:15,040
Speaker 1: is Jean Barvan of black rock for coming out in

194
00:10:15,040 --> 00:10:17,640
Speaker 1: the last month or so. I'm raising a question that

195
00:10:17,679 --> 00:10:19,800
Speaker 1: I don't think we've talked enough about, which is what

196
00:10:19,920 --> 00:10:22,720
Speaker 1: is the appropriate time frame to try and bring inflation

197
00:10:22,760 --> 00:10:25,360
Speaker 1: back towards target? What you hear there from Dana is

198
00:10:26,600 --> 00:10:29,360
Speaker 1: not three story and I just wonder if the risk

199
00:10:29,360 --> 00:10:33,160
Speaker 1: ascue towards maybe pushing that out even further. This task

200
00:10:33,240 --> 00:10:35,160
Speaker 1: might be big and more difficult than maybe we've given

201
00:10:35,160 --> 00:10:37,800
Speaker 1: it credit for, and perhaps people won't have the appetite

202
00:10:37,960 --> 00:10:40,080
Speaker 1: for some of the economic pain in order to get

203
00:10:40,120 --> 00:10:43,960
Speaker 1: it down to two or even four and I think that. That,

204
00:10:44,040 --> 00:10:46,280
Speaker 1: to your point, is the whole Adam posing view. Do

205
00:10:46,320 --> 00:10:48,480
Speaker 1: we get comfortable with a three percent target for a

206
00:10:48,480 --> 00:10:51,720
Speaker 1: little bit longer? Is that politically feasible? But they would

207
00:10:51,720 --> 00:10:53,839
Speaker 1: you go with that? Do you think maybe risk askew

208
00:10:53,920 --> 00:10:58,640
Speaker 1: to this taking longer? Well, it certainly isn't our forecast

209
00:10:58,720 --> 00:11:00,480
Speaker 1: that it's going to take a while. I like we

210
00:11:00,559 --> 00:11:04,040
Speaker 1: don't have the policy. I'm sorry, we don't have interest rates.

211
00:11:04,600 --> 00:11:07,080
Speaker 1: We don't have interest rates falling next year because we

212
00:11:07,120 --> 00:11:11,319
Speaker 1: think inflation is going to remain elevated and certainly this

213
00:11:11,400 --> 00:11:14,000
Speaker 1: is going to take some time. But there is that

214
00:11:14,120 --> 00:11:17,000
Speaker 1: possibility out there. Is something that I was saying earlier

215
00:11:17,000 --> 00:11:19,000
Speaker 1: in the spring that maybe the Fed will get more

216
00:11:19,040 --> 00:11:22,120
Speaker 1: comfortable with having an inflation close to the three percent

217
00:11:22,200 --> 00:11:25,439
Speaker 1: than two percent, especially if we have a very significant

218
00:11:25,520 --> 00:11:29,200
Speaker 1: downturn and economic activity. But I think it's also a

219
00:11:29,280 --> 00:11:31,160
Speaker 1: function of the fact that we have a lot more

220
00:11:31,200 --> 00:11:35,400
Speaker 1: inflationary pressures, long term inflationary pressures such as labor shortages,

221
00:11:35,760 --> 00:11:40,080
Speaker 1: such as the semiconductor shortage, such as industrial policies where

222
00:11:40,440 --> 00:11:43,719
Speaker 1: businesses have to reorient their supply chain that's very expensive,

223
00:11:44,080 --> 00:11:46,320
Speaker 1: and so all those things are going to get passed

224
00:11:46,320 --> 00:11:48,320
Speaker 1: on to the customer, and so it's going to be

225
00:11:48,440 --> 00:11:51,040
Speaker 1: very difficult, I think, for the Fed to keep interest rate,

226
00:11:51,120 --> 00:11:54,560
Speaker 1: I'm sorry, to keep inflation close to that too percent target,

227
00:11:54,920 --> 00:11:57,839
Speaker 1: and so either. So I think that those are all

228
00:11:57,880 --> 00:12:00,720
Speaker 1: forces out there that are going to weigh on the

229
00:12:00,800 --> 00:12:03,600
Speaker 1: Fed and certainly the economy over the longer term. Danna,

230
00:12:03,640 --> 00:12:04,960
Speaker 1: you want of the best. Thanks for being with us,

231
00:12:05,040 --> 00:12:19,120
Speaker 1: Danna Petterson. There at the Conference Board. Matto joins US now.

232
00:12:19,120 --> 00:12:20,760
Speaker 1: They had a few s investment grade and seeing a

233
00:12:20,800 --> 00:12:24,319
Speaker 1: portfolio manager at investco. Matt, have we seen the worst

234
00:12:24,360 --> 00:12:27,920
Speaker 1: of it and do you want to stop buying Hagan Warton, Jonathan? Uh? Yeah,

235
00:12:28,120 --> 00:12:30,320
Speaker 1: I think we've. We've probably not seen the worst of

236
00:12:30,320 --> 00:12:34,120
Speaker 1: it yet, Um, but things are certainly attractive. I think

237
00:12:34,160 --> 00:12:36,319
Speaker 1: you look at valuations, it's it's impossible to argue that

238
00:12:36,320 --> 00:12:38,600
Speaker 1: they don't. Things don't look cheap, particularly investment grade and

239
00:12:38,640 --> 00:12:41,160
Speaker 1: I yield. They look very cheap. But the problem as

240
00:12:41,200 --> 00:12:43,880
Speaker 1: investors keep being early and it's painful to be early.

241
00:12:43,920 --> 00:12:45,720
Speaker 1: You know that. The old saying is Um, you know,

242
00:12:45,880 --> 00:12:48,280
Speaker 1: if you're earlier, you're wrong, and right now everybody that's

243
00:12:48,320 --> 00:12:50,360
Speaker 1: been early has been wrong. And so even though the

244
00:12:50,400 --> 00:12:53,360
Speaker 1: valuations are there. It looks attractive. You're probably gonna make

245
00:12:53,400 --> 00:12:55,480
Speaker 1: money over the next year, but over the next few weeks,

246
00:12:55,600 --> 00:12:57,120
Speaker 1: who knows? We've still got to get to the next

247
00:12:57,120 --> 00:12:59,280
Speaker 1: CPI prep before you can have any sort of clarity

248
00:12:59,320 --> 00:13:01,280
Speaker 1: at this point. On Matt, a lot of people question

249
00:13:01,520 --> 00:13:04,720
Speaker 1: what credit spreads, with the extra premium that investors demand

250
00:13:04,760 --> 00:13:08,160
Speaker 1: to own corporate debt over benchmark rates, over the benchmark

251
00:13:08,200 --> 00:13:10,400
Speaker 1: full faith and credit at the United States, whether that's

252
00:13:10,440 --> 00:13:13,800
Speaker 1: actually pricing in the economic pain that a four to

253
00:13:13,840 --> 00:13:16,320
Speaker 1: four and a half percent fed funds rate is conferring.

254
00:13:16,400 --> 00:13:19,640
Speaker 1: Do you think so? So at this point it's not.

255
00:13:20,000 --> 00:13:22,720
Speaker 1: It's it's really pricing in a slowdown of the economy.

256
00:13:22,760 --> 00:13:25,320
Speaker 1: It's not pricing in a hard procession. Um, you know,

257
00:13:25,320 --> 00:13:28,360
Speaker 1: I think at this point all in yields, you know, historically,

258
00:13:28,440 --> 00:13:30,439
Speaker 1: you know I have not been not been this high

259
00:13:30,440 --> 00:13:32,480
Speaker 1: in thirty years. So if you're looking at pure credit

260
00:13:32,480 --> 00:13:34,240
Speaker 1: spreads versus all in yields is a little bit different

261
00:13:34,280 --> 00:13:36,680
Speaker 1: a story. But we're not seeing a lot of pain

262
00:13:36,720 --> 00:13:39,079
Speaker 1: in corporate credit. The last few weeks, even, or last

263
00:13:39,080 --> 00:13:41,280
Speaker 1: week or so, even after the CPI, it's mainly been

264
00:13:41,360 --> 00:13:44,200
Speaker 1: rate driven. So the credit markets are telling you that

265
00:13:44,240 --> 00:13:48,679
Speaker 1: corporations can get through this Um that unless this, this inflation,

266
00:13:48,679 --> 00:13:51,480
Speaker 1: continues for forever. Um You know, at some point we're

267
00:13:51,480 --> 00:13:53,640
Speaker 1: gonna get the Fed more in balance and we're actually

268
00:13:53,679 --> 00:13:56,320
Speaker 1: gonna see Um, the strength of these balance sheets went out.

269
00:13:56,480 --> 00:13:58,440
Speaker 1: But we still have to get to that terminal, you know,

270
00:13:58,520 --> 00:14:00,600
Speaker 1: terminal high in terminal rate, in order to know, you know,

271
00:14:00,600 --> 00:14:02,280
Speaker 1: how bad it's gonna be from the Fed. A number

272
00:14:02,280 --> 00:14:05,200
Speaker 1: of investors have gotten pretty bullish actually on the prospect

273
00:14:05,200 --> 00:14:07,440
Speaker 1: of credit. I'm thinking, for example, of Jeff gunlock over

274
00:14:07,480 --> 00:14:10,280
Speaker 1: at double line or oak tree, seeing equity like potential

275
00:14:10,280 --> 00:14:12,720
Speaker 1: returns in credit. Do you agree that at this point

276
00:14:12,800 --> 00:14:14,240
Speaker 1: it's a time to lean in and that you're gonna

277
00:14:14,240 --> 00:14:17,439
Speaker 1: get really good returns? So, yeah, we look at the

278
00:14:17,720 --> 00:14:21,400
Speaker 1: difference between Equity Yields and credit yields and if you

279
00:14:21,600 --> 00:14:22,920
Speaker 1: I like to look at three to five of your

280
00:14:22,920 --> 00:14:24,920
Speaker 1: credit yields because you don't have to take on a

281
00:14:24,920 --> 00:14:27,040
Speaker 1: lot of duration there and you're you're getting about three

282
00:14:27,080 --> 00:14:30,520
Speaker 1: percentage points extra yield by buying bonds and you are

283
00:14:30,560 --> 00:14:32,520
Speaker 1: buying stocks. And so to me it's it's, it's, it's

284
00:14:32,560 --> 00:14:35,600
Speaker 1: it's a very, very attractive time to be buying bonds

285
00:14:35,680 --> 00:14:38,240
Speaker 1: versus stocks, and I'm not, you know, stock expert, but

286
00:14:38,240 --> 00:14:39,960
Speaker 1: I'm just staying on a relevant basis. It looks pretty

287
00:14:39,960 --> 00:14:42,200
Speaker 1: good to me, Um and so, from that same point

288
00:14:42,360 --> 00:14:44,920
Speaker 1: you're locking in five percent yields for the first time

289
00:14:44,960 --> 00:14:47,080
Speaker 1: since two thousand and nine on ten year credit. You

290
00:14:47,080 --> 00:14:49,320
Speaker 1: can lock in pretty much the same on front end credit.

291
00:14:49,560 --> 00:14:51,960
Speaker 1: So I like credit at this point. Again, I just

292
00:14:51,960 --> 00:14:53,760
Speaker 1: think that the timing is very difficult. But if you're

293
00:14:53,760 --> 00:14:55,720
Speaker 1: able to close your eyes and buy, we think they're

294
00:14:55,720 --> 00:14:58,040
Speaker 1: gonna do well. I've got no problem with the bond

295
00:14:58,040 --> 00:15:00,400
Speaker 1: market guys talking about stokes. The stock market guys do

296
00:15:00,480 --> 00:15:03,800
Speaker 1: it all the time. They're always talking about the bum market, Matt,

297
00:15:03,840 --> 00:15:06,200
Speaker 1: least when I've reflect on the following over the last

298
00:15:06,200 --> 00:15:07,480
Speaker 1: week or so. In fact, we've been doing it for

299
00:15:07,520 --> 00:15:10,040
Speaker 1: a few months now. The tone that I still get

300
00:15:10,080 --> 00:15:12,320
Speaker 1: from a lot of guests on this program is that

301
00:15:12,400 --> 00:15:15,320
Speaker 1: these issues are still somewhat temporary, that even if the

302
00:15:15,360 --> 00:15:17,480
Speaker 1: Fed goes to four or four and a half, ultimately

303
00:15:17,520 --> 00:15:19,840
Speaker 1: we returned to the world world of the last ten

304
00:15:19,920 --> 00:15:22,800
Speaker 1: years or so. Are you pushing back against that, Matt?

305
00:15:24,760 --> 00:15:26,760
Speaker 1: I think we'll eventually get there, but it's just taking

306
00:15:26,840 --> 00:15:28,760
Speaker 1: so long to get anywhere. If you just think about

307
00:15:28,760 --> 00:15:30,520
Speaker 1: how long we've been in this pandemic. How long been?

308
00:15:30,760 --> 00:15:32,560
Speaker 1: You know, we're officially out of it now, I guess,

309
00:15:32,800 --> 00:15:34,960
Speaker 1: but it's just taking longer to get out of everything

310
00:15:34,960 --> 00:15:37,640
Speaker 1: and get back to normal. So Um, I think the

311
00:15:37,720 --> 00:15:41,960
Speaker 1: longer term trends down the road, aging demographics, technological innovation,

312
00:15:42,480 --> 00:15:45,680
Speaker 1: those are key drivers of of having deflation or lower inflation,

313
00:15:45,920 --> 00:15:48,320
Speaker 1: but they just can't take place fast enough right now.

314
00:15:48,680 --> 00:15:51,400
Speaker 1: And so in that regard, any expectations that we would

315
00:15:51,400 --> 00:15:53,080
Speaker 1: have had for a quicker turnaround and have been have

316
00:15:53,120 --> 00:15:55,680
Speaker 1: been put on hold. Um or a quicker a quicker

317
00:15:55,680 --> 00:15:58,160
Speaker 1: return to normal. And so from that standpoint we're gonna

318
00:15:58,200 --> 00:15:59,960
Speaker 1: have to ride this out a little longer. The next

319
00:16:00,040 --> 00:16:02,240
Speaker 1: NPI print is going to be, you know, on everybody's mind,

320
00:16:02,240 --> 00:16:03,480
Speaker 1: but that may not be enough, for we'd have to

321
00:16:03,520 --> 00:16:05,560
Speaker 1: wait for another one and then another one. So, you know,

322
00:16:05,600 --> 00:16:08,920
Speaker 1: call it two thousand and five, but it's not happening

323
00:16:08,960 --> 00:16:11,040
Speaker 1: nearly as quickly as we'd like it too. We just

324
00:16:11,040 --> 00:16:13,200
Speaker 1: have to rely on evaluations being attractive at this point.

325
00:16:13,240 --> 00:16:15,280
Speaker 1: Just quickly, Matt, what would you be asking Fred Chair

326
00:16:15,360 --> 00:16:16,960
Speaker 1: j Powell, this Wednesday. What do you want to hear

327
00:16:16,960 --> 00:16:20,320
Speaker 1: from him? So I want to know two things. First off,

328
00:16:20,520 --> 00:16:22,440
Speaker 1: what are you gonna do with your your mortgage book? Um,

329
00:16:22,480 --> 00:16:23,920
Speaker 1: you know. Are you going to start to sell is?

330
00:16:24,240 --> 00:16:26,440
Speaker 1: Are you? Are you? Are you? Are you considering that

331
00:16:26,480 --> 00:16:28,520
Speaker 1: at this point at least? And then second I want

332
00:16:28,520 --> 00:16:30,080
Speaker 1: to know how patient are you? You know, we know

333
00:16:30,120 --> 00:16:31,400
Speaker 1: that there's a lot of hikes that have been in

334
00:16:31,440 --> 00:16:33,080
Speaker 1: the pipeline. There's a lot of pipes that a lot

335
00:16:33,120 --> 00:16:35,120
Speaker 1: of hikes that are going to hit the economy at

336
00:16:35,160 --> 00:16:37,960
Speaker 1: some point. You know, how patient are you willing to be?

337
00:16:38,280 --> 00:16:41,000
Speaker 1: And at what point are you? Are you going to

338
00:16:41,040 --> 00:16:43,200
Speaker 1: be more, even more aggressive? You know that would be

339
00:16:43,240 --> 00:16:45,560
Speaker 1: a hunter basis points rather than seventy five. I think

340
00:16:45,560 --> 00:16:47,600
Speaker 1: he's going to take his time. I think he has

341
00:16:47,640 --> 00:16:49,480
Speaker 1: to know that this is going to slow the economy.

342
00:16:49,840 --> 00:16:52,000
Speaker 1: But if he just says I'm out of patience, Um,

343
00:16:52,040 --> 00:16:54,200
Speaker 1: you know, that's gonna be a problem of a vest

344
00:16:55,120 --> 00:17:02,360
Speaker 1: to catch Hump Buddy as a white Peter Sheer, head

345
00:17:02,400 --> 00:17:05,160
Speaker 1: of macro strategy at Academy Securities, joining us now. And Peter,

346
00:17:05,520 --> 00:17:08,560
Speaker 1: you were talking about last week and that something happened

347
00:17:08,640 --> 00:17:11,159
Speaker 1: that was pretty dramatic in your view, and it wasn't

348
00:17:11,200 --> 00:17:17,159
Speaker 1: necessarily a total reset of fed expectations. It was fedex explain. Listen,

349
00:17:17,560 --> 00:17:19,240
Speaker 1: I keep looking at the data and a lot of

350
00:17:19,280 --> 00:17:21,639
Speaker 1: the data we get is backward looking, it's weak, it

351
00:17:21,680 --> 00:17:23,679
Speaker 1: tends to get revised. So I'm kind of looking what

352
00:17:23,840 --> 00:17:26,919
Speaker 1: is really contemporaneous, what is effective, and the Fed x

353
00:17:26,960 --> 00:17:29,560
Speaker 1: warning to me is real right that that's someone seeing

354
00:17:29,560 --> 00:17:32,600
Speaker 1: business move in real time. Stated today. It came right

355
00:17:32,640 --> 00:17:35,560
Speaker 1: on the heels of CPI where we had housing inflation

356
00:17:35,600 --> 00:17:37,960
Speaker 1: was up point seven, one of the biggest contributors to

357
00:17:38,000 --> 00:17:40,360
Speaker 1: the CPI. And yet, as far as anyone can tell,

358
00:17:40,560 --> 00:17:42,640
Speaker 1: nothing good is going on in the housing market right now.

359
00:17:42,920 --> 00:17:44,520
Speaker 1: So I think we all know where the data is

360
00:17:44,560 --> 00:17:46,800
Speaker 1: headed as the official data catches up, and it's going

361
00:17:46,840 --> 00:17:48,600
Speaker 1: to be weak and it's gonna be a little bit scary.

362
00:17:48,760 --> 00:17:49,800
Speaker 1: So do you think that the Fed is going to

363
00:17:49,880 --> 00:17:53,000
Speaker 1: reflect this on Wednesday when we hear from them? Wow,

364
00:17:53,040 --> 00:17:54,960
Speaker 1: I think they are caught on such a you know,

365
00:17:55,080 --> 00:17:57,360
Speaker 1: between a rock and a hard spot, where they've been

366
00:17:57,560 --> 00:18:01,680
Speaker 1: so hockey, starting at Jackson old they've been continuing that message.

367
00:18:01,920 --> 00:18:04,080
Speaker 1: I think someone's got to step back and say okay,

368
00:18:04,200 --> 00:18:06,600
Speaker 1: we've got to be a little bit careful. Traditionally it

369
00:18:06,680 --> 00:18:08,800
Speaker 1: does take some time for our hikes to come through

370
00:18:08,800 --> 00:18:12,119
Speaker 1: the economy and everything we're seeing real time, especially if

371
00:18:12,119 --> 00:18:14,160
Speaker 1: you look at the wealth effect, is saying, Whoa, this

372
00:18:14,240 --> 00:18:17,040
Speaker 1: is getting a little bit dangerous. I think the fixation

373
00:18:17,080 --> 00:18:20,000
Speaker 1: on CP I, how it's calculated, is wrong. I think

374
00:18:20,160 --> 00:18:22,000
Speaker 1: how as usual, is going to wind up having to

375
00:18:22,080 --> 00:18:24,000
Speaker 1: let some of his inner dub come out. So you

376
00:18:24,040 --> 00:18:26,440
Speaker 1: said it's getting a little bit dangerous. Can you explain,

377
00:18:26,440 --> 00:18:28,240
Speaker 1: because a lot of people are pointing to the resilience

378
00:18:28,240 --> 00:18:31,600
Speaker 1: of the consumer. Yes, perhaps Fedex is an outlier, perhaps

379
00:18:31,600 --> 00:18:35,080
Speaker 1: there's some idiosyncratic issues in Tantem with a global economy

380
00:18:35,080 --> 00:18:37,840
Speaker 1: that's slowing down, but what are you looking at that's

381
00:18:37,880 --> 00:18:40,840
Speaker 1: telling you that things are getting dangerous? Well, I'll even

382
00:18:40,880 --> 00:18:42,879
Speaker 1: go back to the consumer. Right people are saying the

383
00:18:42,920 --> 00:18:44,960
Speaker 1: consumer did well, but if you look at the control group,

384
00:18:45,240 --> 00:18:47,520
Speaker 1: people thought they spent point eight percent last month, it

385
00:18:47,560 --> 00:18:50,240
Speaker 1: turns out they only spent point four. Expectations were point five.

386
00:18:50,280 --> 00:18:53,120
Speaker 1: This month they spend zero percent. So I don't think

387
00:18:53,160 --> 00:18:55,240
Speaker 1: the consumer is anywhere near and strong. I think they're

388
00:18:55,240 --> 00:18:58,359
Speaker 1: going back to buying discounting. I'm watching the inventory build,

389
00:18:58,400 --> 00:19:00,800
Speaker 1: which has been shocking. You're seeing month after month after

390
00:19:00,880 --> 00:19:04,080
Speaker 1: month of inventory build as two things I think happened. One,

391
00:19:04,520 --> 00:19:08,359
Speaker 1: companies overestimated consumer demand. They didn't realize how much consumers

392
00:19:08,359 --> 00:19:11,160
Speaker 1: were pulling forward because they were worried about supply chains,

393
00:19:11,359 --> 00:19:14,440
Speaker 1: and two, companies were so worried about supply chains they've overstocked.

394
00:19:14,440 --> 00:19:16,680
Speaker 1: So I think that's a real hangover for this economy.

395
00:19:16,880 --> 00:19:19,359
Speaker 1: And then I look at Crypto and that whole market space. Right,

396
00:19:19,400 --> 00:19:22,119
Speaker 1: it went to two trillion. It funded all these industries.

397
00:19:22,119 --> 00:19:25,000
Speaker 1: They're all struggling and they were sending money wherever they could.

398
00:19:25,080 --> 00:19:27,320
Speaker 1: Right they were buying chips, they were buying new computer systems,

399
00:19:27,320 --> 00:19:30,399
Speaker 1: they were buying, you know, ads on anything as they

400
00:19:30,440 --> 00:19:33,560
Speaker 1: have to focus on actually just survival and turning casual positive.

401
00:19:33,800 --> 00:19:35,600
Speaker 1: That's gonna be a big chunk of this economy. These

402
00:19:35,600 --> 00:19:37,959
Speaker 1: disruptive stocks that keep coming back to them. They were

403
00:19:38,000 --> 00:19:39,919
Speaker 1: such a huge part of the growth story and I

404
00:19:39,960 --> 00:19:42,160
Speaker 1: think they're going to really weigh on the economy because

405
00:19:42,160 --> 00:19:44,719
Speaker 1: their employers were rich in spending and the companies themselves

406
00:19:44,760 --> 00:19:47,920
Speaker 1: were cash rich in spending, and that's not occurring right now. Okay. So, Peter,

407
00:19:48,000 --> 00:19:50,560
Speaker 1: you said that Fed Chair j Powell needs to let

408
00:19:50,560 --> 00:19:52,760
Speaker 1: out his inner dove in order to counteract some of

409
00:19:52,800 --> 00:19:55,119
Speaker 1: the weakness that you're seeing uh to build at a

410
00:19:55,160 --> 00:19:58,240
Speaker 1: pretty rapid clip throughout the economy. But that to other people,

411
00:19:58,240 --> 00:20:01,080
Speaker 1: particularly Equity Bulls, would argue this is exactly what they're

412
00:20:01,080 --> 00:20:03,720
Speaker 1: counting on, basically the Fed pivoting right. This goes back

413
00:20:03,760 --> 00:20:06,239
Speaker 1: to that discussion that exhausted so many people and no one,

414
00:20:06,560 --> 00:20:09,080
Speaker 1: nobody wanted to hear the p word ever again. I mean,

415
00:20:09,200 --> 00:20:10,880
Speaker 1: is that basically what you're saying, that this is a

416
00:20:10,920 --> 00:20:13,840
Speaker 1: bull case for markets, because it is a bear case

417
00:20:13,880 --> 00:20:16,600
Speaker 1: for the economy and a bear case for this Federal Reserve?

418
00:20:17,480 --> 00:20:19,760
Speaker 1: I think it's a temporary bull case. I think we're

419
00:20:19,800 --> 00:20:21,960
Speaker 1: well past the stage of lower yields being good for

420
00:20:22,000 --> 00:20:24,159
Speaker 1: the economy. I think you might get a bounced on

421
00:20:24,200 --> 00:20:25,959
Speaker 1: the Fed if he does this little bit of a pivot.

422
00:20:26,080 --> 00:20:28,760
Speaker 1: But I think the reality, reality is just he's gone

423
00:20:28,760 --> 00:20:31,680
Speaker 1: too far. We're still feeling, starting to feel the impacts

424
00:20:31,680 --> 00:20:33,680
Speaker 1: of what's gone on. Before people are going to realize

425
00:20:33,840 --> 00:20:37,160
Speaker 1: generally lower commodity prices, lower bond yields are the risk

426
00:20:37,240 --> 00:20:39,400
Speaker 1: off type trade I think we forgot all about that.

427
00:20:39,600 --> 00:20:42,280
Speaker 1: And then, let's not forget we've started quantitative tightening a

428
00:20:42,280 --> 00:20:44,520
Speaker 1: little bit more aggressively. We're going to see more of

429
00:20:44,560 --> 00:20:47,560
Speaker 1: that and to me I've always believed that quantitative easing

430
00:20:47,880 --> 00:20:51,400
Speaker 1: really forced people out the risk spectrum and inflated all

431
00:20:51,440 --> 00:20:53,720
Speaker 1: asset prices, and so I think the crawlity of that

432
00:20:53,840 --> 00:20:56,320
Speaker 1: is going to be that quantitative tightening allows people to

433
00:20:56,359 --> 00:20:58,200
Speaker 1: move down the risk spectrum. So I think you've got

434
00:20:58,240 --> 00:21:00,639
Speaker 1: that as an additional headwind and that's just starting to

435
00:21:00,720 --> 00:21:02,439
Speaker 1: ramp up. So right now I'm looking at two year

436
00:21:02,520 --> 00:21:05,840
Speaker 1: yields that have really pushed hired dramatically this morning. Three

437
00:21:05,880 --> 00:21:09,320
Speaker 1: point nine three. We're really close to that four percent level.

438
00:21:09,760 --> 00:21:12,200
Speaker 1: If you talk about lower yields being a bad thing

439
00:21:12,280 --> 00:21:14,719
Speaker 1: for the economy, is it a good thing as an

440
00:21:14,760 --> 00:21:18,719
Speaker 1: investor to go into bonds as an actual haven at

441
00:21:18,720 --> 00:21:21,000
Speaker 1: a time when they're providing yield? We're hearing from David Stubbs,

442
00:21:21,000 --> 00:21:23,760
Speaker 1: from JP Morgan, we've heard from Matt Brill over at

443
00:21:23,800 --> 00:21:27,720
Speaker 1: Invest Go, both talking up the bull case for bonds. Yeah,

444
00:21:27,760 --> 00:21:29,760
Speaker 1: I would agree with that. I'm definitely overweight bonds. I

445
00:21:29,800 --> 00:21:31,720
Speaker 1: like them. You know, I hate to even say this

446
00:21:31,760 --> 00:21:34,000
Speaker 1: because it's been such a disaster, but the twenty year

447
00:21:34,040 --> 00:21:36,520
Speaker 1: Treasury action is appealing and over the past three weeks

448
00:21:36,560 --> 00:21:38,560
Speaker 1: I think we've seen a little bit more support for

449
00:21:38,560 --> 00:21:41,320
Speaker 1: that twenty year. It's just such an outlier in the

450
00:21:41,400 --> 00:21:43,920
Speaker 1: yield curve that it seems attractive. So I like the

451
00:21:44,040 --> 00:21:46,240
Speaker 1: overweight bonds. I like the longer day to more than

452
00:21:46,280 --> 00:21:47,679
Speaker 1: the front end just because I think we'll get more

453
00:21:47,720 --> 00:21:50,560
Speaker 1: bang for the buck. But I think that's really it's

454
00:21:50,600 --> 00:21:52,800
Speaker 1: going to be important and I don't think stocks are

455
00:21:52,800 --> 00:21:54,480
Speaker 1: going to go higher on the back of lower yields.

456
00:21:54,520 --> 00:21:56,760
Speaker 1: Maybe initially, but it's going to be one of these

457
00:21:56,840 --> 00:21:59,600
Speaker 1: risk oftect trades. So we've heard from oak tree, we've

458
00:21:59,600 --> 00:22:02,560
Speaker 1: heard form double line Jeff Gunlock, and they've been talking

459
00:22:02,560 --> 00:22:06,600
Speaker 1: about pretty extreme yield returns for credit for some of

460
00:22:06,640 --> 00:22:10,399
Speaker 1: this longer term debt, talking up equity like returns. Is

461
00:22:10,440 --> 00:22:12,560
Speaker 1: that plausible in your view, or do you think this

462
00:22:12,600 --> 00:22:15,399
Speaker 1: is going to just be less painful for bond investors

463
00:22:15,640 --> 00:22:18,399
Speaker 1: than for stocks? Yeah, I think it is going to

464
00:22:18,480 --> 00:22:20,760
Speaker 1: be less painful. I think quantitative tightening is going to

465
00:22:20,920 --> 00:22:23,520
Speaker 1: keep a lid on the ability for bonds to really

466
00:22:23,560 --> 00:22:25,240
Speaker 1: really rally and I think it's going to take a

467
00:22:25,280 --> 00:22:27,720
Speaker 1: little bit of time for the economic data to think in.

468
00:22:28,000 --> 00:22:31,240
Speaker 1: So I think you'll get a decent game. Uh. You know,

469
00:22:31,320 --> 00:22:32,720
Speaker 1: I could see a ten percent we turn on the

470
00:22:32,800 --> 00:22:34,800
Speaker 1: long bond over the next month or two, over the

471
00:22:34,840 --> 00:22:38,040
Speaker 1: next month or two. So yeah, wow. What are you

472
00:22:38,080 --> 00:22:41,320
Speaker 1: looking to hear from Fed Chair J Powell on Wednesday?

473
00:22:42,200 --> 00:22:43,960
Speaker 1: What I'd like to hear is him paying a little

474
00:22:43,960 --> 00:22:47,320
Speaker 1: bit more attention to the ECON data, to the forward

475
00:22:47,320 --> 00:22:50,679
Speaker 1: looking stuff, maybe even, you know, shout out to the

476
00:22:50,720 --> 00:22:52,840
Speaker 1: Fed X and say, Hey, we have to manage both

477
00:22:52,840 --> 00:22:54,639
Speaker 1: sides of this right. We do have full employment as

478
00:22:54,680 --> 00:22:57,000
Speaker 1: well as inflation. There's a lot of signs inflation are

479
00:22:57,080 --> 00:23:00,240
Speaker 1: rolling over. We've got to look at the more CONTEMPORANEOUSA.

480
00:23:00,960 --> 00:23:03,480
Speaker 1: I think something like that would be realistic. I think

481
00:23:03,480 --> 00:23:07,080
Speaker 1: if he starts pounting on that for the next meeting, blah, blah, blah,

482
00:23:07,119 --> 00:23:09,639
Speaker 1: I think markets are going to be respawnd very, very poorly,

483
00:23:09,640 --> 00:23:11,480
Speaker 1: because he's just going to drive us into a recession.

484
00:23:11,680 --> 00:23:14,600
Speaker 1: Just real quick here. I'm wondering your perspective on oil prices.

485
00:23:14,600 --> 00:23:18,600
Speaker 1: We were talking earlier. What signal is nearly eighty dollars

486
00:23:18,840 --> 00:23:21,840
Speaker 1: on w t I sending to global markets that are

487
00:23:21,880 --> 00:23:26,280
Speaker 1: still looking with this disproportionate imbalance with supply and demand.

488
00:23:27,600 --> 00:23:29,399
Speaker 1: So to me I think it's a negative signal, and

489
00:23:29,440 --> 00:23:31,360
Speaker 1: I've been talking about this going back for months. We've

490
00:23:31,359 --> 00:23:34,040
Speaker 1: all been kind of looking a lower oiler prices, lower inflation.

491
00:23:34,080 --> 00:23:37,400
Speaker 1: That's good. Historically, when you go back to the two thousands,

492
00:23:37,440 --> 00:23:41,200
Speaker 1: the great financial crisis, Um European debt crisis, lower oil

493
00:23:41,240 --> 00:23:43,919
Speaker 1: prices is generally bad for equities. Right it is a

494
00:23:43,960 --> 00:23:46,359
Speaker 1: signal that economy is slowing. And if you just go

495
00:23:46,440 --> 00:23:49,639
Speaker 1: back to my one big argument about we underestimate how

496
00:23:49,680 --> 00:23:52,840
Speaker 1: important crypto was. Right, if they were generating through their minding,

497
00:23:52,840 --> 00:23:55,639
Speaker 1: all this energy usage and that industry starts dying off,

498
00:23:55,760 --> 00:23:58,160
Speaker 1: which I think it's very high probability that it does

499
00:23:58,200 --> 00:24:00,439
Speaker 1: in the coming months, that's just another their source of

500
00:24:00,440 --> 00:24:02,119
Speaker 1: demand that we have. So I think again, we're spending

501
00:24:02,160 --> 00:24:06,400
Speaker 1: way too much policy time responding to prior problems than

502
00:24:06,440 --> 00:24:10,080
Speaker 1: to the current problems. Peter Sheer of academic securities. Thank

503
00:24:10,119 --> 00:24:12,639
Speaker 1: you so much for being with us. This is the

504
00:24:12,640 --> 00:24:17,320
Speaker 1: Bloomberg surveillance podcast. Thanks for listening. Join US live weekdays

505
00:24:17,359 --> 00:24:20,840
Speaker 1: from seven to ten am eastern on Bloomberg radio and

506
00:24:20,920 --> 00:24:25,200
Speaker 1: on Bloomberg television each day from six to nine am

507
00:24:25,280 --> 00:24:29,040
Speaker 1: for insight from the best in economics, finance, investment and

508
00:24:29,119 --> 00:24:35,640
Speaker 1: international relations, and subscribe to the surveillance podcast on apple podcast, soundcloud,

509
00:24:35,800 --> 00:24:39,400
Speaker 1: Bloomberg Dot Com and, of course, on the terminal. I'm

510
00:24:39,440 --> 00:24:42,119
Speaker 1: Tom Keene and this is Bloomberg