WEBVTT - Surveillance: Voter Safety With Boston Mayor 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance podcast. I'm Tom Keane. Daily 0:00:13.960 --> 0:00:17.560 we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.240 Bloomberg dot Com, and of course on the Bloomberg. I 0:00:27.240 --> 0:00:30.680 would suggest the most important political conversation of the day, 0:00:31.160 --> 0:00:34.080 Marty Walsh is from Boston, but it is a different 0:00:34.400 --> 0:00:37.800 path than anybody else. I know, the gentleman who fought 0:00:37.800 --> 0:00:41.080 off cancer as a child, went to BC and then 0:00:41.120 --> 0:00:42.920 he had to root for the New England Patriots. He 0:00:42.960 --> 0:00:45.760 appears with us today even though the Patriots are not 0:00:45.840 --> 0:00:48.519 the patriots he and I know, and even though Brady 0:00:48.560 --> 0:00:51.920 did better than good last night. Marty Walsh, it is 0:00:51.960 --> 0:00:57.160 a Boston in transition. Clearly you are for President Biden. 0:00:57.600 --> 0:01:03.760 What do the cities need from an administration day one? Uh, 0:01:03.840 --> 0:01:06.319 the collaboration, I think is the first and first thing 0:01:06.360 --> 0:01:09.920 that we need the most. Myself and me at Lance 0:01:09.959 --> 0:01:12.600 Bottoms from Atlanta just didn't not bed and we talked 0:01:12.640 --> 0:01:14.720 about the importance of having a White House that that 0:01:14.920 --> 0:01:19.120 understands how a city works and understands the relationships that 0:01:19.160 --> 0:01:21.080 need to happen and in the last three and a 0:01:21.080 --> 0:01:23.800 half years, I've had no meetings, no conversations with the 0:01:23.800 --> 0:01:27.760 White House. The White House the way currently exists is 0:01:27.760 --> 0:01:30.600 a top down approach, and the Joe Biden White House 0:01:30.640 --> 0:01:34.600 will be very different. Mayor Walsh, Christopher Whale, and a 0:01:34.640 --> 0:01:37.560 good friend of the show, an expert in financial history, 0:01:38.040 --> 0:01:40.760 just put out a photo on Twitter on Central Park 0:01:40.920 --> 0:01:45.160 South and it's from the Trump campaign. New Yorkers are 0:01:45.160 --> 0:01:49.000 going to suffer and that's their problem. That's been the 0:01:49.080 --> 0:01:53.720 attitude of this president towards Democratic strongholds, and yet we 0:01:53.800 --> 0:01:58.080 see Republican cities as well having challenges in the pandemic. 0:01:58.480 --> 0:02:01.480 How much do you need from Washington and what will 0:02:01.520 --> 0:02:04.240 you do with the money when you get it? Well, 0:02:04.240 --> 0:02:07.120 when it comes to me, as mayors don't regard each 0:02:07.120 --> 0:02:09.600 other as Democrats and Republicans. We regard each other as 0:02:09.639 --> 0:02:12.600 mayors that run our cities, and we collectively need to 0:02:12.639 --> 0:02:15.280 have an administration of Washington that's gonna work with us. 0:02:15.280 --> 0:02:18.480 And I can say firsthand here in Boston, from their 0:02:18.520 --> 0:02:22.399 early days of the pandemic right through the pandemic, there's 0:02:22.400 --> 0:02:25.520 been no assistance from Washington. We've had to go alone 0:02:25.520 --> 0:02:27.880 for the most party, including states, we've had to figure 0:02:27.880 --> 0:02:31.080 out ppe we've had to figure out even thinking about 0:02:31.160 --> 0:02:34.000 how how do we prepare our residents for the future. 0:02:34.040 --> 0:02:36.600 As far as being careful and physical distancing and show 0:02:36.760 --> 0:02:42.080 social distancing messages have been consistent across America. It's really important. 0:02:42.600 --> 0:02:45.760 And then as racism read, it's ugly head in America 0:02:45.840 --> 0:02:49.880 again and we had protests and demonstrations across the streets 0:02:50.000 --> 0:02:52.959 around the streets in America. Uh. This White House quite 0:02:53.000 --> 0:02:56.880 honestly just agitated and incited violence. Uh. And it's really 0:02:57.120 --> 0:02:59.680 we need leadership right now. And in Boston, I'll tell 0:02:59.680 --> 0:03:02.320 you a hundred and fifty nine thousand people have already 0:03:02.400 --> 0:03:06.040 voted before election day. So there is definitely a feel 0:03:06.120 --> 0:03:09.400 for change in the air. And it's not just democratic cities, 0:03:09.400 --> 0:03:12.760 it's it's it's all cities across America. Mayywell's there is 0:03:12.760 --> 0:03:15.200 a feeling of change. There's also a feeling of fear. 0:03:15.480 --> 0:03:17.760 And my younger son last night said to me, you know, 0:03:17.919 --> 0:03:19.840 is there going to be violence? And he's looking around 0:03:19.880 --> 0:03:22.720 and he's seeing all of the boarded up windows around 0:03:22.720 --> 0:03:25.440 New York City. And I believe in Boston as well, 0:03:25.560 --> 0:03:29.400 your town, how concerned are you about violence in response 0:03:29.440 --> 0:03:33.520 to any election outcome, particularly if President Trump is in 0:03:33.520 --> 0:03:36.720 the lead. Given the fact that people in democratic cities 0:03:36.720 --> 0:03:40.000 are the ones, honestly that are having boarded up windows, 0:03:40.880 --> 0:03:43.120 just think about what the question you just asked me. 0:03:43.640 --> 0:03:47.040 We live in the greatest country in the world, where 0:03:47.080 --> 0:03:50.240 where freedom and democracy is what we're proud of, and 0:03:50.280 --> 0:03:53.840 we have cities and businesses all across America putting boards 0:03:53.840 --> 0:03:56.680 on windows worrying about violence because of the general election. 0:03:57.080 --> 0:04:00.440 We've never seen anything like that. This is not result 0:04:00.520 --> 0:04:04.160 of of Joe Biden and his speeches. This is a 0:04:04.160 --> 0:04:07.320 result of a president who has failed America. This is 0:04:07.320 --> 0:04:10.960 the result of a president whos failed American economy. He's failed, 0:04:11.000 --> 0:04:14.960 He's failed everything that he claims he stands for. UH. 0:04:15.000 --> 0:04:18.719 And I'm hoping that after today's election we don't see violence. 0:04:19.160 --> 0:04:22.200 And what I'm focused on today is making sure that 0:04:22.240 --> 0:04:24.920 people get out to vote, people can vote without intimidation, 0:04:25.160 --> 0:04:27.680 people can vote safely, UH, And that they should be 0:04:27.720 --> 0:04:29.640 able to do that in Boston, Massachusetts, and they should 0:04:29.640 --> 0:04:32.960 be to do that all across America today without that fear. 0:04:33.040 --> 0:04:35.680 I hope that's not the country that we're becoming quite honestly, 0:04:36.200 --> 0:04:39.840 Mary wash one final question, if we would uh this morning. 0:04:39.880 --> 0:04:44.040 Dorchester represents the heritage of a Democratic Party that has 0:04:44.160 --> 0:04:47.920 lost so many people to the Republicans or at least 0:04:48.120 --> 0:04:52.200 Donald Trump. What is the policy prescription you would suggest 0:04:52.680 --> 0:04:55.919 for the Liberals in your party to get back to 0:04:56.040 --> 0:05:00.520 the kind of voters that made Dorchester years ago. I think, 0:05:00.560 --> 0:05:03.279 first and foremost, we need to elect Joe Biden president today. 0:05:03.480 --> 0:05:05.680 And I think that then we go back and to 0:05:06.279 --> 0:05:08.480 kind of look at the party and not I would 0:05:08.480 --> 0:05:10.919 say we have to rebuild the Democratic Party, but certainly 0:05:10.920 --> 0:05:12.760 we have to go back and get those Democrats that 0:05:12.839 --> 0:05:14.880 used to be Democrats and pull them back into the 0:05:14.960 --> 0:05:17.880 Democratic Party. The values of the Democratic Party of the 0:05:17.920 --> 0:05:20.760 same values that those people the party they joined many 0:05:20.760 --> 0:05:23.520 many years ago. And as mayor of the City of Boston, 0:05:23.560 --> 0:05:25.760 I'm committed to doing that, and as other may as 0:05:25.800 --> 0:05:28.440 across America were committed to bring out party back and 0:05:28.560 --> 0:05:31.280 representing everyone. Mayor wasalh. I'd like to see it. Tom 0:05:31.279 --> 0:05:33.520 English is pub but I believe it's shut down a 0:05:33.560 --> 0:05:37.799 year ago. There's still one in Southie. That's all that matters. Mayor. 0:05:37.920 --> 0:05:42.080 Thank you so much, Marty Walsh, the Mayor of Boston. 0:05:42.200 --> 0:05:44.480 Here on a most interesting day, and again we say 0:05:44.520 --> 0:05:47.160 good morning to Bloomberg Radio listening across the England. One 0:05:47.160 --> 0:05:54.200 of six one f M right now in trouble is 0:05:54.240 --> 0:05:57.720 Stephanie Kelly with Aberdeen Standard Investment. She has a really 0:05:58.200 --> 0:06:02.000 interesting mandate at the large investment management firm of trying 0:06:02.000 --> 0:06:05.400 to figure out what all this means for investment management 0:06:05.760 --> 0:06:09.320 and particularly longer term money. Stephanie Kelly, thank you for 0:06:09.440 --> 0:06:12.280 us so much for joining us today. What does this 0:06:12.360 --> 0:06:16.080 mean for active management? How does election play into the 0:06:16.160 --> 0:06:20.920 investment management industry next year? I think if any of 0:06:21.000 --> 0:06:24.799 the US election illustrates just how crucial that role really 0:06:24.920 --> 0:06:27.280 is for us A managers, because if we look at 0:06:27.480 --> 0:06:30.400 what a Biden administration might mean with or without a 0:06:30.440 --> 0:06:34.640 democratic majority, or indeed what happens if gets reelected, all 0:06:34.680 --> 0:06:36.680 of those things I think are really storied about the 0:06:36.720 --> 0:06:39.720 sector rather than necessarily just the pure index. And so 0:06:39.760 --> 0:06:41.240 it's a time when you really need to be thinking 0:06:41.279 --> 0:06:44.320 about what does the regulatory environment mean? And that's not 0:06:44.400 --> 0:06:46.960 always super clear cut, it's not cut and dry, and 0:06:47.000 --> 0:06:50.240 so understanding and actively thinking about what does regulation mean, 0:06:50.400 --> 0:06:52.599 what does legislation mean, and which are the sectors who 0:06:52.600 --> 0:06:55.120 win and which are the sectors who lose. That's what's 0:06:55.120 --> 0:06:58.760 going to be the key to invest gonagement. Summarize the 0:06:58.880 --> 0:07:01.840 state of populism. Right now we have this terrible terror 0:07:01.839 --> 0:07:05.760 attack in Vienna, Austria, the state of populism in Austria, 0:07:05.960 --> 0:07:08.760 in England for that matter, in Canada, and certainly with 0:07:08.920 --> 0:07:12.560 Mr Trump in America, the state of populism on the 0:07:12.600 --> 0:07:15.840 selection day. So I think there's a couple of ways 0:07:15.880 --> 0:07:18.440 to think about populism. We tend to focus on right 0:07:18.440 --> 0:07:20.560 wing populism, and I think that's been the one that's 0:07:20.600 --> 0:07:23.000 been the most successful in recent years. Indeed, you look 0:07:23.000 --> 0:07:26.280 at places like the French, the French Tarty seventeen elections. 0:07:26.360 --> 0:07:28.520 We look in the US, we look to the UK 0:07:28.960 --> 0:07:31.800 that seems to be where the kind of populism support 0:07:31.880 --> 0:07:34.160 is growing. I think the one to watch for investors though, 0:07:34.720 --> 0:07:36.520 is in the next kind of year or so, it's 0:07:36.520 --> 0:07:39.080 actually Italy because although at the moment we have just 0:07:39.200 --> 0:07:43.200 coalition which is relatively stable and for now seems quite stable. 0:07:43.560 --> 0:07:45.680 But my fear is that that kind of is hiding 0:07:45.680 --> 0:07:48.240 what is underneath, which is that actually the majority of 0:07:48.280 --> 0:07:51.800 support for parties in Italy is for populist parties, and 0:07:51.840 --> 0:07:54.240 in particular it looks as though a right wing populist 0:07:54.280 --> 0:07:57.320 coalition could be the next government when we get to 0:07:57.360 --> 0:07:59.280 the next selection. So that's one to watch for the 0:07:59.320 --> 0:08:01.679 next year. It's a near term risk, but it's definitely 0:08:01.720 --> 0:08:04.200 one to bear in mind that it leaves this permanent 0:08:04.280 --> 0:08:07.760 kind of challenge with populism and systemic issues and cyclical 0:08:07.800 --> 0:08:10.200 issues that make it for me quite a kind of 0:08:10.240 --> 0:08:13.160 ever present source of president of political risk. Just not 0:08:13.320 --> 0:08:16.240 right now. This definitely is state the obvious. There is 0:08:16.320 --> 0:08:18.760 upside risk as well as downside risk, and I wonder 0:08:18.880 --> 0:08:23.600 what we're learning about what populism actually means for financial markets. Well, 0:08:23.640 --> 0:08:25.920 I think the interesting things is that, you know, we 0:08:26.000 --> 0:08:28.480 use this kind of term populism very broad sweep. What 0:08:28.520 --> 0:08:31.240 matters is like, what are the policies that they're incorporating 0:08:31.440 --> 0:08:34.880 or are they making a risk event, you know, bigger 0:08:34.880 --> 0:08:36.640 than it would be otherwise. Right to an election is 0:08:36.679 --> 0:08:39.360 a good example. I think here we probably need to 0:08:39.480 --> 0:08:41.520 give your away from just the populism and think more 0:08:41.520 --> 0:08:44.400 about that polarization. Right It's not just that you've got 0:08:44.559 --> 0:08:46.400 parties in the far right or the far left, it's 0:08:46.400 --> 0:08:49.400 not those more centrist parties can also pull apart. And 0:08:49.440 --> 0:08:52.320 in the US prime example, we're looking at a Democratic 0:08:52.320 --> 0:08:54.400 party that's much further left than it was four years 0:08:54.400 --> 0:08:57.480 ago against a Republican party which remains kind of quite 0:08:57.480 --> 0:09:00.319 conservative at its core, although of course Trump is kind 0:09:00.320 --> 0:09:03.800 of implemented this additional element. I think what that means 0:09:03.880 --> 0:09:06.120 is that from one election to the next, you can 0:09:06.120 --> 0:09:08.360 get a lot of swings, and that's where the risk 0:09:08.400 --> 0:09:11.040 comes in for investors at the short term risk. And 0:09:11.080 --> 0:09:13.959 then really the question, as I mentioned, it's what is 0:09:14.080 --> 0:09:16.160 once you're over the event, once you know the result, 0:09:16.200 --> 0:09:18.920 once the uncertainty has gone, what does regulation look like? 0:09:19.040 --> 0:09:20.840 What does legislation look like? And what does that mean 0:09:20.880 --> 0:09:22.640 for the companies you're investing in. That's the way we 0:09:22.640 --> 0:09:24.480 have to think about it, Stephanie. Just to build on 0:09:24.600 --> 0:09:27.720 that sort of connection between markets and politics, can you 0:09:27.760 --> 0:09:30.199 give us a granular sense of the process of how 0:09:30.240 --> 0:09:32.920 you work with investment managers, whether you're looking at long 0:09:33.040 --> 0:09:35.880 term place or short term place based on some of 0:09:35.880 --> 0:09:39.400 the political developments that you were just talking about. Sure, 0:09:39.440 --> 0:09:41.079 so there's a couple of ways that we do this. 0:09:41.240 --> 0:09:43.480 The main was when I started doing this kind of 0:09:43.480 --> 0:09:46.600 political analysis in the asset management industry, which I have 0:09:46.679 --> 0:09:49.480 to say, there aren't that many political economists blowing around 0:09:49.480 --> 0:09:52.360 the asset management industry, and so I was quite struck 0:09:52.440 --> 0:09:54.800 by the extent to which they're just weren't these frameworks 0:09:54.800 --> 0:09:57.440 in place to think about politics. So I always say 0:09:57.440 --> 0:09:59.720 to our investors, to our clients, you know you have 0:09:59.760 --> 0:10:01.720 to do in scenarios. It's not enough to just have 0:10:01.760 --> 0:10:04.040 a base case. Investors always anchor on this kind of 0:10:04.040 --> 0:10:06.680 base case approach when it comes to politics. You have 0:10:06.760 --> 0:10:08.960 to accept there's a lot of information you don't know. 0:10:09.280 --> 0:10:11.200 We don't know if pauls are accurate until they've proven 0:10:11.240 --> 0:10:14.640 accurate or inaccurate. We don't know how politicians are feeling inside. 0:10:14.880 --> 0:10:16.559 We can do lots of engagement, we can do lots 0:10:16.600 --> 0:10:18.440 of research, but I think the best way to think 0:10:18.480 --> 0:10:21.000 about it is not single base case what's going to happen, 0:10:21.320 --> 0:10:24.400 but what's the distribution of risks here? And then from 0:10:24.480 --> 0:10:27.200 that say, okay, this is the distribution of political risks, 0:10:27.440 --> 0:10:30.400 what happens to markets in each of those scenarios, And 0:10:30.440 --> 0:10:32.760 then that way you have not only a distribution of 0:10:32.840 --> 0:10:35.319 political risk, but actually of market risk, and then you 0:10:35.360 --> 0:10:37.920 have a better understanding of how exposed you are to 0:10:38.080 --> 0:10:40.960 a given outcome, be that Brexit, be that U. S. 0:10:41.040 --> 0:10:44.040 China trade relations, or in d the U. S. Election. Definitely, 0:10:44.120 --> 0:10:47.920 probably the most prominent political economists these days or moonlighting 0:10:47.920 --> 0:10:50.960 perhaps is a political economist is rate Hio of Ridgewater. 0:10:51.040 --> 0:10:53.160 He's been talking a lot about the rise of populism, 0:10:53.200 --> 0:10:56.679 about the inequality, and about cash is trash, the expectation 0:10:57.080 --> 0:10:59.920 for inflation in the United States. Do you agree with 0:11:00.200 --> 0:11:03.920 his conclusions based on his assessment of the political landscape, 0:11:05.080 --> 0:11:07.200 But I think that there's a there's a lot of 0:11:07.240 --> 0:11:09.520 parts out in terms of that connection. I think we 0:11:09.559 --> 0:11:11.760 should never kind of be too quick to rush into 0:11:11.760 --> 0:11:13.760 what it means. And in particular, I think you know, 0:11:13.880 --> 0:11:16.280 there tends to be in a particularly that relationship, and 0:11:16.320 --> 0:11:18.480 I don't mean specifically to rad Dalio here, but there 0:11:18.520 --> 0:11:20.800 tends to be this discussion that takes place whereby more 0:11:20.840 --> 0:11:23.840 government intervention equals lots more inflation, and I think we 0:11:23.920 --> 0:11:25.680 really need to put that in the context of what 0:11:25.760 --> 0:11:28.319 other political kind of issues are going on. And one 0:11:28.360 --> 0:11:31.800 big one is actually the globalization element, but also the 0:11:31.880 --> 0:11:34.640 kind of cyclical weakness and the structural weakness. Those things 0:11:34.640 --> 0:11:37.040 push and pull against inflation in different ways, and so 0:11:37.320 --> 0:11:39.559 I think it's another example of where we've got to 0:11:39.559 --> 0:11:42.360 be quite careful and kind of considered when we think 0:11:42.360 --> 0:11:45.120 about each individual risk and how that plays into the 0:11:45.360 --> 0:11:48.640 big macro themes, which still also rely on kind of 0:11:48.720 --> 0:11:51.840 you know, bread and butter economics. Right, what's being produced, 0:11:51.840 --> 0:11:55.240 what's being where's the demand, where's the supply? Thanks deephitiely 0:11:55.280 --> 0:11:58.440 Kelly of Aberdeen Standard Investments, definitely, thank you very much. 0:12:02.480 --> 0:12:05.640 Michael Jesus is with us with Morgan Stanley, not only 0:12:05.679 --> 0:12:09.520 doing policy research, but with a foundational understanding of our 0:12:09.600 --> 0:12:13.280 municipal finance. We're thrilled you could join us this morning. Michael, 0:12:13.600 --> 0:12:18.600 every single conversation we have in your area says and 0:12:18.679 --> 0:12:23.640 then they'll be infrastructure, and yet there's never infrastructure. What 0:12:23.840 --> 0:12:28.400 is a political outcome you need so there can be infrastructure. 0:12:29.440 --> 0:12:32.000 I think it is a necessary condition to get a 0:12:32.040 --> 0:12:36.040 meaningful infrastructure package that you end up with a situation 0:12:36.040 --> 0:12:38.760 where the Democrats take the White House and the Senate 0:12:38.760 --> 0:12:41.920 and keep control of the House. Uh. Simply put in 0:12:42.280 --> 0:12:46.040 a divided government scenario, there's not much legislation getting done. 0:12:46.720 --> 0:12:52.600 Beyond perhaps another COVID relief package under certain circumstances. In 0:12:52.640 --> 0:12:55.040 a scenario where the Republicans take control of the House 0:12:55.080 --> 0:12:57.320 and keep the White House in the Senate, you have 0:12:57.480 --> 0:13:01.439 the same problem that you had in every other time 0:13:01.760 --> 0:13:05.520 that you've had complete control by the Republican Party. In theory, 0:13:05.840 --> 0:13:09.440 they're on board with the idea of infrastructure spending. In practice, 0:13:09.480 --> 0:13:11.880 they haven't been able to get there because they also 0:13:11.920 --> 0:13:15.199 can't agree on raising taxes to do it. They are 0:13:15.240 --> 0:13:18.280 against letting the deficits expand to do it. So you 0:13:18.400 --> 0:13:22.200 end up uh to twist it up without a solution. Uh. 0:13:22.480 --> 0:13:25.960 The Democratic Party uh sort of is obviously a little 0:13:25.960 --> 0:13:28.960 more amenable to raising taxes are expanding deficits when it 0:13:28.960 --> 0:13:31.760 comes to spending. So again I say it's a necessary 0:13:31.760 --> 0:13:34.720 condition that that's the configuration that you get, uh, not 0:13:34.800 --> 0:13:37.120 a sufficient one, because of course the Democrats are gonna 0:13:37.120 --> 0:13:40.880 have to balance their um uh their policy priorities, and 0:13:40.960 --> 0:13:42.880 healthcare is certainly in the mix and probably a high 0:13:42.880 --> 0:13:45.640 priority of them. Also, Michael, there's a lot to unpack 0:13:45.720 --> 0:13:47.719 their I think the broader theme to all of your 0:13:47.760 --> 0:13:51.000 comments is just the risk of a divided government when 0:13:51.040 --> 0:13:54.240 it comes to fiscal spending. How big of a downside 0:13:54.320 --> 0:13:56.680 risk could there be the markets should there be a 0:13:56.720 --> 0:13:59.280 divided government, because it does not appear that that's being 0:13:59.320 --> 0:14:02.480 priced in. Yeah. Well, so the first thing to say 0:14:02.520 --> 0:14:06.079 is that in most post election configurations here lead to 0:14:06.120 --> 0:14:09.920 fiscal expansion. The one that concerns us is the one 0:14:09.960 --> 0:14:12.960 where the Democrats take the White House but the Republicans 0:14:13.040 --> 0:14:15.280 keep control of the Senate. And it's not to say 0:14:15.320 --> 0:14:18.520 that you might never get fiscal expansion or COVID specific 0:14:18.559 --> 0:14:21.600 relief in that situation, but that you might need a 0:14:21.640 --> 0:14:26.080 greater demonstration from economic data or markets that such a 0:14:26.120 --> 0:14:28.720 response is needed. And that's because we know where the 0:14:28.760 --> 0:14:32.000 Democrats are on COVID relief. They want to go big. Uh. 0:14:32.120 --> 0:14:36.840 Senate Republicans um are expressing skepticism that the economy needs it, 0:14:37.200 --> 0:14:41.760 are also expressing concern about raising deficits further, and so 0:14:42.040 --> 0:14:46.640 that disagreement manifests in that type of election outcome. And again, 0:14:46.640 --> 0:14:49.240 you might eventually get there, but the fiscal reaction function 0:14:49.280 --> 0:14:52.160 becomes very reactionary as opposed to proactive, which is what 0:14:52.400 --> 0:14:56.160 markets are expecting right now. Mike, I'm really interested in 0:14:56.160 --> 0:14:58.720 the conversations you're having with clients at the moment, if 0:14:58.720 --> 0:15:01.040 you were to ask them you think whether they would 0:15:01.040 --> 0:15:04.160 prefer to know the outcome of the Senate rice or 0:15:04.200 --> 0:15:07.280 the White House White House rice ahead of time? What 0:15:07.360 --> 0:15:10.840 do you think I'd say most clients would prefer to 0:15:10.840 --> 0:15:13.000 know the outcome of the presidential race. Is that the 0:15:13.040 --> 0:15:15.680 consensus is still, at least in terms of the surveys 0:15:15.680 --> 0:15:18.640 that we've run, the consensus is still that a divided 0:15:18.720 --> 0:15:23.240 government outcome of any type is preferable to be unified outcome, 0:15:23.400 --> 0:15:27.360 mostly because it creates certainty around policy, or at least 0:15:27.400 --> 0:15:29.960 that's the perception right abviously outlined an argument where I 0:15:29.960 --> 0:15:32.800 think it's it's nuanced in a little bit different. So 0:15:32.840 --> 0:15:35.560 I do think that that's where most investors are paying 0:15:35.560 --> 0:15:39.080 their attention. But they are also obviously understand the difference 0:15:39.080 --> 0:15:41.760 between the Democrats taking the White House without the Senate 0:15:42.400 --> 0:15:46.520 versus with the Senate um and generally speaking, in our 0:15:46.560 --> 0:15:49.800 surveys are agreeing that you get the biggest physicist boost 0:15:49.960 --> 0:15:53.240 in that situation, Mr Jasus. The votes are in in 0:15:53.280 --> 0:15:56.360 the judiciary, and I believe we have nine justices. At 0:15:56.400 --> 0:15:59.240 some point here is the clerks get ready to help 0:15:59.600 --> 0:16:03.080 justice Cony Barrett. Great, what about the Affordable Care Act? 0:16:03.120 --> 0:16:05.560 What does a Morgan Stanley view on where the Affordable 0:16:05.600 --> 0:16:10.760 Care Act is, say in March of two thousand twenty two. Again, 0:16:10.760 --> 0:16:14.160 I think this is very past dependent. So, um, if 0:16:14.200 --> 0:16:17.320 we generalize a bit, not specific to the Affordable Care Act, 0:16:17.400 --> 0:16:20.240 but whether or not in one you're going to have 0:16:20.320 --> 0:16:24.640 the same level of government spending on the healthcare or greater. 0:16:25.280 --> 0:16:29.680 The situation that makes that true is the Democrats taking 0:16:29.680 --> 0:16:32.560 the White House in the Senate, regardless of what the 0:16:32.560 --> 0:16:37.720 Supreme Court outcome is, because one could expect a pretty 0:16:37.840 --> 0:16:42.280 uh quick response legislatively should the Supreme Court overturn the 0:16:42.280 --> 0:16:45.960 Affordable Care Act. Uh. In the situation where the Democrats 0:16:45.960 --> 0:16:47.800 take the White House Republicans keep control of the Senate, 0:16:47.840 --> 0:16:50.040 I think it gets quite a bit trickier and obviously 0:16:50.120 --> 0:16:54.680 gets trickier, um if the Republicans maintain the White House. 0:16:54.680 --> 0:16:57.520 So to the extent that you're looking for and certainly 0:16:57.520 --> 0:17:02.240 are healthcarectly team looking at managed care organizations thinks the 0:17:02.280 --> 0:17:05.720 Affordable Care Act has largely been beneficial for the bottom 0:17:05.760 --> 0:17:08.159 line of large m c o s. The configuration that 0:17:08.240 --> 0:17:11.520 gets you the best outcome there is the Democrats winning 0:17:11.520 --> 0:17:14.240 the White House and the Senate. Michael, appreciate your time, says, 0:17:14.280 --> 0:17:15.920 send up best to the team at Morgan Stanley. Why 0:17:15.920 --> 0:17:24.120 do you Michael zesus that of Morgan Stanley right now 0:17:24.200 --> 0:17:26.399 James Sweeney joins us with Credit Sweete. And this is 0:17:26.440 --> 0:17:30.160 an important conversation because in the mix of the political 0:17:30.200 --> 0:17:34.440 pundantry and frankly the financial pundantry. Mr Sweeney has been 0:17:34.560 --> 0:17:39.120 very clear of a cautious view on American economic growth. 0:17:39.200 --> 0:17:42.080 James Hugh still continue with the view that it will 0:17:42.119 --> 0:17:46.080 be a struggle forward. Well, I I think it largely 0:17:46.119 --> 0:17:50.479 depends on the stimulus outlook. And and so you know 0:17:50.480 --> 0:17:53.640 what I'll be looking for today is do we get 0:17:53.640 --> 0:17:58.600 a clean, sweep scenario where the stimulus expectations become clear, 0:17:59.200 --> 0:18:01.359 or do you have something in a lot more modeled 0:18:01.480 --> 0:18:05.199 I think effectively, what's happened in recent months is that 0:18:05.320 --> 0:18:08.480 the big increase in deposit balances of a lot of 0:18:08.480 --> 0:18:11.120 households and the fact that people have bought a lot 0:18:11.119 --> 0:18:13.600 of physical goods while they haven't been buying a lot 0:18:13.640 --> 0:18:17.080 of services has hidden some problems that the household sector 0:18:17.560 --> 0:18:20.639 has with cash flows. If we don't get that stimulus 0:18:20.720 --> 0:18:23.200 there are quite a few things that are going to 0:18:23.320 --> 0:18:27.320 restrict household cash flows and incomes in the month's ahead 0:18:27.440 --> 0:18:31.080 without new help from the government. It James, when you 0:18:31.119 --> 0:18:33.760 say problems, can you be more specific about those problems 0:18:33.760 --> 0:18:37.159 and why you think they are sure? Well, first, you 0:18:37.200 --> 0:18:43.720 remember the unemployment insurance which we had supplementary unemployment insurance 0:18:44.160 --> 0:18:47.040 during the worst part of the pandemic. It expired in 0:18:47.080 --> 0:18:50.480 August UM. People said there would be a cliff. There 0:18:50.560 --> 0:18:53.639 was a cliff, it fell UM. But there's another cliff 0:18:53.880 --> 0:18:57.480 at the end of December UM, so there's more. Basically, 0:18:57.560 --> 0:19:01.760 unemployment payments from the government will be reduced further. There's 0:19:01.800 --> 0:19:06.320 also forbearance measures that many households have benefited from, which 0:19:06.359 --> 0:19:09.520 will expire at the end of the year. UM. If 0:19:09.520 --> 0:19:12.280 you look at labor income, it's very unlikely we're going 0:19:12.320 --> 0:19:15.480 to continue to see six d to a million in 0:19:15.640 --> 0:19:18.720 jobs growth per month. So jobs growth should be good, 0:19:18.800 --> 0:19:23.200 but it should continue to slow. Wage growth should slow 0:19:23.280 --> 0:19:25.879 because wage growth has been driven up by an odd 0:19:25.920 --> 0:19:29.159 composition effect in the in the jobs data, and and 0:19:29.280 --> 0:19:33.080 the hours worked per week should slow due to a 0:19:33.119 --> 0:19:36.919 similar effect. So if you're in the nerdy details, UM, 0:19:37.000 --> 0:19:39.880 a lot of them point south in the near term 0:19:39.880 --> 0:19:44.000 in terms of the cash flows of of of households. James, 0:19:44.160 --> 0:19:46.200 I've got to say, you just don't sound as constructive 0:19:46.240 --> 0:19:48.760 as you were maybe a month or so ago on 0:19:48.840 --> 0:19:52.240 this recovery. Is that a fair characterization of your development 0:19:52.240 --> 0:19:56.359 of your ideas in the last month or so? Uh? Well, 0:19:56.400 --> 0:19:58.600 I think I think I just see it as very 0:19:58.680 --> 0:20:01.520 stimulus dependent in the in the near term. I name, recently, 0:20:02.200 --> 0:20:04.240 we we are in a little bit of a slowdown 0:20:04.280 --> 0:20:07.720 relatives to the sharp acceleration that we had in Q three, 0:20:07.720 --> 0:20:10.480 But economy is not contracting. The economy is growing right now. 0:20:11.160 --> 0:20:14.960 But I do think, uh, stimulus in the very short term, 0:20:15.040 --> 0:20:18.720 something like the package that was negotiated between July and 0:20:19.080 --> 0:20:22.440 this month is very important. And and so you know, 0:20:22.480 --> 0:20:25.840 if you have an election outcome that makes that stimulus likely, 0:20:26.160 --> 0:20:28.040 and I think we can be in pretty good shape. 0:20:28.080 --> 0:20:31.879 But otherwise I think there's there's trouble also the virus. 0:20:31.920 --> 0:20:34.200 I mean, the virus is picking up again and that's 0:20:34.200 --> 0:20:36.280 a new headwind, and the virus is probably picking up 0:20:36.280 --> 0:20:39.600 a little more than a lot of people expected. So um, 0:20:39.640 --> 0:20:43.200 so we're just skittish, I would say, rather than actually 0:20:43.240 --> 0:20:46.439 forecasting a major problem, James. That's where I wanted to go. 0:20:46.480 --> 0:20:49.160 The virus and how much it's spreading. What high frequency 0:20:49.280 --> 0:20:52.600 data are you looking at to gauge the response if 0:20:52.600 --> 0:20:54.919 it isn't lockdowns. There's a lot of people expect the 0:20:55.040 --> 0:20:57.359 US to avoid some of the lockdowns that we're seeing 0:20:57.359 --> 0:21:00.320 in Europe. What are the measures you're looking had to 0:21:00.320 --> 0:21:03.679 determine how much people's behavior is sort of acting in 0:21:03.720 --> 0:21:07.679 a restrictive way on the economy. Well, sure, so, I 0:21:07.680 --> 0:21:09.639 mean on the virus side, we we just look at 0:21:09.640 --> 0:21:12.720 the positivity rates and the spread and you know, the 0:21:12.800 --> 0:21:16.520 direct virus data. On the economy side, I think a 0:21:16.520 --> 0:21:19.520 lot of this new data that we have on on 0:21:19.640 --> 0:21:24.440 foot traffic to establishments on point of sales data. I 0:21:24.440 --> 0:21:27.280 don't think the macro data are all that helpful, and 0:21:27.320 --> 0:21:30.520 I think the market is somewhat accustomed to looking at 0:21:30.800 --> 0:21:34.240 the same old indicators. But but but you can get 0:21:34.240 --> 0:21:36.880 thrown off pretty easily. So, for instance, people have been 0:21:36.880 --> 0:21:40.480