WEBVTT - Bloomberg Presents "What Goes Up" 0:00:00.160 --> 0:00:04.640 Hello, all listeners to Stephanomics Stephanie Flanders, I wanted to 0:00:04.640 --> 0:00:07.200 share with you a new podcast from Bloomberg called What 0:00:07.360 --> 0:00:11.160 Goes Up. Each week, hosts Sarah Pontick and Mike Reagan 0:00:11.560 --> 0:00:15.400 speak with expert guests about the main themes influencing global markets. 0:00:15.840 --> 0:00:19.640 They explore everything from stocks to bonds, to currencies and commodities. 0:00:19.880 --> 0:00:22.560 So if you're curious about the latest buzz on Wall Street, 0:00:22.840 --> 0:00:25.079 this show is for you. We're going to play you 0:00:25.120 --> 0:00:27.120 the latest episode of What Goes Up and if you 0:00:27.160 --> 0:00:29.400 like what you hear and want to hear more, the 0:00:29.400 --> 0:00:32.080 show's out now and you can subscribe to What Goes 0:00:32.159 --> 0:00:35.280 Up on Apple Podcasts or wherever you get your podcasts. 0:00:35.560 --> 0:00:51.879 Thanks and enjoy. Hello and welcome to What goes Out, 0:00:52.159 --> 0:00:55.920 a Bloomberg weekly markets podcast. I'm Sarah Panza, a markets 0:00:55.920 --> 0:00:58.680 reporter on the Cross Asset Team, and I am Mike Reagan, 0:00:58.840 --> 0:01:01.200 a senior editor on the Markets Team. This week on 0:01:01.240 --> 0:01:04.319 the show, from long shot to base Case, Wall Street 0:01:04.360 --> 0:01:07.800 is growing increasingly pestimistic, but a trade deal might not 0:01:07.880 --> 0:01:10.920 be reached over the summer months, and even as the 0:01:10.959 --> 0:01:14.360 Fed preaches patients, bonn yields continue to fall with the 0:01:14.440 --> 0:01:18.600 ten year treasury yield reaching the lowest level since And 0:01:18.800 --> 0:01:21.480 of course, sir, we will finish the show with the 0:01:21.480 --> 0:01:25.600 ever popular the Craziest Thing I ever saw in markets 0:01:25.640 --> 0:01:27.560 this week, at least this week. I hope you have 0:01:27.600 --> 0:01:28.880 a good one. Do you have a good crazy thing? 0:01:29.080 --> 0:01:30.480 I will have a good one by the end of 0:01:30.480 --> 0:01:31.840 the podcast. All right, I've got a good one. No 0:01:31.959 --> 0:01:35.000 pressure on our guests. The mind's mind's pretty good. I'm 0:01:35.040 --> 0:01:38.920 just throwing it out there. That's it. I'm not trying. Well, 0:01:38.920 --> 0:01:41.160 that's one of our guests there, Emily Barrett, you better 0:01:41.200 --> 0:01:45.800 have something good. Uh. Emily is our correspondent straight fresh 0:01:45.800 --> 0:01:48.480 from the trade Wars covering the bonds and FX markets. 0:01:48.480 --> 0:01:52.560 That's exactly how it feels, and also joining us on 0:01:52.600 --> 0:01:57.280 the show. Geno Martin Adams, the chief equity strategist here 0:01:57.280 --> 0:02:00.360 at Bloomberg. Gina spent many years as a strategist Wells 0:02:00.400 --> 0:02:03.240 Fargo Wacoba Corp. Before that. But Sarah, I was looking 0:02:03.280 --> 0:02:05.560 at Gina's bio. Something I did not know about her. 0:02:06.120 --> 0:02:10.320 She's a Gator. Yes, you know that. I am from 0:02:10.360 --> 0:02:12.560 South Florida as well. I'm a Gator by birth. No, 0:02:12.840 --> 0:02:15.800 that's too Florida women on the show. I don't know, 0:02:15.840 --> 0:02:20.240 Florida women don't make the news quite as entertaining. Yeah, 0:02:20.320 --> 0:02:25.720 but maybe we can change that. Don't underestimate that. But 0:02:26.160 --> 0:02:29.200 this week We've been talking about US China trade for 0:02:29.240 --> 0:02:31.440 a while now, but it seems like we got a 0:02:31.520 --> 0:02:34.280 bit of a step up. We think about what's changed, 0:02:34.480 --> 0:02:37.760 for one being the Huawei blacklist. We've also heard talks 0:02:37.840 --> 0:02:41.240 that other surveillance companies out of China could be blacklisted 0:02:41.360 --> 0:02:44.359 as well. And we even have a fight song out 0:02:44.360 --> 0:02:47.640 of China and for gators. I went to school at Michigan. 0:02:47.840 --> 0:02:50.120 You know, a good fight song can really rile people 0:02:50.200 --> 0:02:54.640 up Gina. From your perspective, is this becoming something that 0:02:54.800 --> 0:02:58.440 traders investors can really no longer ignore. Yeah. I don't 0:02:58.440 --> 0:03:01.280 necessarily think they have ignored ward it, but it did 0:03:01.320 --> 0:03:03.160 take a new step this week, and it took a 0:03:03.160 --> 0:03:05.160 step into a tech war as opposed to just a 0:03:05.200 --> 0:03:07.720 trade war. I think when you look back over the 0:03:07.760 --> 0:03:10.040 course of the last year, that's been the most dangerous 0:03:10.120 --> 0:03:13.720 aspect of the U. S. China relationship shift. It's not 0:03:13.840 --> 0:03:16.440 the tariffs. The tariffs are a teeny tiny portion of 0:03:16.480 --> 0:03:19.360 GDP growth, they're a teeny tiny portion of earnings growth. 0:03:19.840 --> 0:03:22.320 You know, you've run through the quantification of tariffs and 0:03:22.360 --> 0:03:25.440 you find out real quick how small they are, which 0:03:25.480 --> 0:03:28.000 is why stocks could sort of bounce around in the 0:03:28.000 --> 0:03:31.160 one to three percent decline range up until this week, 0:03:31.240 --> 0:03:34.560 and we did see an elevated level of volatility this week. 0:03:34.600 --> 0:03:39.520 We've seen a lot more angst evident in broad market classes, 0:03:39.560 --> 0:03:42.160 with the rise and gold as a good example. This week. 0:03:42.240 --> 0:03:45.800 Small caps really getting creamed this week, So much bigger 0:03:45.920 --> 0:03:48.840 risk off sentiment this week than last week. And I 0:03:48.840 --> 0:03:51.040 think the reason for that is this week it became 0:03:51.040 --> 0:03:55.240 about tech, not about trade. Gee, I'm curious, in uh, 0:03:55.360 --> 0:03:57.600 your career, have you ever thought about politics as much 0:03:57.640 --> 0:04:00.080 as as we have through these days. It seems like 0:04:00.120 --> 0:04:07.320 a very uncomfortable thing for fundamental technical analysts. Yeah, it's uh. 0:04:07.440 --> 0:04:10.560 I have thought about politics a lot over the course 0:04:10.600 --> 0:04:13.440 of the last several years. I mean, I can distinctly 0:04:13.480 --> 0:04:17.359 remember sixteen as a year in which it was all 0:04:17.400 --> 0:04:20.560 you know, the popular sentiment on Wall Street was if 0:04:20.600 --> 0:04:24.320 Hillary Clinton wins, stocks should do fine. If trade, if Trump, 0:04:24.320 --> 0:04:27.279 when stocks are gonna get pummeled, right, and the opposite, 0:04:27.320 --> 0:04:30.360 The exact opposite thing occurred right after the Trump election. 0:04:30.800 --> 0:04:34.920 Inen then the thing was stocks just climbed this wall 0:04:34.960 --> 0:04:37.479 of wari because everyone was really concerned about Trump. I 0:04:37.480 --> 0:04:40.480 think throughout my career, I've always had to focus on 0:04:40.600 --> 0:04:43.560 policy in general, but more so on monetary policy than 0:04:43.680 --> 0:04:48.280 on fiscal policy, and certainly never on trade policy. And 0:04:48.680 --> 0:04:51.479 you know, even the smartest trade policy movements in the 0:04:51.520 --> 0:04:54.800 Bush administration weren't so meaningful for the broad market. So 0:04:55.360 --> 0:04:58.679 it's definitely a very different kind of policy that we 0:04:58.680 --> 0:05:01.480 were now focused on. Though policy is always important, it's 0:05:01.520 --> 0:05:04.359 just usually monetary rather than than trade or fiscal that 0:05:04.400 --> 0:05:07.480 really matters. And you mentioned how and I think everyone's 0:05:07.480 --> 0:05:11.960 doing this now. You take the x percent tariffs on 0:05:13.000 --> 0:05:15.640 x dollar value of goods and you get why you 0:05:15.680 --> 0:05:18.400 get a certain effect on earnings on revenue, But I 0:05:18.400 --> 0:05:20.720 wonder is there more to it than that? Or there's 0:05:20.760 --> 0:05:25.599 sort of unquantifiable risks uh to confidence, to sentiment, that 0:05:25.720 --> 0:05:27.279 sort of thing, and and how you know, how do 0:05:27.279 --> 0:05:29.120 you wrap your head around that as the type of 0:05:29.120 --> 0:05:32.200 strategists you are who is deep into the numbers. Yeah, 0:05:32.240 --> 0:05:36.320 it's it's frankly, very very difficult because behavioral analysis is 0:05:36.360 --> 0:05:38.799 a huge part of markets, and I think the only 0:05:38.839 --> 0:05:41.960 way to really analyze the potential impact to this is 0:05:41.960 --> 0:05:45.000 through price itself. You know, we can all speculate as 0:05:45.040 --> 0:05:47.480 to what it means for GDP growth globally. We can 0:05:47.520 --> 0:05:49.520 all speculate as to how much of this is either 0:05:49.600 --> 0:05:52.760 inflationary or deflationary, But the hard truth is nobody knows. 0:05:53.279 --> 0:05:55.080 We could try to quantify it, we could try to 0:05:55.080 --> 0:05:57.440 pretend we know more than anybody else, but the reality 0:05:57.560 --> 0:06:00.680 is the market itself, which is an aggregate of millions 0:06:00.680 --> 0:06:03.599 and millions of people's opinions, is probably smarter than any 0:06:03.640 --> 0:06:05.520 of us in this room. Right I've made a whole 0:06:05.560 --> 0:06:10.600 career out of pretending I know more than uh and 0:06:10.680 --> 0:06:13.239 so I watched price very very carefully, and what price 0:06:13.279 --> 0:06:16.839 tells me right now is okay. So far the risk 0:06:16.880 --> 0:06:19.719 of this, there's somewhat contained five percent correction and stocks 0:06:19.800 --> 0:06:22.000 is nothing. These things come around every nine months or 0:06:22.000 --> 0:06:25.920 so on average. But if we start to work our 0:06:25.920 --> 0:06:28.440 way toward ten percent, we break that ten percent line, 0:06:28.440 --> 0:06:31.160 it becomes very clear that the market's impression of this 0:06:31.240 --> 0:06:33.719 is something much worse right now, something I've been hearing 0:06:33.760 --> 0:06:36.200 as to why markets have been decently resilient. We're not 0:06:36.279 --> 0:06:38.479 too far off the highs. Like you said, is that 0:06:38.520 --> 0:06:40.920 you look at the economic data, you look at the fundamentals, 0:06:40.960 --> 0:06:44.280 and they're still largely strong. However, this past week we 0:06:44.360 --> 0:06:47.520 did see some weaker p m I numbers in the US, 0:06:47.600 --> 0:06:51.520 not yet contracting, but pretty close on the cusp. What 0:06:51.640 --> 0:06:55.240 could it take to really push us off the edge? 0:06:55.640 --> 0:06:59.920 So historically you're not pushed off the edge until manufacturer 0:07:00.080 --> 0:07:01.360 p m I in the US is all the way 0:07:01.360 --> 0:07:05.160 down at forty three. I think the market will absolutely 0:07:06.279 --> 0:07:10.520 hesitate reach a point of very big insecurity if I 0:07:10.680 --> 0:07:13.840 s M falls below fifty. Uh. That's one of the 0:07:13.880 --> 0:07:16.560 big keys that we watch. Initial claims is another one 0:07:17.000 --> 0:07:21.200 incredibly important to the direction of equities, long term initial claims. 0:07:21.200 --> 0:07:23.480 If initial claims start rise, saying, and especially if they 0:07:23.560 --> 0:07:26.240 rise more than fifty thousand, start to move towards seventy 0:07:26.600 --> 0:07:29.080 in a rise, you're pretty much assured that you're falling 0:07:29.080 --> 0:07:32.000 into recession. Uh. The other thing to watch is, of 0:07:32.040 --> 0:07:34.400 course the bond markets. We you still haven't had that 0:07:34.440 --> 0:07:36.800 inversion of the two stents at least last I checked, 0:07:37.320 --> 0:07:40.080 and that's a big key trigger for the equity market sentiment. 0:07:40.080 --> 0:07:42.680 As well. So there are a lot of different things 0:07:42.720 --> 0:07:45.560 that I think you want to watch for the economic data. 0:07:46.120 --> 0:07:49.160 You know, frankly, consumer confidence, which is still near a 0:07:49.200 --> 0:07:52.120 fifteen year high, is still pretty supportive, So you need 0:07:52.160 --> 0:07:55.440 to see a big deterioration and consumer confidence as well. 0:07:55.440 --> 0:07:58.120 What's a good segue into our next guest on the 0:07:58.120 --> 0:08:02.200 Bonds team, Emily, You had a story out UM this 0:08:02.280 --> 0:08:06.160 week talking about the market expectations for inflation. I just 0:08:06.240 --> 0:08:08.160 want to read one line because I think it's it's 0:08:08.160 --> 0:08:11.480 pretty important, uh, right that since consumer price gains have 0:08:11.520 --> 0:08:13.840 been lagging the FEDS two percent target for much of 0:08:13.840 --> 0:08:16.720 the past decade, it's a little wonder that inflation isn't 0:08:16.720 --> 0:08:20.040 a hot topic in the market yet, don't duntune, but 0:08:20.120 --> 0:08:23.000 it may be warming up with the Fed actively debating 0:08:23.040 --> 0:08:25.880 how it can meet its inflation goals, including a June 0:08:26.320 --> 0:08:29.559 fourth the fifth conference to discuss different approaches. I feel 0:08:29.560 --> 0:08:34.120 like the trade tensions are UH causing a lot of 0:08:34.160 --> 0:08:38.120 confusion about what we should expect for inflation. Obviously, the 0:08:38.160 --> 0:08:42.160 market is pricing in lower inflation going forward, Um, but 0:08:42.200 --> 0:08:44.839 a lot of people are talking about the pure inflationary 0:08:44.960 --> 0:08:49.319 effects of the tariffs on the consumer what is sort 0:08:49.360 --> 0:08:51.800 of the consensus out there or what's the smartest take 0:08:51.960 --> 0:08:55.960 you've heard about what we should expect as far as inflation, 0:08:56.320 --> 0:08:58.559 uh in the trade trade war, right, Yeah, I mean 0:08:58.559 --> 0:09:00.160 this is the interesting thing. I think people try and 0:09:00.200 --> 0:09:03.680 disaggregate what's the shorter term issue in terms of the 0:09:03.720 --> 0:09:07.160 inflation impact, and directly I've seen some Golden Sacks Golden 0:09:07.160 --> 0:09:09.640 Sacks analysis saying, you know, this is the boost that 0:09:09.640 --> 0:09:11.240 we might see two c p I and the mean 0:09:11.400 --> 0:09:13.960 in sort of the medium term. But people are really 0:09:13.960 --> 0:09:17.200 focusing on that longer term potential drag on growth, and 0:09:17.280 --> 0:09:19.040 as they're looking to that, they're sort of seeing if 0:09:19.040 --> 0:09:21.120 growth starts to slow, then you have more and more 0:09:21.120 --> 0:09:25.120 headwinds to that inflationary impulse. And so really that's where 0:09:25.120 --> 0:09:27.640 we're seeing this decline and break evens, which is the 0:09:27.720 --> 0:09:30.640 inflation premium that are built into treasuries. Um, we're seeing 0:09:30.640 --> 0:09:32.840 that just coming down and down. And that's despite the 0:09:32.840 --> 0:09:34.920 fact that you know, we've had tariffs put on, there 0:09:34.920 --> 0:09:37.320 are other things. There's been oil price gains sort of 0:09:37.640 --> 0:09:40.360 uh in the year to date hasn't been reflected at all, 0:09:40.400 --> 0:09:43.480 and normally break evens would follow that pretty closely. So 0:09:43.679 --> 0:09:46.320 we're seeing this kind of really sort of counterintuitive moving 0:09:46.360 --> 0:09:49.760 inflation markets. And it's because you know, people talked for 0:09:49.800 --> 0:09:53.040 ages about secular stagnation. You've got bored of hearing about this. 0:09:53.520 --> 0:09:56.160 But it seems that the forces that are pressuring inflation 0:09:56.200 --> 0:09:58.400 lower it's not just in the US, it's globally and 0:09:58.440 --> 0:10:01.480 so much stronger else where. People would argued, UM really 0:10:01.520 --> 0:10:03.719 our top of mind for most investors, and so that's 0:10:03.720 --> 0:10:05.840 going to be hard to fight. And this is this 0:10:05.920 --> 0:10:09.000 is where it comes down to people's expectations for rate cuts. 0:10:09.080 --> 0:10:12.199 I mean, there's a sense in the market that the FED, 0:10:12.400 --> 0:10:14.480 if it's going to be serious about hitting its two 0:10:14.520 --> 0:10:16.800 percent inflation target, is really going to need to take 0:10:16.880 --> 0:10:19.960 some action on rates to lower them UM. And people 0:10:20.000 --> 0:10:21.400 have gone so far as to say, a couple of 0:10:21.400 --> 0:10:23.480 people I spoke to, you know, it's not just one cut, 0:10:23.520 --> 0:10:26.640 it's probably two or three if you want to hit UM. 0:10:26.679 --> 0:10:28.920 The thing that's interesting about where c p I is 0:10:28.960 --> 0:10:31.400 at the moment is relative to the Fed's target. The 0:10:31.400 --> 0:10:35.360 FED prefers consumption expenditure, so they look at a PC 0:10:35.679 --> 0:10:39.160 rate which is actually forty to forty basis points below 0:10:39.360 --> 0:10:43.360 where CPI is, so Um, so that's it's even worse 0:10:43.440 --> 0:10:46.080 really if you look at the Fed's preferred measure. I 0:10:46.160 --> 0:10:48.520 know a lot of people are looking at the FED 0:10:48.559 --> 0:10:51.440 minutes that came out this week and calling it old news. Um, 0:10:51.520 --> 0:10:53.560 but I ran a little control fine just to see 0:10:53.720 --> 0:10:56.880 where the word transitory comes up, and transitory appeared twice 0:10:56.920 --> 0:10:59.960 as it relates to inflation, whereas the last time around 0:11:00.160 --> 0:11:02.680 we saw the word transitory once, but it was related 0:11:02.720 --> 0:11:07.520 to GDP and first quarter slower growth being transitory. What 0:11:07.760 --> 0:11:11.520 else did we possibly learn from the minutes, if it's 0:11:11.559 --> 0:11:13.959 possible to clean anything more from what we've heard from 0:11:13.960 --> 0:11:16.480 FAT officials, I think what people wanted to see. I mean, 0:11:16.520 --> 0:11:19.880 this must be the shortest lived transitory impact on markets ever, 0:11:20.000 --> 0:11:23.400 because after you know, when Fed the Fed's Powell was 0:11:23.480 --> 0:11:26.760 really pushing that transitory message, you know what's weighing on inflation, 0:11:26.800 --> 0:11:28.800 It's going to be very short lived. You did see 0:11:28.840 --> 0:11:31.040 a market correction that started to sell off a little. 0:11:31.040 --> 0:11:32.760 Oh right, Okay, we might come back if the FED 0:11:32.800 --> 0:11:35.480 believes this is going to happen, But that just got crushed. 0:11:35.480 --> 0:11:37.760 And what the minutes gave us was this sense that 0:11:38.559 --> 0:11:41.480 at least among the f O M c that the 0:11:41.520 --> 0:11:45.079 FEDS Committee, there is a broad agreement that these or 0:11:45.120 --> 0:11:48.160 at least they're own message that people seem to think that, yes, 0:11:48.200 --> 0:11:51.200 this could be a transitory impact. But from the people 0:11:51.240 --> 0:11:53.680 I've spoken to, they're listening at the fact to the 0:11:53.720 --> 0:11:57.280 fact that the transitory effects don't quite make up for 0:11:57.320 --> 0:11:59.760 the short form inflation. They really do believe that they're 0:11:59.760 --> 0:12:02.320 a longer forces at work here. So what we learned 0:12:02.320 --> 0:12:04.120 from the minutes, it's a really good question. I mean, 0:12:04.240 --> 0:12:06.920 I'm not even sure that, uh, you know, the trade 0:12:06.960 --> 0:12:09.840 impact wasn't factored in because obviously most of the trade 0:12:09.880 --> 0:12:13.520 fallout really happened after the minutes were released. Um, so 0:12:13.679 --> 0:12:16.240 the bump that we should have got, I've got a 0:12:16.360 --> 0:12:18.560 much more hope of getting it back. Really at this 0:12:18.600 --> 0:12:22.680 point now, if the break evens are right and we're 0:12:23.000 --> 0:12:27.679 due for some weaker inflation going forward, what does that 0:12:28.280 --> 0:12:31.480 make certain sectors, certain factors look more attractive to you? 0:12:31.960 --> 0:12:34.199 How would how would you recommend playing sort of the 0:12:35.160 --> 0:12:38.199 low inflation environment? Well, it depends on if we are 0:12:38.240 --> 0:12:41.480 indeed in for a transitory or a longer term sort 0:12:41.480 --> 0:12:45.360 of disinflationary deflationary trend first start. But if we assume 0:12:45.400 --> 0:12:49.040 that it's very very short term. More than likely it 0:12:49.080 --> 0:12:51.760 pushes you into more defensive sort of sectors, and I 0:12:51.760 --> 0:12:53.480 think we've seen that over the course of the last 0:12:53.480 --> 0:12:56.840 couple of months. Our sector strategy model even pushed us 0:12:56.840 --> 0:12:59.360 into defensive sectors as early as the end of April, 0:13:00.120 --> 0:13:03.000 and that largely reflects what's happening in rates. And rates 0:13:03.000 --> 0:13:06.880 are rallying so much, indicating that this inflation pressure is 0:13:06.920 --> 0:13:09.960 somewhat nil at least in the short run, suggesting that 0:13:10.000 --> 0:13:13.400 the downside risk to growth is still pretty evident. And 0:13:13.480 --> 0:13:16.120 at a time after stocks had already rallied tremendously in 0:13:16.160 --> 0:13:19.360 the first quarter, the valuation multiple started to shift as 0:13:19.400 --> 0:13:22.439 well on the cyclicals versus defensives. Call I could tell 0:13:22.480 --> 0:13:26.120 you one sector it absolutely suggests you want to stay 0:13:26.160 --> 0:13:29.040 away from, and this is manifestans price performance as well 0:13:29.080 --> 0:13:32.200 as energy. There's one sector that is just constantly the 0:13:32.240 --> 0:13:35.240 inflation play in the equity market. It's energy, and then 0:13:35.240 --> 0:13:38.520 to a lesser extent, materials. As much as this last 0:13:38.640 --> 0:13:40.840 month of weakness in the equity market seems to have 0:13:40.880 --> 0:13:44.120 been about tech, the energy sector is down four bases 0:13:44.120 --> 0:13:47.479 points more than tech stocks. I mean, it's just getting crushed. 0:13:47.880 --> 0:13:50.720 It's making new relative price lows in comparison to the 0:13:50.840 --> 0:13:53.880 SMP five hundred, and has been persistently for the last 0:13:53.920 --> 0:13:59.000 several years. So the equity signal is actually very deflationary. 0:13:59.040 --> 0:14:03.280 If not deflationary, then at least disinflationary, and has persisted 0:14:03.679 --> 0:14:06.080 through a long period of time. At the beginning of 0:14:06.080 --> 0:14:07.840 the year, I heard the case being made a lot 0:14:07.880 --> 0:14:10.520 that we needed to see energy prices close the gap 0:14:10.840 --> 0:14:13.679 with oil prices because we had seen oil rally so much. Well, 0:14:13.679 --> 0:14:16.720 now clearly we're seeing oil prices roll over, we're seeing 0:14:16.840 --> 0:14:20.120 energy stocks roll over. Is the case for that, for 0:14:20.240 --> 0:14:22.640 energy prices to move up to oil prices and close 0:14:22.720 --> 0:14:25.920 the gap kind of disintegrating? Yeah, you know, that gap 0:14:25.960 --> 0:14:28.880 has been existing for the last three years, so you 0:14:28.880 --> 0:14:31.560 could even take it all the way back toleven when 0:14:31.600 --> 0:14:34.440 the gaps started to widen. You know, I think that 0:14:34.440 --> 0:14:39.600 the terrible fate for energy stocks is unfortunately, every time 0:14:39.640 --> 0:14:42.360 oil prices rise, it's met with a new wave of supply, 0:14:42.840 --> 0:14:47.000 which constrains profitability and constrains the inevitent and constrains the 0:14:47.080 --> 0:14:51.200 oil price from continuing to rise. And that's very well 0:14:51.240 --> 0:14:54.840 played out in energy stocks and energy investors. Investors just 0:14:54.880 --> 0:14:57.400 don't want to touch the sector on that premise alone. 0:14:58.160 --> 0:15:01.280 From a sentiment perspective, you got a love energy for 0:15:01.320 --> 0:15:04.600 a long term sort of sentiment call. You're looking at 0:15:04.600 --> 0:15:06.800 a sector that's now less as a share of market 0:15:06.800 --> 0:15:09.920 cap of the SMP five than it was when oil 0:15:09.960 --> 0:15:13.160 prices were ten dollars of barrel. So nobody wants to 0:15:13.160 --> 0:15:16.800 touch this stuff. But how do you jump in in 0:15:16.840 --> 0:15:21.160 the face of clear signals from the rates market generally 0:15:21.240 --> 0:15:24.520 sort of depressed economic signals relative to where we were 0:15:24.560 --> 0:15:27.440 at least a year ago, stock price signals that are 0:15:27.440 --> 0:15:31.760 still very very negative, and frankly, the dynamics of oil 0:15:31.840 --> 0:15:34.600 supply and demand are different today than they were ten 0:15:34.680 --> 0:15:38.320 years ago. So it's a tough space. And there's just 0:15:38.560 --> 0:15:41.600 not a lot to suggest that that gap necessarily needs 0:15:41.640 --> 0:15:45.640 to close, because frankly, oil prices keep closing back toward 0:15:45.760 --> 0:15:48.840 energy stocks every time they try to rally, and that's 0:15:48.880 --> 0:15:52.800 just a the fracking boom. I take it. Just the supply, Yeah, 0:15:52.840 --> 0:15:54.600 I mean, if you think about sort of how things 0:15:54.600 --> 0:15:57.400 have changed over the last decade or so, go back 0:15:57.400 --> 0:16:00.320 to two thousand seven, two thousand eight, when oil prices 0:16:00.360 --> 0:16:02.320 were moving towards a hundred and fifty dollars, and the 0:16:02.400 --> 0:16:05.200 sentiment was, We're never going to find supply again. I mean, 0:16:05.200 --> 0:16:07.640 there's just just not enough oil in the world, and 0:16:08.520 --> 0:16:10.400 oh yeah. But the course of the next several years 0:16:10.400 --> 0:16:12.280 we found out, oh lo and behold, there is actually 0:16:12.320 --> 0:16:14.800 plenty of supply. We just needed to use new technologies 0:16:14.840 --> 0:16:18.600 to get to it. That's created this massive downtrend and 0:16:18.640 --> 0:16:22.160 oil prices really since they peaked in two seven and 0:16:22.160 --> 0:16:25.960 then again in and the result of that is just 0:16:26.120 --> 0:16:30.200 this this persistence of supply, or even the perceived persistence 0:16:30.240 --> 0:16:33.040 of supply, con strange your upward potential for price growth, 0:16:33.480 --> 0:16:51.880 and it's feeding through the energy stocks emily. To get 0:16:51.880 --> 0:16:54.800 back to the Fed minutes, there's this weird situation that 0:16:54.840 --> 0:16:58.480 happens where, okay, the trade were escalates a couple of 0:16:58.480 --> 0:17:01.520 weeks ago with President Trump's tweets, and then he follows 0:17:01.520 --> 0:17:04.879 through and raises the tariffs. Then along come the minutes, 0:17:05.240 --> 0:17:08.960 which are reflecting a meeting that occurred before it. So 0:17:09.720 --> 0:17:12.760 yet people still seem to react to them. I mean, 0:17:13.720 --> 0:17:17.880 assuming this is the last best evidence we've gotten from 0:17:17.880 --> 0:17:20.480 the Federal Reserve on their thinking, but at some point 0:17:20.520 --> 0:17:23.479 to people just to ignore them. You've talked to a 0:17:23.480 --> 0:17:27.520 lot of investors after the minutes, presumably they're still reading 0:17:27.560 --> 0:17:29.960 these minutes even though so much has changed since then, 0:17:30.200 --> 0:17:32.400 or did they discount them to some degree. I think 0:17:32.400 --> 0:17:33.919 this is the weird thing, and this is the thing 0:17:33.920 --> 0:17:36.119 that always makes me just sigh and kind of a 0:17:36.200 --> 0:17:38.040 scream sometimes when you look at the minutes, because like 0:17:38.240 --> 0:17:41.439 this is essentially stale news, right, and particularly at this 0:17:41.480 --> 0:17:44.320 point because it's prior to all of the trade stuff 0:17:44.320 --> 0:17:46.840 that happened. So I was actually really interested myself to 0:17:46.880 --> 0:17:48.280 see what the market was going to do to this, 0:17:48.320 --> 0:17:50.199 And it just it's funny because I don't know if 0:17:50.240 --> 0:17:53.560 people actually forget they're still they're so busy reading the 0:17:53.600 --> 0:17:56.639 Fed's ruins sometimes that any signal, like this sort of 0:17:56.640 --> 0:17:58.880 smoke signal is going to tell them what to do. 0:17:59.080 --> 0:18:00.879 But I think the interesting thing that most people are 0:18:00.880 --> 0:18:03.320 trying to pause out of that document is how much 0:18:03.359 --> 0:18:06.239 consensus is there, how firmly held a belief is this 0:18:06.400 --> 0:18:08.080 in the fit, and how difficult it might it be 0:18:08.119 --> 0:18:11.320 to dislodge, Like how much they're looking at the data 0:18:11.400 --> 0:18:13.680 really and what what is their interpretation of the data. 0:18:13.680 --> 0:18:15.240 So people are constant. The thing that I find most 0:18:15.240 --> 0:18:17.560 amusing is looking at how people understand the word few 0:18:17.680 --> 0:18:20.560 versus several versus a number of us some know as 0:18:20.600 --> 0:18:23.119 a measure of how many people on the committee actually 0:18:23.160 --> 0:18:25.800 hold a certain view. So that's that's one of the 0:18:25.800 --> 0:18:27.879 things you talk about stale news. If you looked at 0:18:27.880 --> 0:18:31.520 the staff economic projections in the minutes, they actually talked 0:18:31.560 --> 0:18:34.840 about how trade the U. S and China coming together 0:18:35.040 --> 0:18:39.440 was positive, optimistic. So how that's changed since good minutes 0:18:39.480 --> 0:18:42.920 were actually written. I want to ask you, though, how 0:18:43.040 --> 0:18:46.560 far off does it seem like the bond market is 0:18:46.960 --> 0:18:50.240 from where the Fed actually stands at this point in time. 0:18:50.720 --> 0:18:53.040 This is starting to feel as if that disconnect is 0:18:53.080 --> 0:18:56.400 actually widening again. I mean, we saw earlier this year 0:18:56.440 --> 0:18:59.400 there was, you know, the market was really doubling down 0:18:59.440 --> 0:19:01.399 to say even as many as you know, sort of 0:19:01.400 --> 0:19:03.720 too high, starting to get pricing. We're getting closer to 0:19:03.760 --> 0:19:07.439 that now. I think that the interesting point from what 0:19:07.480 --> 0:19:09.600 the market is pricing in is there is actually now 0:19:09.640 --> 0:19:11.720 still more than one hike pricing by the end of 0:19:11.760 --> 0:19:14.680 the year, just a little more. The Fed. I think 0:19:14.720 --> 0:19:17.959 that after giving that message of transient, they're just sitting 0:19:18.000 --> 0:19:20.240 there with that for the time being, and it seems 0:19:20.240 --> 0:19:26.159 as if that that conviction among policymakers is really at 0:19:26.200 --> 0:19:29.720 odds with the markets movements lately. Um But it's hard 0:19:29.760 --> 0:19:31.639 to see. I mean as as you, Jina, you were 0:19:31.640 --> 0:19:35.560 discussing before, you know, the data are still reasonably strong. 0:19:35.600 --> 0:19:39.000 There's there's actually looking at it objectively from a dispassionate viewpoint, 0:19:39.040 --> 0:19:41.320 it's hard to see whether the FED would find a 0:19:41.359 --> 0:19:44.480 decent case to cut rates at this point. And now 0:19:44.480 --> 0:19:46.680 that they're starting up their inflation review, this is going 0:19:46.720 --> 0:19:49.639 to become a really interesting topic to follow over the 0:19:49.680 --> 0:19:51.520 next couple of months because they're really going to have 0:19:51.560 --> 0:19:54.280 to look at what other kinds of strategies they might 0:19:54.280 --> 0:19:57.480 take to try and meet their mandate. Now, Gina, you 0:19:57.520 --> 0:20:00.560 have a lot of letters after your name, c IF, A, 0:20:01.119 --> 0:20:04.440 c MT. I also have three names. I'm just trying 0:20:04.440 --> 0:20:09.000 to extend their business parts as continued on the confusion 0:20:09.760 --> 0:20:12.879 part of the game here. So I was I was 0:20:12.920 --> 0:20:16.600 curious to see your technicals, putting your CMT head on 0:20:17.040 --> 0:20:21.679 Chartered Market Technician and and looking at the technicals. UM, 0:20:21.760 --> 0:20:24.880 so walk us through two things. I'm curious a sort 0:20:24.880 --> 0:20:28.600 of what levels you're looking at but also is it 0:20:28.680 --> 0:20:32.840 the time, uh right now where technicals kind of take 0:20:32.880 --> 0:20:35.560 a backseat to the fact that everyone's waiting for the 0:20:35.600 --> 0:20:38.000 next headline, waiting for the next tweet. You know, are 0:20:38.000 --> 0:20:41.280 there times when you sort of uh discount technicals to 0:20:41.320 --> 0:20:43.880 some degree and don't give them as much weight as 0:20:43.880 --> 0:20:45.919 you normally would, And are we in a period like 0:20:45.960 --> 0:20:49.800 that now? I never discount technicals. I am a technician. 0:20:50.240 --> 0:20:53.560 I think they're actually always valuable at every market stage, 0:20:54.200 --> 0:20:57.520 and they're valuable in different ways. They give you different signals, 0:20:57.560 --> 0:21:00.320 either they're confirming or not confirming your fund to until 0:21:00.359 --> 0:21:02.000 case that gives you a reason to go back and 0:21:02.000 --> 0:21:05.720 look at the fundamental case. Nonetheless, I think you know 0:21:05.840 --> 0:21:08.680 right now what the technicals are saying is near term, 0:21:08.760 --> 0:21:11.120