WEBVTT - Surveillance: Recession Risk with Loh 0:00:05.160 --> 0:00:08.480 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.520 --> 0:00:12.360 with Jonathan Farrell and Lisa Abramowitz. Join us each day 0:00:12.400 --> 0:00:16.840 for insight from the best an economics, geopolitics, finance and investment. 0:00:17.280 --> 0:00:22.119 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.320 --> 0:00:26.600 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:26.640 --> 0:00:29.840 the Bloomberg Terminal, and the Bloomberg Business App. 0:00:30.000 --> 0:00:32.560 Joining us now is Marvin low Cydney, Global macro strategist 0:00:32.680 --> 0:00:34.640 over Stay Street. Marvin, good morning to you, Sarah. It's 0:00:34.640 --> 0:00:36.440 wonderful to have you with us on the program. To 0:00:36.520 --> 0:00:38.640 kick off the trade in week CPI a little bit 0:00:38.680 --> 0:00:40.960 later this week, we get retail sales as well, Marvin, 0:00:40.960 --> 0:00:42.879 once we get to Friday, what do you expect that 0:00:42.960 --> 0:00:43.960 data to look like? 0:00:45.479 --> 0:00:46.680 Yeah, I mean, I think we're going to get a 0:00:46.680 --> 0:00:50.520 continuation of the positive trends with the with the core data. 0:00:50.960 --> 0:00:55.160 You know, certainly PCE raises the risk that it might 0:00:55.440 --> 0:00:58.680 be a little bit of an upside surprise, but you know, 0:00:58.760 --> 0:01:00.480 kind of having said that, given where we were, it's 0:01:00.480 --> 0:01:00.720 not right. 0:01:00.720 --> 0:01:02.520 I think we're moving in the right direction. 0:01:03.160 --> 0:01:07.440 The consumer remains strong, so they're kind of continues that 0:01:07.600 --> 0:01:10.280 the challenge that the FED has in terms of in 0:01:10.360 --> 0:01:14.640 terms of a strong consumer and it making it harder 0:01:14.920 --> 0:01:16.760 to get towards those inflation goals. 0:01:17.280 --> 0:01:21.280 I look, Marvin at the idea of taking strategy or 0:01:21.360 --> 0:01:23.039 economics and having a. 0:01:23.040 --> 0:01:24.560 Conviction and belief. 0:01:24.760 --> 0:01:29.200 I love your phrase painfully neutral. I mean, there we 0:01:29.280 --> 0:01:32.680 are treading water here. Do you have conviction where you 0:01:32.720 --> 0:01:35.400 can be in the market. Are you convicted to a 0:01:35.480 --> 0:01:37.880 correction or do you got a gloom bear. 0:01:37.760 --> 0:01:38.679 Market out front? 0:01:39.840 --> 0:01:40.080 Yeah? 0:01:40.120 --> 0:01:43.800 I mean, you know, we need a conviction when we 0:01:43.880 --> 0:01:49.960 approach our portfolio selecting process ultimately in terms of playing 0:01:49.960 --> 0:01:50.520 the market. 0:01:50.680 --> 0:01:53.000 With regard to the choppiness around. 0:01:52.640 --> 0:01:55.360 That conviction, I think it makes it to a certain 0:01:55.360 --> 0:01:58.560 degree harder because certainly we're going to have volatility in 0:01:58.560 --> 0:02:01.040 the market, but it's going to create opportunities if we 0:02:01.160 --> 0:02:04.920 believe in ultimately that conviction. You know, I do think 0:02:04.960 --> 0:02:09.600 that the recession versus remain out there, and the higher 0:02:09.639 --> 0:02:13.240 for longer conversation becomes a harder landing, particularly when we 0:02:13.280 --> 0:02:15.799 look at kind of some of the spending headwinds that 0:02:16.040 --> 0:02:18.399 begin to come into the market next year, and then 0:02:18.560 --> 0:02:20.079 you know, again, opportunities around that. 0:02:20.160 --> 0:02:22.560 First study I did this morning, Marvin was a Bloomberg 0:02:22.600 --> 0:02:25.359 financial conditions index. I went back way back, oh six 0:02:25.480 --> 0:02:28.760 oh five, eleven ratios folded in there. I believe it's 0:02:28.800 --> 0:02:32.440 a toxic brow And the answer is, we are accommodative. 0:02:33.000 --> 0:02:37.160 We are Are we painfully accommodative for central banks like 0:02:37.240 --> 0:02:38.520 you're painfully neutral? 0:02:39.720 --> 0:02:42.280 Well, you know, I think I think we've got the 0:02:42.320 --> 0:02:46.360 policy diversions that's starting to emerge globally and it's making 0:02:46.400 --> 0:02:49.600 these conversations interesting for us in the macro space. But 0:02:49.680 --> 0:02:52.680 it's really showing the challenges that all the different central 0:02:52.680 --> 0:02:53.079 banks have. 0:02:53.720 --> 0:02:55.079 It's hard to say that the. 0:02:55.200 --> 0:02:59.720 US is incredibly restrictive, just given where the economy is performing, 0:02:59.720 --> 0:03:03.200 where you see that transmission mechanism making its way much 0:03:03.280 --> 0:03:07.800 more readily into the European economies and certainly the economies 0:03:07.840 --> 0:03:08.640 around the Antipodean. 0:03:08.800 --> 0:03:11.600 So you know, you do have kind of these. 0:03:11.440 --> 0:03:14.440 These divergences, which is really the challenge that we have 0:03:14.520 --> 0:03:16.560 going into the end of the year and thinking about 0:03:16.560 --> 0:03:17.360 policy going. 0:03:17.160 --> 0:03:20.000 Into next year, and then understanding also the inter relationship 0:03:20.040 --> 0:03:22.079 between some of these divergencies. I think of the Bank 0:03:22.120 --> 0:03:26.679 of Japan over the weekend raising the possibility of understanding 0:03:27.000 --> 0:03:29.400 the need to abandon negative yields and even move away 0:03:29.440 --> 0:03:31.800 from yield curve control as soon as later this year. 0:03:31.840 --> 0:03:34.120 This is a new kind of time frame. Does that 0:03:34.240 --> 0:03:35.840 shift your understanding of where. 0:03:35.800 --> 0:03:37.640 US yields should be given? 0:03:37.960 --> 0:03:41.000 Yeah, there is this divergence, but there's inter relationship between 0:03:41.000 --> 0:03:42.040 these global markets. 0:03:42.880 --> 0:03:44.120 Yeah, I mean that's significant. 0:03:44.520 --> 0:03:47.720 You know, the view that Japan is finally in a 0:03:47.760 --> 0:03:51.000 position to make a longer term decision reversing something that 0:03:51.040 --> 0:03:54.440 has been you know, a decades long policy is significant 0:03:54.440 --> 0:03:56.560 within the global landscape, particularly when you look at it 0:03:56.600 --> 0:03:59.520 from the US perspective and they are participation in the 0:03:59.760 --> 0:04:02.400 trade market. You know that that's a conversation that we 0:04:02.480 --> 0:04:04.720 started to have in early August, which now comes to 0:04:04.800 --> 0:04:05.520 the forefront again. 0:04:05.640 --> 0:04:07.360 If they're not as accommodator for sure. 0:04:07.760 --> 0:04:09.600 Morgan Stanley came out and said that they actually have 0:04:09.720 --> 0:04:12.400 conviction that yields are going to come down and to 0:04:12.480 --> 0:04:15.440 remain bullish on US bonds. How much do you push 0:04:15.520 --> 0:04:17.760 back against that? How much do you feel like the 0:04:17.880 --> 0:04:20.720 stickiness that we're seeing in yields is going to be 0:04:20.920 --> 0:04:21.800 really the new normal? 0:04:22.880 --> 0:04:23.080 Yeah? 0:04:23.120 --> 0:04:26.240 I mean I wouldn't be playing a significant decrease in 0:04:26.320 --> 0:04:28.280 yields at this point in time. 0:04:28.360 --> 0:04:30.600 You know, I do think again a recession is going 0:04:30.680 --> 0:04:32.080 to drive that type of conversation. 0:04:32.279 --> 0:04:35.120 But you know again that that painfully neutral type of 0:04:35.240 --> 0:04:38.880 view kind of having said that, where valuations are, I 0:04:38.960 --> 0:04:42.840 don't mind the income quite frankly, and I still think 0:04:42.920 --> 0:04:46.320 that you could think about curve steepeners, but you know, 0:04:46.600 --> 0:04:49.280 you need to do it more tactically than just looking 0:04:49.320 --> 0:04:51.000 at a two s tens perspective. You got to look 0:04:51.000 --> 0:04:53.320 at how long this thing might take and whether or 0:04:53.320 --> 0:04:54.720 not out of five to thirties. 0:04:54.480 --> 0:04:55.640 View makes more sense. 0:04:56.240 --> 0:04:59.479 But you know, just simply simply owning treasuries in an 0:04:59.560 --> 0:05:03.880 environment where inflation is below that yield is a decent return. 0:05:04.279 --> 0:05:06.800 Do you saying pick up the front end, Maffin or 0:05:06.880 --> 0:05:07.640 you sank them out? 0:05:08.680 --> 0:05:11.240 I like, I like, I like the belly more. I 0:05:11.360 --> 0:05:11.960 like the belly more. 0:05:11.960 --> 0:05:15.400 Okay, So the five to seven year portion of the curve, Yeah, 0:05:15.800 --> 0:05:17.480 does the same apply to credit because we had a 0:05:17.520 --> 0:05:20.120 lot of credit issuance last week and the bulk of 0:05:20.200 --> 0:05:22.640 that was quite short term stuff, Marv, And I just 0:05:22.760 --> 0:05:25.600 wonder what kind of signal you take away from that issuance? 0:05:26.880 --> 0:05:28.839 Yeah, I mean, it's it's opportunistic for sure. 0:05:29.160 --> 0:05:31.040 You know, the fact that the liquidity is in the 0:05:31.160 --> 0:05:36.040 market is ultimately concerned corporations are taking advantage of that. 0:05:37.040 --> 0:05:41.080 I still think that credit is a challenge if the 0:05:41.200 --> 0:05:44.760 short end becomes a risk. You know, certainly high yield 0:05:45.120 --> 0:05:48.400 has a greater risk associated with that. Really, kind of 0:05:48.480 --> 0:05:52.400 getting past the choppiness that might evolve over the next 0:05:52.440 --> 0:05:55.440 two to three years is something to be cognizant of. 0:05:55.760 --> 0:05:58.200 Marvin, Thank you, sir for the update from State Street. 0:05:58.240 --> 0:05:59.719 Marvin Low, thank you very much. 0:06:04.000 --> 0:06:04.040 So. 0:06:04.760 --> 0:06:07.360 Rajapa joins us now ahead of US right strategy, it's 0:06:07.400 --> 0:06:10.360 sock Gen here on the forty seven narratives that were 0:06:10.400 --> 0:06:12.400 out there, you have to pick a narrative this weekend 0:06:12.480 --> 0:06:15.720 to go with on Monday, which is the sock Gen 0:06:15.839 --> 0:06:16.720 narrative right now. 0:06:17.200 --> 0:06:21.159 On what rates will do, I. 0:06:21.200 --> 0:06:22.880 Think for the most part it's going to be wait 0:06:22.960 --> 0:06:24.760 and see at least for this week ahead of f 0:06:24.960 --> 0:06:30.400 MC next week. Broadly speaking, if you look at the 0:06:30.640 --> 0:06:32.440 price action that we've seen in the bond market, the 0:06:32.520 --> 0:06:35.800 funand seems to be very anchored to FED expectations. The 0:06:35.880 --> 0:06:38.719 Fed's going to pause at the September meeting whether they 0:06:38.839 --> 0:06:41.320 hike again in November is yet to be seen, but 0:06:41.440 --> 0:06:43.680 the data that we get this week will kind of 0:06:43.760 --> 0:06:47.320 guide the dots for next week as well as set 0:06:47.360 --> 0:06:50.479 the trend for what potentially the Fed could be doing 0:06:50.640 --> 0:06:54.040 in November and beyond. So, and that's sort of context 0:06:54.160 --> 0:06:56.920 range bond markets for the next week or so. We 0:06:57.040 --> 0:06:59.279 did get a ton of corporate supply that's been pushing 0:06:59.600 --> 0:07:02.159 TENA yields higher. We could probably see a little bit 0:07:02.200 --> 0:07:04.960 more of that momentum, but really you're going to need 0:07:05.080 --> 0:07:07.120 more data to direct the markets from your. 0:07:07.040 --> 0:07:10.000 On what's your takets about? Drew on the implication from 0:07:10.080 --> 0:07:13.960 the latest missive over in Japan about potentially ending yield 0:07:14.080 --> 0:07:17.240 curve control as well as negative yielding policy sometime in 0:07:17.280 --> 0:07:19.200 the near future and having a better sense of when 0:07:19.280 --> 0:07:22.040 that would be appropriate by the end of this year. 0:07:22.120 --> 0:07:25.360 Does that change your outlook for US yields given the 0:07:25.480 --> 0:07:28.640 incredible buyer base that we've seen coming from Japan. 0:07:30.480 --> 0:07:34.800 Absolutely, I think that we've seen a pretty decent change 0:07:34.880 --> 0:07:39.320 in the trend and momentum in yields in August. Granted 0:07:39.320 --> 0:07:41.880 it's a quiet month, but we had the Fitch down grades, 0:07:42.240 --> 0:07:45.800 you had the change in the YCC policy that's definitely 0:07:45.840 --> 0:07:50.040 putting some pressure on yields, not just in the US 0:07:50.120 --> 0:07:53.400 but also globally. But we'll have to kind of see 0:07:53.440 --> 0:07:55.880 how things play out because at the same time, while 0:07:55.960 --> 0:08:00.080 they're adjusting policy, you're also looking at a broader snowdown Europe. Know, 0:08:00.120 --> 0:08:02.720 you're starting to see a slowdown in growth there. In 0:08:02.800 --> 0:08:06.480 the fourth quarter of this year, we'll probably see that 0:08:06.600 --> 0:08:08.960 the US economy will also start to come under pressure 0:08:08.960 --> 0:08:10.840 as the consumers start to pull back a little bit. 0:08:11.120 --> 0:08:14.320 We've seen a summer splurge. Consumers have been extraordinarily resilient, 0:08:14.760 --> 0:08:17.880 but you know, with student lot moratoriums expiring, saving straights 0:08:17.880 --> 0:08:20.920 starting to decline, delinquency starting to go up, I think 0:08:20.960 --> 0:08:22.960 that you're going to see a lot more pressure on 0:08:23.160 --> 0:08:25.680 the consumer in the fourth quarter of this year, and 0:08:25.760 --> 0:08:29.640 that again is something that could probably keep a lid 0:08:29.880 --> 0:08:31.679 on the rising years in the US. 0:08:32.000 --> 0:08:35.120 Does that give you more conviction to buy in the 0:08:35.240 --> 0:08:38.480 government bond space and less conviction to buy on the 0:08:38.600 --> 0:08:40.679 credit side of things that might be more affected by 0:08:40.720 --> 0:08:41.199 the weakness. 0:08:42.679 --> 0:08:44.559 That seems to be where you would want to put 0:08:44.600 --> 0:08:46.319 your money in. If you think that there's going to 0:08:46.320 --> 0:08:49.240 be a meaningful slowdown in growth in twenty twenty four. 0:08:49.640 --> 0:08:53.400 We've always had a recession in twenty twenty four. We're 0:08:53.480 --> 0:08:57.480 moving perhaps away from a recession in the early part 0:08:57.520 --> 0:08:59.839 to more the mid part of the year. But you know, 0:09:00.000 --> 0:09:04.000 so if the recession is still very much in the cards, 0:09:04.200 --> 0:09:06.959 and if that were to play out, I think you 0:09:06.960 --> 0:09:11.439 should start seeing a moderation in yields or the sell 0:09:11.480 --> 0:09:12.440 off in years we've seen. 0:09:12.320 --> 0:09:12.880 At the back end. 0:09:12.920 --> 0:09:15.040 It's about v I got to buy a bullet piece 0:09:15.440 --> 0:09:19.760 on the curve, which maturity, full faith and credit right 0:09:19.840 --> 0:09:21.800 now is most attractive for price. 0:09:21.640 --> 0:09:22.720 Up yield down. 0:09:25.080 --> 0:09:28.760 The front end is definitely very attractive. The market, in 0:09:28.880 --> 0:09:32.960 my view, is fully priced in for high for longer 0:09:33.080 --> 0:09:36.160 from the Fed, So we're basically pressing for the Fed 0:09:36.240 --> 0:09:40.680 on hold until perhaps the second second half of nets 0:09:40.720 --> 0:09:44.480 year and only modest cuts after that point on. So 0:09:44.600 --> 0:09:47.760 in this sort of context, it probably feels that the 0:09:47.960 --> 0:09:50.240 place you want to be is the very front end, 0:09:50.280 --> 0:09:53.079 because if the market, if the economy does start to 0:09:53.120 --> 0:09:56.280 slow down, the FED starts to pivot towards easy or 0:09:56.360 --> 0:09:59.400 easier policy, then you're going to see the front and start. 0:09:59.240 --> 0:10:01.800 To rally as it's going to catch up and get 0:10:01.800 --> 0:10:14.520 the view from Selkschen Sabato a jape there joining us 0:10:14.559 --> 0:10:17.120 around a table. Christina Hoop, a chief Global market strategist 0:10:17.480 --> 0:10:19.280 at Invesco. Christina, good morning to you. 0:10:19.520 --> 0:10:20.000 Good morning. 0:10:20.080 --> 0:10:23.559 We also need to talk about union disputes UAW, the 0:10:23.640 --> 0:10:26.640 Detroit Big Three. Can you tell me from your perspective, 0:10:26.760 --> 0:10:28.439 is that just a headline risk we're reading in the 0:10:28.440 --> 0:10:31.800 papers right now. Is that a symptom of a broader, stronger, 0:10:32.200 --> 0:10:34.120 hot labor market in America that's going to lead to 0:10:34.480 --> 0:10:35.920 higher cost for some of these companies. 0:10:36.559 --> 0:10:40.319 Well, I would argue that it's more likely the latter, 0:10:41.080 --> 0:10:44.600 and that's because we saw Walmart's announcement last week about 0:10:44.880 --> 0:10:49.360 lower wages for new employees. I think actually, because the 0:10:49.520 --> 0:10:52.800 labor market has eased a bit, it's tight, but it's 0:10:52.840 --> 0:10:56.720 not as tight that what we're seeing with the UAW 0:10:57.360 --> 0:11:00.839 is probably more of a rear view mirror issue than 0:11:00.920 --> 0:11:03.000 what we have ahead of us in terms of what 0:11:03.120 --> 0:11:05.120 I expect to be moderating wage growth. 0:11:05.440 --> 0:11:08.240 You I have a shingle from Cornell, which is somewhat argue, 0:11:08.280 --> 0:11:11.320 the number one labor economics program in the country. Good 0:11:11.360 --> 0:11:15.560 morning everyone from Northwestern as well. This is not Walter 0:11:15.760 --> 0:11:18.920 Ruther's uaw is it to explain to us right now 0:11:19.440 --> 0:11:22.480 your view, Christine, with all your study at Cornell and 0:11:22.600 --> 0:11:25.520 the atomization of the American labor economy, is it legit 0:11:25.800 --> 0:11:27.439 or can there be a reunionization? 0:11:28.480 --> 0:11:32.120 Well, there certainly can be areas, and we've seen moves 0:11:32.160 --> 0:11:38.000 in different industries towards more unionization. But the reality is 0:11:38.080 --> 0:11:40.160 that that is a function of the tightness of the 0:11:40.240 --> 0:11:44.360 labor market, and directionally the labor market is getting less tight, 0:11:44.760 --> 0:11:47.719 and so I would anticipate we see less of this 0:11:47.880 --> 0:11:51.400 activity in the future. This was a very unique environment 0:11:51.440 --> 0:11:53.280 that we've lived in in the last few years, and 0:11:53.360 --> 0:11:57.040 it really has opened the door to the potential for unionization. 0:11:57.520 --> 0:11:59.960 But I think going forward it will be very specif 0:12:00.280 --> 0:12:01.360 industries where we see this. 0:12:01.440 --> 0:12:04.559 Happening rear view, Mirrord. To me, that's fascinating the idea 0:12:04.559 --> 0:12:06.400 that you're saying that this is not going to be 0:12:06.559 --> 0:12:08.640 what we're going to see going forward. And so from 0:12:08.679 --> 0:12:11.640 your vantage point, what does that mean in terms of 0:12:11.920 --> 0:12:14.199 the last mile of inflation that we were talking about 0:12:14.480 --> 0:12:16.040 and how quickly, oh we can get back to the 0:12:16.120 --> 0:12:18.280 two percent, how much conviction you can have to go 0:12:18.440 --> 0:12:20.760 back into longer term bonds, Well, the. 0:12:20.960 --> 0:12:23.760 Last mile is going to be hard, but I do 0:12:24.040 --> 0:12:27.760 believe that we are very much on that disinflationary trend. 0:12:28.320 --> 0:12:31.720 Not every data point is going to support that narrative, 0:12:32.160 --> 0:12:36.080 but that will be the case. And actually I'll point 0:12:36.120 --> 0:12:38.560 to something that came out last week. The Chicago Fed 0:12:38.679 --> 0:12:44.640 economists put out a note utilizing their model. They anticipate 0:12:44.760 --> 0:12:48.120 will get close to the Fed's target by the middle 0:12:48.200 --> 0:12:51.640 of twenty twenty four without a recession. Now, my opinion 0:12:51.760 --> 0:12:53.599 is it'll be a bumpy landing, but it won't be 0:12:53.679 --> 0:12:54.640 an actual recession. 0:12:54.880 --> 0:12:56.480 So there are two schools of thought with this, and 0:12:56.559 --> 0:12:59.000 it's really highlighted by the Morgan Stanley view of things 0:12:59.480 --> 0:13:01.880 and then the sort of Jim Bianco view of things. 0:13:02.120 --> 0:13:05.040 Increasingly the JP Morgan view of things. As they ratchet 0:13:05.120 --> 0:13:08.160 up some of their yield forecasts that when we go 0:13:08.400 --> 0:13:13.040 back to something more normal, bonds will maybe have lower 0:13:13.120 --> 0:13:15.800 yields than they have now, but not significantly. Morgan Stanley 0:13:15.880 --> 0:13:18.959 is the loan bul right, they're going out there. Matt Hornbach, 0:13:19.000 --> 0:13:20.480 who is a friend of the show, has said no, 0:13:20.800 --> 0:13:23.480 he still has conviction by now this is the time 0:13:23.559 --> 0:13:25.600 to do it. Are you in agreement with that. 0:13:26.160 --> 0:13:28.160 Well, I would argue it is so hard to market 0:13:28.240 --> 0:13:32.160 time so that it makes sense to at least start 0:13:32.400 --> 0:13:36.600 to increase exposure now, even if one is not sure 0:13:37.440 --> 0:13:40.480 that we've actually hit the peak. I think this is 0:13:40.520 --> 0:13:44.199 a time to be starting to increase allocations. 0:13:44.320 --> 0:13:44.760 The vector. 0:13:44.920 --> 0:13:46.520 We brought this up a couple times a day. I'm 0:13:46.520 --> 0:13:47.240 not going to let it up. 0:13:47.240 --> 0:13:49.800 I think it's so important and timely to October sixth, 0:13:50.320 --> 0:13:53.280 and that is the vector of three month annualized non 0:13:53.360 --> 0:13:54.120 farm payrolls. 0:13:54.559 --> 0:13:57.640 Wow, is that moving in a strident direction south. 0:13:58.160 --> 0:14:02.079 Can you frame a negative non firm payroll statistic? 0:14:03.840 --> 0:14:06.319 Well, what I can. I don't have a lot of 0:14:06.480 --> 0:14:08.760 negative things to say right now about the state of 0:14:08.800 --> 0:14:12.560 the labor market. What we have is labor force participation increasing, 0:14:13.440 --> 0:14:17.120 and we have wage growth moderating. That's what I need 0:14:17.240 --> 0:14:21.160 to see. Those are the two most important data points 0:14:21.640 --> 0:14:25.160 within the Job's report in my opinion. Also, if we 0:14:25.200 --> 0:14:28.760 look at jolts and we see the number of job openings, 0:14:28.920 --> 0:14:32.160 they've gone down significantly, all pointing in the right direction 0:14:32.560 --> 0:14:35.480 to maybe not a soft landing, maybe a bumpy landing, 0:14:35.720 --> 0:14:40.000 but one in which we see a moderation in wage growth, 0:14:40.080 --> 0:14:43.080 one in which we see a moderation and inflation going forward. 0:14:43.280 --> 0:14:45.720 Doug cast writes in race is an important question about 0:14:45.760 --> 0:14:47.880 the Detroit three. Let me throw it out you, Christina. 0:14:47.880 --> 0:14:51.840 If I can deglobalization, doesn't it just give these workers 0:14:51.880 --> 0:14:55.160 in Detroit more power, more leverage of their employers. 0:14:56.160 --> 0:15:00.240 Well, one could argue that deglobalization has an impact act 0:15:00.320 --> 0:15:03.720 and serves to boost inflation in a variety of different ways, 0:15:03.840 --> 0:15:08.800 including potentially this way. But the counterbalance, of course is 0:15:08.880 --> 0:15:12.640 technological innovation. So could we get to an environment in 0:15:12.760 --> 0:15:16.880 which we're a bit above the Fed's target in terms 0:15:16.880 --> 0:15:20.760 of inflation for the medium term. Yes, but I think 0:15:20.800 --> 0:15:23.240 the Fed's willing to tolerate that because we also saw 0:15:23.280 --> 0:15:25.160 inflation below target for some time. 0:15:25.440 --> 0:15:27.280 Christina Hooper and Invesco. 0:15:30.920 --> 0:15:33.880 John this is one of my most important conversations over 0:15:33.960 --> 0:15:39.480 the last twelve months. Gentaloni at IMF meetings was stunning. 0:15:39.440 --> 0:15:40.240 How cute he was. 0:15:40.400 --> 0:15:43.360 Let's start that conversation right now with Po Gentiloni, the 0:15:43.400 --> 0:15:47.400 EU Economy Commissioner for the European Commission Commissioner. Want for 0:15:47.520 --> 0:15:49.040 to catch up with you once again, Sarah's been a 0:15:49.120 --> 0:15:51.200 number of months. We've got the new forecast from the 0:15:51.200 --> 0:15:53.760 Commission in front of us right here. Can we start 0:15:53.800 --> 0:15:56.760 with stagflation? Is that the risk for you, sir, from 0:15:56.840 --> 0:15:58.960 your personal assessment or is that the reality? 0:16:01.320 --> 0:16:04.600 I think it's too soon to say that we are 0:16:04.680 --> 0:16:10.440 in a stagflation framework. What is clear, I think is 0:16:10.880 --> 0:16:15.960 first that we avoided recession, which was not obvious only 0:16:16.720 --> 0:16:22.680 eight nine months ago. Please consider that, of course the 0:16:23.080 --> 0:16:29.920 Russian war against Ukraine is for the EU an economic issue, 0:16:30.000 --> 0:16:35.880 not only a geopolitical threat. So we address these issues. 0:16:35.960 --> 0:16:41.160 We avoided recession. But indeed growth is zloing. This morning 0:16:41.240 --> 0:16:44.720 we present the forecast, and the forecast is for twenty 0:16:44.840 --> 0:16:48.320 three of growth of zero point eight percent. 0:16:49.320 --> 0:16:51.120 Is this something. 0:16:52.520 --> 0:16:56.360 Of long duration where our estimate is that we will 0:16:56.440 --> 0:16:58.960 have probably a rebound already next year. 0:16:59.120 --> 0:17:03.040 So this is why I would not call it. 0:17:05.000 --> 0:17:10.120 Abruptly tlagflation. It's a moment of easing growth for sure. 0:17:10.800 --> 0:17:14.080 Commissioner Christine Lagard, in a speech in New York in April, 0:17:14.760 --> 0:17:18.720 talked about a need for capital reform, market reform in Europe. 0:17:19.280 --> 0:17:22.679 Obviously there's a primal scream of fiscal reform in Europe 0:17:22.720 --> 0:17:26.360 which you've lived. Is former Prime Minister of Italy. How 0:17:26.600 --> 0:17:31.440 urgent is reform given the war and given the present 0:17:32.320 --> 0:17:36.760 monetary crisis within Europe, I. 0:17:36.840 --> 0:17:38.840 Think it's urgent. 0:17:40.720 --> 0:17:44.160 We also, of course should take into account the fact 0:17:44.200 --> 0:17:49.879 that we are entering in the period where we will have. 0:17:51.760 --> 0:17:52.840 European elections. 0:17:54.800 --> 0:18:00.200 So this is a challenge, a mid term challenge, not 0:18:00.400 --> 0:18:03.520 something that we can solve tomorrow. What we have to 0:18:04.119 --> 0:18:10.200 address now, I mean tomorrow, is the difficulty to find 0:18:10.359 --> 0:18:15.119 the right balance between supporting investments and. 0:18:16.600 --> 0:18:17.960 Addressing inflation. 0:18:18.760 --> 0:18:21.800 We have the privilege and the opportunity to do so 0:18:22.480 --> 0:18:26.560 for the first time in the EU story, having behind 0:18:26.680 --> 0:18:32.920 us a strong, strong, strong tool of common funding, allowing 0:18:33.080 --> 0:18:39.639 also to weaker fiscally member states to invest and to spend. 0:18:40.200 --> 0:18:42.560 This is the main challenge ahead of us. 0:18:42.920 --> 0:18:45.680 But I fully agree with Christine Lagard that we need 0:18:46.480 --> 0:18:54.040 capital markets reform to re gain our competitivity in the 0:18:54.119 --> 0:18:55.040 global markets. 0:18:55.720 --> 0:18:58.160 Given the fact that you talked about this challenge between 0:18:58.200 --> 0:19:01.840 inflation and slowing growth, right now, has the balance of 0:19:01.880 --> 0:19:05.880 those two risks shifted for you and actually become more 0:19:05.960 --> 0:19:09.000 important to see growth and that investment and all sorts 0:19:09.080 --> 0:19:13.480 of roots of something stronger rather than being that much 0:19:13.600 --> 0:19:15.760 more aggressive in fighting inflation. 0:19:17.720 --> 0:19:18.440 Well, inflation. 0:19:18.880 --> 0:19:23.520 In the forecast we presented this morning, we have growth 0:19:23.720 --> 0:19:28.080 easing momentum, but also inflation declining. 0:19:28.920 --> 0:19:31.600 And so you are right that we are in this 0:19:32.640 --> 0:19:35.879 narrow path between these two things. 0:19:36.359 --> 0:19:40.760 I don't think it's easy now to say, okay, we 0:19:40.960 --> 0:19:46.240 want the challenge with inflation, so that as concentrate on 0:19:46.960 --> 0:19:51.800 spending and investments. I think we are near to the 0:19:51.920 --> 0:19:56.560 peak of interest rates, that the decisions will be taken 0:19:56.640 --> 0:20:01.000 of course by the ECB and not by the European Commission. 0:20:01.040 --> 0:20:02.000 On Interest Rates. 0:20:02.960 --> 0:20:07.400 At the same time, please preserve the good investments. Can 0:20:07.480 --> 0:20:15.400 we do this also in countries without deep financial pockets? Fortunately, yes, 0:20:15.800 --> 0:20:20.080 because we have the eurobonds, this common funding, and this 0:20:20.359 --> 0:20:25.560 is the opportunity we shouldn't miss in the coming months. 0:20:25.920 --> 0:20:30.520 Does that mean you see more potentially, more easy, potentially 0:20:30.920 --> 0:20:33.280 the ability to raise more money PLO? Is that what 0:20:33.400 --> 0:20:35.280 you see further down the line you can come together 0:20:35.600 --> 0:20:36.480 and is she more dere. 0:20:38.520 --> 0:20:45.119 Oh? I see the existing programs that at least until 0:20:45.200 --> 0:20:52.640 twenty twenty six will disburse to member states still more 0:20:52.760 --> 0:20:57.000 than six hundred billion euros of common money. 0:20:58.160 --> 0:21:00.360 Commissioner, we have to leave it there. It was great 0:21:00.400 --> 0:21:02.119 to see you earlier this year in DC, and we 0:21:02.160 --> 0:21:04.879 hope to do it again early next year. Parlo Gentiloni, 0:21:04.960 --> 0:21:08.520 the the Economic Commissioner for the EU Commission. 0:21:18.680 --> 0:21:20.879 Joining us right now, Mandy saying we've got to go 0:21:21.000 --> 0:21:22.200 right to this. It's so important. 0:21:22.280 --> 0:21:26.199 Senior Apple analysts for Bloomberg Intelligence as well, and also 0:21:26.640 --> 0:21:30.560 surveillance tennis expert. Let's digress here, rip up the script 0:21:30.680 --> 0:21:33.879 right now. I could hear people in buildings cheering. That 0:21:34.119 --> 0:21:36.440 was one hell of a final men's tournament. 0:21:36.240 --> 0:21:39.600 Wasn't it. It was? Especially the second set was epic. 0:21:39.720 --> 0:21:42.560 I mean, you don't see those kind of six years old. 0:21:43.080 --> 0:21:45.080 It felt like he was faltering at one point, and 0:21:45.119 --> 0:21:46.960 I've seen this a million times with Novak. It looks 0:21:47.000 --> 0:21:49.320 like he's lost his legs. His fake second set looked 0:21:49.359 --> 0:21:51.160 like he was aging. I was ready to say Novak's 0:21:51.200 --> 0:21:54.240 got old, and then Novak got young again. Meant that 0:21:54.280 --> 0:21:55.920 was kind of the way when the second set. 0:21:56.440 --> 0:21:59.920