WEBVTT - Bloomberg Surveillance TV: September 27, 2024 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.040 Terminal and the Bloomberg Business App. Joining us now is 0:00:37.080 --> 0:00:39.479 Dani Peterson at the conference board. Daniel, welcome back to 0:00:39.520 --> 0:00:41.960 the program. Got lots to talk to you about that 0:00:42.000 --> 0:00:44.320 consumer confidence number from earlier than this week. I just 0:00:44.400 --> 0:00:45.760 want to pick up on the data that came out 0:00:45.800 --> 0:00:48.479 just months ago this morning. How are you thinking about it? 0:00:48.479 --> 0:00:50.560 How does it inform your view of where the Fed 0:00:50.600 --> 0:00:51.160 goes next? 0:00:52.720 --> 0:00:54.320 Well, I think the jury still out. 0:00:54.360 --> 0:00:56.120 We still have a lot more data where you could see, 0:00:56.200 --> 0:00:58.320 especially next week's ecloyment data. 0:00:58.360 --> 0:00:59.480 But I mean the good news is. 0:00:59.400 --> 0:01:01.880 Then please and is continuing to slow and so the 0:01:01.960 --> 0:01:05.480 Fed can be less concerned about that if inflation flows 0:01:05.560 --> 0:01:09.520 faster than the past that they outlined in the September SDPs. 0:01:09.520 --> 0:01:12.280 Then certainly they can go fifty, but again they need 0:01:12.319 --> 0:01:14.279 to I think they need to see the labor market, 0:01:14.319 --> 0:01:17.560 and I think the labor market's doing fine. When we 0:01:17.640 --> 0:01:20.520 look at the number of payrolls, you don't need to 0:01:20.720 --> 0:01:24.479 have two three hundred thousand payroll editions a month when 0:01:24.600 --> 0:01:27.240 you're pretty much at full employment and the unemployment grade 0:01:27.319 --> 0:01:31.160 is very low. Wage inflation is still elevated, so there's 0:01:31.200 --> 0:01:33.119 still a lot of good news about the labor market. 0:01:33.160 --> 0:01:35.640 And also when we look at growth, you know, if 0:01:35.680 --> 0:01:38.120 consumers continue to spend, then that's. 0:01:37.840 --> 0:01:40.920 Going to mean very strong GDP growth. So I think 0:01:40.920 --> 0:01:41.839 the Fed is still going. 0:01:41.760 --> 0:01:44.520 To be data dependent, and you know, all the data 0:01:44.600 --> 0:01:47.320 from now until November are going to decide whether the 0:01:47.360 --> 0:01:47.919 Fed goes. 0:01:47.800 --> 0:01:48.640 Fifty or twenty five. 0:01:48.720 --> 0:01:50.560 Well, Dena, how low is the bar to go fifty? 0:01:50.720 --> 0:01:53.240 We've got payrolls next Friday. They estimate in our surveys 0:01:53.240 --> 0:01:56.280 about one thirty. You said yourself, we don't need two hundred. 0:01:56.480 --> 0:01:59.040 Something between one hundred and one fifty is still okay 0:01:59.240 --> 0:02:01.320 for the economy. And where we're at right now, how 0:02:01.320 --> 0:02:02.840 low is the bar to go fifty. 0:02:04.280 --> 0:02:07.360 Well, I think if you start seeing negative payroll reads 0:02:07.520 --> 0:02:10.720 or further creep in the unemployment rate. You know, the 0:02:10.760 --> 0:02:12.760 FEDS looking at the unemployment rate to kind of top 0:02:12.760 --> 0:02:15.440 out at four point four percent. The natural rate is 0:02:15.440 --> 0:02:18.200 four and a half, so that's full employment. But I 0:02:18.200 --> 0:02:20.680 think if you start seeing the unemployment rate keep above that, 0:02:21.120 --> 0:02:22.240 then the set is going. 0:02:22.040 --> 0:02:22.720 To lean on. 0:02:23.120 --> 0:02:25.679 Okay, now from the downside, risks that we feared or 0:02:25.720 --> 0:02:28.840 starting to materialize, So we need to cut rates faster 0:02:29.040 --> 0:02:30.760 to undergir the labor market. 0:02:31.960 --> 0:02:35.640 Were surprised by Dana and by how weak some of 0:02:35.680 --> 0:02:38.760 the labor sentiment was by the consumers. 0:02:38.240 --> 0:02:39.760 That you ended up surveying. 0:02:39.800 --> 0:02:42.680 Were you surprised that people felt like jobs really were 0:02:42.720 --> 0:02:44.000 getting much harder to get? 0:02:45.639 --> 0:02:48.080 Well, not really, because if you think about it, the 0:02:48.080 --> 0:02:51.120 peak of the job hard to get jobs needed to 0:02:51.160 --> 0:02:54.160 get differential was back in twenty twenty two, when we. 0:02:54.080 --> 0:02:57.359 Know it was very easy to find a job. 0:02:57.400 --> 0:03:00.000 You had all these job openings because companies are still 0:03:00.080 --> 0:03:04.480 trying to replen at their ranks after the pandemic. Now, 0:03:04.680 --> 0:03:07.760 companies that pretty much have all the workers that they need. 0:03:07.800 --> 0:03:09.040 When we talk to the CEOs of. 0:03:09.080 --> 0:03:12.359 Large companies, About forty percent of them are saying, you know, 0:03:12.440 --> 0:03:15.280 we're not making any changes to our workforce, and the 0:03:15.280 --> 0:03:18.040 other forty percent are saying, we're going to continue to hire, 0:03:18.040 --> 0:03:20.280 and only about twenty percent are saying, ah, well, maybe 0:03:20.280 --> 0:03:21.359 you'll let some people go. 0:03:21.800 --> 0:03:24.640 So it's still a story of hiring and hoarding. 0:03:25.120 --> 0:03:28.440 And so if that's the case, then you're not going 0:03:28.480 --> 0:03:31.359 to see big payroll gains month after month because we're 0:03:31.400 --> 0:03:32.239 at full employment. 0:03:32.720 --> 0:03:35.600 We also saw a decline and consumer sentiment just more broadly, 0:03:35.960 --> 0:03:39.560 and previously it had been really inflation expectations that were 0:03:39.600 --> 0:03:41.840 driving that. When people felt like the cost of the 0:03:41.840 --> 0:03:44.440 goods they were buying or going up at a dramatic pace, 0:03:44.760 --> 0:03:47.440 they felt pretty bad about that, pretty negative. Do you 0:03:47.480 --> 0:03:49.360 think that this had more to do with the jobs 0:03:49.400 --> 0:03:53.120 picture maybe softening from a very strong level, or do 0:03:53.160 --> 0:03:54.640 you think this has more to do with things like 0:03:54.960 --> 0:03:59.160 the election and other sentiment factors that come into some 0:03:59.240 --> 0:04:00.480 of these economics points. 0:04:02.120 --> 0:04:03.880 Sure, well, the measures. 0:04:03.480 --> 0:04:07.960 That go into our headline are business conditions, the labor market, 0:04:08.000 --> 0:04:12.160 and income. We don't the election or inflation. Those measures 0:04:12.200 --> 0:04:15.240 don't fold up into the headline. And so when we 0:04:15.240 --> 0:04:17.240 look at the headline. It really has been moving back 0:04:17.240 --> 0:04:19.520 and forth. Certainly, the last reading is at the bottom 0:04:19.520 --> 0:04:21.479 of the range that we've seen in the last two years. 0:04:22.160 --> 0:04:24.600 But certainly we do ask consumers what do you think 0:04:24.600 --> 0:04:28.800 about inflation? What do you think about you know, things 0:04:28.800 --> 0:04:31.039 that are impacting the economy. It's still the case that 0:04:31.160 --> 0:04:34.960 prices and inflation, those two words are still cropping up. Prices, 0:04:35.000 --> 0:04:37.800 you know, the level of you know, how much things 0:04:37.920 --> 0:04:41.400 cost is elevated, but they're a little less concerned about. 0:04:41.160 --> 0:04:42.600 The rate of change and inflation. 0:04:42.960 --> 0:04:46.520 We did notice that the words interest rates and election 0:04:46.880 --> 0:04:47.839 did pop up. 0:04:47.760 --> 0:04:50.000 In some of the right and measures. 0:04:50.160 --> 0:04:54.040 Even still when we looked at the election certainly over 0:04:54.080 --> 0:04:55.560 the last years in terms of. 0:04:55.440 --> 0:04:57.160 Those right and it's still pretty low. 0:04:57.279 --> 0:04:59.240 I think consumers are not really going to get too 0:04:59.320 --> 0:05:02.039 focused on at as being a major issue for the 0:05:02.080 --> 0:05:03.800 economy until we get to October. 0:05:04.160 --> 0:05:06.440 But to Lisa's point, I understand you have a surgical 0:05:06.480 --> 0:05:08.760 way of how you go about this survey, but you 0:05:08.839 --> 0:05:11.000 talk to CEOs, you see what's going on in a 0:05:11.000 --> 0:05:14.360 campaign trail. Right now, if you're a CEO and you 0:05:14.400 --> 0:05:16.799 come out and say, potentially you might be moving workers 0:05:17.080 --> 0:05:19.479 to a different country because you need to save money 0:05:19.560 --> 0:05:22.040 or you need to find certain labor, you are going 0:05:22.080 --> 0:05:25.200 to be basically in the bullseye of one of these 0:05:25.279 --> 0:05:28.479 candidates is they are concerned, potentially in the labor market, 0:05:28.680 --> 0:05:33.240 that companies are just waiting for more clarity after November fifth. 0:05:34.560 --> 0:05:37.760 Yes, companies are waiting for more clarity. But the thing 0:05:37.800 --> 0:05:43.520 is they are investing in include technology and human capital, 0:05:43.600 --> 0:05:45.440 and it's really not the case and not hearing that 0:05:45.480 --> 0:05:48.560 companies are looking to offshore people. They're trying to find 0:05:48.600 --> 0:05:52.480 people right here in the US. And certainly the companies 0:05:52.520 --> 0:05:56.760 that are benefiting from industrial policies around pips and infrastructure 0:05:56.800 --> 0:05:59.920 and factories are doing quite well. They're giving us the 0:06:00.120 --> 0:06:00.640 good story. 0:06:00.720 --> 0:06:01.200 Now it's the. 0:06:01.160 --> 0:06:04.800 Companies that are more consumer facing where they see, you know, 0:06:05.120 --> 0:06:08.159 risks of consumers really pulling back. They're much more worried, 0:06:08.920 --> 0:06:12.720 especially since consumers are still buying a lot of services. 0:06:12.760 --> 0:06:14.800 But we're noticing that as goods. 0:06:14.560 --> 0:06:18.719 Price fall, consumers are running out there and they're buying cars. 0:06:18.760 --> 0:06:21.920 So we're not getting that sense that companies are either 0:06:22.000 --> 0:06:23.440 looking to layoff labor or. 0:06:23.400 --> 0:06:26.080 Even move them abroad. It's a very different story. 0:06:26.360 --> 0:06:29.000 Then, Unpleased that you joined the program today, because I'm 0:06:29.000 --> 0:06:30.760 sure you've got a lot of phone calls this week. 0:06:30.839 --> 0:06:42.120 Danny Peterson at the conference book John Guess Now is 0:06:42.200 --> 0:06:44.840 Christina Hoope of Investgo. Christina is going to see you. 0:06:44.880 --> 0:06:45.640 Welcome to the program. 0:06:45.720 --> 0:06:46.640 It's great to see you too. 0:06:46.800 --> 0:06:49.479 Is this the real deal a game changer in China 0:06:49.520 --> 0:06:49.920 this week? 0:06:50.400 --> 0:06:51.520 I think it could very well be. 0:06:51.600 --> 0:06:54.800 I mean, certainly the initial reaction suggests that it could be. 0:06:55.160 --> 0:06:58.520 That it's certainly more than was expected, and seems like 0:06:58.560 --> 0:07:01.040 there's a real commitment to follow up with more as 0:07:01.040 --> 0:07:01.479 a needed. 0:07:02.000 --> 0:07:04.039 Talk to me about what changes for you, because a 0:07:04.040 --> 0:07:05.800 lot of people are waking up thinking I've been over 0:07:05.800 --> 0:07:07.240 a whit US runners sis to the rest of the 0:07:07.240 --> 0:07:10.560 world for a long long time. Does that need to change? 0:07:11.240 --> 0:07:13.680 I do think it needs to change somewhat. But I 0:07:13.680 --> 0:07:16.840 would say where the bigger overweight is is still cash, 0:07:17.040 --> 0:07:20.440 and so there's an opportunity to deploy and get one's 0:07:20.440 --> 0:07:23.760 portfolio more into balance, but not necessarily take away from 0:07:23.880 --> 0:07:26.679 US equities, but just build up exposures to other areas 0:07:26.720 --> 0:07:30.640 like European equities, like Chinese equities instead. And I think 0:07:30.680 --> 0:07:35.480 there's a real argument to move more into China because 0:07:35.840 --> 0:07:38.600 valuations are very attractive. We've just been waiting for that catalyst. 0:07:38.680 --> 0:07:39.720 It seems to have rived. 0:07:39.800 --> 0:07:42.480 I love this people, person after person who comes in 0:07:42.520 --> 0:07:44.920 the show get out of cash. Why are you in cash? 0:07:44.960 --> 0:07:46.040 There's so many other things. 0:07:45.840 --> 0:07:46.440 To invest in. 0:07:46.520 --> 0:07:48.880 Lock in these yields. Go to China, go to equities 0:07:48.920 --> 0:07:51.280 in the US, go to Europe. And what did we 0:07:51.320 --> 0:07:54.760 see over the past week the biggest weekly flow into 0:07:54.840 --> 0:07:58.640 cash funds into money market funds going back to March 0:07:58.680 --> 0:08:00.600 of twenty twenty three. How do you understand that? 0:08:01.160 --> 0:08:01.320 Well? 0:08:01.320 --> 0:08:03.679 I think there's certainly a lot of nervousness out there. 0:08:04.680 --> 0:08:08.600 There is an excitement about rake cuts and the opportunities 0:08:08.600 --> 0:08:12.320 that they bring, but there's also this trepidation that what 0:08:12.360 --> 0:08:15.080 if that fifty basis point cut was a crisis cut, 0:08:15.360 --> 0:08:18.600 what if the economy is on worse footing than we think, 0:08:18.920 --> 0:08:21.240 and let's face it, what if other areas of the 0:08:21.280 --> 0:08:23.600 world are on worse footing than we think. So I 0:08:23.600 --> 0:08:27.880 think there's certainly a bit of a split personality for 0:08:28.040 --> 0:08:30.200 markets right now, where there are those that are hedging 0:08:30.200 --> 0:08:31.720 their bets look at the kind of money that's going 0:08:31.720 --> 0:08:34.440 into gold as well. But at the same time, there's 0:08:34.480 --> 0:08:38.200 an excitement about equities, and I think that is rightly placed, 0:08:38.240 --> 0:08:40.760 because I do believe my base case scenario is the 0:08:40.840 --> 0:08:42.800 US does see a soft landing, and that we see 0:08:42.800 --> 0:08:46.680 a pretty brief soft landing with an economic reacceleration to follow. 0:08:46.800 --> 0:08:49.560 There's a real question here about whether that soft landing 0:08:49.600 --> 0:08:52.680 can come with a rally and everything. The sort of 0:08:52.800 --> 0:08:55.520 soft landing nirvana that supports bonds as much as it 0:08:55.559 --> 0:08:58.160 does stocks as much as it does is broadening out 0:08:58.160 --> 0:08:59.200 trade well. 0:08:59.240 --> 0:09:01.880 I think of it as almost the opposite of twenty 0:09:01.880 --> 0:09:05.800 twenty two, where virtually everything sank, and so you can 0:09:05.960 --> 0:09:09.360 have a year where you have an everything rally. You 0:09:09.400 --> 0:09:11.360 can have an everything bagel. Why can't you have an 0:09:11.360 --> 0:09:12.120 everything rally? 0:09:13.120 --> 0:09:16.679 I love that everything bagel on and everything rally well potentially, 0:09:16.679 --> 0:09:19.000 and your notes put it, the markets are still swimming 0:09:19.000 --> 0:09:21.720 in a sea of uncertainty. Out of all those uncertainties, 0:09:21.720 --> 0:09:24.280 what ranks number one for you whether or. 0:09:24.280 --> 0:09:27.439 Not the US has a soft landing. Let's face it, 0:09:28.040 --> 0:09:32.440 we're certainly getting data that tells us that the economy 0:09:32.600 --> 0:09:35.920 is in fairly good shape. But there is that fear that, 0:09:35.960 --> 0:09:38.679 because of the long and variable legs of monetary policy, 0:09:39.360 --> 0:09:44.160 that aggressive tightening cycle, that restrictive monetary policy environment catches. 0:09:43.960 --> 0:09:44.480 Up with us. 0:09:45.080 --> 0:09:49.160 And so that's why I think we follow consumer sentiments 0:09:49.160 --> 0:09:52.960 so closely, and that's why we had in reaction to 0:09:53.120 --> 0:09:56.080 the Conference Board consumer numbers the other day. But I 0:09:56.080 --> 0:09:59.480 would argue, when you actually delve into the information, once 0:09:59.480 --> 0:10:02.680 you saw where's consumers got much more negative on economy, 0:10:02.960 --> 0:10:04.840 but they still want to spend, they still want to 0:10:04.840 --> 0:10:06.120 go out to eat, they still want to go to 0:10:06.160 --> 0:10:07.760 the movies. So I think of it more as an 0:10:07.760 --> 0:10:10.840 e or economy where consumers are worried, but they're not 0:10:10.960 --> 0:10:12.560 necessarily acting on their worries. 0:10:12.640 --> 0:10:14.559 It's America, we can't share with the Conference Board a 0:10:14.559 --> 0:10:17.160 little bit later. Isn't that America? But still spending? Anxious 0:10:17.200 --> 0:10:18.160 but still spending. 0:10:18.440 --> 0:10:20.000 Well, you know, to me, this is the sort of 0:10:20.000 --> 0:10:22.760 big million dollar question everyone's been saying, you're running out 0:10:22.760 --> 0:10:26.160 of savings. Americans just go and they're reckless, ruthless, they 0:10:26.160 --> 0:10:28.679 spend anyway, they're going to borrow to spend. But actually 0:10:28.760 --> 0:10:32.040 the savings rate it was potentially highed that we previously 0:10:32.120 --> 0:10:35.640 reported in new data, So maybe people actually haven't been imprudent. 0:10:35.720 --> 0:10:38.360 Maybe Americans were smartly spending on things that matter to 0:10:38.400 --> 0:10:40.000 them and trips, and you know. 0:10:40.240 --> 0:10:42.160 They still have credit cards. So even if you're worried 0:10:42.200 --> 0:10:44.360 about losing your job, you might as well yolo, go 0:10:44.440 --> 0:10:46.840 out to dinner, go to the movies, go on a vacation, 0:10:47.120 --> 0:10:47.600 have some fun. 0:10:47.640 --> 0:10:49.520 And Donald Trump's going to camp the interest rate on 0:10:49.559 --> 0:10:51.720 the credit cards, right, potentially? What did you make of that? 0:10:51.760 --> 0:10:53.000 Can I just pick up on that? I think it's 0:10:53.040 --> 0:10:55.319 really important. We talked a lot about price controls coming 0:10:55.360 --> 0:10:57.600 out of the Harris campaign. We haven't told enough about 0:10:57.600 --> 0:10:59.520 this camping interest rates on credit cards? Can you mution 0:10:59.520 --> 0:11:01.680 what would hapen? And if we did that, we'd basically 0:11:01.720 --> 0:11:03.520 only have credit allowed for people who had high fight 0:11:03.640 --> 0:11:06.480 host scores, and I mean really really high credit scores, 0:11:06.520 --> 0:11:09.079 there'd be a lot of people locked out of credit markets. 0:11:09.120 --> 0:11:12.240 Two things, One again, is Donald Trump or Bernie Sanders 0:11:12.280 --> 0:11:15.240 brow like literally a Bernie brow because this is what 0:11:15.280 --> 0:11:17.800 the progressives have been talking about, but at a fifteen 0:11:17.800 --> 0:11:20.720 percent cap AOC and Bernie Sanders. But what was interesting 0:11:21.000 --> 0:11:24.359 so we heard from mister Moultpass was a serious immediate 0:11:24.360 --> 0:11:27.080 step back. I'm not one of those people. He doesn't 0:11:27.080 --> 0:11:28.320 really think that that should be happening. 0:11:28.360 --> 0:11:29.920 All I can say is, think about all the money 0:11:29.920 --> 0:11:31.920 in private markets. It would come up with creative ways 0:11:31.920 --> 0:11:35.200 to give credit in other or more punitive rates later 0:11:35.280 --> 0:11:37.000 in some other views. So I mean, it's not that 0:11:37.000 --> 0:11:38.400 they'd be locked out, it's just, you. 0:11:38.320 --> 0:11:39.240 Know, you really want to borrow. 0:11:39.360 --> 0:11:40.280 Come on over here, I've. 0:11:40.160 --> 0:11:40.920 Got a price for you. 0:11:41.040 --> 0:11:44.800 Don't underestimate innovation in financial markets in America. Christina is 0:11:44.800 --> 0:11:46.640 going to see it. Thanks for being here, Christina Hoop 0:11:46.720 --> 0:11:58.640 there of Investco. Marvin Low of State Street stain bullish 0:11:58.920 --> 0:12:01.400 ris in this. The FED is alive and well. The 0:12:01.440 --> 0:12:04.280 Fed's willingness to start with a fifty basis point RATECUN 0:12:04.720 --> 0:12:07.720 while remaining data dependent, essentially hands the market the option 0:12:07.840 --> 0:12:10.520 to push the Fed towards fifty on any sign of 0:12:10.600 --> 0:12:13.360 economic weakness. Smuth and Low joined us now for more, 0:12:13.480 --> 0:12:14.760 Marv and I've said this a few times out of 0:12:14.800 --> 0:12:16.320 the last week. Does it get much better than this? 0:12:18.040 --> 0:12:19.760 You know what, it's a pretty good time right now 0:12:19.800 --> 0:12:24.200 with the stories coming out of China. Certainly the global 0:12:24.320 --> 0:12:27.400 cutting cycle and discussions. 0:12:26.800 --> 0:12:29.760 That it might accelerate is just good for risk assets. 0:12:29.760 --> 0:12:31.679 And you know, let's not look that gift towards in 0:12:31.720 --> 0:12:32.880 the Mount Marvin. 0:12:32.920 --> 0:12:35.280 The mans are up, luxuries up, Chinese tech is up 0:12:35.280 --> 0:12:38.080 by almost twenty percent so far this week. We've seen 0:12:38.080 --> 0:12:40.720 this movie before you get Hitts the stimulus out of China, 0:12:40.760 --> 0:12:42.840 We rip for a little bit and then we roll over. 0:12:43.120 --> 0:12:44.120 Is it different this time? 0:12:45.320 --> 0:12:46.680 You know, it's pretty significant. 0:12:47.280 --> 0:12:50.240 Certainly, it does seem as if the central government is 0:12:50.320 --> 0:12:55.200 looking to stabilize at least the economy through the financial markets. 0:12:55.440 --> 0:12:58.040 It's a real question to us whether or not, you know, 0:12:58.120 --> 0:13:00.000 similar to whether or not Wall Street can make it 0:13:00.080 --> 0:13:02.760 way into Main Street, whether or not these actions can 0:13:03.040 --> 0:13:07.920 once again drive a more active consumer that has really 0:13:08.080 --> 0:13:12.360 had problems feeling comfortable with the economic situation there. So 0:13:12.640 --> 0:13:15.000 that's to be seen, but from a market's perspective, it 0:13:15.120 --> 0:13:16.040 certainly is supportive. 0:13:16.240 --> 0:13:18.520 There's a broader theme here, and this, I think is 0:13:18.559 --> 0:13:22.160 what really got people's attention this week, which is maybe 0:13:22.360 --> 0:13:26.240 the market underestimated just how much the FED cutting cycle 0:13:26.480 --> 0:13:28.800 would open the floodgates to the rest of the world 0:13:28.920 --> 0:13:31.920 also taking easing steps. How much is that what we're 0:13:31.960 --> 0:13:34.720 seeing and basically paving the way to a global easing 0:13:34.800 --> 0:13:38.600 cycle that really fuels more growth than people previously expected. 0:13:40.120 --> 0:13:42.520 You know what, I've always been of the thought that 0:13:43.320 --> 0:13:46.680 while everyone expected the FED to cut, it really took 0:13:47.640 --> 0:13:50.120 a view of how the cycle was going to evolve 0:13:50.240 --> 0:13:54.440 in their minds, in the fomc's minds, to get investors 0:13:54.440 --> 0:13:57.160 comfortable with how that might domino. 0:13:56.800 --> 0:13:59.079 Through the rest of the world. So, yeah, there is 0:13:59.120 --> 0:13:59.640 a bit of that. 0:13:59.679 --> 0:14:02.679 Even though everything has been you know, fairly well priced, 0:14:03.760 --> 0:14:06.720 a looser monetary policy coming out of the US just 0:14:06.840 --> 0:14:08.920 makes it a lot easier for the rest of the 0:14:08.920 --> 0:14:10.679 world to ultimately follow along. 0:14:11.120 --> 0:14:13.360 Is it now just a potential policy error waiting for 0:14:13.400 --> 0:14:16.840 the ECB not to hike, not to cut rates in 0:14:16.840 --> 0:14:20.000 tandem with the FED more aggressively, just simply because they 0:14:20.000 --> 0:14:23.160 have inflation below two percent, they have growth rolling over, 0:14:23.280 --> 0:14:25.840 They've got a whole host of potential challenges. There is 0:14:25.920 --> 0:14:28.600 no argument for them to keep rates where they are. 0:14:28.640 --> 0:14:29.560 Am I missing something? 0:14:30.640 --> 0:14:32.400 Yeah? I agree with you completely. 0:14:33.360 --> 0:14:35.520 What is going to be interesting, I think as we 0:14:35.600 --> 0:14:38.560 go into next year, our potential changes in our star 0:14:38.680 --> 0:14:41.880 kind of if you will, this neutral rate where in 0:14:41.960 --> 0:14:45.480 Europe it looks like there are star could potentially be 0:14:45.520 --> 0:14:47.400 lower than what it was before the pandemic. 0:14:47.600 --> 0:14:48.360 Where in the us. 0:14:48.800 --> 0:14:50.880 We're still debating whether or not kind of this two 0:14:50.920 --> 0:14:53.320 and seven eighth neutral rate, which is, you know, almost 0:14:53.320 --> 0:14:57.360 fifty basis points above where it was before. 0:14:57.240 --> 0:15:01.240 The pandemic started, makes sense, you know, does it need 0:15:01.280 --> 0:15:02.400 to be even higher than that? 0:15:02.480 --> 0:15:06.280 And that's kind of the Monte policy diversion, a dispersion 0:15:06.360 --> 0:15:08.760 that we had been expecting really for the last year 0:15:08.880 --> 0:15:11.040 year and a half, which is now finally playing out. 0:15:11.240 --> 0:15:14.480 Marvin leaving the ECB to one side. How promising is 0:15:14.520 --> 0:15:18.240 it for Europe basically only dependent on how well China 0:15:19.040 --> 0:15:20.760 goes with these new stimulus measures. 0:15:22.040 --> 0:15:23.720 I mean, I mean, for sure we have to look 0:15:23.840 --> 0:15:27.640 underneath the covers there and wonder what that economy looks like. 0:15:28.520 --> 0:15:31.400 It's again part of that r Star discussion I'm talking about. 0:15:31.640 --> 0:15:35.640 It's Germany's really real inability to kind of get out 0:15:35.680 --> 0:15:39.520 of its dulgrums. I do think it is a sick 0:15:39.760 --> 0:15:43.840 type of economy that takes a lot more than just 0:15:44.160 --> 0:15:46.160 this one sugar dose. 0:15:46.200 --> 0:15:48.040 It'll help, for sure, but there's still a lot of 0:15:48.080 --> 0:15:49.080 underlying concerns. 0:15:49.480 --> 0:15:52.040 How difficult does understand the German economy when you see 0:15:52.040 --> 0:15:54.240 the headlines coming out of say the auto industry, but 0:15:54.280 --> 0:15:56.040 then you look at where the decks has been trading. 0:15:57.680 --> 0:15:59.680 Yeah, I mean, I mean, for sure, again it's the 0:15:59.720 --> 0:16:03.640 separate between Wall Street and Main Street to a certain degree. 0:16:04.440 --> 0:16:08.920 You know, Germany has really benefited from a pre pandemic 0:16:09.000 --> 0:16:12.440 world which was much different from a geopolitical perspective, which is, 0:16:12.480 --> 0:16:15.120 you know, certainly impacting Europe a bit more than it 0:16:15.200 --> 0:16:17.560 might be the US economy. And we really need to 0:16:17.600 --> 0:16:22.040 think through that as a potential headwind as we go 0:16:22.240 --> 0:16:27.080 into an environment where geopolitics potentially becomes a much higher 0:16:27.120 --> 0:16:30.520 headline concern than it really had been in the you know, 0:16:30.600 --> 0:16:32.040 mid twenty tens, if you will. 0:16:32.120 --> 0:16:36.160 Okay, putting aside potential geologic political shocks, you are potentially 0:16:36.520 --> 0:16:38.400 much more bullish than you were, say a week ago. 0:16:38.560 --> 0:16:39.920 Is that an accurate characterization? 0:16:41.600 --> 0:16:44.080 No, no, no, I mean I really did feel that 0:16:44.120 --> 0:16:49.160 the cutting cycle was something that was underappreciated. You know, 0:16:49.240 --> 0:16:53.160 I do think that the tailwind globally is pretty significant. 0:16:53.200 --> 0:16:55.760 So you know, I've been I've liked stocks for the 0:16:55.800 --> 0:16:56.640 better part of the summer. 0:16:56.840 --> 0:16:58.520 Okay, so you've been bullish for a while, and that's 0:16:58.520 --> 0:17:00.000 what a lot of people have been saying. They're getting 0:17:00.080 --> 0:17:03.240 more bullish as the cutting cycle goes on. Maybe you've 0:17:03.240 --> 0:17:05.520 always been this bullish. People are saying, get out of cash. 0:17:05.560 --> 0:17:07.639 It is the time to start going into other assets, 0:17:07.680 --> 0:17:11.520 into stocks, into longer term bonds. Yesterday we got data 0:17:11.560 --> 0:17:16.760 from ICI showing the biggest weekly inflow into money market funds. 0:17:16.920 --> 0:17:19.399 Jerome Schinder yesterday of PIMCO is telling us this is 0:17:19.440 --> 0:17:20.960 not really going to be the best place to be. 0:17:21.280 --> 0:17:24.400 It is actually accelerating the flows into these asset classes. 0:17:24.680 --> 0:17:27.960 Six point four trillion dollars now in money market funds. 0:17:27.960 --> 0:17:30.200 How do you explain the fact that people are still 0:17:30.280 --> 0:17:33.439 rushing to cash at a time where you're hearing the 0:17:33.520 --> 0:17:34.920 increasing cries to get out. 0:17:36.320 --> 0:17:38.520 Yeah, you know what. We were having that exact same 0:17:38.520 --> 0:17:39.960 discussion on the desk yesterday. 0:17:40.840 --> 0:17:43.040 There are a lot of things that don't necessarily package 0:17:43.080 --> 0:17:46.840 well in terms of the flows and liquidity. I do 0:17:46.920 --> 0:17:49.720 think it speaks to the amount of liquidity that remains 0:17:49.760 --> 0:17:53.320 in the system, which ultimately supportive until we really start 0:17:53.359 --> 0:17:56.800 to worry about liquidity, if you will. At the same 0:17:56.840 --> 0:18:01.080 time that that's happening, we've got this Treasury conference that's 0:18:01.119 --> 0:18:03.120 going on at the New York Fed where they're talking 0:18:03.160 --> 0:18:07.199 about thinking what the liquidity situation will look like as 0:18:07.280 --> 0:18:10.320 QT kind of goes on. So for the moment, it 0:18:10.440 --> 0:18:12.560 is a tailwind. There is a lot of liquidity in 0:18:12.600 --> 0:18:15.119 the system. I think it speaks to the growth that 0:18:15.160 --> 0:18:17.760 we have in the US and that potentially either supports 0:18:17.800 --> 0:18:19.560 retail and or supports the market. 0:18:19.800 --> 0:18:23.360 But QT will continue to operate in the background given. 0:18:23.080 --> 0:18:25.320 That there's so much liquidity out there, and we do 0:18:25.440 --> 0:18:28.040 need to think through into the second half of twenty 0:18:28.119 --> 0:18:31.000 twenty five, which feels like a lifetime away, when maybe 0:18:31.040 --> 0:18:34.880 all of these talmans we have really start to die. 0:18:34.720 --> 0:18:37.080 Down twenty twenty five, I think we've got to talk 0:18:37.119 --> 0:18:40.080 about the policy anxiety around the election. Mavin. Do you 0:18:40.119 --> 0:18:42.600 think we can avoid that kind of gambler in the 0:18:42.600 --> 0:18:44.760