1 00:00:01,360 --> 00:00:04,120 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along 2 00:00:04,120 --> 00:00:06,200 Speaker 1: with my co host of Bonnie Quinn. Every business day 3 00:00:06,240 --> 00:00:10,360 Speaker 1: we bring you interviews from CEO, market pros and Bloomberg experts, 4 00:00:10,400 --> 00:00:13,600 Speaker 1: along with essential market moving news. Find the Bloomberg Markets 5 00:00:13,600 --> 00:00:17,000 Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts, 6 00:00:17,000 --> 00:00:21,160 Speaker 1: and on Bloomberg dot com. Well, it is election day 7 00:00:21,239 --> 00:00:24,400 Speaker 1: and investors have their various scenarios for how this could 8 00:00:24,440 --> 00:00:27,680 Speaker 1: play out and how different outcomes could impact the markets. 9 00:00:27,680 --> 00:00:31,520 Speaker 1: We're going to speak with Christina Hooper, chief Global market 10 00:00:31,560 --> 00:00:35,280 Speaker 1: strategists for Investco. They have over one trillion dollars in 11 00:00:35,320 --> 00:00:39,040 Speaker 1: assets under management, so they're in all of the markets. Christina, 12 00:00:39,080 --> 00:00:40,959 Speaker 1: thanks so much for joining us. Again, we always appreciate 13 00:00:41,240 --> 00:00:44,320 Speaker 1: having you on here. What kind of what's your base 14 00:00:44,400 --> 00:00:48,279 Speaker 1: case scenario for when we wake up tomorrow morning? How 15 00:00:48,320 --> 00:00:51,519 Speaker 1: are you thinking that this might play out? Well, I 16 00:00:51,600 --> 00:00:53,519 Speaker 1: have to say, and Paul, it's great to be with you. 17 00:00:53,600 --> 00:00:55,959 Speaker 1: Thank you for having me. I have to say that 18 00:00:56,120 --> 00:01:00,720 Speaker 1: market strategists learn along early in their careers never to 19 00:01:00,800 --> 00:01:05,479 Speaker 1: prognosticate about elections, So I have no base case scenario 20 00:01:05,600 --> 00:01:08,560 Speaker 1: in terms of the election outcome. All I have is 21 00:01:08,560 --> 00:01:12,560 Speaker 1: is if this happens, then we expect this to happen. 22 00:01:12,959 --> 00:01:15,400 Speaker 1: And so if we were to see a Biden sweep, 23 00:01:15,760 --> 00:01:20,640 Speaker 1: we would expect to see UH some probably the largest 24 00:01:20,680 --> 00:01:25,200 Speaker 1: fiscal stimulus package of any potential scenario. Um. But we 25 00:01:25,240 --> 00:01:30,480 Speaker 1: would also expect to see more controls on the spread 26 00:01:30,520 --> 00:01:33,560 Speaker 1: of the virus UH. So we would expect more of 27 00:01:33,600 --> 00:01:36,880 Speaker 1: the cyclical parts of the market to perform well. If 28 00:01:36,880 --> 00:01:40,000 Speaker 1: we were to see a Trump UH win, we would 29 00:01:40,000 --> 00:01:42,920 Speaker 1: assume he would keep the Senate as well, um, and 30 00:01:43,000 --> 00:01:46,200 Speaker 1: we would expect some kind of a relief rally for 31 00:01:46,280 --> 00:01:50,400 Speaker 1: the negative assets associated with Joe Biden. So, for example, 32 00:01:50,640 --> 00:01:53,720 Speaker 1: traditional energy would be one that would probably come under 33 00:01:53,720 --> 00:01:55,920 Speaker 1: pressure if Biden were to win. And then, of course, 34 00:01:55,960 --> 00:01:58,240 Speaker 1: if there is a contested result of some kind, we 35 00:01:58,240 --> 00:02:02,160 Speaker 1: would expect gold and treasuries to perform well, and perhaps 36 00:02:02,240 --> 00:02:06,680 Speaker 1: the Japanese Yet so UM, not prognosticating on the election, 37 00:02:06,880 --> 00:02:10,480 Speaker 1: just have our scenarios laid out for what happens in 38 00:02:10,520 --> 00:02:13,760 Speaker 1: the case of a particular election outcome. I just want 39 00:02:13,760 --> 00:02:15,639 Speaker 1: to point out a headline that costed the Bloomberg. In 40 00:02:15,639 --> 00:02:18,720 Speaker 1: the last few minutes, the US early voting topped one 41 00:02:18,919 --> 00:02:22,080 Speaker 1: hundred million ballots according to the latest data from the 42 00:02:22,080 --> 00:02:25,240 Speaker 1: Elections Project, So that's pretty phenomenal, the first time ever 43 00:02:25,400 --> 00:02:29,679 Speaker 1: that a hundred million ballots have happened early Christina. Is 44 00:02:29,720 --> 00:02:32,600 Speaker 1: there consensus? So there may not be consensus on what 45 00:02:32,760 --> 00:02:37,160 Speaker 1: percentage you know, chances this outcome happens, or what presented 46 00:02:37,280 --> 00:02:40,480 Speaker 1: chance this outcome happens, but is there a consensus on 47 00:02:40,880 --> 00:02:44,359 Speaker 1: how the markets will react in any given scenario. Well, 48 00:02:44,360 --> 00:02:47,760 Speaker 1: I think there's a content consensus that in a contested election, 49 00:02:48,200 --> 00:02:51,520 Speaker 1: that would be a worst case scenario for markets. As 50 00:02:51,520 --> 00:02:54,640 Speaker 1: we know, markets don't like any form of uncertainty, and 51 00:02:54,680 --> 00:02:59,200 Speaker 1: that of course includes and is especially the case in 52 00:02:59,280 --> 00:03:03,160 Speaker 1: presidential elections. So that would be an environment where we'd 53 00:03:03,240 --> 00:03:06,080 Speaker 1: likely see a stock market sell off. In fact, we 54 00:03:06,120 --> 00:03:09,720 Speaker 1: could go back to two thousand sixteen and get a 55 00:03:09,760 --> 00:03:13,200 Speaker 1: little taste of what we might see in with a 56 00:03:13,200 --> 00:03:17,880 Speaker 1: contest election, because recall that night, the conventional wisdom was 57 00:03:18,200 --> 00:03:22,040 Speaker 1: that markets were surprised and disappointed with a Trump win 58 00:03:22,520 --> 00:03:25,280 Speaker 1: um and that's why stock sold off. I would argue 59 00:03:25,320 --> 00:03:28,600 Speaker 1: that in fact what happened was that markets were nervous 60 00:03:28,600 --> 00:03:32,560 Speaker 1: because Hillary Clinton didn't concede on the night of the election. 61 00:03:32,639 --> 00:03:35,480 Speaker 1: She didn't actually give her concessions speech until the next morning, 62 00:03:35,760 --> 00:03:38,040 Speaker 1: so we got a taste of that fear of a 63 00:03:38,040 --> 00:03:41,920 Speaker 1: contested election, and we saw stocks sell off. So that's 64 00:03:42,040 --> 00:03:44,120 Speaker 1: I think what is most likely if we see a 65 00:03:44,160 --> 00:03:47,760 Speaker 1: contested election this time around. You know, there's still so 66 00:03:47,840 --> 00:03:51,400 Speaker 1: much uncertainty I guess around this election at this stage. 67 00:03:51,400 --> 00:03:54,920 Speaker 1: Are you surprised that we're seeing the stock market behave 68 00:03:55,000 --> 00:03:58,760 Speaker 1: the way it is today? Up two and I am surprised, 69 00:03:59,040 --> 00:04:01,720 Speaker 1: And that sets to me that the stock market stock 70 00:04:01,760 --> 00:04:06,680 Speaker 1: market is expecting a decisive victory. Um, it might be disappointed, 71 00:04:06,680 --> 00:04:08,960 Speaker 1: but that's certainly the way it's behaving right now, and 72 00:04:09,000 --> 00:04:10,640 Speaker 1: I'm shocked that there doesn't seem to be a lot 73 00:04:10,640 --> 00:04:15,920 Speaker 1: of hesitation with that. But sometimes the stock market knows better. Christina, 74 00:04:15,960 --> 00:04:18,320 Speaker 1: how long do you wait before you put on a 75 00:04:18,440 --> 00:04:21,160 Speaker 1: trade in the event the outcome is clear? So in 76 00:04:21,200 --> 00:04:23,800 Speaker 1: the event that we know what's going to happen in January, 77 00:04:25,000 --> 00:04:26,840 Speaker 1: do you put one on immediately? Do you do wait 78 00:04:26,960 --> 00:04:29,880 Speaker 1: until January? Well, I had to give the caveat that. 79 00:04:29,960 --> 00:04:36,120 Speaker 1: We always encourage long term investing mindset because most investors 80 00:04:36,120 --> 00:04:38,680 Speaker 1: had a long time horizon, But the reality is that 81 00:04:38,720 --> 00:04:41,120 Speaker 1: if we go back in history, what we often see 82 00:04:41,200 --> 00:04:46,920 Speaker 1: is moved made in advance of an administration coming into office. UM. 83 00:04:47,240 --> 00:04:49,480 Speaker 1: It's really funny, but a lot of the things you 84 00:04:49,480 --> 00:04:53,080 Speaker 1: would expect to see when a president is in office 85 00:04:53,400 --> 00:04:57,480 Speaker 1: doesn't happen. It's anticipated, and there are moves made before 86 00:04:57,520 --> 00:05:00,360 Speaker 1: they come in UM. But in fact the result is 87 00:05:00,440 --> 00:05:02,440 Speaker 1: quite different. And I'll give you a perfect example. There 88 00:05:02,480 --> 00:05:06,440 Speaker 1: was so much nervousness and apprehension around healthcare stocks before 89 00:05:06,960 --> 00:05:10,719 Speaker 1: UH the Obama administration came into office, and in fact 90 00:05:10,760 --> 00:05:12,840 Speaker 1: what we saw was that healthcare was one of the 91 00:05:12,880 --> 00:05:16,960 Speaker 1: top three performing sectors for several years during UH President 92 00:05:16,960 --> 00:05:19,719 Speaker 1: Obama's time in office. Similarly, there was a lot of 93 00:05:19,760 --> 00:05:25,000 Speaker 1: excitement about energy in advance of President Trump coming into office. 94 00:05:25,360 --> 00:05:28,160 Speaker 1: There were a lot of policies that he was promoting 95 00:05:28,160 --> 00:05:31,520 Speaker 1: that would be supportive of of traditional energy, of fossil fuels, 96 00:05:31,560 --> 00:05:33,840 Speaker 1: and in fact, energy over the last several years has 97 00:05:33,880 --> 00:05:37,080 Speaker 1: been the worst performing sector in the SMP five. So 98 00:05:37,200 --> 00:05:39,880 Speaker 1: quite often those moves we see are made in advance. 99 00:05:40,360 --> 00:05:43,000 Speaker 1: It's akin to um, buy on the rumor sell on 100 00:05:43,040 --> 00:05:46,320 Speaker 1: the news. Remind us why healthcare didn't perform so well 101 00:05:46,400 --> 00:05:49,280 Speaker 1: was that the market didn't anticipate that the President would 102 00:05:49,279 --> 00:05:51,280 Speaker 1: be able to get the Affordable Care Act through, or 103 00:05:51,320 --> 00:05:53,719 Speaker 1: that the Affordable Care Act would be bad somehow for 104 00:05:53,760 --> 00:05:56,760 Speaker 1: healthcare stocks. It was concerned that the Affordable Care Act 105 00:05:56,800 --> 00:05:59,200 Speaker 1: would be bad for a lot of healthcare stocks, and 106 00:05:59,279 --> 00:06:02,080 Speaker 1: that's why we saw a lot of even as it 107 00:06:02,160 --> 00:06:05,920 Speaker 1: expanded the base of customers it did. Um, there were 108 00:06:06,080 --> 00:06:11,960 Speaker 1: particular concerns about specific industries, and we could very well 109 00:06:12,000 --> 00:06:14,479 Speaker 1: see that again. And there are concerns today about what 110 00:06:14,560 --> 00:06:18,840 Speaker 1: might happen to pharmaceuticals uh in a in a Biden administration, 111 00:06:19,120 --> 00:06:21,800 Speaker 1: so we might very well see something akin to that 112 00:06:21,960 --> 00:06:24,440 Speaker 1: now as well. Um. But again I have to say 113 00:06:24,520 --> 00:06:27,880 Speaker 1: that quite often these traits are relatively short lived, and 114 00:06:27,960 --> 00:06:31,920 Speaker 1: when a president actually does take office, we can see 115 00:06:31,920 --> 00:06:36,320 Speaker 1: a very different sector performance than we would have expected 116 00:06:36,320 --> 00:06:39,719 Speaker 1: in what would seem intuitive. Such a great reminder, because 117 00:06:40,080 --> 00:06:42,600 Speaker 1: it can be hard sometimes remember exactly what happened four 118 00:06:42,680 --> 00:06:45,640 Speaker 1: years ago, and and and before that and after that. 119 00:06:45,800 --> 00:06:50,880 Speaker 1: Christina Hooper is investcos Chief Global Market Strategists, reminding us 120 00:06:50,880 --> 00:06:54,279 Speaker 1: there that all sorts of sectors have potential moves ahead 121 00:06:54,279 --> 00:06:58,800 Speaker 1: of them. Time now to welcome somebody who knows a 122 00:06:58,800 --> 00:07:03,040 Speaker 1: lot about elections, politics, and this landscape in particular. Wendy 123 00:07:03,320 --> 00:07:07,320 Speaker 1: Schiller joins us. She of Brown University, of course, and 124 00:07:07,360 --> 00:07:10,880 Speaker 1: a friend to the program and to the station, really 125 00:07:11,000 --> 00:07:14,280 Speaker 1: chair of political science again at Brown University. Wendy, what 126 00:07:14,480 --> 00:07:18,640 Speaker 1: is your base case now, Hi, you just get right 127 00:07:18,760 --> 00:07:22,600 Speaker 1: to it. I think here's what I mean. I I 128 00:07:23,080 --> 00:07:26,680 Speaker 1: think we'll we'll know from some congressional races. I think, 129 00:07:26,760 --> 00:07:30,520 Speaker 1: signaling earlier than even the presidential races. We know that 130 00:07:30,560 --> 00:07:33,000 Speaker 1: there's a lot of people who are elected in what 131 00:07:33,000 --> 00:07:36,640 Speaker 1: we call competitive swing districts, like Virginia, for example. We 132 00:07:36,680 --> 00:07:39,680 Speaker 1: have Illinois. We have a couple of races in Texas 133 00:07:39,800 --> 00:07:42,480 Speaker 1: that look really tight and are surprisingly competitive. We have 134 00:07:42,480 --> 00:07:44,960 Speaker 1: a couple of Minnesota. You know, if things start to 135 00:07:45,000 --> 00:07:49,040 Speaker 1: swing in congressional districts sooner for the Democrats, then you 136 00:07:49,080 --> 00:07:50,840 Speaker 1: start to think, okay, maybe Biden will have a very 137 00:07:50,840 --> 00:07:54,120 Speaker 1: good night. But you know, we'll know about Florida, We'll 138 00:07:54,160 --> 00:07:56,800 Speaker 1: know about North Carolina, we'll know about Arizona, and we'll 139 00:07:56,800 --> 00:08:00,320 Speaker 1: know about Georgia probably but before midnight tonight and all 140 00:08:00,360 --> 00:08:03,840 Speaker 1: of those swing for Trump. If Trump looks really healthy 141 00:08:03,920 --> 00:08:06,000 Speaker 1: in those states and looks like he could win, then 142 00:08:06,040 --> 00:08:09,280 Speaker 1: I think things get very very dicey for Biden. So 143 00:08:09,440 --> 00:08:11,440 Speaker 1: that's a big sort of romina. And Biden only has 144 00:08:11,440 --> 00:08:13,400 Speaker 1: to win one of those states, you know, one of 145 00:08:13,400 --> 00:08:15,840 Speaker 1: those four states, or look like he's in the lead, 146 00:08:16,160 --> 00:08:18,600 Speaker 1: in a considerable lead in one of those states for 147 00:08:18,680 --> 00:08:20,720 Speaker 1: him to sort of have a more relaxed night. But 148 00:08:20,800 --> 00:08:22,560 Speaker 1: if he if Trump wins all of them or looks 149 00:08:22,560 --> 00:08:23,840 Speaker 1: like he's going to win all of them, I think 150 00:08:23,880 --> 00:08:25,960 Speaker 1: that that tells us that this sort of blue wave 151 00:08:26,040 --> 00:08:30,440 Speaker 1: we thought might emerge isn't going to emerge the same way. So, Professor, 152 00:08:30,440 --> 00:08:32,240 Speaker 1: how do you think the Senate will shake out? Is 153 00:08:32,280 --> 00:08:34,480 Speaker 1: there in fact, you know, the markets are kind of 154 00:08:34,520 --> 00:08:37,640 Speaker 1: suggesting here today that a blue wave may in fact, 155 00:08:38,120 --> 00:08:40,120 Speaker 1: uh be in the cards. How do you think that 156 00:08:40,200 --> 00:08:44,320 Speaker 1: might go in the Senate? That that that's a great question, Paul, 157 00:08:44,400 --> 00:08:46,160 Speaker 1: because you think about the Senate and you think, you know, 158 00:08:46,200 --> 00:08:48,480 Speaker 1: Mitch McConnell is totally immune this time. You would have 159 00:08:48,480 --> 00:08:50,520 Speaker 1: thought if there's a big blue wave, you know, the 160 00:08:50,559 --> 00:08:53,680 Speaker 1: guy has really been the poster boy for the campaign 161 00:08:53,679 --> 00:08:56,440 Speaker 1: against the Republicans controlling the Senate in Mitch McConnell, and 162 00:08:56,440 --> 00:08:58,880 Speaker 1: he's gonna probably breathe to re election. So I'm a 163 00:08:58,880 --> 00:09:01,560 Speaker 1: little suspicious of that big blue way for the Senate. 164 00:09:01,840 --> 00:09:03,960 Speaker 1: Iowa looks neck and neck. You know, we had a 165 00:09:03,960 --> 00:09:06,880 Speaker 1: recent poll that's very credible that looks like Johnny Earnest 166 00:09:06,920 --> 00:09:09,040 Speaker 1: can pull it out and stay. You know, if cal 167 00:09:09,120 --> 00:09:13,280 Speaker 1: Cunningham can win in North Carolina, that suggests probably that 168 00:09:13,400 --> 00:09:16,280 Speaker 1: the Democrats might get to fifty one if they can 169 00:09:16,320 --> 00:09:19,280 Speaker 1: win Maine as well. They're probably gonna win Arizona, probably 170 00:09:19,280 --> 00:09:22,240 Speaker 1: gonna win Colorado and lose Alabama. So they're looking at 171 00:09:22,280 --> 00:09:26,360 Speaker 1: probably minimally of fifty forty nine Republican or a fifty 172 00:09:26,400 --> 00:09:30,040 Speaker 1: fifty fifty nine Democrat. So I think that's where this's 173 00:09:30,160 --> 00:09:32,719 Speaker 1: you know, we don't know, and I think that's where 174 00:09:32,760 --> 00:09:35,600 Speaker 1: North Carolina becomes so important, even even if we don't 175 00:09:35,600 --> 00:09:37,959 Speaker 1: know Biden Trump. You know, if cal Cunningham looks like 176 00:09:37,960 --> 00:09:40,480 Speaker 1: he's really gonna win that race, that suggests better things 177 00:09:40,480 --> 00:09:43,439 Speaker 1: for the Democrats across the board for the Senate. Say 178 00:09:43,520 --> 00:09:45,400 Speaker 1: some of that again, When do you say Arizona is 179 00:09:45,440 --> 00:09:47,920 Speaker 1: definitely going to go Democrats? In Texas? What do you 180 00:09:47,920 --> 00:09:51,200 Speaker 1: say about Texas? Oh? No, no, So I think Arizona 181 00:09:51,280 --> 00:09:54,880 Speaker 1: from Mark Kelly, I think he's been polling very consistently 182 00:09:54,920 --> 00:09:57,560 Speaker 1: ahead of Martha mc sally. But you can imagine let's 183 00:09:57,559 --> 00:10:00,120 Speaker 1: say people voting for Mark Kelly, a former AST or 184 00:10:00,120 --> 00:10:03,320 Speaker 1: not UM, you know, and not voting for Joe Biden, 185 00:10:03,480 --> 00:10:05,680 Speaker 1: you know, voting for Kelly because they want him over 186 00:10:05,720 --> 00:10:08,280 Speaker 1: Martha McSally, and then voting for Trump in Arizona. So 187 00:10:08,320 --> 00:10:10,360 Speaker 1: you can see the Democrats winning the Senate in Arizona 188 00:10:10,400 --> 00:10:14,000 Speaker 1: but not winning the presidential race. UM. And Texas is 189 00:10:14,120 --> 00:10:17,360 Speaker 1: you know, shocking, right, The turnout in Texas has been 190 00:10:17,360 --> 00:10:21,359 Speaker 1: absolutely shocking, and but it looks like John Cornyn's comfortably 191 00:10:21,400 --> 00:10:25,600 Speaker 1: ahead of Edguard that the challenger there. But I think 192 00:10:25,600 --> 00:10:28,120 Speaker 1: that the issue is that Trump is only basically one 193 00:10:28,160 --> 00:10:30,760 Speaker 1: point ahead in Texas, which is just you know, if 194 00:10:30,800 --> 00:10:33,640 Speaker 1: you think about politics, just stunning. Same with Georgia, and 195 00:10:33,679 --> 00:10:36,839 Speaker 1: Georgia will be interesting because the dude does not get 196 00:10:37,480 --> 00:10:41,240 Speaker 1: or more against as off. Then you've got to runoff 197 00:10:41,240 --> 00:10:44,800 Speaker 1: elections in Georgia in January, and I think that's really 198 00:10:44,840 --> 00:10:48,000 Speaker 1: going to be some interesting voting dynamics. So it's possible 199 00:10:48,440 --> 00:10:51,400 Speaker 1: the Senate Democrats could ultimately end up with a fifty 200 00:10:51,400 --> 00:10:53,720 Speaker 1: one or fifty two majority. But I still think it's 201 00:10:53,760 --> 00:10:56,320 Speaker 1: a bit of a lung shop. So, Professor, if the 202 00:10:56,320 --> 00:11:01,120 Speaker 1: presidential election becomes contested, what is you're kind of base 203 00:11:01,240 --> 00:11:05,080 Speaker 1: case for how it may play out. I think we 204 00:11:05,080 --> 00:11:08,320 Speaker 1: could be faced with an unprecedented historic situation. I think, 205 00:11:08,559 --> 00:11:11,800 Speaker 1: you know, if we have a tie, For example, if 206 00:11:11,800 --> 00:11:14,800 Speaker 1: in the electoral College in December it's actually a tie, 207 00:11:14,840 --> 00:11:17,839 Speaker 1: it goes to the newly elected House, which is expected 208 00:11:17,840 --> 00:11:22,920 Speaker 1: to be more democratic. However, the Republicans still control more 209 00:11:23,040 --> 00:11:26,600 Speaker 1: votes in state delegations than the Democrats, and that probably 210 00:11:26,640 --> 00:11:29,840 Speaker 1: isn't going to change. So you could conceivably have literally 211 00:11:29,880 --> 00:11:32,840 Speaker 1: the House electing or re electing President Trump. But in 212 00:11:32,880 --> 00:11:36,560 Speaker 1: the Senate, if it's nine with the new Senate and 213 00:11:36,600 --> 00:11:40,320 Speaker 1: it's new Democrats, then they may elect Kalma Harris as 214 00:11:40,400 --> 00:11:43,200 Speaker 1: vice president. I mean, it's really quite I mean it's stunning. 215 00:11:43,320 --> 00:11:45,680 Speaker 1: It's a really stunning thing. So I think so many 216 00:11:45,679 --> 00:11:48,400 Speaker 1: things have changed already in whether Trump gets re elected 217 00:11:48,480 --> 00:11:50,880 Speaker 1: or not, as obviously monumental, but even if he gets 218 00:11:50,920 --> 00:11:53,240 Speaker 1: re elected, I think the Democrats have shown they know 219 00:11:53,240 --> 00:11:55,200 Speaker 1: how to mobilize voters, and I think they've shown that 220 00:11:55,240 --> 00:11:57,680 Speaker 1: some of these states have changed a lot in terms 221 00:11:57,679 --> 00:12:00,880 Speaker 1: of demographics, and they are going to be more competitive 222 00:12:00,880 --> 00:12:04,600 Speaker 1: moving forward, which changes the nature of politics going too, 223 00:12:04,880 --> 00:12:07,120 Speaker 1: because we know that politicians look at the next election 224 00:12:07,200 --> 00:12:09,520 Speaker 1: the minute the selection is over, and so when we 225 00:12:09,520 --> 00:12:11,280 Speaker 1: start to think about what the balance of power might 226 00:12:11,280 --> 00:12:13,560 Speaker 1: be in the Senate in the House in two these 227 00:12:13,600 --> 00:12:16,680 Speaker 1: games the Democrats appear to be making among voters in 228 00:12:16,720 --> 00:12:19,800 Speaker 1: these states changes a lot of the dynamics, which will 229 00:12:19,800 --> 00:12:22,560 Speaker 1: probably change some of the policies coming out of Congress. Yeah. 230 00:12:22,600 --> 00:12:24,720 Speaker 1: I mean it's really the African American vote, right, Wendy. 231 00:12:24,800 --> 00:12:28,120 Speaker 1: And how much more of that we'll see. We're already seeing, 232 00:12:28,280 --> 00:12:31,679 Speaker 1: you know, a lot more engagement. Yeah, So, I think 233 00:12:31,679 --> 00:12:33,960 Speaker 1: African American voter has always been key. You know, North 234 00:12:33,960 --> 00:12:37,680 Speaker 1: Carolina and Georgia had about sixty African American turnout in 235 00:12:38,840 --> 00:12:41,679 Speaker 1: it wasn't enough because those numbers were not hit in 236 00:12:41,679 --> 00:12:45,760 Speaker 1: in Wisconsin, Michigan, and Pennsylvania among African American voters, and 237 00:12:45,800 --> 00:12:47,400 Speaker 1: they and you know, they may or may not get there. 238 00:12:47,400 --> 00:12:49,880 Speaker 1: If they get there, I think Biden wins relatively easily. 239 00:12:50,160 --> 00:12:53,720 Speaker 1: But what's interesting is suburban white women of all educational 240 00:12:53,800 --> 00:12:56,720 Speaker 1: levels seem to be really vehemently at the moment against 241 00:12:56,760 --> 00:12:59,320 Speaker 1: Trump and the polls, and it could be that instead 242 00:12:59,360 --> 00:13:01,920 Speaker 1: of the back vote really being key in the Midwest, 243 00:13:02,120 --> 00:13:04,480 Speaker 1: it ends up being white women, which would be really 244 00:13:04,480 --> 00:13:08,520 Speaker 1: an interesting shift. You know, a mirror eighteen when white 245 00:13:08,520 --> 00:13:11,080 Speaker 1: the majority of white women voted for Democratic candidates. But 246 00:13:11,160 --> 00:13:14,280 Speaker 1: it would change the nature of the Democratic coalition if 247 00:13:14,320 --> 00:13:16,560 Speaker 1: that were the deciding factor. So that's what I'm looking for. 248 00:13:16,600 --> 00:13:19,760 Speaker 1: I'm looking for a turnout, particularly in particular counties in 249 00:13:19,840 --> 00:13:21,880 Speaker 1: Michigan where we still have a lot of people are 250 00:13:21,880 --> 00:13:25,000 Speaker 1: going to vote in person, and certainly in Pennsylvania. Wendy 251 00:13:25,040 --> 00:13:26,920 Speaker 1: were really out of time. But I am desperate to 252 00:13:26,920 --> 00:13:30,120 Speaker 1: ask you, given the amount of of of judges at 253 00:13:30,120 --> 00:13:32,160 Speaker 1: the state level made us be level and and and 254 00:13:32,200 --> 00:13:35,360 Speaker 1: obviously federal level that the president has overseen get on 255 00:13:35,400 --> 00:13:37,360 Speaker 1: the court, does that give him an advantage in any 256 00:13:37,360 --> 00:13:41,360 Speaker 1: court cases? It may, although you saw in Texas the 257 00:13:41,400 --> 00:13:44,040 Speaker 1: Texas State Supreme Court refused to throw out a hundred 258 00:13:44,280 --> 00:13:47,080 Speaker 1: seven thousands in ballots and Harris County Democratic County and 259 00:13:47,360 --> 00:13:50,880 Speaker 1: George W. Bush judge just yesterday a federal judge, a 260 00:13:50,960 --> 00:13:53,720 Speaker 1: court judge also refused to throw those ballots out. So 261 00:13:53,800 --> 00:13:55,400 Speaker 1: I don't know that you're going to see the kind 262 00:13:55,400 --> 00:13:58,080 Speaker 1: of rulings that Trump expects to sort of throw out 263 00:13:58,160 --> 00:14:02,600 Speaker 1: hundreds of thousands of ballots that were cast, presumably for Democrats. Wendy, 264 00:14:02,600 --> 00:14:04,400 Speaker 1: thank you so much for joining us. We appreciate we 265 00:14:04,440 --> 00:14:06,880 Speaker 1: know you're busy today on this election day. Wendy Schiller, 266 00:14:07,320 --> 00:14:10,439 Speaker 1: chair of the Political Science department at Brown University, located 267 00:14:10,440 --> 00:14:14,199 Speaker 1: in Providence, Rhode Island, really appreciate you coming on. And Vanni, 268 00:14:14,280 --> 00:14:17,080 Speaker 1: It's gonna be a fascinating day of fascinating evening and 269 00:14:17,080 --> 00:14:19,760 Speaker 1: I wonder what we're gonna be talking about tomorrow, but 270 00:14:20,080 --> 00:14:25,600 Speaker 1: we will see. Well, it is a decidedly risk on 271 00:14:25,760 --> 00:14:28,640 Speaker 1: day today. As Greg Jarrod was just reporting equity markets 272 00:14:28,680 --> 00:14:32,040 Speaker 1: up over two bonds selling off here, let's get a 273 00:14:32,080 --> 00:14:34,960 Speaker 1: sense of, you know what this means in the bigger picture. 274 00:14:35,040 --> 00:14:37,360 Speaker 1: We could do that with our good friend Nick Holas, 275 00:14:37,400 --> 00:14:40,600 Speaker 1: co founder Data Trek Research. Nick, thanks so much for 276 00:14:40,680 --> 00:14:42,560 Speaker 1: joining us here. We had a big sell off in 277 00:14:43,160 --> 00:14:45,920 Speaker 1: the equity markets last week. This week kind of a 278 00:14:45,960 --> 00:14:48,440 Speaker 1: turnaround here in a big move today. What are you 279 00:14:48,480 --> 00:14:52,120 Speaker 1: reading into it? If anything? You know? I think the 280 00:14:52,160 --> 00:14:55,400 Speaker 1: thing we can take away from today and yesterday as well, 281 00:14:55,520 --> 00:14:57,760 Speaker 1: is that the market is looking forward to having the 282 00:14:57,800 --> 00:15:03,160 Speaker 1: election behind us and to focus on fundamentals, which during 283 00:15:03,200 --> 00:15:06,280 Speaker 1: this earning season have been remarkably good, where it really 284 00:15:06,680 --> 00:15:10,320 Speaker 1: record or near record levels for earnings beats and earnings amounts, 285 00:15:10,360 --> 00:15:13,560 Speaker 1: and the profits are coming through. But everybody's a little 286 00:15:13,560 --> 00:15:16,760 Speaker 1: bit cautious about what comes next, and so estimates aren't rising. 287 00:15:16,800 --> 00:15:19,640 Speaker 1: But the baseline that we're having right now in terms 288 00:15:19,680 --> 00:15:25,400 Speaker 1: of earnings is excellent. That said, if the pandemic continues 289 00:15:25,480 --> 00:15:27,920 Speaker 1: to ravage the nation as it is now and we 290 00:15:27,960 --> 00:15:33,480 Speaker 1: don't get widespread vaccine, you know, delivery, let's say until 291 00:15:33,520 --> 00:15:38,280 Speaker 1: sometime next year, can results continue to impress. Yeah, it's 292 00:15:38,320 --> 00:15:40,880 Speaker 1: it's an excellent question. And unfortunately we have to go 293 00:15:40,920 --> 00:15:43,640 Speaker 1: back to the political sphere to answer some of that 294 00:15:43,720 --> 00:15:46,800 Speaker 1: because the missing link in terms of earnings for the 295 00:15:46,840 --> 00:15:50,040 Speaker 1: next couple of quarters is going to be fiscal stimulus. 296 00:15:50,080 --> 00:15:53,480 Speaker 1: Monetary stimulus is less an important factor because it's already 297 00:15:53,520 --> 00:15:56,280 Speaker 1: so accommodated. We really have to focus on whether or 298 00:15:56,280 --> 00:15:59,040 Speaker 1: now we get a another CARES Act, and that is 299 00:15:59,480 --> 00:16:01,560 Speaker 1: in the per view of the belt Away, and I 300 00:16:01,600 --> 00:16:04,720 Speaker 1: think we have to really worry a bit about repeating 301 00:16:04,760 --> 00:16:07,640 Speaker 1: say two thousands and eights, where we had an election outcome, 302 00:16:08,000 --> 00:16:10,920 Speaker 1: but the election outcome created a change of power, which 303 00:16:11,000 --> 00:16:14,480 Speaker 1: delayed the Recovery Act until February of two thousand nine, 304 00:16:15,080 --> 00:16:17,080 Speaker 1: and that's why the market didn't really bought them until 305 00:16:17,120 --> 00:16:19,960 Speaker 1: March of two thousand nine. So I am cautious about 306 00:16:19,960 --> 00:16:23,320 Speaker 1: that particular scenario that we just don't get stimulus until 307 00:16:23,520 --> 00:16:26,920 Speaker 1: DC sees a change of power. Yeah, Nick, the you 308 00:16:26,920 --> 00:16:29,120 Speaker 1: know the other Obviously, the issue out there, arguably the 309 00:16:29,160 --> 00:16:32,200 Speaker 1: biggest issue is the pandemic and the and the numbers 310 00:16:32,240 --> 00:16:35,000 Speaker 1: are just going in the absolute wrong direction, and we're 311 00:16:35,000 --> 00:16:38,960 Speaker 1: seeing European economies shutting down to varying degrees, and so 312 00:16:39,080 --> 00:16:41,520 Speaker 1: people are concerned that, uh, you know, the US is 313 00:16:41,600 --> 00:16:44,920 Speaker 1: just a matter of weeks behind Europe. Here. If that, 314 00:16:45,120 --> 00:16:47,440 Speaker 1: if these numbers were coming across the tape in March 315 00:16:47,480 --> 00:16:51,480 Speaker 1: and April, this market would presumably be down significantly. What 316 00:16:51,560 --> 00:16:53,480 Speaker 1: do you think the market? How do you think the 317 00:16:53,480 --> 00:16:58,480 Speaker 1: market's viewing this second slash third wave globally? You know, 318 00:16:58,880 --> 00:17:03,960 Speaker 1: I think you're absolutely right. The the European situation is bad, 319 00:17:04,040 --> 00:17:07,239 Speaker 1: and it's bad for a bunch of different reasons. The 320 00:17:07,359 --> 00:17:10,040 Speaker 1: US has a little bit of a different situation. You're 321 00:17:10,119 --> 00:17:14,080 Speaker 1: right to cle a. The virus is definitely taking a toll, 322 00:17:14,720 --> 00:17:17,960 Speaker 1: but I think there's hopefully enough awareness to understand that, 323 00:17:18,119 --> 00:17:20,960 Speaker 1: particularly in places like New York. We're all based, you know, 324 00:17:21,040 --> 00:17:23,320 Speaker 1: there is a lot of mitigation efforts still under waste, 325 00:17:23,320 --> 00:17:25,879 Speaker 1: still a lot more work from home. Europe did not 326 00:17:25,920 --> 00:17:28,320 Speaker 1: really embrace work from home the way the US did, 327 00:17:28,359 --> 00:17:31,080 Speaker 1: and so I am hopeful that the US economy can 328 00:17:31,160 --> 00:17:34,879 Speaker 1: continue to move along in conjunction with some stimulus that 329 00:17:34,960 --> 00:17:38,879 Speaker 1: avoids the worst economic outcomes of what's going to happen 330 00:17:38,920 --> 00:17:41,120 Speaker 1: in Europe, which I agree with you are are pretty profound. 331 00:17:41,760 --> 00:17:44,639 Speaker 1: So what's the base case make and what industries would 332 00:17:44,640 --> 00:17:48,040 Speaker 1: you be recommending keeping a close eye on if your 333 00:17:48,040 --> 00:17:51,720 Speaker 1: base case scenario does come to pass. So the base 334 00:17:51,760 --> 00:17:55,120 Speaker 1: case scenario is actually bullish, you know, it does require 335 00:17:55,160 --> 00:17:58,760 Speaker 1: more stimulus, but it is positive. And against that backdrop, 336 00:17:58,840 --> 00:18:02,119 Speaker 1: we like industrials very much. They've had a very good quarter, 337 00:18:02,480 --> 00:18:04,399 Speaker 1: and then we think there's a lot of earnings leverage 338 00:18:04,400 --> 00:18:08,919 Speaker 1: and industrials large camp industrials going into We also like 339 00:18:09,080 --> 00:18:13,040 Speaker 1: small caps over large caps. The one area where cautious 340 00:18:13,040 --> 00:18:16,280 Speaker 1: on its technology Tech has had such a strong year 341 00:18:16,600 --> 00:18:19,400 Speaker 1: that it's coming up against what we call very tough cumps. 342 00:18:19,800 --> 00:18:22,000 Speaker 1: It's very hard to get earnings leverage when you have 343 00:18:22,119 --> 00:18:25,159 Speaker 1: a blowout year and the next year goes back to normal. 344 00:18:25,280 --> 00:18:28,400 Speaker 1: So we don't like technology right now, but do like cixicles, 345 00:18:28,440 --> 00:18:31,160 Speaker 1: like industrials and small caps. We'd also stay away from 346 00:18:31,240 --> 00:18:34,800 Speaker 1: financials because of the very low rate environment. A ten 347 00:18:34,880 --> 00:18:36,960 Speaker 1: year yield that goes back to one percent just isn't 348 00:18:37,000 --> 00:18:39,359 Speaker 1: good enough to generate a lot of marginal earnings for 349 00:18:39,440 --> 00:18:42,600 Speaker 1: the financial sector. So it's interesting, Nick, You know, I 350 00:18:42,600 --> 00:18:45,960 Speaker 1: think a lot of people are kind of trying to 351 00:18:46,040 --> 00:18:49,359 Speaker 1: figure out when they do that rotation, and you know, 352 00:18:49,480 --> 00:18:51,720 Speaker 1: out of those big tech growth names that have worked 353 00:18:51,760 --> 00:18:55,200 Speaker 1: so well for so long, arguably since the financial crisis, 354 00:18:55,760 --> 00:18:58,919 Speaker 1: but appears that the market is in fact already beginning 355 00:18:58,920 --> 00:19:02,399 Speaker 1: that rotation. Is that what you're saying, yes, absolutely right, 356 00:19:02,440 --> 00:19:04,840 Speaker 1: That is that that's exactly what we're seeing, and it's 357 00:19:04,880 --> 00:19:06,640 Speaker 1: for all the right reasons. It might be a little 358 00:19:06,640 --> 00:19:09,960 Speaker 1: bit counterintuitive to see companies report blow at earnings and 359 00:19:10,000 --> 00:19:12,159 Speaker 1: the market turned their back on them, but at the 360 00:19:12,200 --> 00:19:14,720 Speaker 1: same time you have to look forward, how does tech 361 00:19:14,800 --> 00:19:17,920 Speaker 1: generate the same kind of earnings comps and earnings leverage? 362 00:19:18,040 --> 00:19:21,280 Speaker 1: Next year that it did this year. If things, as 363 00:19:21,320 --> 00:19:23,919 Speaker 1: we all hope, begin to go back to normal, you know, 364 00:19:24,000 --> 00:19:28,520 Speaker 1: you had absolutely tremendous demand for MacBooks and iPads. iPhones 365 00:19:28,640 --> 00:19:30,520 Speaker 1: might take some of the slack up in Q four 366 00:19:30,600 --> 00:19:33,320 Speaker 1: for Apple, But what are you looking for next year? 367 00:19:33,440 --> 00:19:36,600 Speaker 1: How are you gonna replicate through the upgrade cycle that 368 00:19:36,600 --> 00:19:41,760 Speaker 1: we got in I don't think you can and make 369 00:19:41,880 --> 00:19:45,159 Speaker 1: just you know, very quick answer. Does any of this 370 00:19:45,240 --> 00:19:47,520 Speaker 1: depend on who's the next president or of what color 371 00:19:47,600 --> 00:19:51,480 Speaker 1: the next Congress is? You know it does to some degree. 372 00:19:51,480 --> 00:19:54,520 Speaker 1: I would tell you that obly enough, markets don't like 373 00:19:54,600 --> 00:19:57,479 Speaker 1: gridlock as much as the cliche seems to say. Market 374 00:19:57,520 --> 00:20:00,080 Speaker 1: does better since World War Two, when either them of 375 00:20:00,119 --> 00:20:03,760 Speaker 1: Crats or Republicans hold the White House and converse, a 376 00:20:03,880 --> 00:20:07,840 Speaker 1: split decision isn't necessarily a great outcome. Yeah, that's so 377 00:20:07,920 --> 00:20:10,359 Speaker 1: interesting because we hear that quite a lot. That the 378 00:20:10,359 --> 00:20:13,879 Speaker 1: opposite that is Nicholas, thank you. Nicholas is co founder 379 00:20:13,960 --> 00:20:17,760 Speaker 1: of Data check Research, our Data Track Research. As I 380 00:20:17,760 --> 00:20:20,840 Speaker 1: should say, we all know that Data Track Research. Nicolas 381 00:20:20,920 --> 00:20:23,280 Speaker 1: co founder of that, and of course Paul, you know 382 00:20:23,359 --> 00:20:25,320 Speaker 1: that's we hear that quite a bit. You know, good, 383 00:20:25,400 --> 00:20:27,439 Speaker 1: good markets like good luck. Markets like good luck, but 384 00:20:27,600 --> 00:20:29,399 Speaker 1: you know you have to wonder why that is or 385 00:20:29,480 --> 00:20:32,080 Speaker 1: what the origin for that sort of Yeah. I love 386 00:20:32,119 --> 00:20:34,520 Speaker 1: having Nick on. He really puts things, I think very 387 00:20:34,600 --> 00:20:37,280 Speaker 1: clearly here and he is clearly in that rotation camp 388 00:20:37,280 --> 00:20:41,240 Speaker 1: in the cyclicals. Well, it is time to have a 389 00:20:41,240 --> 00:20:43,159 Speaker 1: look at the bond market because there again we are 390 00:20:43,200 --> 00:20:46,959 Speaker 1: seeing a few basis points in moves. It would appear 391 00:20:47,000 --> 00:20:49,800 Speaker 1: to be a risk on move. What will ask the expert? 392 00:20:49,840 --> 00:20:54,040 Speaker 1: Iro Jersey is chief interest rate strategist for Bloomberg Intelligence, 393 00:20:54,119 --> 00:20:56,480 Speaker 1: and he joins us now I wrote, what is the 394 00:20:56,480 --> 00:20:59,359 Speaker 1: bond market saying to you today? Yeah, it is a 395 00:20:59,480 --> 00:21:03,400 Speaker 1: risk on of like you mentioned, Vonnie, I think importantly, Um, 396 00:21:03,800 --> 00:21:07,919 Speaker 1: I think the bond markets giving us to two important signals. Firstly, 397 00:21:08,040 --> 00:21:10,239 Speaker 1: is if we close where we are right now at 398 00:21:10,240 --> 00:21:12,919 Speaker 1: around eighty eight basis points on the tenure yield, we 399 00:21:12,960 --> 00:21:17,200 Speaker 1: are now targeting the um the June yield high, so 400 00:21:17,760 --> 00:21:21,320 Speaker 1: somewhere near nineties basis points. So so we're looking at 401 00:21:21,359 --> 00:21:23,199 Speaker 1: maybe another little bit of a sell off. And I 402 00:21:23,240 --> 00:21:26,080 Speaker 1: think that that could happen pretty quickly if there's kind 403 00:21:26,080 --> 00:21:29,320 Speaker 1: of an uncontested election, and if you know, Joe Biden 404 00:21:29,320 --> 00:21:32,120 Speaker 1: wins the presidency. I think regardless of who who controls 405 00:21:32,119 --> 00:21:34,600 Speaker 1: the Senate, I think if the White House changes hands 406 00:21:34,640 --> 00:21:36,480 Speaker 1: and it's not a contested election, I think that's a 407 00:21:36,520 --> 00:21:38,879 Speaker 1: little bit more of a risk on and for bond deals. 408 00:21:38,880 --> 00:21:41,159 Speaker 1: That means slightly higher bond deals. So where do you 409 00:21:41,160 --> 00:21:44,240 Speaker 1: think the tenure could go arrive? You know, we've spoken 410 00:21:44,280 --> 00:21:46,240 Speaker 1: to some folks over the last day or so that says, 411 00:21:46,320 --> 00:21:49,080 Speaker 1: you know, you know, one in a quarter UH is 412 00:21:49,920 --> 00:21:52,000 Speaker 1: not out of the discussion, at least within your term. 413 00:21:52,000 --> 00:21:54,400 Speaker 1: Do you do you have that kind of sense? Yeah, 414 00:21:54,440 --> 00:21:56,200 Speaker 1: I think one in a quarter at one point to 415 00:21:56,320 --> 00:21:59,119 Speaker 1: seven percent is uh. It was the high back in 416 00:21:59,359 --> 00:22:01,720 Speaker 1: UH to yield tie back in March. I think that 417 00:22:01,720 --> 00:22:04,320 Speaker 1: that's uh, that's possible to get there. I don't think 418 00:22:04,359 --> 00:22:06,400 Speaker 1: near term. I don't think that's a end of two 419 00:22:06,480 --> 00:22:10,160 Speaker 1: thousand twenty type of thing, because I think in order 420 00:22:10,200 --> 00:22:11,840 Speaker 1: to get to those type of levels, we have to 421 00:22:11,880 --> 00:22:14,919 Speaker 1: increase optimism on what's the future of growth. You have 422 00:22:15,000 --> 00:22:17,440 Speaker 1: to have more optimism on whether or not we'll have 423 00:22:17,480 --> 00:22:19,879 Speaker 1: a vaccine in the first half of next year, like like, like, 424 00:22:19,920 --> 00:22:21,560 Speaker 1: there was a time when I thought that in the 425 00:22:21,600 --> 00:22:24,720 Speaker 1: first half of twenty twenty one, we could get to 426 00:22:24,760 --> 00:22:27,399 Speaker 1: those type of levels, but that was predicated on an 427 00:22:27,440 --> 00:22:30,520 Speaker 1: early vaccine release and the fact that we don't have UM. 428 00:22:30,720 --> 00:22:32,760 Speaker 1: It doesn't look like we're gonna necessarily get an early 429 00:22:32,840 --> 00:22:36,800 Speaker 1: vaccine UM and a quicker return to normalcy. I don't 430 00:22:36,840 --> 00:22:39,160 Speaker 1: know how how we get there now. It's not out 431 00:22:39,160 --> 00:22:42,159 Speaker 1: of the question, though, Paul, because one of the pieces 432 00:22:42,200 --> 00:22:45,560 Speaker 1: of news that we're gonna get tomorrow morning is treasury supply. 433 00:22:45,720 --> 00:22:48,480 Speaker 1: So how much in terms of bonds is the Treasury 434 00:22:48,480 --> 00:22:51,480 Speaker 1: Department going to have to issue now? Now they've decreased 435 00:22:51,520 --> 00:22:55,120 Speaker 1: their bond issuance forecast for this quarter because there wasn't 436 00:22:55,160 --> 00:22:58,280 Speaker 1: a fiscal stimulus prior to the election, UM, but they 437 00:22:58,359 --> 00:23:00,840 Speaker 1: increase They basically moved that back to the first quarter 438 00:23:00,840 --> 00:23:04,320 Speaker 1: of next year. So if we do get another trillion dollars, 439 00:23:04,720 --> 00:23:07,000 Speaker 1: you know, to where I should say, another two trillion 440 00:23:07,040 --> 00:23:09,880 Speaker 1: dollar stimulus plan in the first quarter of next year, 441 00:23:10,280 --> 00:23:14,119 Speaker 1: they would have to increase additional bond issuance to fund it, 442 00:23:14,280 --> 00:23:16,680 Speaker 1: and that could be an impetus to push yields above 443 00:23:16,760 --> 00:23:19,240 Speaker 1: one percent once again on the ten year yield. Well, 444 00:23:19,240 --> 00:23:21,040 Speaker 1: funny you should mention because we also have an f 445 00:23:21,119 --> 00:23:23,840 Speaker 1: O m C meeting this speet era. And while typically 446 00:23:24,040 --> 00:23:26,320 Speaker 1: the Fed wouldn't try and do anything at all to 447 00:23:26,400 --> 00:23:28,840 Speaker 1: influence markets that we can an election, you have to 448 00:23:28,880 --> 00:23:30,720 Speaker 1: wonder if at some point in the future the FED 449 00:23:30,760 --> 00:23:33,320 Speaker 1: chair won't have to roll back a little bit what 450 00:23:33,440 --> 00:23:36,920 Speaker 1: he said about not raising rates for years. Well, I 451 00:23:37,240 --> 00:23:40,000 Speaker 1: do think that that's uh, that's still in a card. 452 00:23:40,119 --> 00:23:44,080 Speaker 1: I don't see the Federal Reserve hiking interest rates probably 453 00:23:44,160 --> 00:23:48,119 Speaker 1: until at least three even in an optimistic scenario. Um. 454 00:23:48,280 --> 00:23:50,600 Speaker 1: And and you know that's not completely dissimilar to what 455 00:23:50,680 --> 00:23:53,719 Speaker 1: happened after the the Great Financial Crisis. The fact is 456 00:23:53,720 --> 00:23:56,280 Speaker 1: is that we'll probably have, you know, growth that's not 457 00:23:56,280 --> 00:23:59,000 Speaker 1: going to be particularly high. You're not gonna have inflation 458 00:23:59,080 --> 00:24:01,080 Speaker 1: that's going to spike up that you're going to need 459 00:24:01,119 --> 00:24:04,400 Speaker 1: to arrest that by increasing front end interest rates. And 460 00:24:04,400 --> 00:24:07,040 Speaker 1: and I think that the Federal Reserve would would not 461 00:24:07,160 --> 00:24:09,520 Speaker 1: mind the yield curve to steepen a little. But I 462 00:24:09,560 --> 00:24:12,400 Speaker 1: also think that they're worried that if, because of all 463 00:24:12,440 --> 00:24:15,840 Speaker 1: this supply and you have better growth expectations, if the 464 00:24:15,920 --> 00:24:18,600 Speaker 1: yield curve were to move significantly so that those numbers 465 00:24:18,600 --> 00:24:20,639 Speaker 1: that Paul mentioned, if you get above one and a 466 00:24:20,720 --> 00:24:23,919 Speaker 1: quarter percent very quickly on the tenure yield. The Federal 467 00:24:23,920 --> 00:24:27,200 Speaker 1: Reserve could take some action like buying more long term 468 00:24:27,200 --> 00:24:30,480 Speaker 1: bonds instead of short term bonds in order to slow 469 00:24:30,560 --> 00:24:33,880 Speaker 1: down the pace of increase in in long term bond yields. Um. 470 00:24:33,920 --> 00:24:36,600 Speaker 1: You know, there's not something that traditionally they've done, but 471 00:24:37,119 --> 00:24:39,480 Speaker 1: as part of their monetary policy framework, they want to 472 00:24:39,560 --> 00:24:41,879 Speaker 1: ensure that interest rates are low and borrowing clusters are 473 00:24:41,960 --> 00:24:44,560 Speaker 1: low for at least a little while until we get 474 00:24:44,600 --> 00:24:48,320 Speaker 1: over the hump of um of growth and we start 475 00:24:48,359 --> 00:24:51,200 Speaker 1: to see job gains that are consistent and wage gains 476 00:24:51,200 --> 00:24:54,880 Speaker 1: that are consistent with their um with their dual mandate 477 00:24:54,960 --> 00:24:58,760 Speaker 1: of full employment, as well as stable inflation. So are 478 00:24:58,840 --> 00:25:02,640 Speaker 1: you mentioned, you know, buying the Fed buying bonds give 479 00:25:02,680 --> 00:25:05,119 Speaker 1: us a sense of kind of what their activity has 480 00:25:05,160 --> 00:25:07,159 Speaker 1: been to date. Have they been in the market, have 481 00:25:07,280 --> 00:25:09,840 Speaker 1: they been active is or is it just more a 482 00:25:09,840 --> 00:25:12,280 Speaker 1: little bit of a show. Well, well, they've been buying 483 00:25:12,280 --> 00:25:15,040 Speaker 1: every day because they've they've been buying eighty billion dollars 484 00:25:15,040 --> 00:25:17,960 Speaker 1: a month of treasury securities. But most of those treasuries 485 00:25:18,000 --> 00:25:21,600 Speaker 1: that they're buying are are five years and and shorter 486 00:25:21,680 --> 00:25:24,119 Speaker 1: and maturity, so so there's not a lot of market 487 00:25:24,200 --> 00:25:27,240 Speaker 1: risk in in that um in that part of the market. 488 00:25:27,320 --> 00:25:29,399 Speaker 1: So so while they're buying a lot of bonds on 489 00:25:29,440 --> 00:25:32,520 Speaker 1: a dollar basis, they're not buying a lot of market risks. 490 00:25:32,560 --> 00:25:34,320 Speaker 1: So one of the things that we think is possible 491 00:25:34,359 --> 00:25:36,280 Speaker 1: and and and we'll be talking about this in one 492 00:25:36,320 --> 00:25:39,400 Speaker 1: of our our research reports later this week, is they 493 00:25:39,800 --> 00:25:42,679 Speaker 1: can reduce the amount of those short term bonds that 494 00:25:42,720 --> 00:25:46,280 Speaker 1: they're buying to buy longer term securities again in order 495 00:25:46,320 --> 00:25:49,040 Speaker 1: to buy more market risk and make sure that the 496 00:25:49,119 --> 00:25:52,920 Speaker 1: market doesn't sell off in an uncontrolled fashion, which is 497 00:25:52,960 --> 00:25:54,480 Speaker 1: a risk. I mean, when you think about what happened 498 00:25:54,520 --> 00:25:57,680 Speaker 1: during the Taper tantrum, and and even in two thousand nine, 499 00:25:58,200 --> 00:26:01,440 Speaker 1: um after after he hit the yield loads, you wound 500 00:26:01,520 --> 00:26:04,560 Speaker 1: up having very significant increases in ten year yields, and 501 00:26:04,600 --> 00:26:07,480 Speaker 1: that did have an effective of slowing down the economy 502 00:26:07,480 --> 00:26:10,719 Speaker 1: a little bit and people were a little bit less 503 00:26:10,760 --> 00:26:13,760 Speaker 1: likely to borrow money when ten year bond yields, you know, 504 00:26:13,880 --> 00:26:16,199 Speaker 1: rose by a hundred basis points and in just a 505 00:26:16,200 --> 00:26:19,840 Speaker 1: couple of months. Our Jersey, thanks so much for joining us. 506 00:26:19,880 --> 00:26:22,680 Speaker 1: We always appreciate getting your thoughts here on all things 507 00:26:22,840 --> 00:26:26,439 Speaker 1: in the bond market. Ira Jersey, chief US interest rate 508 00:26:26,480 --> 00:26:29,639 Speaker 1: strategist for Bloomberg Intelligence, joining us here. A little bit 509 00:26:29,640 --> 00:26:31,080 Speaker 1: of a lift to a rates, a little bit of 510 00:26:31,080 --> 00:26:33,159 Speaker 1: a stepending Vanni to the yield curve here just over 511 00:26:33,200 --> 00:26:36,640 Speaker 1: the last several days, yes, for sure, and we did 512 00:26:36,680 --> 00:26:39,240 Speaker 1: get that big move last week, don't forget polls. Yep. Yeah, 513 00:26:39,440 --> 00:26:41,359 Speaker 1: very interesting. So I have to see how the bond 514 00:26:41,400 --> 00:26:44,680 Speaker 1: market reacts here throughout the day, uh, and then of 515 00:26:44,760 --> 00:26:48,120 Speaker 1: course tomorrow and over the next several days, we'll see, 516 00:26:48,240 --> 00:26:50,800 Speaker 1: you know, to get a sense of how uh the 517 00:26:50,840 --> 00:26:55,280 Speaker 1: election is going in into what extent it's contesting. Thanks 518 00:26:55,320 --> 00:26:58,440 Speaker 1: for listening to the Bloomberg Markets podcast. You can subscribe 519 00:26:58,480 --> 00:27:01,480 Speaker 1: and listen to interviews at Apple Podcasts or whatever a 520 00:27:01,560 --> 00:27:04,919 Speaker 1: podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter 521 00:27:05,119 --> 00:27:07,440 Speaker 1: at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter 522 00:27:07,520 --> 00:27:10,320 Speaker 1: at pt Sweeney. Before the podcast, you can always catch 523 00:27:10,440 --> 00:27:12,000 Speaker 1: us worldwide at Bloomberg Radio.