WEBVTT - Biden Selects Powell To Lead Federal Reserve Again 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.960 at Bloomberg dot com slash podcast. President Joe Biden selected 0:00:23.000 --> 0:00:25.920 Jerome pal for a second four year term as US 0:00:25.960 --> 0:00:29.840 Federal Reserve Chair and elevated Governor Leo Brainerd to vice chair. 0:00:30.600 --> 0:00:33.640 And I guess, uh, we're talking about consistency here, and 0:00:33.640 --> 0:00:35.240 that's kind of what the market likes. With the SMP 0:00:35.320 --> 0:00:37.559 up nine tenths of one percent this morning. Let's get 0:00:37.600 --> 0:00:39.400 some color behind the decision. We can do that with 0:00:39.440 --> 0:00:43.040 Craig Tours, Federal Reserve, an economy reporter for Bloomberg News. So, 0:00:43.120 --> 0:00:49.560 Craig again, I guess this. The message here today is consistency. Yeah. Yeah. 0:00:49.800 --> 0:00:53.840 And the so elevation of Governor brainer to vice chair 0:00:54.240 --> 0:00:57.840 is interesting in that gives her a little bit more 0:00:57.920 --> 0:01:03.360 agency over monetary policy. I think, um, I can go 0:01:03.400 --> 0:01:08.040 into that if you want, yeah, please, okay, So, chairs 0:01:08.440 --> 0:01:11.399 Taylor have to kind of be in the center. Right, 0:01:11.800 --> 0:01:14.520 They can't be like on one side of their committee 0:01:14.600 --> 0:01:16.800 or on the other. They have to find the consensus. 0:01:17.560 --> 0:01:20.760 And right now you to both know the consensus is 0:01:20.840 --> 0:01:26.000 shifting towards tighter policy. So where I think Governor Brainard 0:01:26.080 --> 0:01:29.360 comes in as a voice that doesn't have to be 0:01:29.400 --> 0:01:32.120 in the center, but kind of can kind of push 0:01:32.200 --> 0:01:36.399 hard on the flank, um, and maybe push the consensus 0:01:36.520 --> 0:01:40.759 one direction or another. UM. I want to as suspect 0:01:40.840 --> 0:01:44.920 that she'd opposed the chair, but she she can exercise 0:01:44.959 --> 0:01:48.640 a lot of weight here. That That's how I view it. Craig, 0:01:48.680 --> 0:01:51.280 what do you think? I guess you know, Taylor and 0:01:51.280 --> 0:01:54.400 I were just talking earlier. This just feels like a 0:01:54.440 --> 0:01:57.520 decision that could have been made days ago, weeks ago, 0:01:57.600 --> 0:02:01.360 and agree to the timing here. I don't have a 0:02:01.400 --> 0:02:04.200 lot of thoughts the timing, and as you know, there 0:02:04.200 --> 0:02:08.400 are more vacancies. UM. It does seem that the delay 0:02:08.600 --> 0:02:12.959 gave rise to a lot of, um, frankly distasteful personal 0:02:13.080 --> 0:02:16.200 digging at both these people. So I don't know why 0:02:16.240 --> 0:02:19.720 it took so long. People say democrats are a complex 0:02:19.800 --> 0:02:24.679 lot now, UM, so maybe there was some work to do. 0:02:25.000 --> 0:02:27.720 I just don't know. On that note, Craig, it's not 0:02:27.800 --> 0:02:30.120 just sort of the two headliners that we got today, 0:02:30.160 --> 0:02:33.320 but a vacancy for Vice Chair of Supervision to other 0:02:33.440 --> 0:02:36.200 vacancies as well. Are we going to hear more about 0:02:36.240 --> 0:02:39.840 those in early December? And you know who do we 0:02:39.880 --> 0:02:42.680 think could be in the front running for those? I 0:02:42.680 --> 0:02:48.440 mean clearly, Um, the White House will want diverse voices 0:02:48.600 --> 0:02:53.120 at the FED. Of course that's important. Um uh So 0:02:53.240 --> 0:02:56.480 I would expect them to go in that direction on 0:02:56.600 --> 0:03:00.640 the two governors seats and on the Vice Chair of Supervision. Wow, 0:03:00.880 --> 0:03:06.600 that requires a lot of expertise. It's highly complicated. Um. 0:03:06.639 --> 0:03:10.079 Obviously Democrats like Elizabeth Warren want to see a new 0:03:10.120 --> 0:03:13.880 direction after Randy Quarrels. I really don't have any idea 0:03:14.320 --> 0:03:17.480 who they're going to pick for that, but it probably 0:03:17.480 --> 0:03:22.720 won't be as complicated as as controversial um as their 0:03:22.760 --> 0:03:27.040 pick for o CC So, Craig, we're gonna hear um 0:03:27.040 --> 0:03:31.799 from the President um and the FED Chairman Palellan uh 0:03:31.960 --> 0:03:34.400 and Governor brainer. Did I guess one Wall Street time here, 0:03:34.440 --> 0:03:36.840 what do you expect to hear from the President as 0:03:36.840 --> 0:03:41.400 it relates to these selections. You know, I think what 0:03:41.560 --> 0:03:46.560 he said a lot is um. He's emphasized independence, and 0:03:46.640 --> 0:03:49.880 so now we have a Republican. His chair at Democrat 0:03:50.040 --> 0:03:53.120 is vice chair. I think he'll strike that note, but 0:03:53.320 --> 0:03:58.280 I think he'll also strike, uh, Paul, the note of 0:03:58.560 --> 0:04:02.119 inflation is high and he expects that independence to lean 0:04:02.120 --> 0:04:06.000 against us. If you look at pulling on biden Um, 0:04:06.040 --> 0:04:10.680 inflation is really hurting them. So I think those are 0:04:10.680 --> 0:04:13.360 the two things he'll bring up. And Craig talked to 0:04:13.440 --> 0:04:16.080 us more about that because we're Some have said this 0:04:16.120 --> 0:04:18.400 is one of the more difficult times that we faced 0:04:18.440 --> 0:04:22.200 in Federal Reserve history, given inflation is taking up, and 0:04:22.320 --> 0:04:26.279 yet there has been an increased emphasis on meeting maximum 0:04:26.320 --> 0:04:29.400 in full employment, and the measures of that full employment 0:04:29.640 --> 0:04:32.920 are looking a little bit differently than they did before. 0:04:33.320 --> 0:04:36.000 How are you thinking about a balancing act of tackling 0:04:36.040 --> 0:04:43.000 inflation but maximizing full employment. So good observation. Taylor and 0:04:43.240 --> 0:04:45.839 I had a story on this on the Terminal and 0:04:45.839 --> 0:04:49.640 on our website yesterday. So this is a challenge, right 0:04:49.680 --> 0:04:55.320 they made. They went around the country in and with 0:04:55.400 --> 0:05:00.240 this trumping that maximum employment is a broad Bay East 0:05:00.360 --> 0:05:05.359 an inclusive mandate which is aimed at correcting their past 0:05:05.480 --> 0:05:10.240 mistakes of tightening before, things like minority unemployment rates had 0:05:10.680 --> 0:05:16.120 moved down substantially, before female labor force participation have moved 0:05:16.279 --> 0:05:19.000 up substantially. So what are they going to do here? 0:05:19.040 --> 0:05:21.839 How are they going to keep that pledge but go 0:05:22.000 --> 0:05:28.200 on the fight against inflation? I think one answer is gradualism. 0:05:28.240 --> 0:05:31.440 This is a highly credible central bank. They don't have 0:05:31.520 --> 0:05:35.280 to use a lot of power to get um inflation 0:05:35.360 --> 0:05:40.600 expectations nailed down. But you pointed directly at the challenge 0:05:40.640 --> 0:05:43.880 their Taylor, just like third thirty seconds. Do you think 0:05:43.880 --> 0:05:48.880 this White House is adequately you know, touting the success 0:05:48.880 --> 0:05:51.560 they're having with the economy coming out of this pandemic 0:05:51.720 --> 0:05:54.080 or it just seems like maybe the inflation narrative is 0:05:54.200 --> 0:05:58.159 overtaking it. It does as I said, It does seem 0:05:58.160 --> 0:06:01.840 to be overtaking the public sentiment for sure, and that's 0:06:01.880 --> 0:06:06.720 showing up in lots of places. As you both know, Uh, inflation, 0:06:06.839 --> 0:06:09.039 it's probably in your food basket when you go to 0:06:09.080 --> 0:06:12.599 the grocery store and other costs. You have. Americans really 0:06:12.760 --> 0:06:16.520 of all levels, Okay, Americans of all income levels really 0:06:16.560 --> 0:06:20.119 don't like inflation. Greig Tours, thanks so much for joining 0:06:20.160 --> 0:06:24.000 us Craig is the Federal Reserve, an economy reporter for 0:06:24.160 --> 0:06:30.320 Bloomberg News. I want to bring in Brian ben Diggi's 0:06:30.360 --> 0:06:33.920 president of m JP Wealth Advisors. Bryant thinks so much 0:06:33.960 --> 0:06:35.840 for joining us here. I don't know. I'm looking at 0:06:35.880 --> 0:06:37.880 my screen here. I see a lot of green here. 0:06:38.000 --> 0:06:41.680 So the market likes I guess some continuity at this 0:06:42.000 --> 0:06:44.360 Federal Reserve. What do you make of the announcements this morning? 0:06:44.440 --> 0:06:48.400 But Fed Chairman J. Pale, good morning Taylor. Yeah, I 0:06:48.440 --> 0:06:53.680 completely agree. Uh, you know, less than certainty regarding UM 0:06:53.880 --> 0:06:57.719 leadership at the FED obviously reduces some concerns and policy 0:06:57.760 --> 0:07:00.880 direction moving forward. I mean, Chairman has done a great 0:07:00.920 --> 0:07:04.280 job in trying to be as transparent as a communicator 0:07:04.320 --> 0:07:08.520 in light of all the conflicting variables. I think, um, 0:07:08.560 --> 0:07:10.800 you know, the focus is going to be moving forward. 0:07:11.080 --> 0:07:13.320 Are we going to stay at this pace of bond 0:07:13.360 --> 0:07:17.440 tapering or will that be accelerated as as we as 0:07:17.440 --> 0:07:22.000 we look at economic numbers moving forward? And obviously some 0:07:22.640 --> 0:07:25.600 commentary coming out of the St. Louis Fed, um, you know, 0:07:25.680 --> 0:07:29.120 which isn't encouraging the f o MC to continue to 0:07:29.160 --> 0:07:31.280 look at that policy. But I think at the end 0:07:31.320 --> 0:07:34.200 of the day. UM, you know, less change is good, 0:07:34.320 --> 0:07:37.240 especially when considering UM, some of the news out of 0:07:37.280 --> 0:07:40.760 Europe and in the oral markets, and and obviously inflation 0:07:40.760 --> 0:07:43.560 and interest rate. We have a full full plate here, 0:07:43.640 --> 0:07:47.960 so one less item on on on on the on 0:07:48.000 --> 0:07:51.000 the list is better for I think decision mature is 0:07:51.040 --> 0:07:53.600 moving forward. You talk about the news out of Europe. 0:07:53.640 --> 0:07:55.440 Of course we can talk about COVID cases. We can 0:07:55.440 --> 0:07:58.040 also talk about the Buddhist being talking about six percent 0:07:58.160 --> 0:08:02.160 inflation and this is a global inflationary story. How are 0:08:02.160 --> 0:08:04.600 you thinking about markets next year as you have a 0:08:04.640 --> 0:08:08.880 FED that's trying to confront inflation and maybe walk back 0:08:08.960 --> 0:08:13.240 comments that it's uh less transitory than they thought, but 0:08:13.320 --> 0:08:17.480 also trying to tackle full employment mandate and the changes 0:08:17.560 --> 0:08:22.400 and what full employment really means. Great question. I think 0:08:22.400 --> 0:08:25.480 we need to think about inflation actually into three parts, 0:08:26.200 --> 0:08:28.760 uh and I'll take the easiest part, which is that 0:08:28.840 --> 0:08:32.040 the FED does have a dual mandate, So until we 0:08:32.160 --> 0:08:36.360 reach uh full unemployment, I think the FED is going 0:08:36.440 --> 0:08:40.520 to be very cautious about raising short term interest rates. 0:08:40.559 --> 0:08:44.599 And based on our analysis, m full employment UM is 0:08:44.640 --> 0:08:47.640 getting to an unemployment rate probably around three point eight 0:08:47.760 --> 0:08:51.920 percent when taking into account the number of folks that 0:08:51.960 --> 0:08:55.280 have retired early or have chosen not to re engage 0:08:55.280 --> 0:08:57.440 on a on a full time basis. And the economy 0:08:57.440 --> 0:09:00.520 now the other two parts of the inflation store, I 0:09:00.559 --> 0:09:04.079 think is breaking down the components of cp I. If 0:09:04.080 --> 0:09:07.200 we take a look at food, energy, auto sales, and 0:09:07.280 --> 0:09:10.240 some of these items that are really impacted by the 0:09:10.280 --> 0:09:14.640 supply chain and efficiencies, we think that those core components 0:09:14.679 --> 0:09:17.520 of inflation should come down as we move into Q 0:09:17.760 --> 0:09:20.400 three in the beginning of Q four second half of 0:09:20.520 --> 0:09:23.240 next year. I think the twelve six curveball or the 0:09:23.280 --> 0:09:27.319 point of uncertainty is really around wages and wage labor 0:09:27.360 --> 0:09:30.480 as being a critical driver of inflation year over year. 0:09:30.880 --> 0:09:34.240 And I think as we look at the level of 0:09:34.320 --> 0:09:37.640 engagement in the workforce, we look at the productivity numbers 0:09:38.320 --> 0:09:43.959 moving forward, how technology is impacting employer's decisions as well as, 0:09:44.040 --> 0:09:47.160 to be fair, the cultural shift that's going on, I 0:09:47.200 --> 0:09:50.600 think domestically between people evaluating do they work to live 0:09:50.679 --> 0:09:53.040 or live to work? Um if that's going to keep 0:09:53.040 --> 0:09:55.000 a watchful eye on that. And I think that as 0:09:55.040 --> 0:09:57.839 time goes on, with science, you know, trying to help 0:09:57.960 --> 0:10:01.000 us lead out of this pandemic can We're optimistic that 0:10:01.040 --> 0:10:04.520 next year will be in an epidemic UM. That should help. 0:10:04.559 --> 0:10:06.360 The labor marks has been cool some of the wage 0:10:06.880 --> 0:10:10.280 labor inflation concerns, but that is definitely something I don't 0:10:10.280 --> 0:10:14.280 think anyone can prognosticate with accuracy as of this point 0:10:14.320 --> 0:10:17.480 in time. Hey, Brian, you know, looking at the SMP, boy, 0:10:17.720 --> 0:10:21.800 what a year investors have had up twenty year to date. 0:10:22.559 --> 0:10:25.880 When you talk to your clients about how do you 0:10:25.920 --> 0:10:32.280 start the conversation? Absolutely, I think moving forward the point 0:10:32.400 --> 0:10:34.360 is to break it down into a couple of quadrants. 0:10:34.400 --> 0:10:36.320 I mean, the first is looking at things from a 0:10:36.360 --> 0:10:41.360 fundamental economic perspective, which obviously is driving valuations UH, and 0:10:41.520 --> 0:10:44.640 looking at corporate earnings and the pessimism that I've gone 0:10:44.679 --> 0:10:47.400 into corporate earnings, and and the fact that you know, 0:10:47.559 --> 0:10:50.400 over the last success of quarters we were beating those 0:10:50.440 --> 0:10:54.000 expectations and earnings growth for next year is still robust. 0:10:54.400 --> 0:10:58.880 We're thinking about a four percent global GDP growth perspective, 0:10:58.920 --> 0:11:05.120 supply chains UH, inventory levels UH being healed, demand for 0:11:05.920 --> 0:11:10.320 goods and services exceeding supplies, so we're still um optimistic 0:11:10.440 --> 0:11:14.280 about the market continuing to grind higher over the course 0:11:14.360 --> 0:11:16.959 of the next twelve thirteen months. But at the same 0:11:17.000 --> 0:11:19.600 point in time, we have to be cognizant of those risks, 0:11:19.720 --> 0:11:23.640 and those risks are policy decisions coming out of Washington 0:11:23.880 --> 0:11:28.400 and the Fed. It's obviously the confluence of variables around 0:11:28.880 --> 0:11:33.320 interest rates and inflation. So it doesn't mean we're risk gone. 0:11:33.440 --> 0:11:37.960 We definitely need to find areas to allocate capital um 0:11:38.040 --> 0:11:41.600 that that can that can think about portfolio management and 0:11:41.640 --> 0:11:44.080 asset allocation, but doing it a little bit different. And 0:11:44.080 --> 0:11:46.480 that's why I think, you know, looking at you know, 0:11:46.559 --> 0:11:49.960 assets like real estate for example, might be a better hedge, 0:11:50.040 --> 0:11:52.440 let's say, than you know, trying to stick to the 0:11:52.440 --> 0:11:56.679 traditional sixty forty portfolio with with bonds being being the 0:11:56.960 --> 0:11:59.640 other side of that allocation. Brian, thanks so much for 0:11:59.720 --> 0:12:03.199 joining us. Really appreciate getting your thoughts here on this market. 0:12:03.280 --> 0:12:11.200 Brian Vendigi's president of m JP Wealth Advisors, Paul, we know, 0:12:11.280 --> 0:12:13.000 of course, the big news of the day has been 0:12:13.080 --> 0:12:15.960 some of the consistency the clarity coming out of the 0:12:16.040 --> 0:12:18.240 White House when it comes to the Federal Reserve. J 0:12:18.360 --> 0:12:21.280 Powell of course getting the renomination for the head of 0:12:21.320 --> 0:12:24.480 the Federal Reserve and Leal Brainerd of course the nominee 0:12:24.480 --> 0:12:27.320 now for Vice chair. Of all of that, we talked 0:12:27.320 --> 0:12:29.840 about some of the headline news, but really, Paul, what 0:12:30.000 --> 0:12:31.679 stands out to me is some of the headline news 0:12:31.720 --> 0:12:34.920 that we've gotten out of the rate markets. You have 0:12:35.000 --> 0:12:38.320 two year yields now climbing about six basis points. Let's 0:12:38.320 --> 0:12:40.640 do all of this with the Lnend Managing director and 0:12:40.760 --> 0:12:44.240 head of US rates strategy for BEMO Capital Markets, where 0:12:44.240 --> 0:12:47.760 he helps run the fixed income strategy team, and Ian 0:12:48.440 --> 0:12:50.800 maybe talk to us about some of the jerk reactions 0:12:50.840 --> 0:12:53.840 that we see within the rate market up six basis 0:12:53.920 --> 0:12:58.880 points across the curve. What does that tell you? Well, 0:12:58.880 --> 0:13:02.000 I think that the biggest take away from today's events 0:13:02.520 --> 0:13:06.800 was that Biden has effectively doubled down on Powell, saying 0:13:06.800 --> 0:13:09.640 that this is the person that we think should be 0:13:09.920 --> 0:13:12.520 leading the tightening campaign the end of KIWI in the 0:13:12.600 --> 0:13:15.120 first series of rate hikes. And what we're seeing in 0:13:15.160 --> 0:13:18.679 the market is that any risk that we would have 0:13:18.920 --> 0:13:24.000 a more decidedly dovish chair has been limitated until we're 0:13:24.040 --> 0:13:26.520 pricing in rate hikes. We see that in the two 0:13:26.559 --> 0:13:29.160 year sector, the three year sector, and the five year sector. 0:13:29.600 --> 0:13:32.959 And what I'm watching is the continued flattening of the 0:13:33.000 --> 0:13:36.160 five thirties curve that we expect will actually be very 0:13:36.280 --> 0:13:39.600 thematic in two thousand and twenty two and be somewhat 0:13:39.640 --> 0:13:42.400 at odds with what one would typically expect for this 0:13:42.480 --> 0:13:46.720 point in the cycle. So in Taylor had to, you know, 0:13:46.840 --> 0:13:49.280 correct me earlier this morning. She's so discussed about my 0:13:49.360 --> 0:13:51.400 lack of knowledge of the yield curve because I said, Hey, 0:13:51.520 --> 0:13:53.480 I look at the tenure and I see it at 0:13:53.520 --> 0:13:55.719 one point six percent. It's kind of been around there 0:13:55.760 --> 0:13:58.280 for a long time. What's the big deal? And she says, no, 0:13:58.360 --> 0:14:00.560 you're looking at the wrong part of the curve. Look 0:14:00.600 --> 0:14:02.840 at the short end, where you know, the two years 0:14:02.840 --> 0:14:04.840 gone from you know, a little more than twenty basis 0:14:04.840 --> 0:14:07.160 points up to where we are today at uh, you know, 0:14:07.280 --> 0:14:11.120 close to fifty six basis points. What does that tell you? 0:14:11.160 --> 0:14:12.839 Why should I be looking at the short end of 0:14:12.840 --> 0:14:17.120 the curve? Well, what it tells us at a minimum 0:14:17.240 --> 0:14:20.440 is that borrowing costs are going to be increasing for 0:14:20.520 --> 0:14:23.200 a lot of the corporate sector and for a lot 0:14:23.240 --> 0:14:26.560 of the economy because most rates, with the exception of 0:14:26.760 --> 0:14:30.960 mortgages and longer dated paper, tend to be focused on 0:14:31.000 --> 0:14:34.560 the two and five year sector as key benchmarks, and 0:14:34.640 --> 0:14:38.240 that's why the FEDS tightening campaign, a potential tightening campaign, 0:14:38.560 --> 0:14:42.080 is going to have so many ramifications for the outlook 0:14:42.120 --> 0:14:45.440 on inflation as well as a potential for slowing growth 0:14:45.840 --> 0:14:49.640 in a recovery that quite frankly has been going pretty 0:14:49.680 --> 0:14:52.600 strong thus far. But two thousand and twenty two and 0:14:52.640 --> 0:14:56.280 twenty three are are key periods of uncertainty for that. 0:14:56.960 --> 0:15:00.480 What about borrowing costs for the Treasury? Your notes? Looking 0:15:00.520 --> 0:15:05.440 at two's and fives today, what do you expect? I 0:15:05.480 --> 0:15:08.400 do think that the Treasury Department has done a good 0:15:08.480 --> 0:15:13.080 job historically in terms of turning out their debt, so 0:15:13.560 --> 0:15:16.760 rising rate environment won't be too dramatic for the budget 0:15:16.800 --> 0:15:20.680 in terms of federal borrowing in the very near term. 0:15:20.800 --> 0:15:25.680 The two and five year auctions today, given the holiday 0:15:25.760 --> 0:15:28.320 shortened week and some of the price action that we 0:15:28.360 --> 0:15:32.840 have seen, will represent an important litmus tests for investor demand. 0:15:33.080 --> 0:15:35.600 But all else being equal, the backup and rates I 0:15:35.640 --> 0:15:38.880 think are going to provide an attractive buying opportunity for 0:15:38.960 --> 0:15:41.600 investors in the front GEAM today, Ian, how do you 0:15:41.640 --> 0:15:46.280 think the Fed will move here? Um? You know, assuming 0:15:46.320 --> 0:15:50.880 they finish their you know, repurchases, the kind of kind 0:15:50.880 --> 0:15:53.360 of winds down mid next year. How do you think 0:15:53.360 --> 0:15:54.800 they're going to be in terms of raising rates in 0:15:55.520 --> 0:15:58.120 because there's some folks out there, like pre Amira of 0:15:58.240 --> 0:16:02.400 TV Security suggesting a gonna do anything three. What do 0:16:02.440 --> 0:16:05.240 you think? Well, I think they will have a lot 0:16:05.240 --> 0:16:07.960 of information over the course of the next two weeks 0:16:08.240 --> 0:16:11.320 running up to the December f fm C meeting, and 0:16:11.360 --> 0:16:16.480 if they're actively discussing accelerating the tapering process when they 0:16:16.520 --> 0:16:20.240 meet in December, that suggests that they could be done 0:16:20.280 --> 0:16:24.480 with kilee, not in the middle of but earlier let's 0:16:24.480 --> 0:16:27.280 call it the INDO the first quarter, and then that 0:16:27.360 --> 0:16:31.680 opens up the possibility for two rate hikes or potentially 0:16:31.840 --> 0:16:35.920 more if the situation dictates it. What I worry about 0:16:36.160 --> 0:16:38.560 is that Powell has come out and he had has 0:16:38.640 --> 0:16:41.920 said that the set is expecting inflation to moderate in 0:16:42.240 --> 0:16:47.040 Q two and Q three. So that's effectively the chair 0:16:47.160 --> 0:16:50.160 doubling down on the transitory narrative and saying we're going 0:16:50.200 --> 0:16:53.960 to continue to assume that this is temporary, temporary influence 0:16:54.000 --> 0:16:56.440 on inflation until at least the middle of next year. 0:16:56.800 --> 0:16:59.280 So while we might see an argument to be made 0:16:59.520 --> 0:17:03.080 to two QUEI more quickly. At the end of the day, 0:17:03.520 --> 0:17:06.280 we suspect that the FED will be content to deliver 0:17:06.680 --> 0:17:11.040 one rate hike in two. Is that then, the why 0:17:11.080 --> 0:17:14.320 behind the flattening of the yield curve that you started 0:17:14.320 --> 0:17:17.520 this conversation with and you said it was traditionally not 0:17:17.600 --> 0:17:22.200 what you would expect in this part of the economic cycle. Well, 0:17:22.240 --> 0:17:24.560 I think one of the key reasons that we're seeing 0:17:24.600 --> 0:17:28.040 the curve flatten is that there's already so much inflation 0:17:28.080 --> 0:17:31.199 in the system, and the FED is has proven that 0:17:31.240 --> 0:17:35.719 they're going to be reactive, perhaps not proactive, but trying 0:17:35.760 --> 0:17:38.240 to make sure that inflation doesn't get out of control. 0:17:38.680 --> 0:17:42.520 And so in that in that environment, we would typically 0:17:42.520 --> 0:17:44.920 expect it to the curve to flatten, but we wouldn't 0:17:44.920 --> 0:17:49.280 expect it to flatten with outright yields flat to lower. 0:17:49.359 --> 0:17:51.959 And I think that that's the real interesting part of 0:17:51.960 --> 0:17:54.120 what we're seeing play out in the market right now, 0:17:54.640 --> 0:17:58.040 is that there's inflation that the market believes the FED 0:17:58.160 --> 0:18:03.080 can counteract. But the global growth story has campt rates 0:18:03.119 --> 0:18:07.119 contained overall, and when we think about it, each individual 0:18:07.160 --> 0:18:10.199 economy up coming out of the pandemic in a different setting, 0:18:10.240 --> 0:18:12.880 and I think that's what has contributed to that. Very good. 0:18:12.880 --> 0:18:14.439 All right, and thank you so much for joining us. 0:18:14.480 --> 0:18:17.480 Really appreciate it. In LinkedIn Managing director and head of 0:18:17.600 --> 0:18:22.560 US Rates Strategies at BMO Capital Markets for home Strategy team. 0:18:22.560 --> 0:18:25.520 That's Bank of Montreal for the folks that go back 0:18:25.560 --> 0:18:30.919 a little bit. All right, let's talk tech with Dan. 0:18:31.040 --> 0:18:34.880 I'ves he's a managing director senior equity analyst at Wedbush Securities. 0:18:34.880 --> 0:18:37.679 There's a million ways we can go with Dan, but 0:18:37.800 --> 0:18:41.080 I want to start in honor of Matt Miller with 0:18:41.359 --> 0:18:45.320 Tesla and the EV market. Um. Dan, you've been so 0:18:45.440 --> 0:18:47.679 out in front on this story, and you've been so 0:18:47.760 --> 0:18:49.760 kind to share your thoughts with us here Bloomberg Radio 0:18:49.760 --> 0:18:52.439 and TV over the years about your bullishness about this 0:18:52.480 --> 0:18:56.640 story and this market. Here as you think about two, 0:18:56.720 --> 0:18:59.560 how do you think the EV market from a competitive 0:18:59.600 --> 0:19:02.680 stamp point is going to evolve? And then how does 0:19:02.720 --> 0:19:07.200 Tesla fit into that? Yeah? I think it's it's great 0:19:07.280 --> 0:19:10.160 framing into two thousand twenty two because I think this 0:19:10.280 --> 0:19:12.879 is where we see the next level of adoption for 0:19:12.960 --> 0:19:15.280 ev s. I think you're going to see your rereading 0:19:15.840 --> 0:19:18.439 on the likes of a GM and a Ford because 0:19:18.480 --> 0:19:20.560 of what we see on evs is those comings have 0:19:20.680 --> 0:19:23.439 success and more and more the street used them as 0:19:23.520 --> 0:19:27.480 disruptive technology plays, and you lose it in others that 0:19:27.520 --> 0:19:30.760 are going to benefit because we're not five trillions of 0:19:30.880 --> 0:19:34.760 dollars over the next decade. But but ultimately the name 0:19:34.840 --> 0:19:38.560 that's going to continue disproportionately benefit is Tesla. And that's 0:19:38.560 --> 0:19:43.640 why this is a stock despite the musk circus, Twitter poll. 0:19:44.160 --> 0:19:46.120 I think now this is this doctor's on its way. 0:19:46.200 --> 0:19:50.159 Four are base case eighteen hundred bookcase talk to us 0:19:50.160 --> 0:19:52.520 about some of the bold cases that you see more generally, 0:19:52.680 --> 0:19:55.280 Dan when you think about next year. It was so interesting. 0:19:55.320 --> 0:19:57.560 Paul and I were earlier speaking about a big call 0:19:57.560 --> 0:20:00.119 out of b of A saying that tech is and 0:20:00.560 --> 0:20:02.560 you know, one of the biggest bubbles that they've seen 0:20:02.600 --> 0:20:05.719 going back since nineteen nine. But you have a federal 0:20:05.760 --> 0:20:09.800 reserve that's holding rates still relatively low. How are you 0:20:09.840 --> 0:20:15.000 thinking about tech and tech bubbles into next year? Yeah? 0:20:15.000 --> 0:20:17.399 I mean, and I covered tech during the bubble and 0:20:17.480 --> 0:20:19.639 during the burst, and when I compare thement, it's an 0:20:19.640 --> 0:20:24.679 apple's oranges because the fundamental growth stories are happening, and 0:20:24.880 --> 0:20:28.639 it's a fourth Industrial revolution that's happening across clouds, tiever security, 0:20:29.240 --> 0:20:32.000 five G as well as disruptive tech with e VS 0:20:32.680 --> 0:20:34.879 front and center. So I view it totally different in 0:20:35.040 --> 0:20:38.679 terms of the fundamental stories that are happening now. Some could, 0:20:39.119 --> 0:20:42.040 you know, web wards about valuation, but we're talking about 0:20:42.080 --> 0:20:44.600 growth over the next three, five, seven years, and there's 0:20:44.640 --> 0:20:47.440 a scarcity of growth stories. Many of them are in tech. 0:20:47.960 --> 0:20:51.200 That's why we view Nastac nineteen thousands for two thousand 0:20:51.240 --> 0:20:54.040 and twenty two. And you know, many investors that have 0:20:54.040 --> 0:20:57.000 stayed focus on the right lane on so many of 0:20:57.000 --> 0:21:00.320 these valuation calls. You missed Amazon, you missed net Licks, 0:21:00.480 --> 0:21:03.280 you missed Tesla, and I think you know the worries 0:21:03.320 --> 0:21:05.080 you're gonna miss so many these others that are really 0:21:05.520 --> 0:21:09.480 part of this Fourth Industrial Revolution. Dan, how do you 0:21:09.560 --> 0:21:11.639 think I'd love to get the Dan eyes of you 0:21:12.040 --> 0:21:16.840 on the metaverse? To you? What is that? And is 0:21:16.880 --> 0:21:20.679 it something you want to pay attention to? Yeah, I 0:21:20.680 --> 0:21:24.640 mean to me, it's serious. Dours that's going after we'll 0:21:24.640 --> 0:21:27.399 call them is an Internet three dota or four dota. 0:21:27.560 --> 0:21:31.520 And I think it's important because it's not just Facebook 0:21:31.800 --> 0:21:34.240 in terms of metaverse, because when you look at Apple 0:21:34.359 --> 0:21:37.479 and I believe Apple Glass comes out next summer, the 0:21:37.520 --> 0:21:40.840 a r VR headset, that's just the start of really 0:21:40.880 --> 0:21:43.080 what's gonna be in arms where it's going after metabus 0:21:43.080 --> 0:21:46.360 between big tech and as well as pure plays on gaming, 0:21:46.880 --> 0:21:49.280 as well as other errors its names like Mattaport and 0:21:49.280 --> 0:21:51.920 others that play into the scheme. And I think it's 0:21:51.920 --> 0:21:55.400 one where today you don't necessarily the revenue, but going forward, 0:21:55.560 --> 0:21:57.680 this is not a hype theme. I mean it's real 0:21:57.880 --> 0:22:01.879 dours being spent, and I ultimately think it's really Cupertino 0:22:01.960 --> 0:22:04.440 that's going to lead the metaverse. I think facebooks on 0:22:04.440 --> 0:22:06.840 the outside looking in when it comes to this, they're 0:22:06.840 --> 0:22:10.280 gonna have to spend significant dours to catch up. But 0:22:10.440 --> 0:22:14.840 is there any regulatory risk? We have an administration that 0:22:15.000 --> 0:22:18.880 is very against and verbally has come out against big 0:22:18.920 --> 0:22:22.960 tech about big conglomerates. What's the regulatory risk for you 0:22:23.119 --> 0:22:27.600 next year? There is regulatory risk, and I think we've 0:22:27.640 --> 0:22:30.040 seen that in terms of what coming out of the 0:22:30.040 --> 0:22:33.119 belt Way as well as Brussels. But our view is 0:22:33.160 --> 0:22:38.679 that is likely finds and importantly, the lack of consensus 0:22:38.760 --> 0:22:43.119 within the Beltway is ultimately perceived bullish for tech because 0:22:43.119 --> 0:22:45.879 the lack of consensus shows it's gonna be hard to 0:22:45.920 --> 0:22:50.760 have legally change antitrust laws. And that's why right now 0:22:50.880 --> 0:22:53.760 it's been at risk, but it's viewed as a contain 0:22:53.960 --> 0:22:57.000 risk in the eyes of investors. I'd also say you 0:22:57.000 --> 0:22:59.359 look at a company like Microsoft, which has already been 0:22:59.359 --> 0:23:02.360 through the antect ust issues late nineties two thousands, they're 0:23:02.480 --> 0:23:05.560 much more in position or strength to do acquisitions. First. 0:23:05.600 --> 0:23:07.480 I think a lot of the traditional big tech which 0:23:07.480 --> 0:23:11.119 you're going to be constrained, especially with that you're shining 0:23:11.200 --> 0:23:14.159 light from the tour or two eight Dan, twenty seconds. 0:23:14.200 --> 0:23:19.880 What's your top pick for continues to be Apple? Um? 0:23:19.960 --> 0:23:22.640 You know, I mean Apple to me is a three 0:23:22.640 --> 0:23:25.480 trillion dollar mark up going to next year. I think 0:23:25.520 --> 0:23:28.679 it's a massive cycle that's going on iPhone and services 0:23:28.720 --> 0:23:31.160