WEBVTT - Bloomberg Surveillance TV: October 4, 2024 0:00:00.160 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 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 --> 0:00:37.560 Terminal and the Bloomberg Business App. Premisserer of JP Morgan 0:00:37.600 --> 0:00:40.159 writing a print of one fifty or higher and the 0:00:40.200 --> 0:00:43.800 federal likely cut twenty five in November. Payrolls around one 0:00:43.880 --> 0:00:47.199 hundred k or below means fifty basis points, bad news 0:00:47.280 --> 0:00:50.080 on jobs, bad news for risk assets, and the curve 0:00:50.320 --> 0:00:52.680 should ball steepen. Pre it's with us around the table, Prey, 0:00:52.680 --> 0:00:55.120 good morning, going to see you. I've got one question 0:00:55.160 --> 0:00:56.760 in the bomb market, and then we can go broad 0:00:56.760 --> 0:00:59.160 and we can talk about payrolls. Why is so much money, 0:00:59.440 --> 0:01:02.160 so much going into money market funds right now? 0:01:02.840 --> 0:01:06.560 Great question as we hit another record yesterday, I would 0:01:06.600 --> 0:01:09.479 say one word valuations. You know the fact that you're 0:01:09.520 --> 0:01:11.959 still getting four and a half to five percent on 0:01:12.080 --> 0:01:15.800 money funds. The Eiger is still inverted. Every asset class 0:01:15.840 --> 0:01:17.959 is priced for a soft landing. So I think people 0:01:18.040 --> 0:01:21.039 are staying in cash, waiting for better levels and bonds, 0:01:21.040 --> 0:01:23.880 better levels. On stocks, I will say we're seeing significant 0:01:23.880 --> 0:01:26.440 inflows into bond funds, but people who are waiting for 0:01:26.440 --> 0:01:28.480 a while, I'll buy. When the tenure treasury is at 0:01:28.480 --> 0:01:31.520 five percent, you're not getting that. You know, inflation's coming down. 0:01:31.520 --> 0:01:33.800 The Fed's telling you they're going to cut. We don't 0:01:33.800 --> 0:01:35.600 have to read between the lines on the Fed put 0:01:35.640 --> 0:01:38.320 they're telling you it's there. If things weaken, they're going 0:01:38.360 --> 0:01:41.160 to cut much faster. And I think people who've been 0:01:41.280 --> 0:01:43.200 sort of you know, there might be a melt up 0:01:43.280 --> 0:01:46.480 move because if you get a short period of volatility, 0:01:46.600 --> 0:01:49.160 we are absolutely going to be in there buying if 0:01:49.400 --> 0:01:51.600 if there is a risk off. But I think, you know, 0:01:51.640 --> 0:01:54.760 there's a sense of everything is so well priced, everything's 0:01:54.800 --> 0:01:56.600 done well, let me just stay in cash. It's still 0:01:56.640 --> 0:01:58.720 giving me four and a half. Well, within a year 0:01:58.760 --> 0:02:01.280 it's going to give you two andough half or three percent, 0:02:01.400 --> 0:02:02.960 And you know that's when I think a lot of 0:02:02.960 --> 0:02:04.320 that money is going to start to move. 0:02:04.200 --> 0:02:06.040 Out, although it comes at a time when people are 0:02:06.040 --> 0:02:08.040 taking a look at what's going on with the oil prices, 0:02:08.040 --> 0:02:09.720 They're taking a look at what's going on with the 0:02:09.720 --> 0:02:12.720 resilience and a number of different indicators. Yesterday we had 0:02:12.760 --> 0:02:16.359 ism services data that came in better than anyone expected 0:02:16.520 --> 0:02:19.440 who is surveyed by Bloombird. And you have to wonder 0:02:19.560 --> 0:02:22.120 whether people are questioning this idea that the Fed is 0:02:22.280 --> 0:02:24.280 willing to go fifty basis points so quickly you hurt 0:02:24.320 --> 0:02:26.400 a sew of people lining up twenty five, twenty five, 0:02:26.480 --> 0:02:28.440 twenty five, and then Nil Tata saying no, why I 0:02:28.480 --> 0:02:30.520 stop it? Guys? How much do you see this as 0:02:30.560 --> 0:02:32.720 sort of a given? Even though you are seeing signs 0:02:32.720 --> 0:02:33.960 of strength in so many places. 0:02:34.400 --> 0:02:36.440 So I think the data has really mixed. You can 0:02:36.480 --> 0:02:38.720 see signs of strength, then you can see signs of weakening. 0:02:38.760 --> 0:02:41.600 Look at that unemployment rate increase, look at labor differential 0:02:41.880 --> 0:02:44.920 in consumer confidence. I think this is where the earnings report, 0:02:45.040 --> 0:02:47.359 details of the job report. You've been talking about revisions. 0:02:47.520 --> 0:02:50.040 I think revisions look at dispersion within jobs. Is it 0:02:50.120 --> 0:02:53.560 really only two or three sectors that is creating all 0:02:53.600 --> 0:02:56.480 the job growth, what happens with margins? So I think 0:02:56.880 --> 0:02:59.360 there is you know, a lot of uncertainty. The data 0:02:59.400 --> 0:03:02.200 is not giving a it's a clear picture, and every 0:03:02.240 --> 0:03:04.800 market's price for soft landing. So I think this is 0:03:04.840 --> 0:03:08.320 where I would push back. The reacceleration risk seems to 0:03:08.360 --> 0:03:10.400 be off the table. I think we've got really a 0:03:10.400 --> 0:03:12.960 bimodal world. You've got these binary risks, and there's a 0:03:13.000 --> 0:03:17.200 lot between the election, between geopolitical risks, between payrolls frankly, 0:03:17.280 --> 0:03:20.480 or the entire jobs report, where either stay in soft landing, 0:03:20.840 --> 0:03:23.480 everything is priced in, but can rates fall some marshal 0:03:23.680 --> 0:03:26.520 can spread titan absolutely if we stay in soft lining, 0:03:26.880 --> 0:03:29.040 or we go much worse. And I think that's the 0:03:29.080 --> 0:03:30.640 world that we're sort of grappling with. 0:03:30.760 --> 0:03:32.160 And that's the reason why I think good news is 0:03:32.200 --> 0:03:34.800 good news for risk assets, because ultimately you do think 0:03:34.800 --> 0:03:36.720 that that reacceleration is off the table. I want to 0:03:36.720 --> 0:03:38.800 pick up on that. Are you're basically saying that this 0:03:38.920 --> 0:03:41.360 headfake that we're saying in oil prices is a headfake 0:03:41.640 --> 0:03:43.360 and that any kind of take up in yields is 0:03:43.400 --> 0:03:46.920 a buying opportunity right now, because ultimately inflation is dead, 0:03:47.720 --> 0:03:48.200 I think so. 0:03:48.240 --> 0:03:52.240 I mean oil price increased through supply related issues, which 0:03:52.280 --> 0:03:54.880 is what this is. That's actually at taxed on consumers. 0:03:54.960 --> 0:03:57.480 So I think if it's geopolitical related, I would not 0:03:57.560 --> 0:04:00.280 buy it. If there's massive fiscal easing in China or 0:04:00.280 --> 0:04:03.680 significant fiscal easing in the US which actually creates growth, 0:04:03.680 --> 0:04:06.120 then it's a different question. But I think oil prices 0:04:06.160 --> 0:04:09.640 is negative. Bonds are a diversifier for risk asses. We 0:04:09.680 --> 0:04:12.120 saw it the last two payroll reports. We had slightly 0:04:12.160 --> 0:04:14.960 weaker numbers. You've got, you know, the market pricing in 0:04:15.000 --> 0:04:18.279 this higher chance of fifty rates fell and that's why 0:04:18.320 --> 0:04:21.120 I think, you know, if you get weak numbers, we're 0:04:21.160 --> 0:04:23.600 going to price in fifty. And the whole idea of 0:04:23.920 --> 0:04:26.520 why did the FED go fifty, all those reasons are 0:04:26.560 --> 0:04:30.800 still present today. Monetary policy is restrictive. What's one to 0:04:30.839 --> 0:04:34.320 fifty basis points really going to do? I think, well, exactly. 0:04:34.480 --> 0:04:37.360 I think for the housing market, you need mortgage rates 0:04:37.480 --> 0:04:40.279 much lower. We're talking four percent, four and a half. 0:04:40.320 --> 0:04:42.160 We're not you know, at six percent, you're not going 0:04:42.200 --> 0:04:44.200 to have that happen. You're not going to create a 0:04:44.200 --> 0:04:46.360 big positive on the housing market. So when I think 0:04:46.360 --> 0:04:49.159 about reacceleration, I look at where are the drivers. It's 0:04:49.200 --> 0:04:52.599 not rates, you need much lower rates. It's not really 0:04:52.640 --> 0:04:54.919 fiscal so far. This is where the election, This is 0:04:54.920 --> 0:04:57.560 where China becomes important. So right now, I would say 0:04:57.560 --> 0:05:00.920 oil prices and that's resulted in this and rates. It's 0:05:00.960 --> 0:05:03.640 absolutely a buying opportunity. If you've got risk on your 0:05:03.640 --> 0:05:06.640 portfolio anyway, and we do, we get a little nervous 0:05:06.680 --> 0:05:10.160 about all these binary risks. I think owning some hedges, 0:05:10.279 --> 0:05:13.640 be it steepeners, owning some duration, especially given this backup, 0:05:13.720 --> 0:05:16.200 it's an opportunity. Rayo. Let's talk about the election. 0:05:16.279 --> 0:05:18.120 You went there. You say after the job's report, the 0:05:18.160 --> 0:05:20.240 market's going to be solely focused on the US election, 0:05:20.360 --> 0:05:22.239 And you say the market will move in any scenario, 0:05:22.360 --> 0:05:25.080 since it is not priced for any scenario. But if 0:05:25.120 --> 0:05:27.400 you have conviction that you think Harris is going to 0:05:27.400 --> 0:05:29.000 win with a sweep or Trump is going to win 0:05:29.040 --> 0:05:31.120 with a sweep, how should you be pricing that? 0:05:31.960 --> 0:05:34.680 It's very hard. I mean, I would say your key 0:05:34.720 --> 0:05:37.479 point was the sweep. I think what happens if it's 0:05:37.520 --> 0:05:39.600 not a sweep. But I love that you bring up 0:05:39.600 --> 0:05:41.960 sweep because I think everyone focuses on the White House, 0:05:42.000 --> 0:05:44.640 not you all. I know y'all have talked about Congress. 0:05:45.160 --> 0:05:48.680 Congress is very very important. So what happens with the House, 0:05:48.680 --> 0:05:50.599 and this is where the House is at a knife edge, 0:05:50.640 --> 0:05:53.279 the presidency. Look at Poles. I mean, I'm not even 0:05:53.320 --> 0:05:55.080 sure we can trust Poles a whole lot, but the 0:05:55.080 --> 0:05:57.719 Poles are very close. So and then look at all 0:05:57.720 --> 0:06:01.119 the policies we're talking about right from which actually doesn't 0:06:01.120 --> 0:06:06.160 need Congress as much. Fiscal policy absolutely needs Congress, immigration regulation. 0:06:06.720 --> 0:06:08.640 There is so much out there that we're going to 0:06:08.720 --> 0:06:10.760 have to see, you know, what's the maker? Will we 0:06:10.839 --> 0:06:13.200 know the result on election night? I hope for all 0:06:13.200 --> 0:06:14.880 our sakes that we do. But what if we don't 0:06:14.880 --> 0:06:18.200 know that, what if it's a divided government. Then we 0:06:18.240 --> 0:06:21.760 have to see what is priority number one? And there's 0:06:21.800 --> 0:06:24.120 something on the campaign trail, and then there's actually what 0:06:24.240 --> 0:06:26.960 they talk about. So I think for the market pricing, 0:06:27.279 --> 0:06:29.360 we're going to move in either direction because there's so 0:06:29.480 --> 0:06:33.479 many unknowns around the makeup of Congress, around the presidency, 0:06:33.560 --> 0:06:35.599 and then what policies are their number one priority? 0:06:35.720 --> 0:06:38.559 And what happens when the FOMC NEETs and we don't 0:06:38.560 --> 0:06:41.000 potentially have an election result. 0:06:41.600 --> 0:06:45.000 I think they look at financial conditions and the economy. Clearly, 0:06:45.520 --> 0:06:48.640 if monetary policy is still restrictive, which is likely to be, 0:06:48.760 --> 0:06:50.520 we're going to be in the four handle. We can 0:06:50.560 --> 0:06:53.039 debate our star and say maybe neutral rate is not 0:06:53.080 --> 0:06:55.240 two and a half but three and a half. It's 0:06:55.279 --> 0:06:57.960 not four and a half or five. So I think 0:06:58.000 --> 0:06:59.800 they continue to cut. They're going to try and be 0:06:59.800 --> 0:07:02.599 as a political as they can. Look at the data, 0:07:02.640 --> 0:07:05.159 the entirety of the data, inflation and growth. I think 0:07:05.360 --> 0:07:07.880 Governor Walla tells us inflation is also important, so we 0:07:07.920 --> 0:07:11.120 have to look at both and then look at financial conditions. 0:07:11.320 --> 0:07:13.760 In the scenario where we don't have an election result, 0:07:13.840 --> 0:07:17.080 financial conditions will tighten because markets don't like uncertainty. You 0:07:17.160 --> 0:07:19.480 don't want binary outcomes which you don't know how to price. 0:07:19.920 --> 0:07:22.280 In that scenario, I think they cut, and they tell us, well, 0:07:22.280 --> 0:07:25.040 if financial conditions continue to tighten, we'll cut more. I 0:07:25.040 --> 0:07:26.480 think that's the message we'll want to hear. 0:07:26.640 --> 0:07:28.960 So final message from you, I'm saying, in cash, like 0:07:29.040 --> 0:07:31.000 so many other people, what do I do? Where do 0:07:31.040 --> 0:07:31.320 I go? 0:07:32.400 --> 0:07:34.720 I think you buy bonds? Okay, I mean I don't 0:07:34.720 --> 0:07:36.560 want to talk my book, but I think what I. 0:07:36.440 --> 0:07:38.240 Had to say that you might turn around and say 0:07:38.360 --> 0:07:40.080 it might be the coll plus bond. 0:07:39.880 --> 0:07:45.280 Bts if you're getting you know, investment rates, securitize, you know, 0:07:45.480 --> 0:07:48.760 high yield bonds, high quality height. I think high quality 0:07:48.800 --> 0:07:51.440 fixed income is sort of the best place to be 0:07:51.480 --> 0:07:53.840 in right now. Spreads are tied, but look at all 0:07:53.840 --> 0:07:55.440 in needs. You're getting five to five and a half 0:07:55.560 --> 0:07:58.000 percent higher than money market rates. So if you're in 0:07:58.000 --> 0:08:00.160 money funds, you're getting four and a half or you 0:08:00.200 --> 0:08:02.320 get five and a half, and it's going to be 0:08:02.360 --> 0:08:05.720 a diversify, especially if one of these events. When we 0:08:05.760 --> 0:08:08.680 talk about October Surprise, we have multiple contenders for the 0:08:08.680 --> 0:08:13.080 October Surprise, any of them ban out, You've got that 0:08:13.160 --> 0:08:14.239 yield and you've. 0:08:14.040 --> 0:08:16.080 Got that hedge, so massive month ahead prayer is going 0:08:16.120 --> 0:08:18.480 to say, as always, thank you prayers for of JP 0:08:18.640 --> 0:08:30.240 mort Let's get to the market view. Jeff Rosenberg of 0:08:30.280 --> 0:08:32.559 black Rock with us, Mohammed al Aaron of Queens College, 0:08:32.559 --> 0:08:34.360 Cambridge with us as well. Jeff, I want to come 0:08:34.360 --> 0:08:36.000 to you first, your thoughts on this and as a 0:08:36.000 --> 0:08:37.920 market participant, what do I do with this? 0:08:39.640 --> 0:08:42.400 Yeah, I mean clearly it was just described, this is, 0:08:42.600 --> 0:08:44.880 you know, across the board, a very strong report. You know, 0:08:44.880 --> 0:08:50.840 if you look in the under components retail, professional services, 0:08:50.960 --> 0:08:54.320 education and health services, you know all significantly beat above 0:08:54.360 --> 0:08:58.160 their three month running average, and you know across the 0:08:58.920 --> 0:09:02.679 earnings and the household survey, you know, this is this 0:09:02.720 --> 0:09:05.560 is a very strong report. As was mentioned before, the 0:09:05.600 --> 0:09:09.160 revisions in terms of August was kind of expected. The 0:09:09.200 --> 0:09:11.560 home based data and the alternative data. You had some 0:09:11.600 --> 0:09:14.880 people looking at that as well, maybe not to the 0:09:14.960 --> 0:09:18.760 extent you know Bloomberg and Analong did and emphasizing it, 0:09:18.800 --> 0:09:21.440 but you certainly saw, you know, some data points that 0:09:21.480 --> 0:09:24.560 were pointing towards you know, the potential here for a 0:09:24.559 --> 0:09:28.680 stronger report. But this is stronger than anyone expected. And 0:09:28.720 --> 0:09:30.680 as Lisa said, and I think this will be the 0:09:30.760 --> 0:09:33.520 longer run debate, and it's something we've talked about on 0:09:33.559 --> 0:09:36.200 this on this program a lot that the debate about 0:09:36.280 --> 0:09:40.200 not only where kind of policy is, how restrictive it 0:09:40.240 --> 0:09:43.400 really is where you know, our star and neutral stands, 0:09:43.440 --> 0:09:46.160 but but something else that that has really been missing 0:09:46.160 --> 0:09:50.120 from this fed's conversation that was present in past cycles. 0:09:50.160 --> 0:09:54.280 They've abandoned it, and that is the impact of financial conditions. 0:09:54.320 --> 0:09:59.000 Financial conditions say that this is a much easier monetary policy, 0:09:59.400 --> 0:10:01.520 and you look at where growth is and it's it's 0:10:01.600 --> 0:10:05.400 kind of a it's a concurrent signal. But growth is 0:10:05.480 --> 0:10:10.360 running well above potential, and that really tells you that 0:10:10.440 --> 0:10:13.320 this is not as tight of a Fed as the market, 0:10:13.400 --> 0:10:15.680 or really as the FED thinks it is. But today 0:10:15.760 --> 0:10:18.400 is maybe another data point kind of in support of 0:10:18.440 --> 0:10:18.920 that view. 0:10:19.160 --> 0:10:22.600 Mark Rowan Apollo earlier this week. Financing is available, real 0:10:22.679 --> 0:10:24.679 estate prices are going up. It's not clear we need 0:10:24.720 --> 0:10:26.920 more right cuts to the extent we accelerate the economy 0:10:26.920 --> 0:10:29.000 and have to come in the other direction. That would 0:10:29.000 --> 0:10:31.480 not be a good day. Muhammed, I want your early 0:10:31.600 --> 0:10:33.600 views on this job's report and what on earth does 0:10:33.600 --> 0:10:35.080 the FED do with this one? 0:10:36.720 --> 0:10:39.960 So thanks John. Four takeaways, including for the Fed. One 0:10:40.360 --> 0:10:42.520 on the labor market. This is not just a solid 0:10:42.600 --> 0:10:45.160 labor market, but if you take these numbers at face value, 0:10:45.360 --> 0:10:48.600 it's a strong labor market late in the cycle. Two 0:10:49.000 --> 0:10:53.760 for the economy, it speaks to US economic exceptionalism, something 0:10:53.800 --> 0:10:57.559 we've seen and something that's continuing. Three for the Fed, 0:10:57.800 --> 0:11:02.040 it means pushback much harder against pressure from the markets 0:11:02.400 --> 0:11:06.280 to put you in the single mandate box. Enough talk 0:11:06.440 --> 0:11:11.200 about inflation is dead, inflation is not dead. Enough talk 0:11:11.240 --> 0:11:15.040 about the Fed should only be concerned about maximum employment. 0:11:15.240 --> 0:11:18.800 It should still be concerned about this dual mandate. And finally, 0:11:18.840 --> 0:11:22.360 for the markets, I think this is pushing back against 0:11:22.360 --> 0:11:24.440 what has been, in my view, and you've heard me 0:11:24.440 --> 0:11:27.960 say it over and over again, an overly aggressive expectation 0:11:28.400 --> 0:11:31.240 of weight cuts by the FED. I think this will 0:11:31.320 --> 0:11:34.400 will get the market closer to what's likely, and then 0:11:34.440 --> 0:11:37.360 we're going to have a debate on two things. One 0:11:37.559 --> 0:11:41.920 is where's the neutral rate? And two is how do 0:11:41.960 --> 0:11:45.400 you think about this economy in terms of growth and 0:11:45.480 --> 0:11:48.680 employment and how are these two things coming together. So 0:11:49.280 --> 0:11:53.360 you know, at face value, this is a report that 0:11:53.400 --> 0:11:56.839 will cause a lot of both revision both in analysis 0:11:57.080 --> 0:12:01.800 and in market pricing. But I stress it is part 0:12:01.840 --> 0:12:04.720 of a much bigger picture of mixed data and that's 0:12:04.760 --> 0:12:06.160 where the complications arise. 0:12:06.280 --> 0:12:08.920 John. As you know, Mohammad Emory nailed it when she 0:12:08.960 --> 0:12:10.640 started saying how much does this have to do with 0:12:10.679 --> 0:12:13.080 a fifty basis point rate cut? And it's somewhat tongue 0:12:13.120 --> 0:12:15.520 in cheek, of course, but at the same time, there 0:12:15.600 --> 0:12:18.760 is a real question how much have the easier financial 0:12:18.800 --> 0:12:22.240 conditions that have basically been manufactured by this Federal Reserve 0:12:22.679 --> 0:12:26.520 helped boost a market that wasn't maybe in need of 0:12:26.760 --> 0:12:27.600 such a big boost. 0:12:29.200 --> 0:12:31.679 Look, you know my view. We've been living in a 0:12:31.720 --> 0:12:35.040 world of liquidity dominance. It has been all about liquidity. 0:12:36.480 --> 0:12:40.880 That world was reinforced by fifty basis points scut Let's 0:12:40.920 --> 0:12:44.480 also remember that the market didn't expect the fifty basis 0:12:44.520 --> 0:12:47.720 point cut based on data. It expected it based on 0:12:48.040 --> 0:12:53.360 a reporting on the Thursday before the FED Board meeting, 0:12:53.559 --> 0:12:57.600 So there was no economic conditions that would justify fifty 0:12:57.600 --> 0:13:01.360 basis points, but there was a leak to newspaper that 0:13:01.720 --> 0:13:06.559 moved market expectations. I worry that we continue to feed this, 0:13:06.880 --> 0:13:12.040 this monster of liquidity dominance, and at some point we 0:13:12.080 --> 0:13:15.400 may regret it, either because inflation will not settle two 0:13:15.400 --> 0:13:20.640 percent and or because financial stability will result from excessive 0:13:20.720 --> 0:13:21.240 risk taking. 0:13:21.600 --> 0:13:23.400 Muhammad, is there a chance that we can have a 0:13:23.480 --> 0:13:24.800 no landing scenario? 0:13:27.559 --> 0:13:30.440 Sure, there's a chance that we can have a world 0:13:30.559 --> 0:13:34.000 in which we there are positive things happening on the 0:13:34.040 --> 0:13:38.600 supply side, and we can be quote bigger but not hotter. Yes, 0:13:38.880 --> 0:13:41.520 that is part of the distribution of potential outcome. I 0:13:41.559 --> 0:13:45.160 think a soft landing is still the fifty five percent probability. 0:13:45.840 --> 0:13:49.520 Bigger but not hotter is fifteen percent. So add them 0:13:49.559 --> 0:13:51.920 to to up, you get seventy and then you have 0:13:51.960 --> 0:13:57.080 a thirty percent probability that either becomes up or because 0:13:57.080 --> 0:14:00.280 of weakness in low income households or because of FED 0:14:00.320 --> 0:14:02.319 policy mistake, we end up in a recession. 0:14:02.880 --> 0:14:04.960 Looking at these numbers and Mohammad, thanks for being with us. 0:14:04.960 --> 0:14:06.240 You're going to stick with us. If you are just 0:14:06.320 --> 0:14:08.840 joining us, Welcome. It's about eight forty five Eastern time 0:14:09.040 --> 0:14:11.080 this morning here in New York, and about fifteen minutes 0:14:11.080 --> 0:14:13.200 ago we got to blum out Jobs Report two hundred 0:14:13.240 --> 0:14:15.600 and fifty four thousand. The median estimate our survey was 0:14:15.600 --> 0:14:18.880 one fifty. Lisa's talked about the revisions repeatedly. The revisions 0:14:18.880 --> 0:14:20.440 were good, they were positive. If a look at the 0:14:20.480 --> 0:14:22.760 unemployment rate, we've dropped back to four point one percent 0:14:22.960 --> 0:14:25.680 from four point two, Mike McKee suggesting we came very 0:14:25.760 --> 0:14:28.520 very close to drop into four point zero. Wage growth 0:14:28.600 --> 0:14:30.920 was hot as well. A lot of this was very unexpected. 0:14:30.920 --> 0:14:33.360 We've said it repeatedly through this morning, the range of 0:14:33.440 --> 0:14:36.560 estimates stretching from anywhere between seventy at the low side 0:14:36.600 --> 0:14:48.920 and two twenty at the high end. Nowhere near this one. 0:14:49.520 --> 0:14:51.280 I want to throw this one at you. There will 0:14:51.280 --> 0:14:52.720 be a lot of people in this country that don't 0:14:52.720 --> 0:14:54.800 believe these numbers. They will look at them, and some 0:14:54.960 --> 0:14:57.240 will say sarcastically, snarkily, they will say, if you're the 0:14:57.240 --> 0:14:59.960 Harris campaign, you can have written this Job's report any better, 0:15:00.040 --> 0:15:02.400 even if you wanted to. There are others who look 0:15:02.400 --> 0:15:04.880 at this, perhaps a little bit more sophisticatedly, and say 0:15:04.920 --> 0:15:08.240 that even the chairman himself is mentally marking these numbers 0:15:08.280 --> 0:15:11.000 down by let's say fifty or sixty thousand, should we 0:15:11.040 --> 0:15:12.600 be doing the same thing this morning. 0:15:12.840 --> 0:15:14.640 I think that's fair. And if it was a week report, 0:15:14.680 --> 0:15:16.360 that would have been the initial thing of okay, well, 0:15:16.360 --> 0:15:18.280 now if you subtract out the sixty eight thousand that 0:15:18.280 --> 0:15:21.320 we got from annual revisions last year, now we're in trouble. 0:15:21.400 --> 0:15:24.440 The initial reaction to this Job's print isn't necessarily that, 0:15:24.640 --> 0:15:27.680 but it should be. So perhaps the conclusion shouldn't be 0:15:27.680 --> 0:15:30.360 the economy's on fire or there's no landing. It's probably 0:15:30.400 --> 0:15:33.240 that we're actually hitting the soft landing. If you take 0:15:33.280 --> 0:15:35.760 a straight three month average, you're a little above one 0:15:35.840 --> 0:15:39.200 hundred eighty six thousand. Then if you subtract the QCUW, 0:15:39.240 --> 0:15:40.840 then you're at a trend that's kind of normal. So 0:15:41.080 --> 0:15:43.320 I think the market reaction is probably going to be 0:15:43.360 --> 0:15:45.320 a bit extreme on the back of this. We should 0:15:45.320 --> 0:15:48.760 probably look through it a couple Last night, the concern 0:15:48.880 --> 0:15:51.040 was we're headed for a recession. Now the concern is 0:15:51.360 --> 0:15:53.440 no landing. It's probably somewhere in between. 0:15:53.600 --> 0:15:55.760 Jeff Rosenberg, is good news good news. 0:15:57.320 --> 0:15:59.840 Good news is good news here, and I think that 0:16:00.120 --> 0:16:03.720 key going back to what Mohammad said is the market 0:16:03.760 --> 0:16:07.000 had been very aggressive in terms of its pricing for 0:16:07.080 --> 0:16:09.800 the FED. You know, partly maybe that pushed them into 0:16:09.840 --> 0:16:13.040 the fifty. You had more than two twenty fives for 0:16:13.120 --> 0:16:16.760 the November and December priced in. That's obviously pricing out here. 0:16:17.120 --> 0:16:19.680 And you know, next week when we get the CPI number, 0:16:19.880 --> 0:16:24.440 you know you may have As Muhammad was suggesting more 0:16:24.480 --> 0:16:27.000 of a debate as opposed to a one sided debate 0:16:27.040 --> 0:16:30.120 where we shifted completely away from inflation as the focus 0:16:30.240 --> 0:16:33.400 back to growth. Having a little bit more balance here 0:16:33.440 --> 0:16:35.880 is going to make the outlook a little bit more challenging, 0:16:36.080 --> 0:16:38.280 and I think for the bond market, it's going to 0:16:38.360 --> 0:16:41.920 have to reassess its pricing in terms of how aggressive 0:16:41.920 --> 0:16:45.680 it has been pricing, as Muhammad pointed out, very aggressive 0:16:45.720 --> 0:16:48.480 from the get go here in terms of expecting, you know, 0:16:48.520 --> 0:16:51.120 the most extreme in terms of in terms of what 0:16:51.160 --> 0:16:54.520 the Fed was going to be able to deliver. Hard 0:16:54.520 --> 0:16:57.240 to say whether next week you get that surprise. I 0:16:57.280 --> 0:17:00.840 don't think we're talking about here inflation going back up 0:17:00.880 --> 0:17:02.000 and an inflation scare. 0:17:02.040 --> 0:17:02.760 That's not the point. 0:17:02.760 --> 0:17:05.600 The point about no landing is that the last mile 0:17:06.000 --> 0:17:08.840 from two point six percent inflation down to two percent 0:17:08.960 --> 0:17:11.679 may be harder to achieve. And why it's harder to 0:17:11.760 --> 0:17:15.040 achieve is because growth and financial conditions are not as 0:17:15.119 --> 0:17:18.920 tight as the nominal rate suggests, and so you don't 0:17:19.000 --> 0:17:23.320 have to necessarily be as aggressive on securing the soft 0:17:23.400 --> 0:17:26.240 landing because the inflation side is pushing back. That's what 0:17:26.280 --> 0:17:28.679 you're seeing here this morning in terms of pricing. It 0:17:28.680 --> 0:17:31.800 makes the front end here a bit more rational in 0:17:31.880 --> 0:17:35.679 terms of pricing in less than two fifties to the 0:17:35.760 --> 0:17:37.560 end of the year, and I think that's starting to 0:17:37.600 --> 0:17:40.040 be more of the story pricing out of the bond market. 0:17:40.160 --> 0:17:42.400 Jeff, how off sides is this market? And we saw 0:17:42.400 --> 0:17:44.879 this being sort of sniffed out earlier this week, this 0:17:44.960 --> 0:17:47.520 idea that people were thinking, wait a second, maybe we 0:17:47.640 --> 0:17:50.040 overplayed just how many rate cuts there would be, just 0:17:50.080 --> 0:17:51.760 what kind of dollar weakness there would be. 0:17:52.160 --> 0:17:54.200 How much does that trade. 0:17:53.840 --> 0:17:57.400 The steepening curve all have to unwind as people reassess 0:17:57.480 --> 0:17:58.119 with this data. 0:17:59.480 --> 0:18:02.679 Yeah, as you pointed out, it started earlier this week, 0:18:02.960 --> 0:18:06.720 you've had some better data. The labor market data hasn't 0:18:06.760 --> 0:18:09.720 been as one sided in terms of the fears. In 0:18:09.800 --> 0:18:13.400 terms of negativity, there's still a preponderance of the steepener 0:18:13.520 --> 0:18:16.560 view because when you're in a FED cutting cycle, and 0:18:16.640 --> 0:18:19.160 we're in the beginning of the FED cutting cycle, it's 0:18:19.200 --> 0:18:22.159 about how fast and how frontloaded it's going to be. 0:18:22.240 --> 0:18:25.280 It's also about the terminal rate and where it ends up. 0:18:25.840 --> 0:18:28.840 But generally, when you're in that time period, the steepener 0:18:29.280 --> 0:18:31.760 market reaction is what you're going to get, and you're 0:18:31.840 --> 0:18:34.199 starting from a very flat point of the curve. The 0:18:34.240 --> 0:18:37.240 problem for the steepener trade is timing. You need the 0:18:37.280 --> 0:18:40.280 pace of steepening to overcome the negative cost of carry, 0:18:41.040 --> 0:18:44.640 and fast levered players don't have a lot of patience 0:18:44.680 --> 0:18:46.720 for that negative carry, and so that can, as we're 0:18:46.840 --> 0:18:50.480 potentially seeing this morning, kind of exacerbate the moves on 0:18:50.600 --> 0:18:52.920 the headline, you know, going back to the birth death 0:18:53.000 --> 0:18:56.159 model and what Bloomberg Economics has been highlighting. Yes, this 0:18:56.240 --> 0:18:59.520 may be overstated in terms of the headline impact, and 0:18:59.560 --> 0:19:02.399 therefore may be overstated in terms of the impact of 0:19:02.440 --> 0:19:05.760 the market move, But the overall message here is that 0:19:05.800 --> 0:19:10.160 this is still a normalizing labor market, but not necessarily 0:19:10.160 --> 0:19:12.439 normalizing to the point where the FED has to deliver 0:19:12.560 --> 0:19:14.680 consistent fifties to secure that. 0:19:14.640 --> 0:19:15.880 Soft landing Muhammaded. 0:19:15.880 --> 0:19:18.040 One thing that you've talked about is that this is 0:19:18.080 --> 0:19:22.040 an overly data dependent and data point dependent federal reserve. 0:19:22.119 --> 0:19:24.760 It seems like everyone expects this FED to still cut 0:19:24.800 --> 0:19:27.040 at least twenty five basis points. Do you think that 0:19:27.080 --> 0:19:30.280 they have moved to a framework that is less data 0:19:30.320 --> 0:19:33.600 dependent if the data actually suggests that the labor market 0:19:33.720 --> 0:19:35.520 is doing just fine. 0:19:36.480 --> 0:19:38.760 Yes, I think that moving that way. It started with 0:19:39.000 --> 0:19:44.240