WEBVTT - Surveillance: Investment Time with Kelly 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.200 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz. Daily we bring you 0:00:13.280 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.759 Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:30.320 and of course, on the Bloomberg terminal. UH. The Associated 0:00:30.320 --> 0:00:32.479 Press does the best job on exit polls. The Wall 0:00:32.520 --> 0:00:35.120 Street Journals got it in real time, which is fascinating. 0:00:35.520 --> 0:00:42.280 Which best describes your family's financial situation? Falling behind Democrats 0:00:43.600 --> 0:00:46.839 Republicans a big majority, sixty two percent. That's a good 0:00:46.920 --> 0:00:50.920 leading to David Kelly, chief Global strategist at JP Morgan 0:00:51.280 --> 0:00:54.840 Asset Management. So let's dove tell this into tomorrow's inflation report. 0:00:54.960 --> 0:00:58.240 David Kelly, when does inflation ebb away to help the 0:00:58.280 --> 0:01:01.920 sixty two percent of republic who say they're falling behind. 0:01:02.400 --> 0:01:05.320 I think inflation has already peaked. I think it is 0:01:05.319 --> 0:01:08.000 going to gradually full. We're looking for a six tenth 0:01:08.160 --> 0:01:11.960 or maybe even seven tenths tomorrow because of a rebound 0:01:12.000 --> 0:01:14.720 in energy. But on a year of year basis, we 0:01:14.840 --> 0:01:16.680 might be down to seven point nine or an eight, 0:01:17.160 --> 0:01:19.280 and by March I think we're going to be down 0:01:19.319 --> 0:01:21.160 to something with a five handle on the year of 0:01:21.240 --> 0:01:24.520 year basis. Inflation is falling, but to your point, nobody's 0:01:24.520 --> 0:01:27.920 going to notice, because if you look at political leaning 0:01:27.920 --> 0:01:30.920 in this country redetermines how people feel about the economy. 0:01:30.959 --> 0:01:33.960 People are, you know, if your Republicans always feel worse 0:01:34.000 --> 0:01:36.039 about the economy when there's a Democrat in the White 0:01:36.040 --> 0:01:41.480 House and vice versa. Um Americans believe the economy is 0:01:41.520 --> 0:01:44.280 in recession, even though if you talk to any economists, 0:01:44.280 --> 0:01:46.399 they will tell you, well, that's not actually true right now. 0:01:46.680 --> 0:01:48.520 Might be next year, but it's not true right now. 0:01:48.840 --> 0:01:51.640 So how people feel about the economy and what it 0:01:51.680 --> 0:01:55.360 actually is doing are two completely separate things, David, among 0:01:55.360 --> 0:01:58.800 the wealthy and among the halves and decidedly a broad 0:01:58.880 --> 0:02:02.200 part of America that have not they've got to recover 0:02:02.360 --> 0:02:06.200 from a bear market, disinflation and a decided bear market 0:02:06.280 --> 0:02:10.560 and bonds. What's your two thousand twenty three strategy to 0:02:10.720 --> 0:02:15.880 begin a financial recovery. Well, I mean it's certainly that 0:02:15.960 --> 0:02:18.040 people are being you know, have been hurt by the 0:02:18.120 --> 0:02:20.400 rise of price that we've seen and also a fiscal 0:02:20.520 --> 0:02:22.799 drag and things have sowed down a lot. So there's 0:02:22.800 --> 0:02:25.359 a lot of hurt out there in main street for investors. 0:02:25.400 --> 0:02:27.960 Though the most important thing that happened this year isn't inflation, 0:02:28.000 --> 0:02:30.160 it isn't fiscal drag. It's in fact, the prices fell. 0:02:30.520 --> 0:02:33.679 Prices fell for bonds, prices felt for stocks. So we're 0:02:33.680 --> 0:02:35.880 just putting out a long term capital market assumptions. We 0:02:36.000 --> 0:02:38.640 just released some yesterday. Uh and you know, we're looking 0:02:38.680 --> 0:02:40.919 for about an eight percent long term gain out of 0:02:40.960 --> 0:02:43.840 equities in the US, more than ten percent in Europe, 0:02:43.880 --> 0:02:46.600 emerging markets in Japan. So I'd say this is a 0:02:46.639 --> 0:02:50.919 time to be overweight equities for a long term investor. Uh. 0:02:50.960 --> 0:02:53.919 And you know, I think bonds are back. I think 0:02:54.000 --> 0:02:56.560 it makes sense to have a you know, a slightly 0:02:56.600 --> 0:02:59.919 below average allocation, but a pretty strong allocation fixed inco 0:03:00.120 --> 0:03:02.240 So this is time to get invested. I know people 0:03:02.320 --> 0:03:05.600 feel miserable, but as I said, there's a difference between 0:03:05.639 --> 0:03:08.680 what's actually going on the economic dynamics and what people 0:03:08.720 --> 0:03:13.080 feel given the extraordinarily partisan nature of news coverage in 0:03:13.080 --> 0:03:16.040 this country. David, do you think that there is anything 0:03:16.120 --> 0:03:19.200 in tomorrow's CPI report from the United States that could 0:03:19.240 --> 0:03:21.639 have changed your assessment to go long bonds to go 0:03:21.720 --> 0:03:25.200 along equities. Well, I've been looking. I'll be looking at 0:03:25.280 --> 0:03:32.120 service sector inflation outside of the housing market. So if 0:03:32.120 --> 0:03:35.320 we see a big bump in things like uh, you know, 0:03:35.360 --> 0:03:40.960 inflation and restaurants inflation, food in general, in a lot 0:03:41.000 --> 0:03:44.520 of household services, that that would worry me a little bit. 0:03:44.560 --> 0:03:47.000 But I think that they know we're looking at all 0:03:47.040 --> 0:03:49.760 these numbers, and what they're telling us is that outside 0:03:49.760 --> 0:03:53.200 of shelter, inflation is gradually falling here. So that makes 0:03:53.200 --> 0:03:55.680 it very it's very hard for me to be positive 0:03:55.880 --> 0:03:58.040 on or to worry about bonds that much. And the 0:03:58.080 --> 0:03:59.480 one other thing, you know, the one thing that's coming 0:03:59.480 --> 0:04:01.920 out of this all is there will be no fiscal 0:04:01.960 --> 0:04:06.440 stimulus before so at some stage of this economy weakens 0:04:06.440 --> 0:04:09.560 a falls into recession, the only game in town will 0:04:09.600 --> 0:04:12.120 be the Federal Reserve cutting interest rates to stimulate the economy. 0:04:12.120 --> 0:04:14.400 And I think that's that's the big takeaway from gridlock 0:04:14.560 --> 0:04:19.359 is gridlock means a more um more dovish fed and 0:04:19.360 --> 0:04:21.160 down the road if they choose to count if they 0:04:21.240 --> 0:04:22.840 choose to turn dovish, and this is going to be 0:04:22.920 --> 0:04:25.640 the big debate through next year. David, Thank you, so much, sir, 0:04:25.720 --> 0:04:39.360 as always David Kelly, a JP Morgan Asset Management. Right 0:04:39.440 --> 0:04:43.080 now we dive to tomorrow morning at eight thirty and 0:04:43.120 --> 0:04:46.880 an incredibly important inflation report. We do this this measurement 0:04:46.880 --> 0:04:50.400 of the deepest market foreign exchange. Ibramabari joins his chief 0:04:50.440 --> 0:04:56.080 currency strategists. It's city group inflation. I get disinflation. Abraham, 0:04:56.160 --> 0:04:59.400 what will that do to the resilient dollar? Well, we 0:04:59.440 --> 0:05:02.120 think it's a key driver for the dollar and for 0:05:02.200 --> 0:05:05.039 broader markets as it's as it's been all year, and 0:05:05.080 --> 0:05:07.760 we've seen this really big shifting sentiment on the dollar 0:05:08.680 --> 0:05:12.400 relative to last week, even between Thursday and Friday last week, 0:05:12.440 --> 0:05:16.080 and all eyes are now on on tomorrow's reading. Our 0:05:16.080 --> 0:05:20.360 economists have a slightly lower forecast than than the consensus. 0:05:20.440 --> 0:05:22.960 Something like a point four month on month increased in 0:05:23.320 --> 0:05:26.440 in core CPI after two point six is about the 0:05:26.480 --> 0:05:31.240 tenth below the consensus forecast if that was to to pass. 0:05:31.839 --> 0:05:34.320 We we we think that recent dollar seller has further 0:05:34.400 --> 0:05:35.960 to go. So we've had two and a half percent. 0:05:36.320 --> 0:05:39.160 We think that you can get another two hustle down 0:05:39.400 --> 0:05:42.880 in the dollar as global even in framing around a 0:05:42.920 --> 0:05:45.320 major pair. Let's take Euro dollar I mean yen as 0:05:45.400 --> 0:05:49.479 its own beast right now. But an euro dollar is 0:05:49.480 --> 0:05:53.279 it a big figure move? If we get a disinflation 0:05:53.360 --> 0:05:56.599 in America, how many parts of the euro will go 0:05:56.760 --> 0:05:59.800 through parody? And up up? One oh one, one, o two, 0:05:59.800 --> 0:06:04.560 one five. Absolutely, So, as as you just highlighted, we're 0:06:04.600 --> 0:06:06.960 hanging above parody again, and we think that if we 0:06:07.000 --> 0:06:10.080 get a low inflation lumber tomorrow, we will easily pass 0:06:10.120 --> 0:06:12.280 through one oh one. But I think one or four 0:06:12.440 --> 0:06:15.279 is probably the next the next place to focus in 0:06:15.279 --> 0:06:17.359 in that in that scenario. So really quite a different 0:06:17.360 --> 0:06:20.599 picture from where we were last week, and it's reflecting 0:06:20.839 --> 0:06:23.159 a little bit more China optimism again, the idea that 0:06:23.200 --> 0:06:26.840 maybe the Fed can take the foot off of the 0:06:27.240 --> 0:06:30.560 gas peddle, but really also the luxury of looking into 0:06:30.640 --> 0:06:33.920 next year and and sort of allowing allowing investors, we 0:06:33.960 --> 0:06:36.479 worked this from David Kelly just now, allowing investors to 0:06:36.600 --> 0:06:39.200 maybe see a little bit more downside risk in the 0:06:39.240 --> 0:06:42.000 dollar over time as the global economy normalizers. And we 0:06:42.040 --> 0:06:45.240 think that's premature, but nevertheless, I think that will be 0:06:45.240 --> 0:06:48.240 the theme if we get low inflation tomorrow. Abraham, let's 0:06:48.240 --> 0:06:50.800 getting the ways just a little bit I'm not convinced 0:06:50.800 --> 0:06:52.400 that the end of hiking is the same as the 0:06:52.480 --> 0:06:54.919 end of technic And the reason I say that is 0:06:54.960 --> 0:06:58.120 because even if they end hiking interest rates and they pause, 0:06:58.640 --> 0:07:02.279 but the economy rolls out and they don't do anything, Abraham, 0:07:02.320 --> 0:07:04.960 isn't the FED still tightening in that environment? Isn't that 0:07:05.040 --> 0:07:08.760 ultimately the story when you really think about it. Absolutely, 0:07:08.920 --> 0:07:12.080 we're exactly on on the same page. And that's particularly 0:07:12.080 --> 0:07:14.720 relevant for the equity market. Usually have these two phases 0:07:15.000 --> 0:07:18.920 of the bear market. The first one is monitor policies tightening, 0:07:18.920 --> 0:07:21.840 and you get the D rating the seconds earnings compressed, 0:07:21.840 --> 0:07:23.440 and we get more and more signs of that, and 0:07:23.480 --> 0:07:25.960 you see the continuation usually the majority of the of 0:07:26.000 --> 0:07:28.720 the bear market, and that's very much our expectation. Now. 0:07:28.760 --> 0:07:31.240 When it comes to effects and and rates, you also 0:07:31.280 --> 0:07:33.320 have two stages. And the first stage is when do 0:07:33.480 --> 0:07:36.440 global rates peak or US rates peak? And that's usually 0:07:36.520 --> 0:07:39.520 around the time of the of the last FED rate tips. 0:07:39.560 --> 0:07:42.040 So I think that last FED rate type does have 0:07:42.480 --> 0:07:46.520 importance for rights markets. Usually also is a tradeable dollar correction, 0:07:47.000 --> 0:07:49.040 but it's usually not the dollar turn that comes much 0:07:49.120 --> 0:07:52.920 later when you see a turnaround bottoming and growth expectations. 0:07:53.600 --> 0:07:55.880 Is that source for the dollar turn abroad then, and 0:07:56.000 --> 0:07:59.840 not domestic? That's a it's a it's a very it's 0:07:59.840 --> 0:08:03.520 a very good question, and I think right now we 0:08:03.680 --> 0:08:06.240 may think so. Again, we think it's it's premature, but 0:08:06.480 --> 0:08:10.320 the focus has of late being maybe some expectation of 0:08:10.400 --> 0:08:12.680 an easing of restrictions and not really reopening, but a 0:08:12.720 --> 0:08:17.080 gradual easing of restrictions and the bottoming of sentiment around China. 0:08:17.440 --> 0:08:20.240 There is maybe a little bit of hope that some 0:08:20.320 --> 0:08:24.280 of the market concerns around conflict related tensions could also 0:08:24.800 --> 0:08:27.360 debate over time. So I do think that when it 0:08:27.400 --> 0:08:30.920 comes to the durable turn, the emphasis will be outside 0:08:30.920 --> 0:08:33.400 of the US. When it comes to the tightening, the 0:08:33.440 --> 0:08:37.680 FED is obviously the most important factor globally. Just to 0:08:37.720 --> 0:08:39.560 underscore the point that you just made, ever him, are 0:08:39.559 --> 0:08:42.240 you saying that this election at gridlock does not do 0:08:42.320 --> 0:08:44.559 anything one way or another to the dollar and that 0:08:44.720 --> 0:08:47.040 ultimately it has to be the drivers of the FED, 0:08:47.240 --> 0:08:49.880 but more so even the stockpiles of national casts over 0:08:49.920 --> 0:08:54.280 in Europe. Yes, generally, generally, I would agree. We think 0:08:54.320 --> 0:08:58.280 that inflation, broader risk sentiment, global growth of far more 0:08:58.360 --> 0:09:02.640 important drivers of the dollar than this specific or even 0:09:02.679 --> 0:09:06.640 more generally political considerations in the US. Historically, the dollar 0:09:06.800 --> 0:09:10.920 did appreciate post midterm elections into into year end. It 0:09:11.080 --> 0:09:14.120 is a it is a risk preview for US assets 0:09:14.160 --> 0:09:15.920 that tends to dissolve. You do tend to see an 0:09:15.960 --> 0:09:19.680 equity price increase as well, but we don't think we'll 0:09:19.679 --> 0:09:22.920 see a particularly decisive outcome, and this year isn't like most. 0:09:23.000 --> 0:09:26.200 We have much bigger developments in the macro landscape outside 0:09:26.200 --> 0:09:28.720 of US politics, and again inflation is probably the first 0:09:28.760 --> 0:09:31.000 in global growth the second. So we don't think that 0:09:31.040 --> 0:09:34.880 there will be durable implications from the midterm elections, even 0:09:34.920 --> 0:09:37.679 when we know the full results, and of course waiting 0:09:37.679 --> 0:09:41.360 because some important ones. Ibriham, We're speaking with Mark McCormick 0:09:41.400 --> 0:09:43.720 of TV Securities yesterday and he was talking about the 0:09:43.760 --> 0:09:45.880 same thing that you were, some of the rumors of 0:09:45.960 --> 0:09:49.160 China perhaps reopening that have just been that rumors, right, 0:09:49.200 --> 0:09:52.080 that have not really come to fruition in any meaningful way. 0:09:52.400 --> 0:09:54.680 He was saying that if there is some sort of 0:09:54.679 --> 0:09:57.680 material reopening, you could see a five to six percent 0:09:58.320 --> 0:10:01.320 weakening in the dollar through year end and even more 0:10:01.559 --> 0:10:04.960 through the remainder of three. How likely do you see 0:10:04.960 --> 0:10:07.640 that scenario, And in the off chance that it happens, 0:10:07.679 --> 0:10:12.280 do you see a commensurate type of weakening. So we don't. 0:10:12.400 --> 0:10:16.440 We don't expect a breakthrough in reopening into year end 0:10:16.480 --> 0:10:18.800 and and even seasonally that would be that would be 0:10:18.800 --> 0:10:22.080 hard to imagine. That being said, I think that idea 0:10:22.160 --> 0:10:26.720 that investors position for next year, and generally speaking, particularly 0:10:26.760 --> 0:10:30.320 longer term investors would like to be exposed to cheap 0:10:30.360 --> 0:10:33.840 assets and and maybe high high carrying assets. So from 0:10:33.840 --> 0:10:36.840 both of those perspectives that the dollar doesn't look as 0:10:36.840 --> 0:10:41.000 attractive as it has has a year. So if inflation 0:10:41.080 --> 0:10:43.720 and the FED allow investors to position in that way, 0:10:43.720 --> 0:10:46.960 then we could see again a continuation and maybe not 0:10:47.160 --> 0:10:48.920 five or six percent, but at least the two or 0:10:48.920 --> 0:10:52.240 three that I mentioned could follow from a soft soft 0:10:52.280 --> 0:10:55.160 CPI reading. But I do also want to emphasize what 0:10:55.200 --> 0:10:59.040 we've seen over the last week, particularly with China related assets. 0:10:59.080 --> 0:11:01.800 BO wasn't so much counting on a big reopening in 0:11:01.840 --> 0:11:04.680 the short term. It was pricing out some of the 0:11:04.679 --> 0:11:07.079 extreme pessimism that we've seen, and when it comes to 0:11:07.160 --> 0:11:10.079 China specifically, obviously the big asset price declines that followed 0:11:10.440 --> 0:11:13.360 the latest China Party Congress, and that's a bigger theme 0:11:13.400 --> 0:11:17.840 across markets, big risk reduction away from the big themes 0:11:17.880 --> 0:11:19.880 that we saw this year. And there was obviously all 0:11:19.960 --> 0:11:22.640 the strength people declined in equity markets, but even in 0:11:22.800 --> 0:11:25.240 rates markets, we've seen rates volatility come down and at 0:11:25.240 --> 0:11:27.560 the margint rates come down over the last two days. 0:11:27.559 --> 0:11:31.520 So it's it's mostly risk reduction so far. Abraham Fancy 0:11:31.520 --> 0:11:39.719 for Familist today, Abraham Rachmary there of City, Let's drive 0:11:39.760 --> 0:11:41.480 it forward. I want to do this through the show today, 0:11:41.520 --> 0:11:43.600 even as we look to inflation tomorrow and of course 0:11:43.600 --> 0:11:47.880 what we see an economics financial investment. On this global 0:11:48.040 --> 0:11:51.400 day we go to Washington. Henrietta Trades, director of Economic Policy. 0:11:51.480 --> 0:11:55.400 Vada Partners has helped so much in the recent days. Henrietta, 0:11:55.480 --> 0:11:58.640 we all have our individual statistic mind comes from the 0:11:58.760 --> 0:12:02.680 wonderful Associated Press Exit Pulse service that they do the 0:12:02.760 --> 0:12:08.800 depth of it. Then, in Florida, Latinos voted fifty two 0:12:09.000 --> 0:12:15.120 percent for the GOP. Is the Latino expansion happening much 0:12:15.320 --> 0:12:20.600 much quicker than anybody believed. Good morning, Thanks for having me. 0:12:20.679 --> 0:12:23.600 I think that in Florida you're seeing that expansion but 0:12:23.679 --> 0:12:26.840 it's not necessarily the case elsewhere. I'm appoint to Arizona 0:12:26.960 --> 0:12:29.960 and Nevada, um as two states that also have signs 0:12:29.960 --> 0:12:33.400 of Latino populations that are not mirroring mirroring that trend 0:12:33.480 --> 0:12:37.000 right now. So I think it's isolated work, considering basically 0:12:37.000 --> 0:12:39.160 that every Republican on the East coast moved to Florida 0:12:39.200 --> 0:12:41.719 over COVID, and that's what you're seeing right now. Very 0:12:41.720 --> 0:12:44.480 positive for the Santas, is very positive for Rubio, but 0:12:44.520 --> 0:12:49.360 not necessarily for Republicans elsewhere. What does your capital look 0:12:49.480 --> 0:12:51.960 like a month from now, well even two months, let's 0:12:51.960 --> 0:12:54.600 go out past the lame duck session. What does the 0:12:54.679 --> 0:12:58.920 Washington you know so well look like they're gonna be tired? 0:12:58.960 --> 0:13:01.400 Because the Lame Duck is going to be insane? Is 0:13:01.440 --> 0:13:06.199 my expectation, UM, now that Republicans have uh not one 0:13:06.360 --> 0:13:08.480 in a red wave, I wouldn't even call it a 0:13:08.520 --> 0:13:11.400 red ripple at this point. It was the worst showing 0:13:11.400 --> 0:13:14.120 for a minority party that I can think of, um 0:13:14.160 --> 0:13:16.840 since two thousand and two, and that one required an 0:13:16.880 --> 0:13:19.920 Act of war. UM. I think that the two thousand 0:13:19.960 --> 0:13:22.240 and twenty three Congress is gonna be lucky if they 0:13:22.280 --> 0:13:26.160 have a decided speaker and it's gonna be very difficult 0:13:26.200 --> 0:13:28.960 to govern. So that's optimistic for the lame duck session. 0:13:29.400 --> 0:13:32.559 We could now possibly see the dead ceiling, but it's 0:13:32.559 --> 0:13:35.600 gonna be tough. And Lisa, you brought this up earlier. 0:13:35.679 --> 0:13:38.880 I'm assuming McCarthy's a shoeing I'm wrong, right, Well, that's 0:13:38.880 --> 0:13:41.240 what I was gonna ask Henrietta. How much is this 0:13:41.360 --> 0:13:43.600 really up for grabs? What is the big question in 0:13:43.640 --> 0:13:46.640 your mind? We don't have the final votelies in the 0:13:46.679 --> 0:13:48.960 House yet, but he could be as many as eight 0:13:49.000 --> 0:13:51.719 vote shy of becoming speaker next year. It requires two 0:13:51.760 --> 0:13:54.680 hundred and eighteen votes no matter how you get them. Um, 0:13:54.760 --> 0:13:57.120 and it could be that some Democrats cross the line 0:13:57.160 --> 0:14:00.000 to vote for him. I sincerely doubt that the McCarthy, 0:14:00.000 --> 0:14:01.679 he's going to have a lot of people coming from 0:14:01.679 --> 0:14:05.360 his thought, namely Jim Jordan's. What does this say about 0:14:05.520 --> 0:14:09.320 Donald Trump as a leader of the Republican Party that 0:14:09.480 --> 0:14:12.439 the American voters are not going to vote for him 0:14:12.679 --> 0:14:15.760 the third time either? I think this was a very 0:14:15.760 --> 0:14:18.560 problematic night for Donald Trump. UM. I know he's set 0:14:18.600 --> 0:14:21.000 to declare on the fifteenth or that's what he's been saying. 0:14:21.040 --> 0:14:24.280 But I wouldn't be surprised if he reassesses um after 0:14:24.360 --> 0:14:27.240 he makes any kind of declaration. He's got ten days 0:14:27.280 --> 0:14:29.560 to file with the FBC if he wants to seriously 0:14:29.640 --> 0:14:33.040 campaign again. He is down on fundraising against the Santis. 0:14:33.080 --> 0:14:36.720 He's down in a in Republicans support by seven points 0:14:37.200 --> 0:14:39.360 versus the last time he ran. He's down by twelve 0:14:39.440 --> 0:14:42.160 points with independence. Uh, it would be ill advised, and 0:14:42.200 --> 0:14:43.840 I imagine he'll be hearing that from a lot of 0:14:43.840 --> 0:14:46.720 folks today. When you looked at the exit polse Henrietta, 0:14:46.760 --> 0:14:49.800 everyone was concerned about the economy. That was the first 0:14:49.840 --> 0:14:53.680 and foremost concerned, inflation being the pre eminent issue there. 0:14:54.080 --> 0:14:57.600 How much does this really speak to other drivers of 0:14:57.680 --> 0:15:00.800 people to the polls, potentially some of the social issues 0:15:01.120 --> 0:15:04.560 or other concerns, not necessarily what typically people vote for, 0:15:04.600 --> 0:15:08.440 which is the pocket book exactly. I mean, you're looking 0:15:08.480 --> 0:15:11.880 at a percent inflation five dollar gasoline and you're still 0:15:11.880 --> 0:15:16.320 going to keep the majority party in Congress. It is 0:15:16.480 --> 0:15:20.200 a huge referendum. Republicans need to focus on serious issues 0:15:20.200 --> 0:15:23.200 and have serious answers to the American public about how 0:15:23.200 --> 0:15:25.160 they're going to get bring gas prices down. It's not 0:15:25.320 --> 0:15:28.120 enough to just rail against whatever the Democrats try to do. 0:15:28.160 --> 0:15:31.640 The spr release obviously has worked to an extent, and 0:15:31.840 --> 0:15:34.080 voters are a lot smarter than I think Republicans are 0:15:34.080 --> 0:15:36.760 giving them credit for um, and that's gonna be something 0:15:37.000 --> 0:15:40.440 that Republicans need to reassess today. Again, if you're gonna 0:15:40.480 --> 0:15:43.840 come in to an election as the minority party and 0:15:43.920 --> 0:15:47.800 not win the Senate outright or the House outright, and 0:15:47.840 --> 0:15:50.840 perhaps have the lowest show out in an a percent 0:15:50.880 --> 0:15:54.240 inflation environment, you need to really reassess your message. And 0:15:54.320 --> 0:15:57.000 we had it just quickly. What time does Biden announced 0:15:57.000 --> 0:16:02.400 that he's running. Here's the question of the I'll be honest, 0:16:02.480 --> 0:16:05.200 I think if Donald Trump does not run, Biden will 0:16:05.240 --> 0:16:07.880 also not run, and we could be facing a situation 0:16:07.880 --> 0:16:10.720 in America that is unprecedented where we have two human 0:16:10.760 --> 0:16:12.880 beings that could run again the both choose not to. 0:16:13.040 --> 0:16:16.160 I think Biden's decision depends on Trump's decision, and like 0:16:16.200 --> 0:16:18.280 they said, I think there will be some serious reassessing 0:16:18.320 --> 0:16:21.120 going on a Team Trump today. There should be. That 0:16:21.240 --> 0:16:24.200 decision comes in November fifte at least we're expecting it 0:16:24.240 --> 0:16:26.840 to Henriettes, Are you suggesting that it might not come 0:16:26.840 --> 0:16:29.920 about at all? I mean, I know I'm wildly out 0:16:29.920 --> 0:16:31.880 of consensus on this, but it's been my view for 0:16:31.920 --> 0:16:35.000 a while that the polling and the fundraising dollars are 0:16:35.000 --> 0:16:38.160 sending a message that President Trump cannot win again. I 0:16:38.160 --> 0:16:40.720 think last night proved it again. I think he's facing 0:16:40.800 --> 0:16:43.600 serious threats from De Santis. Um. We saw his uper 0:16:43.640 --> 0:16:46.840 Secretary State, Mike Pompeo come out in favor of De 0:16:46.920 --> 0:16:49.720 Santis in his own way. We see the Vice President 0:16:49.760 --> 0:16:51.840 Pence is also preparing to run. The very next day, 0:16:51.840 --> 0:16:54.240 he's dropping his book and holding a town hall. Um. 0:16:54.240 --> 0:16:55.960 I think there's gonna be a lot of challenges within 0:16:56.000 --> 0:16:59.440 the Republican Party. And readA thank you Henridda tries that 0:16:59.560 --> 0:17:12.280 invite of honestly or someone expert at this is Laura Ray, In, 0:17:12.359 --> 0:17:16.119 chief US economist at FS Investments Law. I really want 0:17:16.160 --> 0:17:19.639 to drill on inflation as we've been doing politics all morning. 0:17:19.680 --> 0:17:24.800 Do you presume that disinflation is rapid and suddenly or 0:17:24.920 --> 0:17:28.479 is there going to be a duration to our disinflationary trend. 0:17:29.800 --> 0:17:33.600 I definitely am in the camp where I think inflation 0:17:33.880 --> 0:17:36.200 may have peaked, but boy, the descent is going to 0:17:36.280 --> 0:17:41.639 be gradual, and it's going to be far from steady. Um. 0:17:41.680 --> 0:17:43.840 I think at the end of the day, you're looking 0:17:43.880 --> 0:17:47.359 at key components which are now sort of the cat 0:17:47.400 --> 0:17:50.520 is out of the bag. They are significantly higher. You're 0:17:50.560 --> 0:17:54.640 seeing it across sectors. It's not just sort of one uh, 0:17:54.720 --> 0:17:57.000 you know area the weekend cherry pick like it was 0:17:57.040 --> 0:17:59.080 on the way up. I think maybe that's the best 0:17:59.119 --> 0:18:01.239 way to express it. On the way up, we were 0:18:01.280 --> 0:18:04.879 able to really pick out clear single drivers. On the 0:18:04.920 --> 0:18:08.520 way back down, the picture is much more uneven and 0:18:08.840 --> 0:18:13.359 much more uncertain. Should the fellow reserved care about rent 0:18:13.440 --> 0:18:19.879 and home ownership statistics because that's the kind of inflation 0:18:20.200 --> 0:18:22.720 that makes people go to their bosses and say, my 0:18:22.800 --> 0:18:25.160 rent just one up ten percent. I want a ten 0:18:25.200 --> 0:18:28.160 percent increase. And even if that number has come down 0:18:28.240 --> 0:18:30.960 to five, even if it's come down to three percent, 0:18:31.119 --> 0:18:35.520 that is significantly higher than inflation and their target inflation. 0:18:35.960 --> 0:18:39.720 I think increasingly, going forward, while we will still focus 0:18:39.880 --> 0:18:43.200 very heavily on the CPI numbers, we're gonna start focusing 0:18:43.200 --> 0:18:46.040 on the wage numbers. You know, that's already something everybody 0:18:46.119 --> 0:18:48.879 is watching, but you know, there's no way to declare 0:18:48.960 --> 0:18:53.959 victory on inflation when wages are at four or five percent. 0:18:54.160 --> 0:18:57.840 That also is much higher than the FED wants to see. Laura, 0:18:57.920 --> 0:19:00.320 we were just speaking with Emory Herdern about the election 0:19:00.440 --> 0:19:02.680 and she was saying, yes, inflation was at the forefront 0:19:02.680 --> 0:19:05.680 of people's minds, but they still have jobs. They still 0:19:05.720 --> 0:19:08.959 aren't concerned about their chances of being employed. When does 0:19:09.000 --> 0:19:12.760 that change? So this is one of the key issues 0:19:12.800 --> 0:19:14.800 that I get all the time. How's the economy doing? 0:19:15.080 --> 0:19:16.840 And while people look at growth that feel like it's 0:19:16.880 --> 0:19:19.960 stagnant on the jobs front, we are so racing ahead 0:19:20.000 --> 0:19:23.240 on all cylinders with an incredibly strong jobs market. So 0:19:23.720 --> 0:19:26.520 I think that, you know, the jobs market is the 0:19:26.600 --> 0:19:30.440 lagging indicator. I think the jobs markets stays strong until 0:19:30.480 --> 0:19:33.720 the middle of next year. I put the economy on 0:19:33.880 --> 0:19:37.000 solid footing for the first half of next year, and 0:19:37.000 --> 0:19:40.080 I think the FED is going to have to continue 0:19:40.119 --> 0:19:44.320 to raise rates past what markets currently anticipate is their 0:19:44.359 --> 0:19:46.800 sort of finish line a little over five percent. For 0:19:46.880 --> 0:19:48.920 the FED, I think they may have to go further, 0:19:49.280 --> 0:19:51.640 and I think they're gonna want to wait and see 0:19:51.920 --> 0:19:56.960 the labor market really break here's the problem. Given the 0:19:57.040 --> 0:20:00.960 last downturn, the company is are going to be more 0:20:01.119 --> 0:20:04.399 cautious about laying off workers. And you know, you have 0:20:04.520 --> 0:20:07.240 what the headlines in in Silicon Valley right now is 0:20:07.320 --> 0:20:10.479 very different from what you're seeing across small businesses, across 0:20:10.520 --> 0:20:13.040 every business really on a week by week basis in 0:20:13.080 --> 0:20:15.720 the US. And we were just speaking actually with Neil 0:20:15.800 --> 0:20:19.200 Richardson of ADP about exactly this, that the tech companies 0:20:19.200 --> 0:20:21.679 are a very small subset, and we've been arguing about 0:20:21.680 --> 0:20:24.040 whether this is the beginning though of something broader, or 0:20:24.080 --> 0:20:28.240 if this really is just a specific issue to the 0:20:28.280 --> 0:20:32.080 tech sector. Where do you see the job losses broadening 0:20:32.080 --> 0:20:34.520 out in the middle of next year. How substantial will 0:20:34.560 --> 0:20:37.000 that be given the reluctance that you just spoke about 0:20:37.280 --> 0:20:40.359 of companies to cut staff. I think, you know, when 0:20:40.440 --> 0:20:44.400 you look at the fact that we've lost so many 0:20:44.480 --> 0:20:46.920 of the sort of lower product we're still hiring back 0:20:46.960 --> 0:20:50.480 a lot of the quote unquote lower productivity jobs. I 0:20:50.480 --> 0:20:54.000 think one of the problems there has been significant migration 0:20:54.200 --> 0:20:57.600 due to the pandemic. You still have localities where so 0:20:57.720 --> 0:21:01.440 many people have moved. You can't get the service jobs 0:21:01.520 --> 0:21:04.399 hired fast enough. To accommodate the fact that some of 0:21:04.440 --> 0:21:07.639 these populations have really swelled. So I think that this 0:21:07.800 --> 0:21:11.080 match continues to keep pressure on the labor market to 0:21:11.160 --> 0:21:14.159 stay very strong. I mentioned this in one of the 0:21:14.200 --> 0:21:16.399 recent hours Laura, let me do it again? And the 0:21:16.440 --> 0:21:20.400 AP exit polls, which are voluminous and really really informative, 0:21:20.960 --> 0:21:24.000 they show this massive divide over the question are you 0:21:24.160 --> 0:21:28.000 confident you can get the next job? And Republicans are 0:21:28.080 --> 0:21:31.520 less confident. Let's call it rural, let's call it exurban, 0:21:31.600 --> 0:21:34.680 whatever you want to call it. But is there two 0:21:34.680 --> 0:21:38.399 America's that are a job economy? And does the FED 0:21:38.720 --> 0:21:43.480 have to react to two America's or one America? So, 0:21:43.560 --> 0:21:46.159 you know, this is a critical question. First of all, 0:21:46.200 --> 0:21:49.120 the unemployment rate is low all over the place. And 0:21:49.480 --> 0:21:52.880 when I say that, obviously there's divergence in localities between 0:21:52.920 --> 0:21:57.440 the unemployment rates, but overall it's lower than it was, uh, 0:21:57.480 --> 0:22:01.400 you know, during the pandemic, and it's really come down significantly, 0:22:01.440 --> 0:22:04.040 matching where we were a pre pandemic. I think the 0:22:04.400 --> 0:22:07.560 real issue is that the FED doesn't have the luxury 0:22:07.760 --> 0:22:12.200