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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie Hortern. Join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify, or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business App. Here's the lacest this morning.

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Speaker 2: The Vice President putting some distance between herself and President Biden,

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Speaker 2: with election day less than three weeks away, and new

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Speaker 2: polling from Fox News showing Donald Trump leading Kamala Harris

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Speaker 2: by two points. Joining us now to discuss a good

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Speaker 2: friend of this program over the years, the Governor of Connecticut,

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Speaker 2: Ned Lamont.

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Speaker 1: Governor.

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Speaker 2: It's good to see us, sir, I see you, and

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Speaker 2: welcome back to the program. She's taking some risks, some

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Speaker 2: risks that maybe this campaign wouldn't have taken maybe a

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Speaker 2: month ago. Do you like what you see?

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Speaker 3: Yeah, take those risks, go right into the lions. Den

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Speaker 3: go right there with Brett Baer, go back and forth.

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Speaker 3: You know, Donald Trump won't even debate again, and she's

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Speaker 3: having a pretty good debate.

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Speaker 1: I appreciate that.

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Speaker 4: Is it too late though? Should she have done this

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Speaker 4: interview two weeks a month ago the week.

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Speaker 3: Been a candidate for ninety days. I think she's moving along.

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Speaker 3: I mean, Donald Trump won't go on ABC without seeing them,

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Speaker 3: So I think she's doing okay.

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Speaker 4: Do you think she's evolving as a candidate? Then over

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Speaker 4: the course we've seen since July, I.

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Speaker 3: Think so everything has been so compressed for her and Tim.

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Speaker 3: But now we're in the final stretch.

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Speaker 4: So this weekend you're hosting a fundraiser for Governor Walls,

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Speaker 4: her running mate. Have you been happy with his performance

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Speaker 4: as her running mate? Supporting Kamala Harris?

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Speaker 3: Look, I love Tim. He and I were elective at

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Speaker 3: the same time, all the governors, both sides the aisle.

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Speaker 3: He's so genuine and he's so real. We like governors

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Speaker 3: by the way. You know, governors have to balance budgets

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Speaker 3: and live in the real world, unlike these other guy.

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Speaker 3: I think he's a going to be a great vice president.

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Speaker 4: So you're praising some of his work. He used to

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Speaker 4: be when he was in Congress, a blue dog Democrat,

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Speaker 4: a moderate. As a governor, he's very liberal, legalizing marijuana

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Speaker 4: licenses to undocument immigration immigrants in his state. Do you

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Speaker 4: think that given his record as governor, he was the

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Speaker 4: right choice for a general election when the Democratic Party

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Speaker 4: needed to be seen as coming into the middle, especially

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Speaker 4: after VP Harris's flop flops from her primary.

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Speaker 1: I don't know.

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Speaker 3: Legalizing marijuana does that make you liberal? I thought it

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Speaker 3: was sort of libertarian. I think you see that happening

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Speaker 3: in states across the country, you know, fighting for a

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Speaker 3: woman's right to choose, that's about freedom. I don't think

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Speaker 3: that's particularly liberal. Like I said, he balances budgets, so

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Speaker 3: I think he's got a pretty good balance there. He's pragmatic.

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Speaker 5: Well, there's a question here about how much the Harriswalds

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Speaker 5: campaign is really going to reach out to business and

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Speaker 5: Tim Wats is going to Benish Cantiquett, where he's.

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Speaker 1: Going to be talked with a lot of business people.

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Speaker 5: How are they responding to some of their concerns, whether

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Speaker 5: it's about tax increases, whether it's about having a viable

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Speaker 5: immigration policy, or frankly, when it comes to antitrust and

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Speaker 5: the ability to understand whether or not Lina CON's canerman

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Speaker 5: in the FTC.

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Speaker 3: I like the fact they're reaching out the business, you know,

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Speaker 3: I think the Biden administration was a little more ideological.

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Speaker 3: I think Harris Waltz are much more pragmatic. I've seen

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Speaker 3: that crypto. I've seen that what they want to do

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Speaker 3: with capital gains and not do as much as President Biden.

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Speaker 3: They take the deficit very seriously, as do I. Nobody

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Speaker 3: else seems to. But I think their outreach makes sense,

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Speaker 3: and I'm proud he's coming to Greenwich to tell a story.

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Speaker 5: Do you have a sense of what they're going to

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Speaker 5: do with any trust?

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Speaker 3: I don't. That's not sort of an insight I have.

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Speaker 3: My instinct is if they talk about price increases, they

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Speaker 3: worry a little bit about monopoly pricing and pricing power,

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Speaker 3: so probably they'll be strict when it comes.

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Speaker 1: To anti trust.

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Speaker 5: One thing that you've talked a lot about with US

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Speaker 5: is this quest around immigration, and you're talking about how

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Speaker 5: there are people coming to Connecticut. That made you really

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Speaker 5: got check some of the assumptions. Do you think that

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Speaker 5: there is anything further that they can do? Tim Walton

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Speaker 5: and Kamala Harris campaign to sort of change the narrative

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Speaker 5: that their immigration policies led to a lot of problems.

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Speaker 3: I start with the fact that this is a country

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Speaker 3: built on immigration, legal immigration, that's part of our economic strength,

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Speaker 3: unlike other parts of the world, people keeping out.

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Speaker 1: If they had asked me.

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Speaker 3: The last night was difference between you and President Biden,

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Speaker 3: I would have said, mister Briden, give me the tools

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Speaker 3: I need to shut down the border to illegal immigration.

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Speaker 3: I think that's what Kama should have said, and I

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Speaker 3: think that's what she believes.

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Speaker 2: Why do you think she won't say it? I think

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Speaker 2: this is the problem that people have right now. A

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Speaker 2: frame as follows. You say she's pragmatic. You say that

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Speaker 2: both pragmatic. Other people might use a less kind phrase.

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Speaker 2: They might say she's a shape shifter, she just wants

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Speaker 2: to get elected. Untrustworthy. These are the values, the thoughts,

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Speaker 2: the policies of just five years ago, and now some

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Speaker 2: there overhea How can we trust them? What's the message

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Speaker 2: to the electorate without in mind?

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Speaker 3: What talk about a shape shifter? Talk about no principles.

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Speaker 3: We're talking about Donald Trump there. Look, I think you

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Speaker 3: know where she stands on these issues. Look, she was

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Speaker 3: a vice president, Jonathan, vice president's not worth a war,

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Speaker 3: buncket a spit, and so every saying, boy, you were

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Speaker 3: on board with the Biden administration, that's tot of your

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Speaker 3: job as vice president. Now she's been a candidate for

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Speaker 3: ninety days and I think she's showing her stuff.

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Speaker 4: But if you think the vice president's job is that important,

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Speaker 4: then how is she qualified for this job? If she's

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Speaker 4: running on some of her time in office as vice president.

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Speaker 1: I think it's a pretty.

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Speaker 3: Good training ground, don't you. I mean jd Vance stopped

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Speaker 3: by the US Senate for a cup of coffee. You know,

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Speaker 3: she's been a front and center as a senator. She's

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Speaker 3: been front and center as vice president. I think she's

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Speaker 3: got the training, the experience she needs to be a

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Speaker 3: really good president.

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Speaker 4: So some states are already voting. I know Connecticut and

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Speaker 4: I you can go out and vote on Monday. I

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Speaker 4: saw that you said you're going to vote on Monday,

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Speaker 4: getting there early.

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Speaker 1: What does she need to.

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Speaker 4: Do as really people are already out and about voting.

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Speaker 4: It's not like she has time before November fifth. The

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Speaker 4: time is now, the election has already started.

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Speaker 1: I'm just urging.

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Speaker 3: Look, my friends, I'm a little worried, you know, the

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Speaker 3: guys in sort of finance world that I know. Maybe

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Speaker 3: it wasn't so bad under the Trump administration. Maybe I'll

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Speaker 3: sit this one out like drunken Miller. No way, this

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Speaker 3: is a transcendental of vote we've got coming up here

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Speaker 3: right now. I came in the office under President Trump.

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Speaker 3: The government was shut down. Remember every time you didn't

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Speaker 3: get your own way, you shut down the government.

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Speaker 5: You know.

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Speaker 3: Then we had COVID and he said, we don't have

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Speaker 3: a stockpal you don't have any stock. Oh, we had

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Speaker 3: to go to China to buy our masks. It was

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Speaker 3: dysfunctional there for two and a half years.

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Speaker 1: This election is that important.

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Speaker 3: I can't stand people saying, maybe i'll set this one out.

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Speaker 2: Let's get into some of the issues. You could have

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Speaker 2: very low unemployment right in a study of Connecticut, it's

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Speaker 2: something around three and a half pounder finance because people

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Speaker 2: have been leaving the state.

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Speaker 1: We all want legal immigration.

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Speaker 2: In fact, the former president of SOLF, Donald Trump, in

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Speaker 2: a convers saction with essentially talked about that that he

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Speaker 2: wants legal immigration. How are we going to achieve that

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Speaker 2: as a country? It's something that I think a lot

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Speaker 2: of us can agree on. That's what we want. I

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Speaker 2: went through a very long process to be here. I

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Speaker 2: know how difficult it is. How do we make it

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Speaker 2: easy for people to come here legally to fill the

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Speaker 2: job openings that you have in a state like Connecticut.

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Speaker 3: Well, first of all, challenge your bretech. So we have

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Speaker 3: a lower unemployment rate than the rest of the countries,

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Speaker 3: not because people are leaving the state. In fact, for

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Speaker 3: the first time in the generation, people are moving in

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Speaker 3: the state. Some of them are coming from New York,

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Speaker 3: and I'm.

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Speaker 1: Really proud of that fact.

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Speaker 3: How do you keep that economic momentum going? You know,

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Speaker 3: for us manufacturing on shoring manufacturing, we have a lot

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Speaker 3: in the defense trade.

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Speaker 1: They're growing.

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Speaker 3: It's a bigger piece of our economy. Fintech and life

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Speaker 3: sciences sort of the next generation. We had a lot

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Speaker 3: of old industries Jonathan, right, that was sort of our

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Speaker 3: reputation no longer.

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Speaker 5: Yeah, But you're talking about what policy is going forward?

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Speaker 5: Can there be to be implemented that actually can be

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Speaker 5: viable immigration policies?

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Speaker 1: I guess the bigger takeaway is you.

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Speaker 5: Said that a lot of your business friends and colleagues

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Speaker 5: are on the fence, like Duck and Miller, don't want

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Speaker 5: to vote necessarily feel like it's an equal chance between

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Speaker 5: the two. What do you think is driving them to

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Speaker 5: feel that way? What do you think is the most

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Speaker 5: misunderstood policy that you kind of want to underscore and

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Speaker 5: want them to understand.

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Speaker 1: I think.

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Speaker 3: For a lot of those folks, cut my taxes is

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Speaker 3: kind of determinant of there, despite what it means to

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Speaker 3: the deficits, despite what it means to make in investments. Look,

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Speaker 3: you know what I like about commloss. She's not talking

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Speaker 3: about handing out money to people. She's talking about opportunities.

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Speaker 3: She's saying with daycare, I'm going to give you the

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Speaker 3: opportunity to start your own business. It's an ownership economy.

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Speaker 3: I think it's a different field than we had for

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Speaker 3: the last four years.

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Speaker 1: Governor, you're always generous with your time.

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Speaker 2: It's going to see you against I did against sing

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Speaker 2: Thank Scutty, join us nap for what thank good morning

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Speaker 2: to you, good morning, John, good to you. Netflix reporting

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Speaker 2: after the closed a little bit likes we won't do

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Speaker 2: single names for you, but the emphasis starts to shift

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Speaker 2: away from the financials and towards some of the media

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Speaker 2: tech type players. How high is the bar for the

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Speaker 2: rest of the market after what we've seen from the

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Speaker 2: financials early in the last week.

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Speaker 6: Well, we've gotten off to a great starter, as you

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Speaker 6: know in the last week with banks and even seeing

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Speaker 6: some of the consumer plays as well. So the bar

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Speaker 6: is hi, Jonathan, And one thing we've been talking about

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Speaker 6: is respecting that rotation since July and August. It has

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Speaker 6: been fairly consistent since then that you've been seeing the

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Speaker 6: value in cyclical sectors responding better to their earnings results.

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Speaker 2: The tech story has been a mess. I think this

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Speaker 2: week's a fantastic example of that. ASML drops, everyone's foot

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Speaker 2: TSMC comes out, Everything's okay. Where is that trade now?

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Speaker 1: It is a mixed bag.

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Speaker 6: At the moment, it was the only game in town

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Speaker 6: for eighteen months. So you're seeing the broadening out of

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Speaker 6: earnings into other sectors. We talked about financials. Industrials is

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Speaker 6: certainly another place.

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Speaker 1: Materials.

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Speaker 6: Let's see what happens with China, which I know we'll

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Speaker 6: get into, but we're seeing better global growth potentially. So

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Speaker 6: the reality is it is a higher bar. It's a

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Speaker 6: mixed bag. The Magnificent seven itself has gone almost to

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Speaker 6: like the dynamic duo or the dynamic two, So things

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Speaker 6: have certainly changed.

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Speaker 5: Yeah, well, you talk about the idea of growth outside

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Speaker 5: of the US, and you talk about China, and yet

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Speaker 5: you've been telling people not to buy into the Chinese

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Speaker 5: equity rally, and frankly it's probably face on today's action,

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Speaker 5: which is one day it seems to be where the

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Speaker 5: mood is shifting. How much can the rotation continue if

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Speaker 5: all of the pillars don't hold up. You have the earnings,

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Speaker 5: you have FED rate cuts that people believe will be

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Speaker 5: cutting down the pike, and China stimulus. Can you get

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Speaker 5: some of those fall away and still have the rotation theme.

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Speaker 6: It's a really really good question, Lisa, and in particular,

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Speaker 6: we think as it pertains to the US leadership in

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Speaker 6: large cap value fed cuts, more confirmation about a soft landing.

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Speaker 6: We've seen that in services, but do we need to

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Speaker 6: see more in manufacturing. Yes, manufacturing has lagged, so that's

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Speaker 6: still to come.

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Speaker 1: And then it's the earnings broadening out.

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Speaker 6: So we think if you have enough domestic drivers that

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Speaker 6: can still power the US trade, you're not necessarily as

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Speaker 6: reliant on China. Continue to follow through with stimulus to

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Speaker 6: get that.

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Speaker 1: Trade to work.

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Speaker 5: How excited can you be outside of the US, And

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Speaker 5: I'm talking about Europe in particular. If you don't have

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Speaker 5: China cooperating, you.

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Speaker 1: Got to pick your spots.

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Speaker 6: I mean, look at some of these countries like Germany

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Speaker 6: as an example, that's been entirely reliant on autos for

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Speaker 6: a long period of time.

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Speaker 1: So not only are.

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Speaker 6: There cyclical pressures there, there are structural pressures there with

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Speaker 6: changes in the industry, with competition, new technologies, and so

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Speaker 6: I think there's a lot of more bottom up idiosyncratic

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Speaker 6: risk to those places. Then maybe most people discount Dan.

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Speaker 4: Let's talk about the geopolitical and domestic politics. These risks

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Speaker 4: you say are over the market. When you talk about

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Speaker 4: the US election, you say the passing the election will

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Speaker 4: be a clearing event with downsign volatility. What about if

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Speaker 4: there's a contest.

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Speaker 6: Election, So notably, Anne Marie, we didn't say election night,

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Speaker 6: So we do subscribe to the fact that it will

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Speaker 6: be more of an election week. So once we get

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Speaker 6: past that week, we do think that it'll be a

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Speaker 6: risk clearing event.

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Speaker 1: We will accept a winner. And what's notable, and we've

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Speaker 1: talked about it.

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Speaker 6: Over the last several months, the market continues to climb

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Speaker 6: this wall of worry. We think the election's one component

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Speaker 6: of that. Two years ago, it was trying to disprove

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Speaker 6: the recession. A year ago, it was what was the

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Speaker 6: path of the Fed? Would they be proactive or reactive

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Speaker 6: with rate cuts? We think the election is the last

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Speaker 6: run on that wall of worry.

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Speaker 4: But what if there's a Florida recount issue, what if

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Speaker 4: it's that kind of contested election, It.

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Speaker 6: Could certainly be a higher volatility environment, But we do

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Speaker 6: think that it's going to be short lived.

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Speaker 2: You can't wait to see the back of this.

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Speaker 6: Can you cannot wait? I can find it, cannot wait.

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Speaker 6: I think we're all in agreement on that.

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Speaker 2: Possibility wishful thinking. Do you think this is that typical

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Speaker 2: election that once the event is cleared, we're back to

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Speaker 2: business or could we see some serious changes to policy

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Speaker 2: that we all need to Passentien see.

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Speaker 6: Well, it's an excellent point, and not to diminish this

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Speaker 6: is the gravity of the moment. I think the one

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Speaker 6: scenario that does present the most near term volatility is

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Speaker 6: that red sweep scenario, which is over the last week

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Speaker 6: or so been increasing in terms of the betting odds.

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Speaker 1: Why is that more relevant?

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Speaker 6: It's relevant because in Trump two point zero with a

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Speaker 6: red Congress, debt to GDP is thirty percent higher than

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Speaker 6: it was in sixteen. Interest rates are way higher than

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Speaker 6: they were back then as well.

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Speaker 1: It's a different backdrop.

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Speaker 6: And so the idea of doing all this fiscal expansion, tariffs, trade,

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Speaker 6: extreme trade policy, and potential changes to immigration policy, all

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Speaker 6: of that throws a real wrinkle in this Goldilock soft

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Speaker 6: landing disinflation thesis.

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Speaker 2: Den sketty, appreciate your time, Thaank. You could see some

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Speaker 2: big changes then, sketymoke and standing investment management. Let's get

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Speaker 2: across the Jeremy stretch of CIPC. Jeremy, your innerial take

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Speaker 2: on this, and then I want to get it into

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Speaker 2: ultimately what is holding them back from pre committee to

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Speaker 2: even more given how dreadful the bank drop is for European.

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Speaker 7: Growth, Well, clearly the data backdrop has materially deteriorated.

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Speaker 1: Since that September meeting.

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Speaker 7: I think you've touched on the PMIS. I think the

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Speaker 7: inflation downturn was obviously more aggressive than expected, Although if

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Speaker 7: you were listened to the September press briefing, Madam Reguard

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Speaker 7: tried to pre prepare the market for a downturn in

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Speaker 7: September due to base effects. But I think it is

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Speaker 7: still this sort of broader negative backdrop in terms of

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Speaker 7: the global manufacturing sector, which really is amplifying the Eurozone downturn,

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Speaker 7: which is warranting easier policy. But the problem from an

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Speaker 7: ECB perspective is the nature of the composition of the Council,

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Speaker 7: where you do have a whole range of policy members

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Speaker 7: with very different perspectives, and you still have those very

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Speaker 7: hawkish bias members from the core members of the European

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Speaker 7: Union such as Germany and Austria, you are reluctant to

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Speaker 7: sanction a very aggressive easing profile. So that leaves Madame

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Speaker 7: Regarde with a very difficult balancing act, and so she

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Speaker 7: continues to try and pursue that by this meeting by

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Speaker 7: meeting data dependent approach. But I think it is still

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Speaker 7: very much the case that so we're now moving towards

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Speaker 7: a more sequential policy backdrop. So I suspect that it's

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Speaker 7: going to be a case of the ECB maintaining a

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Speaker 7: data dependent meeting by meeting approach. But I think we're

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Speaker 7: probably going to be heading headlong towards other deposit rate,

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Speaker 7: heading towards two percent by the middle of next year.

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Speaker 2: There's a big wrinkle in that approach, though, Chemine.

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Speaker 1: You know it.

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Speaker 2: When Traaghi led the ECB, he had to convince the

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Speaker 2: Germans to do things they did not want to do.

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Speaker 2: This time around, though, the German economy is the weak link.

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Speaker 2: And if I'm looking at the Euro this morning, here's

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Speaker 2: my question to you in foreign exchange. Should the Euro

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Speaker 2: be training on rate differentials or growth differentials banked up

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Speaker 2: by an ECP that's willing to support growth in a

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Speaker 2: material way.

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Speaker 1: Well, I think at the moment we're looking at rate differentials.

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Speaker 7: I think we've seen a clear crossover in terms of

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Speaker 7: what's been priced for immediate policy action from the FED

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Speaker 7: relative to the ECB over the course of the last month.

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Speaker 7: That's really been constituent with this retreat in terms of

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Speaker 7: Euro dollar over the course of the last two to

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Speaker 7: three weeks. And if we are still going to see

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Speaker 7: the ECB being very much biased, or the market interpretation

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Speaker 7: the ECB being biased towards policy easing, then that does

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Speaker 7: imply that the euro is going to continue to struggle somewhat,

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Speaker 7: but I think we've got to a situation now where

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Speaker 7: a lot of the real money eurolungs, I think have

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Speaker 7: probably been cleared away. We're looking at a market which

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Speaker 7: is now looking or increasingly looking a little bit over sold.

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Speaker 1: So I think it is the case.

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Speaker 7: That headwinds for are obvious.

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Speaker 1: The risk of.

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Speaker 7: Further activity from nec BE is evidential, But I think

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Speaker 7: it may be the case that as we get near

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Speaker 7: that sort of one oh eighth threshold, that might be

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Speaker 7: an opportunity to expect some degree of slow down in

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Speaker 7: terms of this retreat from those recent heavy highs of

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Speaker 7: one twelve.

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Speaker 5: Jeremy, how much does the ECB essentially have their hands

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Speaker 5: tied as a result of the pace of the Fed.

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Speaker 5: How much do they want to keep the euro in

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Speaker 5: this sort of zone in order to prevent important inflation

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Speaker 5: from really coming into play.

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Speaker 7: Well, absolutely, the evaluation of the euro obviously has an

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Speaker 7: impact via the import price dynamic.

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Speaker 1: So in a sense you.

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Speaker 7: Have nominal commodity prices which will always be evidential for

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Speaker 7: the inflation backdrop, but the euro does amplify that if

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Speaker 7: we were to see a substantial cheaping of the euro,

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Speaker 7: So in a sense there is a recognition as to

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Speaker 7: what the Fed is doing is relevant for the ECB.

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Speaker 7: But I think the majority of the ECB members will

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Speaker 7: try and look at the policy narrative in isolation. Look

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Speaker 7: at that single mandate as you've touched upon. I think

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Speaker 7: that is very notable, that single mandate of maintaining inflation,

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Speaker 7: and that is how they will pursue policy.

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Speaker 1: But if the Euro were.

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Speaker 7: To cheap them back to one four one oh five,

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Speaker 7: that's not our base case. But if that word happen,

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Speaker 7: then obviously that would create greater inflationary pressures and that

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Speaker 7: would prove to be problematic for the ECD policy narrative.

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Speaker 2: Jeremy, appreciate the updates sir, and your reaction to an

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Speaker 2: ACP rate reduction this morning. Genreally stretch there of CIBC.

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