WEBVTT - Ward McCarthy: Fed's Jackson Hole Message 'Friendly' to Bonds

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<v Speaker 1>You're listening to Taking Stock with Pim Fox and Kathleen

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<v Speaker 1>Hayes on Bloomberg Radio. Mondaliz no longer pursuing a combination

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<v Speaker 1>with her. She what a day for breaking news we

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<v Speaker 1>have had today from Apple and Caesar's Entertainment to now

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<v Speaker 1>Mondaliz can she joins us Bloomberg News Bloomberg Intelligence to

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<v Speaker 1>tell us we don't know too much yet. Can we

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<v Speaker 1>know that it was down at least ten percent? As

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<v Speaker 1>soon as that news came out postmarket, uh, mondely saying

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<v Speaker 1>it's discipplined with the outcome. What's going to happen in

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<v Speaker 1>this case? Yeah, Hi, Kathleen, Um, Yeah, today's news certainly

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<v Speaker 1>was a disappointment, certainly for investors who thought that combination

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<v Speaker 1>of her, she and Mondalez as powerful brands, would um,

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<v Speaker 1>you know, be a strong investment um. And they may

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<v Speaker 1>have had a good case there. I mean, they would

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<v Speaker 1>have a leading US share and a very attractive high

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<v Speaker 1>margin grocery category. Um. Without getting into the gory details,

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<v Speaker 1>I mean, we know that her, she is closely controlled

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<v Speaker 1>by the board and they were cool to the to

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<v Speaker 1>the bid her. She's got a strange uh characteristic about it.

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<v Speaker 1>Also in that a deal has to be approved by

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<v Speaker 1>the Attorney General of Pennsylvania. So there's really it's really

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<v Speaker 1>a tough company to acquire, and Mondale's I guess felt that,

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<v Speaker 1>you know, it had enough ways to to get around it. Um.

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<v Speaker 1>But investors, we're thinking that the deal was going to

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<v Speaker 1>get done based on how hers She was trading. So yeah,

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<v Speaker 1>it certainly could be a disappointment to hold as a Hershey, yeah,

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<v Speaker 1>what happens? I mean, but can anybody step in on

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<v Speaker 1>either side? Right? I mean, I know there's a lot

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<v Speaker 1>of technical, technical and difficult things with hershe Will anybody

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<v Speaker 1>else step up? Now? You know that's such a million

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<v Speaker 1>out of question with her She. I think they you

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<v Speaker 1>know that they think they've probably scared some people off

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<v Speaker 1>in terms of you know, trying to acquire it um

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<v Speaker 1>with Mondale. You know, I think it underscores its need

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<v Speaker 1>to pursue acquisitions to row. You know, it's it's it's

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<v Speaker 1>an emerging markets like China and some attractive markets, but

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<v Speaker 1>they're slowing down, and so it feels that it needs

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<v Speaker 1>to diversify better. UM. And it's signaled that by by

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<v Speaker 1>looking at a company with who's essentially US based company

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<v Speaker 1>like hershey, but for her, she it's hard to say

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<v Speaker 1>if anyone's going to take a run out of here. Well,

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<v Speaker 1>I'm sure if anybody does, you'll be the first to

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<v Speaker 1>let us know. Ken sh Senior Allies or Food and

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<v Speaker 1>Beverage at Bloomberg Intelligence. Let's get right to Ward McCarthy,

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<v Speaker 1>chief financial economist at Jeffreys a ball market rally today, Ward,

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<v Speaker 1>we had consumers spending looking reasonably healthy. Inflation, you're over

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<v Speaker 1>here still lagging the Fed's target by a long shot.

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<v Speaker 1>What's going on? Well, I think what we saw today

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<v Speaker 1>was a couple of things. First of all, UH, the

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<v Speaker 1>three hours fell off that we saw on Friday afternoon,

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<v Speaker 1>UH created some yield levels that looked to be a

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<v Speaker 1>little bit attractive. And keep in mind we're right on

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<v Speaker 1>the threshold of the end of the month as well,

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<v Speaker 1>so UH, there was some institutional investors that were involved

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<v Speaker 1>with extension trades. So I think that's really primarily what

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<v Speaker 1>we're looking at. But when you take a bigger step

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<v Speaker 1>back and you look at last week's big development, which

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<v Speaker 1>of course was Jackson Home, it was really kind of

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<v Speaker 1>a friendly message from the Fed, even though they were

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<v Speaker 1>telling us that they expect to raise short term rates

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<v Speaker 1>UM in the not too distant future. Uh. They also

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<v Speaker 1>said we're not going to raise them a lot, and

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<v Speaker 1>we're going to leave the balance sheet enormous for a

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<v Speaker 1>long time to come. So I think these were probably

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<v Speaker 1>um some company messages as well. So what do you

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<v Speaker 1>take away from Jackson Hole ward? Uh? I think I

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<v Speaker 1>guess you just summed up what you you take away,

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<v Speaker 1>Uh do the bone recompenning attention to governor crota boj

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<v Speaker 1>Governor reiterating and maybe even saying more firmly he's ready

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<v Speaker 1>to do whatever it takes to uh, you know, we

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<v Speaker 1>can the end boost inflation, etcetera. Because it seems like

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<v Speaker 1>get one other big benchro bank, central banks sanking, we're

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<v Speaker 1>gonna have lots of lots of liquidity coming out there,

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<v Speaker 1>lots of stimulus. Well, you know, there were a lot

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<v Speaker 1>of messages coming from Jackson Hall, and in fact there

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<v Speaker 1>was so many that it's you know, makes it difficult

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<v Speaker 1>to um, you know, get a very clear picture. But

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<v Speaker 1>it's one thing is quite clear that uh central banks

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<v Speaker 1>still want to provide uh stimulus to the economies to

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<v Speaker 1>do what they can, although a lot of them seem

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<v Speaker 1>to think that they may be near the end of

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<v Speaker 1>their rope. There's only so much central banks can do.

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<v Speaker 1>And one of the important themes out of the Jackson

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<v Speaker 1>Hall Symposium as well is that it's time for the

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<v Speaker 1>politicians to start carrying some of the load UM and

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<v Speaker 1>with some physical policy changes that will promote growth. Okay, word,

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<v Speaker 1>So I guess the question is, then, what does this

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<v Speaker 1>mean for the bond market. We've got okay, got a

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<v Speaker 1>kind of a bounce back rally, some nice looking yield levels,

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<v Speaker 1>But if it FEDS near the end of its rope,

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<v Speaker 1>of it's not going to raise my that would seem

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<v Speaker 1>to be bullish. On the other hand, to the physical

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<v Speaker 1>side were to step up, what does that mean? Well,

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<v Speaker 1>I'm not going to hold my breath waiting for the

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<v Speaker 1>physical side to UH to step up. And first of all,

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<v Speaker 1>we have to get through what I think is UM

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<v Speaker 1>an election that very few people expected. When you look

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<v Speaker 1>at the UH, the two parties both seem like they

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<v Speaker 1>want to spend more money, especially on infrastructure, so that

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<v Speaker 1>would fit all the type of actions that central banks

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<v Speaker 1>would like. But on the other hand, the two parties

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<v Speaker 1>go in opposite directions on tax policy. The Republicans wanting

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<v Speaker 1>to cut taxes, and uh, the Democrats are going in

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<v Speaker 1>the other direction, especially on corporate tax I think, which

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<v Speaker 1>is um, you know, a really significant issue for this country. Um,

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<v Speaker 1>because of the inversion issue. UM. And that's really just

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<v Speaker 1>a function of the fact that the lad of time

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<v Speaker 1>we changed tactics is thirty years ago and we're high now.

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<v Speaker 1>Oh boy, all right, where McCarthy summing up so much?

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<v Speaker 1>What lies ahead from Jackson Hall as we head toward

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<v Speaker 1>that September twenty one Federal Reserve meeting and in September

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<v Speaker 1>twenty one Bank of Japan meeting. And I want to

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<v Speaker 1>thank John Lauder, our technical director today of course, our

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<v Speaker 1>producer Sam Linga. I'm Kathleen Hayes, and this is Bloomberg