WEBVTT - Bloomberg Surveillance TV: March 18, 2024 0:00:00.120 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwoz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.240 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.879 Terminal and the Bloomberg Business app. I pleased to say 0:00:36.880 --> 0:00:39.080 that joining us around the table is the CEO of 0:00:39.120 --> 0:00:42.560 Barclay's cs Van Kama Krishnan Benkat. Great to see you, sir, 0:00:42.840 --> 0:00:44.800 Very good to see you, particularly here in New York City. 0:00:44.840 --> 0:00:46.600 The stock is doing really nicely, so let's start with 0:00:46.680 --> 0:00:49.480 some good news. We've rallied since the mid of February 0:00:49.520 --> 0:00:52.120 pretty aggressively, I would say, up by something like twenty 0:00:52.120 --> 0:00:54.400 percent last time I looked yesterday evening. Do you think 0:00:54.440 --> 0:00:57.120 that's evidence that shareholders are buying into your vision. 0:00:57.840 --> 0:01:01.520 It's the earliest stage of that evidence. What's most important 0:01:01.560 --> 0:01:04.840 for us is this plan, and it's a plan to 0:01:04.880 --> 0:01:07.840 increase our rote to twelve percent from the tennis it 0:01:08.000 --> 0:01:10.840 is now. It's a plan to return about ten billion 0:01:10.880 --> 0:01:14.880 pounds to shareholders and capital distributions, and it's a plan 0:01:15.360 --> 0:01:19.440 to have a broad diversified bank that's a global banking 0:01:19.520 --> 0:01:22.720 leader centered in the UK, with an investment bank that 0:01:22.880 --> 0:01:25.400 is going to fifty percent of the bank from around 0:01:25.400 --> 0:01:28.560 the sixty percent it's now. So our job is to 0:01:28.880 --> 0:01:31.679 having created the plans to execute it, and the share 0:01:31.720 --> 0:01:32.760 price hopefully will follow. 0:01:32.880 --> 0:01:34.920 Can we get into the investment bank and you talk 0:01:34.959 --> 0:01:39.560 about diversifying revenue and leaning maybe more into advisory phase. 0:01:40.120 --> 0:01:42.440 Is the talent there on board in the investment bank 0:01:42.480 --> 0:01:44.240 all ready to make that shift or do you need 0:01:44.280 --> 0:01:45.800 to hire to make that happen? 0:01:46.280 --> 0:01:49.360 It is substantially there. You know, we made some organizational 0:01:49.440 --> 0:01:52.520 changes last year. We have new leadership in the investment bank. 0:01:52.800 --> 0:01:57.080 We hired a bunch of very you know, very skilled 0:01:57.120 --> 0:02:02.520 bankers in healthcare, in technology, in the energy transition, and 0:02:03.720 --> 0:02:07.240 that has already started to have its effect. Last week 0:02:07.280 --> 0:02:11.079 we announced eqt's sale. We advised EQT on its sale 0:02:11.080 --> 0:02:15.160 to ecuotrans ecotansit and its sale to EQT and so 0:02:15.240 --> 0:02:17.680 we're beginning to feel the momentum from those HighRes. 0:02:18.120 --> 0:02:20.480 What do you think it is about investment banking in 0:02:20.520 --> 0:02:23.679 and of itself that makes it a less attractive proposition 0:02:23.840 --> 0:02:27.079 to remain it the same size versus say, advisory fees. 0:02:29.160 --> 0:02:30.959 Well, one of the things is when you move into 0:02:30.960 --> 0:02:34.280 advisory fees, you start getting a better return on your 0:02:34.280 --> 0:02:37.560 capital because you're not outlaying as much capital per unit 0:02:37.600 --> 0:02:40.480 of revenue as you do if you're purely lending. Now, 0:02:40.560 --> 0:02:43.480 lending is an important part of what we do. We 0:02:43.520 --> 0:02:45.799 are a very big player in the fixed income markets, 0:02:46.040 --> 0:02:48.560 in the debt capital markets as well as fixed income trading, 0:02:49.000 --> 0:02:50.520 So lending is a part of what we do, but 0:02:50.560 --> 0:02:52.640 we are just trying to broaden it into more advisory 0:02:52.680 --> 0:02:54.160 and more equity related revenues. 0:02:54.440 --> 0:02:56.520 How much is this sort of a new model of 0:02:56.560 --> 0:02:59.400 banking that's basically taking all of Wall Street and a 0:02:59.440 --> 0:03:01.720 lot of the global banks too, which is trying to 0:03:01.760 --> 0:03:05.359 cater to the whole client rather than say, go after 0:03:05.440 --> 0:03:08.920 specific deals and be focused on, for example, being at 0:03:08.919 --> 0:03:10.000 the top of a league table. 0:03:10.360 --> 0:03:12.959 Yeah, I think it's an important part of the shift 0:03:13.000 --> 0:03:18.720 that's happening, and it's happening because Previously in the investment 0:03:18.760 --> 0:03:23.840 banking side, we were working with corporations, and since then 0:03:23.960 --> 0:03:26.280 we still work with corporations in a very big way. 0:03:26.600 --> 0:03:29.000 But in addition to that, you've got the financial sponsors 0:03:29.000 --> 0:03:32.279 and the sovereign wealth funds, So the growth of concentrated 0:03:32.320 --> 0:03:35.320 pools of capital makes it important to have that full 0:03:35.360 --> 0:03:37.720 relationship with those players in the market. 0:03:38.240 --> 0:03:40.160 Every time we sit across the Barclay spouse, I think 0:03:40.200 --> 0:03:42.000 we asked the same question. I can think of that 0:03:42.120 --> 0:03:44.880 when Bob Diamond left that morning. Then Anthony Jenkins came 0:03:44.920 --> 0:03:47.160 in our Remember I was actually at Barclay's HQ the 0:03:47.160 --> 0:03:49.480 morning Jenkins got fired. I was sitting down with the chairman, 0:03:49.640 --> 0:03:52.040 and we talked about the same thing, the investment bank, 0:03:52.080 --> 0:03:54.000 the future of the investment bank. Do you find that's 0:03:54.040 --> 0:03:56.400 more of a media obsession than it is an obsession 0:03:56.440 --> 0:03:58.840 with investors. Where does that question come from? 0:03:59.240 --> 0:04:03.880 It's a legitimate question, and in our Invested Day four 0:04:03.880 --> 0:04:06.080 weeks ago, I tried to address it directly as well. 0:04:06.760 --> 0:04:09.760 I think, first of all, it's important for Barclays to 0:04:09.760 --> 0:04:11.800 have an investment bank. We are good at it. We 0:04:11.840 --> 0:04:14.040 are the largest investment bank outside the top five in 0:04:14.080 --> 0:04:16.480 the US. I think it's an important for the world 0:04:16.920 --> 0:04:20.040 to have a counterparty that's not just a US bank, 0:04:20.040 --> 0:04:22.880 and they would prefer a UK bank when they do it. 0:04:22.880 --> 0:04:24.920 It's an important source of revenue for US, and as 0:04:24.920 --> 0:04:25.960 I said, we are good at it. 0:04:26.640 --> 0:04:28.919 Why is it important and why do they prefer a 0:04:29.000 --> 0:04:31.279 UK bank? Why is it important to have a bank 0:04:31.320 --> 0:04:33.440 outside of the US. What are the benefits of that? 0:04:33.920 --> 0:04:37.560 Well, you're diversifying your counterparty exposure in a national way 0:04:38.040 --> 0:04:40.880 as the world is becoming a little more deglobalized. You know, 0:04:40.920 --> 0:04:44.800 London has been historically a great financial center and remains one, 0:04:44.880 --> 0:04:48.120 so and it's a very important one. And then UK 0:04:48.200 --> 0:04:51.160 law governs a lot of financial contracts. So all those 0:04:51.200 --> 0:04:53.599 three things make it very attractive to work with a 0:04:53.680 --> 0:04:54.239 UK bank. 0:04:54.360 --> 0:04:57.120 Does it also make it incredibly difficult to compete outside 0:04:57.120 --> 0:04:59.120 of the UK, or say in the US, when you've 0:04:59.120 --> 0:05:01.400 got a JP Morgan that's dominating absolutely everything. 0:05:01.760 --> 0:05:05.200 Well, look, there are very large banks that are in 0:05:05.240 --> 0:05:07.760 the US. The world is big enough for all of us. 0:05:08.560 --> 0:05:10.479 We act like a US bank when we are in 0:05:10.520 --> 0:05:10.919 the US. 0:05:11.800 --> 0:05:13.560 Well, when you act like a US bank with a 0:05:13.640 --> 0:05:16.599 very specific focus you've talked about in the Pillars the 0:05:16.640 --> 0:05:21.039 five pillars in reorganization, the importance on focusing on consumer 0:05:21.400 --> 0:05:25.320 lending consumer spending. Recently, you offset some risks from your 0:05:25.320 --> 0:05:29.800 credit card portfolio. There is a real question here about 0:05:29.839 --> 0:05:32.280 where you see an opportunity to consumer to lend in 0:05:32.320 --> 0:05:36.320 the consumer space at a time of uncertainty in the cycle. 0:05:37.120 --> 0:05:39.680 So we view the consumer space in two ways. In 0:05:39.720 --> 0:05:42.760 the US, we've got a great credit card for business, 0:05:42.760 --> 0:05:46.159 but it's very specialized on partnership cards. We've got twenty 0:05:46.200 --> 0:05:50.400 corporate partners, very blue chip corporations, twenty million underlying customers. 0:05:50.720 --> 0:05:54.200 We're looking to continue to grow that partnership card business 0:05:54.240 --> 0:05:57.320 in the US in a measured way because it has 0:05:57.360 --> 0:06:01.440 great synergies with our investment bank and a great overall 0:06:01.480 --> 0:06:05.000 business for US. In the UK, we have strength across 0:06:05.000 --> 0:06:08.839 the consumer franchise and in small business banking, in corporates 0:06:09.240 --> 0:06:12.039 and there it's sort of you know, it's our homeland, 0:06:12.440 --> 0:06:14.760 it is our home turf, and we are very strong 0:06:14.800 --> 0:06:16.880 and we look to increase that strength. 0:06:16.880 --> 0:06:19.560 Well, I guess here's a question. Is there basically more 0:06:19.600 --> 0:06:22.800 emphasis on growing in the United Kingdom outside of the US, 0:06:23.120 --> 0:06:24.800 and the US effort is going to be much more 0:06:24.800 --> 0:06:29.120 bespoke focused on very clear sort of verticals rather than 0:06:29.400 --> 0:06:31.039 the whole picture in the same kind of way as 0:06:31.080 --> 0:06:32.080 the UK or elsewhere. 0:06:32.400 --> 0:06:35.039 Yeah, So the way I think about it is that 0:06:35.080 --> 0:06:38.120 we've got a complete banking presence in the UK, touching 0:06:38.200 --> 0:06:42.320 customers from the very largest corporations down to individuals and 0:06:42.440 --> 0:06:45.240 offering them the full range of financial services. In the 0:06:45.400 --> 0:06:49.800 US we offer investment banking services very well trading and 0:06:49.839 --> 0:06:54.440 for banking, and as I said, a very good specialized 0:06:54.520 --> 0:06:55.920 partnership credit card business. 0:06:56.320 --> 0:06:58.560 We had a right shock big time on both side 0:06:58.560 --> 0:07:01.440 of the Atlantic in the last twelve eighteen months. What 0:07:01.520 --> 0:07:03.320 we haven't seen is the credit stress off the back 0:07:03.360 --> 0:07:07.600 of that. As you look across the business at the moment, corporates, consumers, 0:07:07.720 --> 0:07:10.160 the US, the UK, you see any of that emerge 0:07:10.320 --> 0:07:10.800 at all. 0:07:12.040 --> 0:07:15.960 You're seeing small signs of it in the consumer side, 0:07:16.600 --> 0:07:19.920 with just a take up of delinquencies off the COVID lows. 0:07:20.320 --> 0:07:24.320 And I think, look, employment remains extremely strong or unemployment 0:07:24.400 --> 0:07:27.120 is low. You're seeing the effects of inflation, and you're 0:07:27.120 --> 0:07:30.440 seeing the effects of the r you know, the wearing 0:07:30.480 --> 0:07:32.960 off of the consumer stimulus that you had during COVID, 0:07:33.240 --> 0:07:36.320 and so you're seeing a small increase in delinquencies in 0:07:36.360 --> 0:07:37.280 the consumer business. 0:07:37.280 --> 0:07:39.160 It's the a popular risk that you're being super vigilant 0:07:39.160 --> 0:07:41.320 at about at the moment that maybe you're pulling back 0:07:41.560 --> 0:07:44.000 on lending around that particular area of the economy. 0:07:44.520 --> 0:07:47.040 Not really. I mean, I think as an overall matter, 0:07:48.120 --> 0:07:51.240 taking the very big picture, the economy is stabilizing. It 0:07:51.240 --> 0:07:53.520 looks like on both sides of the Atlantic you're having 0:07:53.920 --> 0:07:57.840 a softish landing. Uh employment, as I said, remains strong 0:07:57.880 --> 0:08:00.880 in overall credit statistics and the corporate it's remained strong. 0:08:01.280 --> 0:08:04.600 So generally we are constructive towards lending. 0:08:04.800 --> 0:08:06.880 I wanted to finish on the City of London if 0:08:06.920 --> 0:08:09.840 I can, if you'll indulge me. Barclay's and its roots 0:08:09.840 --> 0:08:11.520 of Barclays go all the way back to the late 0:08:11.560 --> 0:08:16.000 sixteen hundreds, early seventeen hundreds. We're talking about centuries the 0:08:16.040 --> 0:08:18.160 city of London for a long long time. It's been 0:08:18.160 --> 0:08:21.200 at the epicenter of global finance. Do you see that 0:08:21.440 --> 0:08:23.560 as under threat in any way, shape or form. Do 0:08:23.560 --> 0:08:25.960 you think the UK has taken that for granted over 0:08:25.960 --> 0:08:27.080 the last several years. 0:08:27.640 --> 0:08:30.240 I don't think the UK has taken it for granted. 0:08:30.280 --> 0:08:32.679 I think it's very important for the UK. I think 0:08:32.679 --> 0:08:36.720 the UK understands that. I think politicians on both sides 0:08:36.720 --> 0:08:40.200 in the UK understand that extremely well. So No, I 0:08:40.240 --> 0:08:42.160 think there's a lot of support for the City of London. 0:08:42.440 --> 0:08:44.240 This raises a question of where we are in the 0:08:44.240 --> 0:08:47.200 economic cycle, where it is strongest, and this week would 0:08:47.200 --> 0:08:49.800 you get a Bank of England decision is it beneficial 0:08:49.840 --> 0:08:51.800 of rate stay higher for longer or do you want 0:08:51.840 --> 0:08:54.880 them to come down to support the economic growth and 0:08:54.920 --> 0:08:56.800 maybe some of the engine that John was talking about. 0:08:57.200 --> 0:09:00.120 So ultimately that's a decision they have to make. It's 0:09:00.200 --> 0:09:04.920 very important to balance, you know. I actually think, I 0:09:05.520 --> 0:09:08.520 actually think a little prudence and waiting a little is 0:09:08.559 --> 0:09:09.160 not a bad thing. 0:09:10.400 --> 0:09:11.920 You think there is an option that's a wait a 0:09:11.960 --> 0:09:13.880 little longer than why do you think? So why is 0:09:14.040 --> 0:09:16.280 the bigger risk? Maybe the cut too soon and not 0:09:16.320 --> 0:09:17.040 to hold too long. 0:09:18.480 --> 0:09:23.160 Well, I think that the economy is stabilizing, employment is 0:09:23.200 --> 0:09:28.000 still robust, inflation is coming down, so I think on 0:09:28.040 --> 0:09:30.760 the balance it might be more prudent to wait a 0:09:30.840 --> 0:09:34.120 little longer. Now our house view and that of many others, 0:09:34.320 --> 0:09:35.880 is for more rate cuts over. 0:09:35.760 --> 0:09:38.240 This year, with the same applied to the US the 0:09:38.280 --> 0:09:39.960 same characterization of the situation. 0:09:40.559 --> 0:09:43.240 I think so yeah, but just would that be good 0:09:43.240 --> 0:09:45.800 for you? Are high rates good for banks or are 0:09:45.800 --> 0:09:47.800 they bad for banks? This has been a preennial question. 0:09:48.400 --> 0:09:49.840 Stable rates are good for banks. 0:09:50.559 --> 0:09:52.920 Thank camp, very diplomatic. We appreciate your time. So it's 0:09:52.920 --> 0:09:54.680 fantastic catch up and thank you see here in New 0:09:54.760 --> 0:10:07.000 York City. Thanks for being able to see you, Baby 0:10:07.000 --> 0:10:09.200 Morgan's Monica to sense so saying this, we need to 0:10:09.240 --> 0:10:11.360 acknowledge the strong starts of the year, with the S 0:10:11.400 --> 0:10:14.160 and P five hundred now only a few percent away 0:10:14.160 --> 0:10:16.760 from our year round twenty twenty four price target. This 0:10:16.840 --> 0:10:20.400 also argues for more selectivity and being thoughtful if you 0:10:20.440 --> 0:10:22.760 are still sitting on too much cash. We believe stocks 0:10:22.760 --> 0:10:25.800 will continue to make new highs. Monica joins us now 0:10:26.040 --> 0:10:28.520 in New York. Monica cand morning to year warning, we 0:10:28.559 --> 0:10:31.560 will make new highs in this sancraity market. Talk to 0:10:31.559 --> 0:10:33.560 me about how you put cash to work right now? 0:10:33.600 --> 0:10:36.719 Then, the challenge has been everyone's waiting for certainty. You 0:10:36.840 --> 0:10:38.400 just talked about that. I don't think we're going to 0:10:38.480 --> 0:10:39.800 get it. The FED is never going to tell us 0:10:39.800 --> 0:10:41.000 what the path is going to look like, and so 0:10:41.120 --> 0:10:43.160 the challenge becomes, then what do I do do I 0:10:43.200 --> 0:10:45.439 wait for certainty? Well, anyone who tried that the last 0:10:45.480 --> 0:10:47.679 couple of years has missed out on a massive rally. 0:10:47.720 --> 0:10:50.240 And so what we've been advocating to clients is just 0:10:50.360 --> 0:10:53.720 look at what we can see earnings inflecting right. Put 0:10:53.720 --> 0:10:56.439 the mag seven aside. The other four ninety three earnings 0:10:56.440 --> 0:10:58.400 were down last year. We think they'll be up this year. 0:10:58.640 --> 0:11:01.400 You do have a modist inflictioneryronment, probably some cuts at 0:11:01.400 --> 0:11:03.280 some point. That is all good for stocks. 0:11:03.520 --> 0:11:03.760 Now. 0:11:03.840 --> 0:11:05.800 I don't think it means another twenty five percent rally, 0:11:06.080 --> 0:11:08.079 but it is the path to saying maybe five six 0:11:08.120 --> 0:11:10.360 seven percent from here, which is pretty good after we've 0:11:10.360 --> 0:11:11.040 already run something. 0:11:11.040 --> 0:11:12.400 How would you play that? Is that an equal way? 0:11:12.480 --> 0:11:15.360 SMP five hundred? Is there a sect the preference underpinning 0:11:15.400 --> 0:11:16.559 that in any hy shape or form. 0:11:16.640 --> 0:11:18.960 I mean, the temptations to say we'll see the broadening 0:11:19.040 --> 0:11:21.360 you've got to go outside of the magnificent seven. I 0:11:21.360 --> 0:11:23.640 think it depends where you're starting from. Many people just 0:11:23.640 --> 0:11:25.520 don't have enough risk on full stop. So if you 0:11:25.559 --> 0:11:27.160 don't have an ef equities full stop, you should be 0:11:27.160 --> 0:11:30.040 buying broad. If you are over levered to tech, then 0:11:30.040 --> 0:11:32.240 that's where I start looking to things like MidCap, where 0:11:32.280 --> 0:11:34.640 you have valuations that are significantly lower than the SMP 0:11:35.000 --> 0:11:37.160 and you have better earnings growth always you've leverage to 0:11:37.200 --> 0:11:38.080 things like industrials. 0:11:38.160 --> 0:11:40.080 I was looking at your notes and it was amazing 0:11:40.120 --> 0:11:42.880 because there's sort of this clarion call from all different 0:11:42.880 --> 0:11:44.520 financial advisors saying. 0:11:44.600 --> 0:11:46.360 Get out of your cash. Why are you in so 0:11:46.440 --> 0:11:46.920 much cash? 0:11:47.040 --> 0:11:49.360 Rotate out? You're going to miss out. But you talk 0:11:49.400 --> 0:11:51.760 about keeping a buffer. What's the buffer? 0:11:52.800 --> 0:11:54.960 It depends on what your goals are, right, Like, I 0:11:54.960 --> 0:11:57.400 work with clients across the wealth spectrum, and so you 0:11:57.480 --> 0:11:58.880 have to just have a plan. I think that's the 0:11:58.880 --> 0:12:01.800 biggest challenge. Has felt good, but the problem is I've 0:12:01.840 --> 0:12:04.880 seen balance is go twenty thirty percent plus of a portfolio. 0:12:04.960 --> 0:12:07.040 I think that's too much really, whoever you are, and 0:12:07.080 --> 0:12:08.600 so it comes down to what is my plan. If 0:12:08.600 --> 0:12:10.800 I'm trying to work towards a ten percent buffer, you 0:12:10.840 --> 0:12:13.120 probably have some wood to chob most people. I would 0:12:13.120 --> 0:12:15.360 also argue, you look at what the market's giving you. 0:12:15.480 --> 0:12:18.040 Volatility is still exceptionally low. So if you're really that 0:12:18.200 --> 0:12:21.160 scared about going into equities and risk assets. I would say, 0:12:21.200 --> 0:12:22.800 dip a toe in and then buy a little protection. 0:12:22.960 --> 0:12:24.960 You're earning a lot on your cash, spend a little 0:12:25.000 --> 0:12:26.760 bit of that to buy some pots or something like that, 0:12:26.840 --> 0:12:27.760 just to keep you invested. 0:12:27.920 --> 0:12:31.000 There is this issue that the winners have won a lot, 0:12:31.040 --> 0:12:34.320 the losers really haven't gone anywhere. You start looking at 0:12:34.320 --> 0:12:37.720 the winners. I think, for example, Japanese equities, do you 0:12:38.000 --> 0:12:40.160 pile on or do you sort of say, you know, 0:12:40.440 --> 0:12:43.559 there's more downside risk here just based on potential surprises 0:12:43.559 --> 0:12:45.000 in the Bank of Japan and elsewhere. 0:12:45.480 --> 0:12:45.599 You know. 0:12:45.600 --> 0:12:46.920 It's funny at the beginning of the year we did 0:12:47.000 --> 0:12:49.920 see some rotation out of Japan into areas that looked cheap, 0:12:50.080 --> 0:12:53.640 like China. I get that just as a tactical trade. 0:12:53.960 --> 0:12:56.240 But if you are heavily levered to the US from 0:12:56.240 --> 0:12:58.920 a risk asset standpoint, and Japan has been underinvested in 0:12:58.920 --> 0:13:01.120 for decades, I think it's okay to say and need 0:13:01.160 --> 0:13:02.800 to have a little bit of Japan as a longer 0:13:02.880 --> 0:13:04.560 term bet. Hard to make a call for one to 0:13:04.600 --> 0:13:06.480 two weeks or even a couple months, but I do 0:13:06.520 --> 0:13:09.880 think there's some reasons to own Japan again. Very cheap valuations. 0:13:09.960 --> 0:13:11.640 I think it's like twenty five percent of the topics 0:13:11.720 --> 0:13:14.680 is under one times book value, which seems kind of crazy. 0:13:14.840 --> 0:13:18.840 And then obviously you have policy shifts coming, reforms coming. Again, 0:13:18.880 --> 0:13:20.560 that doesn't happen overnight, but it's a reason to have 0:13:20.600 --> 0:13:21.200 some allocation. 0:13:21.280 --> 0:13:23.160 We've been trying to work out what happens to Japanese 0:13:23.200 --> 0:13:25.200 equities if you do get this move in the Japanese 0:13:25.280 --> 0:13:27.800 Yet certainly things have been pretty contained because we've had 0:13:27.840 --> 0:13:30.160 five days of again weakness going and gets to this decision. 0:13:30.200 --> 0:13:32.320 Dolly En is still in and around one fifty. But 0:13:32.440 --> 0:13:34.520 just a little bit of scenario analysis, what would happen 0:13:34.559 --> 0:13:36.760 if we went from one to fifty forty one thirty 0:13:36.800 --> 0:13:38.480 one twenty Where does that leave equacies? 0:13:38.600 --> 0:13:41.040 Yeah, that is clearly a more challenging backdrop, and I 0:13:41.040 --> 0:13:43.000 think that's the risk, and so some of our clients 0:13:43.040 --> 0:13:45.640 have been doing this trying to hedge out the currency 0:13:45.679 --> 0:13:47.760 exposure really have been added to Japan. That's a little bit 0:13:47.760 --> 0:13:50.160 more complicated, but again I think that's why the Japan 0:13:50.160 --> 0:13:52.280 call can't be a one month or two month trade. 0:13:52.400 --> 0:13:54.120 You have to say I want to have an allocation 0:13:54.559 --> 0:13:57.160 intermediate to longer term to something outside of the US, 0:13:57.320 --> 0:13:59.719 and I think Japan does look relatively more interesting than see. 0:13:59.760 --> 0:14:01.000 You're right now, there's. 0:14:00.840 --> 0:14:03.440 This question right now, just taking a step back, whether 0:14:03.480 --> 0:14:05.719 there's a shift going on under the surface. We saw 0:14:05.720 --> 0:14:10.360 it last week with commodity stocks outperforming dramatically, and it 0:14:10.400 --> 0:14:12.520 makes me wonder whether we are on the precipice of 0:14:12.559 --> 0:14:15.760 a reinflating of goods and whether you see that from 0:14:15.800 --> 0:14:18.440 the increase in activity not only Japan, but also to 0:14:18.440 --> 0:14:20.440 some degree on the march is China and around the 0:14:20.440 --> 0:14:21.200 rest of the world. 0:14:22.000 --> 0:14:23.480 Do you lean into that or do. 0:14:23.480 --> 0:14:25.280 You see that as something that has a sort of 0:14:25.360 --> 0:14:26.880 self limiting aspect to it. 0:14:27.720 --> 0:14:30.560 We do think, I mean our outlook for presable brent. 0:14:30.680 --> 0:14:32.760 We do think you can see brents like mid eighties 0:14:32.800 --> 0:14:35.360 to low nineties. So that does suggest a bit higher 0:14:35.360 --> 0:14:38.160 from here that probably is supportive for energy equities. I 0:14:38.200 --> 0:14:40.680 would remind you energy equities underperformed last year. That was 0:14:40.680 --> 0:14:42.720 the one sector that did not do well, and so 0:14:42.840 --> 0:14:45.680 I think you could see some rebalancing some addition back there. 0:14:45.680 --> 0:14:48.320 There's always this struggle to people who want to get 0:14:48.360 --> 0:14:50.960 on board with the ev revolution, but then you realize 0:14:51.000 --> 0:14:53.000 we still need oil in the near to intermediate term, 0:14:53.000 --> 0:14:54.280 and so I think that makes sense to have some 0:14:54.320 --> 0:14:56.760 allocation there, especially as we figure out what that transition 0:14:56.840 --> 0:14:58.600 looks like. But I'm not overly worried that we're going 0:14:58.640 --> 0:15:01.120 to see oil north of a hunt barring some big 0:15:01.160 --> 0:15:04.280 geopolitical shock, and so I think that from an inflationary standpoint, 0:15:04.280 --> 0:15:05.840 is a little bit less of a risk. 0:15:06.040 --> 0:15:07.800 To wrap it all up, I am wanting to know 0:15:07.880 --> 0:15:10.080 what your take is on Ben Ladler's points that he 0:15:10.120 --> 0:15:12.080 made earlier this morning. He kind of kicked off the 0:15:12.120 --> 0:15:14.640 show at the same where he thinks that in Vidia's 0:15:14.960 --> 0:15:17.400 conference Developer conference is going to be more important than 0:15:17.480 --> 0:15:21.160 Ja Powell's speech. Do you think that that's true, especially 0:15:21.200 --> 0:15:23.520 because in some ways the FED can't tell us all 0:15:23.520 --> 0:15:25.280 that much because they don't really have a crystal ball. 0:15:25.640 --> 0:15:27.800 I think it's probably true for equities this week. If 0:15:28.080 --> 0:15:31.880 something cataclysmically negative were to happen today, you would see 0:15:31.880 --> 0:15:33.360 some rotation out of some of these names that have 0:15:33.400 --> 0:15:36.600 been so heavily owned. That said, I actually think the 0:15:36.600 --> 0:15:38.600 tone is probably going to be pretty positive, and you're 0:15:38.640 --> 0:15:41.360 going to hopefully hear some commentary about how this is 0:15:41.360 --> 0:15:43.760 not just an Nvidia story. It's a broad story for 0:15:43.840 --> 0:15:46.240 the market, for the S and P for companies that 0:15:46.280 --> 0:15:48.600 will become more efficient. I know as a JP Morgan 0:15:48.680 --> 0:15:50.720 we're using AI everywhere. It's a huge part of all 0:15:50.760 --> 0:15:53.600 of our conversations and how we can become better advisors, 0:15:53.600 --> 0:15:56.320 more efficient, quicker, faster. Doesn't mean we're not hiring. It 0:15:56.360 --> 0:15:57.920 just means hopefully I'll get better at my job and 0:15:57.960 --> 0:15:58.520 I can do more. 0:15:58.840 --> 0:16:01.520 I think it ends capitalized, not today, no. 0:16:02.320 --> 0:16:04.920 Tomorrow, longer term than it's a different question, but we'll 0:16:04.920 --> 0:16:05.880 still be here next week. 0:16:05.920 --> 0:16:07.520 Want I have it's going to see it. I want 0:16:07.520 --> 0:16:20.360 to cut a sense of JP morcom Private Bank, former 0:16:20.400 --> 0:16:22.480 fed aclumist Cladia Sal'm a good friend of this program 0:16:22.560 --> 0:16:24.360 over the years. Joined just now for more, Claudia, I 0:16:24.360 --> 0:16:26.400 want to put a catch up with you. As you've said, 0:16:26.520 --> 0:16:28.960 maybe a challenge for chairman power this week is to 0:16:29.000 --> 0:16:32.280 make sure that everyone stays around the three implied in 0:16:32.360 --> 0:16:34.520 the Median dog. Can we just start with the dots themselves? 0:16:34.560 --> 0:16:37.320 Because I know you have thoughts on this. When can 0:16:37.440 --> 0:16:40.240 we and how can we get away from this? 0:16:42.160 --> 0:16:45.000 It's hopeless at this point. I mean, everyone wants some 0:16:45.160 --> 0:16:47.800 scrap of certainty and they look at the FED and 0:16:47.840 --> 0:16:50.040 have a very misguided belief that the Fed is going 0:16:50.080 --> 0:16:52.080 to give that to us. The FED would really like 0:16:52.120 --> 0:16:54.480 a scrap of certainty about what they're going to do 0:16:54.600 --> 0:16:57.360 later this year. My hope for this meeting. It is 0:16:57.400 --> 0:17:00.240 the most boring meeting ever. And you have traders to 0:17:00.280 --> 0:17:02.800 sleep at their desk, like, we know they're not going 0:17:02.840 --> 0:17:06.960 to cut this week, and we better not see anything 0:17:07.000 --> 0:17:10.680 material change on that summary of economic projections, in particular 0:17:11.320 --> 0:17:15.199 the are we looking at likely three cuts or two cuts? 0:17:15.640 --> 0:17:19.119 Jay is absolutely my reading of what he has said, 0:17:19.200 --> 0:17:21.960 he is a let's cut in June. He's got to 0:17:22.080 --> 0:17:25.040 keep it together. If those dots move towards July, which 0:17:25.040 --> 0:17:28.359 I actually think that's not likely, or the longer run 0:17:28.480 --> 0:17:32.160 estimate of where the rate should be the infamous r star, 0:17:32.680 --> 0:17:34.959 either of those two could get people and see and 0:17:35.080 --> 0:17:38.600 push the expectations to July in the markets. 0:17:38.800 --> 0:17:41.359 I am a longstanding hater of the dot plot. I 0:17:41.400 --> 0:17:43.560 love the way you write. Thank you for that, Claudia. 0:17:43.600 --> 0:17:45.960 I am curious whether you think it's a liability though, 0:17:46.160 --> 0:17:48.919 that the Federal Reserve isn't operating with some sort of 0:17:49.040 --> 0:17:52.840 overarching thesis of where the economy is right now post pandemic, 0:17:53.080 --> 0:17:55.520 about whether it is sort of a hotter and higher 0:17:55.560 --> 0:17:58.120 inflation regime or if it is going to revert back 0:17:58.280 --> 0:18:00.880 to something more of what we were customed to pre pandemic. 0:18:02.240 --> 0:18:04.760 My expectations of what the Fed is on track to 0:18:04.800 --> 0:18:07.360 do did not change. Last week. We did we had 0:18:07.400 --> 0:18:11.080 the second disappointing read on inflation. We also had this 0:18:11.200 --> 0:18:16.040 second disappointing read on retail sales. And Pale has talked 0:18:16.040 --> 0:18:18.359 about multiple times that the risk to the two sides 0:18:18.359 --> 0:18:21.040 of the mandate, the stable prices and the maximum employment, 0:18:21.119 --> 0:18:24.320 those risks are coming into balance, and we saw that 0:18:24.440 --> 0:18:28.000