WEBVTT - Surveillance: Stimulus Payments with Bernstein 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrill and Lisa Brownwitz jay Leie. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance and Apple Podcast, SoundCloud, Bloomberg 0:00:23.360 --> 0:00:29.800 dot Com, and of course on the Bloomberg Termament audience 0:00:29.800 --> 0:00:31.920 worldwide and place to Say on Bloomberg Radio and TV. 0:00:32.080 --> 0:00:33.519 We can now head down to the White House and 0:00:33.520 --> 0:00:37.080 catch up with Jared Bernstein of the Council of Economic Advisors. Jared, 0:00:37.080 --> 0:00:38.720 it's always good to catch up, sir, Thank you for 0:00:38.760 --> 0:00:41.000 being with us. Let's just start here with a question 0:00:41.080 --> 0:00:43.199 that I think a lot of people will be wandering. 0:00:43.560 --> 0:00:47.159 Really solid payrolls report. The outlook is brighter, the vaccine 0:00:47.159 --> 0:00:49.920 time table. You guys have accelerated it. Why on earth 0:00:49.920 --> 0:00:54.280 do we need a one point nine trillion dollar bill. 0:00:54.320 --> 0:00:56.240 First of all, it's great to see you too, Always 0:00:56.320 --> 0:00:59.440 enjoy catching up. Look, I think we need to get 0:00:59.520 --> 0:01:02.080 under the hood of this job report in a second. 0:01:02.080 --> 0:01:06.399 We're always happy to see more people get more jobs, 0:01:06.600 --> 0:01:08.360 but let's take a breath here and look at the 0:01:08.400 --> 0:01:12.080 bigger picture. This job market is still down nine and 0:01:12.120 --> 0:01:15.360 a half million jobs from a year ago. That's actually 0:01:15.440 --> 0:01:18.679 eight hundred thousand jobs worse than the lowest point of 0:01:18.680 --> 0:01:22.080 the Great Recession. We learned today that the black unemployment 0:01:22.160 --> 0:01:25.800 rate is just below ten P nine point nine P 0:01:26.760 --> 0:01:31.200 sixty nine thousand educator jobs down. That's a million over 0:01:31.240 --> 0:01:34.440 the past year. Our state local help from the American 0:01:34.480 --> 0:01:38.080 Rescue Plan directly targets that problem. So there is a 0:01:38.160 --> 0:01:41.520 lot of economic pain out there and that hasn't changed 0:01:41.560 --> 0:01:44.480 because of this one print, especially by the way, a 0:01:44.560 --> 0:01:48.200 print that was driven. Uh of those gains come from 0:01:48.240 --> 0:01:51.480 the very volatile leisure and hospitality sector, a sector that 0:01:51.560 --> 0:01:54.639 a couple of months ago shed half a million jobs. 0:01:54.800 --> 0:01:56.760 So let's get under the hood, let's take a breath, 0:01:56.920 --> 0:02:00.360 and let's recognize that many, many Americans are still in 0:02:00.400 --> 0:02:03.160 the throes of this crisis and need to help delivered 0:02:03.160 --> 0:02:05.280 by the American Rescue Plans. So, charge, what do you 0:02:05.320 --> 0:02:07.640 think that that argument that you've just illustrates it quite 0:02:07.640 --> 0:02:13.840 perfectly is not resonating with prominent democratic economists. Uh, In fact, 0:02:13.880 --> 0:02:16.359 that not only is it resonating with economists on both 0:02:16.360 --> 0:02:19.600 sides of the aisle, it's massively resonating with the American people, 0:02:19.600 --> 0:02:21.799 which I would argue are the most important group here, 0:02:22.000 --> 0:02:24.600 even if I argue, even if I'm neglecting my own 0:02:24.600 --> 0:02:28.880 profession of it. Here we're talking about approval rates for 0:02:28.919 --> 0:02:32.000 this plan that are north of se I just saw 0:02:32.040 --> 0:02:34.880 a number that was seventy five or seventy six, and 0:02:34.880 --> 0:02:38.280 and and bipartisan. By the way, you know this word partisanship, 0:02:38.320 --> 0:02:40.760 it means something different in Washington than in the rest 0:02:40.760 --> 0:02:43.000 of the country. This is a plan that, whether you're 0:02:43.000 --> 0:02:45.160 a deed or an r you want to see the 0:02:45.200 --> 0:02:49.040 schools open. That simply doesn't happen in a timely fashion 0:02:49.120 --> 0:02:52.880 that's acceptable to this president without the American Rescue Plan, 0:02:53.240 --> 0:02:57.120 distribution of the vaccine, getting shots and arms as I mentioned, 0:02:57.160 --> 0:03:01.239 schools providing checks, relief, unemployment an insurance by the way, 0:03:01.320 --> 0:03:05.280 unemployment benefits that expire in something like eleven or twelve days. 0:03:05.280 --> 0:03:08.280 Without the American Rescue Plan. The urgency of this plan 0:03:08.639 --> 0:03:11.000 is just as as big as it was yesterday, and 0:03:11.040 --> 0:03:13.320 the American people know that. Jared, Let's pick up on that, 0:03:13.400 --> 0:03:15.520 because in many ways, yes, that is true, but also 0:03:15.560 --> 0:03:17.760 you are stating the obvious. If I was getting sent 0:03:17.840 --> 0:03:20.320 a four hundred dollar check by you, and I was surveyed, 0:03:20.720 --> 0:03:22.840 I'd be approving it as well. No wonder there is 0:03:22.880 --> 0:03:25.280 a high approval rate on the economist on the democratic 0:03:25.280 --> 0:03:29.080 economist Larry Summers, former Treasury secretary, raising questions about this, 0:03:29.120 --> 0:03:32.080 Olivier Blanchard raising questions about this. And I have an 0:03:32.080 --> 0:03:35.360 economist after economist on this program with me, raising the 0:03:35.520 --> 0:03:38.480 very same questions. Did the matter? And then let me 0:03:38.480 --> 0:03:40.120 just finish the question, Jared, let me just fit Quinnis 0:03:40.320 --> 0:03:43.720 finish the question quickly. You've said the electorate matters, and 0:03:43.760 --> 0:03:46.600 of course they approved this. If you've lost the argument 0:03:46.600 --> 0:03:50.760 in financial circles and in markets, does that matter at all? Well, 0:03:50.800 --> 0:03:55.400 first of all, the objection from Larry, for example, who 0:03:55.440 --> 0:03:57.840 is a good old friend of mine, to whom I 0:03:57.880 --> 0:03:59.680 try to catch up with as often as I can, 0:03:59.680 --> 0:04:02.360 and we'd us agree on this heating point. If you 0:04:02.400 --> 0:04:05.400 read what Larry is saying at all carefully, he is 0:04:05.520 --> 0:04:09.440 absolutely agreeing of the need for relief, the need to 0:04:09.560 --> 0:04:12.600 finally hit this virus with the knockout punch that is 0:04:12.640 --> 0:04:15.600 here tofore alluded it, and finally get us to the 0:04:15.640 --> 0:04:18.719 other side of this crisis so we can launch a 0:04:18.839 --> 0:04:23.480 robust reliable and racially inclusive recovery. So there is definitely 0:04:23.600 --> 0:04:26.360 arguments about this heating question, and that has a lot 0:04:26.440 --> 0:04:29.400 to do more with the size of the output gap 0:04:29.480 --> 0:04:32.200 and the speed of the spend out and whether people 0:04:32.240 --> 0:04:34.960 are gonna save or spend. And those are nuanced arguments 0:04:34.960 --> 0:04:37.719 that I'm happy to get into. But in fact, you know, 0:04:38.160 --> 0:04:41.680 there are very few economists who disagree with the need 0:04:41.720 --> 0:04:44.520 for this plan. There's argument around the edges. Now you 0:04:44.640 --> 0:04:47.320 set a second ago, you know the people like it. Well, 0:04:47.720 --> 0:04:52.159 sometimes if the public you know, north of approve of 0:04:52.200 --> 0:04:55.080 a plan, that actually means it's a good plan. You 0:04:55.080 --> 0:04:57.559 don't have to hope forthink it, especially in a period 0:04:57.560 --> 0:05:00.960 where we're nine point five million jobs own from where 0:05:00.960 --> 0:05:02.839 we were a year ago. If you were telling me 0:05:02.880 --> 0:05:05.000 we were at full employment, we'd be having a much 0:05:05.000 --> 0:05:08.320 different discussion. The black unemployment it is almost ten percent. 0:05:08.640 --> 0:05:11.680 So the urgency of this plan is recognized by the 0:05:11.680 --> 0:05:13.480 American and people in a way that we should pay 0:05:13.480 --> 0:05:15.640 attention to jam. There's a need for a relief. Everyone 0:05:15.640 --> 0:05:17.520 agrees with that. I don't disagree with you not had 0:05:17.640 --> 0:05:20.200 hit to advocate a separate argument. It's about the composition 0:05:20.240 --> 0:05:22.560 of this plan, And more importantly, for a lot of people, 0:05:22.880 --> 0:05:24.599 it's about the size and you know that, and the 0:05:24.640 --> 0:05:27.960 size is absolutely massive. Secondary Summers, who comes on bloom Bug, 0:05:28.040 --> 0:05:30.000 has talked about this repeatedly as well. The worriors you 0:05:30.040 --> 0:05:32.120 know is this takes all the oxygen out of the 0:05:32.160 --> 0:05:35.080 room to secure an infrastructure plan down the road, to 0:05:35.160 --> 0:05:38.960 secure public investment. And you'll be overwhelmed if we do overheat. 0:05:39.200 --> 0:05:42.360 What gives you the confidence, what gives you the confidence 0:05:42.400 --> 0:05:46.480 that we won't overheat? That this isn't big enough? Great question, 0:05:46.520 --> 0:05:48.039 So I'm gonna get to that. Let me just first 0:05:48.040 --> 0:05:51.400 slow address this targeting point. There are elements of this 0:05:51.440 --> 0:05:54.840 plan that reduced child poverty by fifty that would be 0:05:54.880 --> 0:05:57.720 a massive success at a time when low income families, 0:05:57.920 --> 0:06:00.799 many of whom are essential workers, are under trum mendous pressure. 0:06:01.400 --> 0:06:04.800 This plan targets state and local government, said, as I 0:06:04.839 --> 0:06:07.800 just told you, have shed one point four million jobs, 0:06:07.880 --> 0:06:11.880 one million of those jobs in education. Now heating versus overheating. 0:06:11.960 --> 0:06:14.760 Let me be very clear, nobody is saying that the 0:06:14.839 --> 0:06:17.880 risks of economic heat are zero. In fact, we've already 0:06:18.160 --> 0:06:20.600 seen and you've reported on some of the heat that's 0:06:20.640 --> 0:06:23.840 generated by expectations. There's plan heat that I, by the way, 0:06:23.960 --> 0:06:27.719 would consider vitally important to an economy that's experienced much 0:06:27.720 --> 0:06:31.080 more deflation than than inflation in recent years. Why am 0:06:31.080 --> 0:06:35.560 I confidence against overheating? Well, for one, the output gap 0:06:35.640 --> 0:06:38.479 is much larger than many economists assume it is. And 0:06:38.520 --> 0:06:40.120 if you if you look at some of the works 0:06:40.120 --> 0:06:42.320 safe from Goldman Sacks, you'll find an output gap that's 0:06:42.360 --> 0:06:45.040 twice as large as some of the sort of inflation 0:06:45.080 --> 0:06:49.440 Eastas are saying. Secondly, the spend out is considerably slower 0:06:49.560 --> 0:06:52.040 than some folks believe. That is, according to the Corressional 0:06:52.040 --> 0:06:54.560 Budget Office, this does not spend out in one year. 0:06:54.760 --> 0:06:57.680 It spends out in two years. And that's important both 0:06:57.720 --> 0:07:00.839 in terms of making sure the fiscal impulse is lasting, 0:07:01.120 --> 0:07:03.960 and making and and and and putting down overheating risks. Now, 0:07:04.000 --> 0:07:06.839 to be very clear about this, people will start getting 0:07:06.960 --> 0:07:11.640 checks very quickly, people will get unemployment insurance benefits very quickly. 0:07:11.880 --> 0:07:14.040 But some of the longer term plan parts of the 0:07:14.080 --> 0:07:18.920 plan spend out more slowly. Finally, some folks are going 0:07:18.960 --> 0:07:22.440 to initially save some of these resources. That translates into 0:07:22.440 --> 0:07:26.600 a lower multiplier and less inflation. Is that a problem. No, 0:07:26.800 --> 0:07:29.240 I think it's actually a feature, not a bug, because 0:07:29.240 --> 0:07:33.119 in times of great pandemic induced uncertainty, families who usually 0:07:33.200 --> 0:07:36.600 have negative or lower or zero savings rates need that 0:07:36.680 --> 0:07:39.200 kind of a cushion to help deal with the air 0:07:39.240 --> 0:07:41.440 pockets that they face over the terms of this crisis. 0:07:41.760 --> 0:07:44.440 That final point there is the difference between relief and stimulus. 0:07:44.520 --> 0:07:47.080 What those checks get used for. And even I've spoken 0:07:47.080 --> 0:07:49.120 before and you've said it's relief and it's not stimulus. 0:07:49.160 --> 0:07:51.160 So help me understand this just a little bit better. 0:07:51.560 --> 0:07:54.880 How do you calibrate who those checks go to based 0:07:54.880 --> 0:07:56.720 on where the need is and what the money is 0:07:56.840 --> 0:07:58.320 used for? And why did you come up with a 0:07:58.400 --> 0:08:02.400 number at say seventy and yeah, so first of all, 0:08:02.480 --> 0:08:06.040 let's let I think listeners may sometimes reasonably be confused, 0:08:06.040 --> 0:08:07.760 what do you mean relief? What do you mean stimulus? Well, 0:08:08.000 --> 0:08:11.160 so oftentimes stimulus is designed to get people back into 0:08:11.200 --> 0:08:13.520 the labor force as quickly as possible, to spend out 0:08:13.880 --> 0:08:16.880 UH and have higher multipliers on the kinds of of 0:08:16.920 --> 0:08:20.160 resources that we're providing, and definitely a lot of that 0:08:20.240 --> 0:08:24.240 will happen are anti eviction resources in the in the 0:08:24.280 --> 0:08:26.680 rescue plan get to people right away and help them 0:08:26.880 --> 0:08:29.800 cut down some of that debt that they've been accumulating 0:08:29.800 --> 0:08:32.920 for from rent. But others we've found when we've when 0:08:32.960 --> 0:08:36.520 we've seen past examples of this, initially save these resources 0:08:36.559 --> 0:08:38.720 because they can't go out and spend them as quickly 0:08:38.760 --> 0:08:40.880 as they want, and then when they hit an air 0:08:40.880 --> 0:08:44.040 pocket in their personal economies, that's when they spend. So 0:08:44.120 --> 0:08:47.120 having this cushion, this relief cushion, is essential to them. 0:08:47.360 --> 0:08:50.360 In terms of the targeting of the checks. Congress recently 0:08:50.440 --> 0:08:52.960 ratcheted down the high end of the phase out of 0:08:52.960 --> 0:08:55.600 those checks, so they phase out sooner. But there's no 0:08:55.720 --> 0:08:57.959 question if you actually look at the kinds of burdens 0:08:57.960 --> 0:08:59.640 that people face, if you look at some of the 0:08:59.679 --> 0:09:02.440 low aiming rights that they went into, that a single 0:09:02.480 --> 0:09:06.520 family with seventy k is facing hardship in this economy 0:09:06.640 --> 0:09:10.079 and they need those direct income income payments just as 0:09:10.120 --> 0:09:12.800 much as some of the well targeted That's just as 0:09:12.880 --> 0:09:15.000 much as some of the more directly targeted to the 0:09:15.040 --> 0:09:17.960 poor payments that I mentioned a minute ago, helping to 0:09:17.960 --> 0:09:20.520 cut child poverty by fifty percent. Jared, I hear you're 0:09:20.520 --> 0:09:22.679 fighting for this, and I know you're passionate about it. 0:09:23.040 --> 0:09:25.600 What it don't here is the same passionate fight around 0:09:25.600 --> 0:09:27.920 a high minimum white. And many people might sit here 0:09:27.960 --> 0:09:30.000 and ask the question, why don't you're fighting hard enough 0:09:30.040 --> 0:09:31.599 for it? Why don't you fight hard and want you 0:09:31.640 --> 0:09:34.120 to go shedding? Wann't you willing to give something up 0:09:34.160 --> 0:09:37.840 to secure it? What's happening? Uh? You know now that 0:09:37.880 --> 0:09:40.360 you've raised the minimum wage. Let me tell you that 0:09:40.400 --> 0:09:43.600 I have been fighting for that policy, uh, for my 0:09:43.640 --> 0:09:46.680 whole career, which last too many, too many decades for 0:09:46.679 --> 0:09:49.480 me to get into. And the President of the United States, 0:09:49.480 --> 0:09:52.240 far more importantly than me, has been fighting for this 0:09:52.360 --> 0:09:54.600 ever since the campaign. And I want to tell you 0:09:54.679 --> 0:09:57.240 right here on Bloomberg TV that he is not going 0:09:57.320 --> 0:10:00.560 to stop fighting for that. He is committed to fifteen 0:10:00.600 --> 0:10:03.920 dollar in our minimum wage, phasing in over a few years. 0:10:04.200 --> 0:10:06.200 He's going to continue to fight for that. And the 0:10:06.240 --> 0:10:09.360 people who say that that's somehow unrelated to, uh, to 0:10:09.400 --> 0:10:11.200 what's going on in the country, I think are just 0:10:11.320 --> 0:10:14.920 missing the boat. You've got millions of low paid essential 0:10:14.960 --> 0:10:18.280 workers working away, toiling away at a minimum wage that 0:10:18.360 --> 0:10:20.480 said it's seven dollars and twenty five cents an hour. 0:10:20.840 --> 0:10:23.120 Now if anybody who can hear my voice thinks that's 0:10:23.120 --> 0:10:25.920 that that's an adequate wage for you've got an argument 0:10:25.960 --> 0:10:28.560 with myself and the President of the United States. Because 0:10:28.880 --> 0:10:31.480 we believe that minimum wage should be raised. We need 0:10:31.520 --> 0:10:33.640 to figure out how to get from here to there. 0:10:33.880 --> 0:10:37.079 And trust me, that is going to be an ongoing 0:10:37.080 --> 0:10:39.200 focus of this. Why let's finish there on that road. 0:10:39.520 --> 0:10:41.520 Last time around there was a willingness to draw taxes 0:10:41.520 --> 0:10:44.440 own companies to face this in Can we do that again? 0:10:45.440 --> 0:10:47.320 You know this is neither the time nor place for 0:10:47.320 --> 0:10:50.400 that negotiation. But you are right that historically those kinds 0:10:50.440 --> 0:10:52.600 of things have been paired. I think there are many 0:10:52.720 --> 0:10:54.800 variations that we're gonna have to work with Congress to 0:10:54.840 --> 0:10:57.240 get from here. To understand you, what with me? Are 0:10:57.280 --> 0:10:59.120 you willing to negotiate with them on that point? And 0:10:59.160 --> 0:11:02.800 are you I'm really here for the economic analysis. The 0:11:02.880 --> 0:11:05.400 negotiators are a different group of people. What I'm here 0:11:05.440 --> 0:11:08.080 to tell you is that this nation can get to 0:11:08.160 --> 0:11:11.720 fifteen dollars an hour UH in UH in a phase 0:11:11.760 --> 0:11:15.400 out range and provide much needed relief to people. It's 0:11:15.440 --> 0:11:19.040 a simple plan that that has the intended consequences of 0:11:19.160 --> 0:11:22.280 raising the pay of low wage workers without having distortionary 0:11:22.320 --> 0:11:24.640 effects on the other side. So full speed ahead on 0:11:24.640 --> 0:11:27.200 the minimum wage. Let's catch up saying it's gonna see 0:11:27.400 --> 0:11:37.320 John Best the Council of Economic Advisors, thank you right 0:11:37.360 --> 0:11:39.400 now joining us. And this is the perfect guest to 0:11:39.440 --> 0:11:42.880 start on radio and TV. Sevida Supermannian is a Bank 0:11:42.920 --> 0:11:46.280 of America. She has bulletproof skill sets out of Berkeley 0:11:46.360 --> 0:11:51.720 and mathematics and philosophy as well. Forget about the mathematics, Sevina, 0:11:51.880 --> 0:11:55.600 this is a nuts job's day. Give us the equity 0:11:55.640 --> 0:12:01.880 philosophy of Supermania in this morning philosophy. You know, I 0:12:01.920 --> 0:12:04.640 think it's simple. I think that we saw a very 0:12:04.720 --> 0:12:08.079 strong run up in the market last year anticipating and 0:12:08.200 --> 0:12:11.760 economic recovery and earnings recovery. And this year we're not 0:12:11.800 --> 0:12:14.920 going to get much more on the multiple expansion side, 0:12:14.960 --> 0:12:17.080 but we are going to get the earnings. And that's 0:12:17.120 --> 0:12:19.120 where I think, well, that's what we need to watch 0:12:19.160 --> 0:12:22.360 this year is how strong earnings actually come in. I mean, 0:12:22.360 --> 0:12:26.440 we're penciling in something close to earnings growth, but if 0:12:26.440 --> 0:12:29.160 we see anything short of that, yeah, I mean it's 0:12:29.200 --> 0:12:31.800 a it's a blockbuster number for earnings, but I think 0:12:31.800 --> 0:12:35.440 what's fascinating is that the market multiple expanded even more 0:12:35.480 --> 0:12:37.880 than that last year. And you know, Tom, this is 0:12:37.960 --> 0:12:40.800 kind of typical. I mean, the market generally anticipates the 0:12:40.840 --> 0:12:43.720 good news before it happens. And now what I worry 0:12:43.720 --> 0:12:46.000 about is that the bulk of news we're gonna get 0:12:46.120 --> 0:12:48.640 is going to be less good and it's more about 0:12:48.679 --> 0:12:53.000 you know, kind of uh inklings of inflationary pressure on margins. 0:12:53.120 --> 0:12:55.520 Do companies have the pricing power to pass this on 0:12:55.559 --> 0:12:59.120 to consumers? That I think is to be determined. So 0:12:59.120 --> 0:13:00.640 so I think this is going to be really kind 0:13:00.640 --> 0:13:03.920 of a show me year in terms of earnings growth, um, 0:13:03.960 --> 0:13:06.640 you know, in terms of the fundamentals actually supporting a 0:13:06.760 --> 0:13:09.600 fairly lofty multiple on the SMP five hundred right now. 0:13:09.640 --> 0:13:11.760 So I just build on that. Why we're so challenged 0:13:11.760 --> 0:13:14.040 on the SMP five hundred at the index level. You 0:13:14.080 --> 0:13:16.040 have the year end price target I think thirty eight 0:13:16.120 --> 0:13:19.040 hundred thirty seven right now in future is why are 0:13:19.120 --> 0:13:22.560 we sub challenged at the headline? Yeah, I think it's 0:13:22.640 --> 0:13:25.520 because of the constitution of the market, and we've talked 0:13:25.520 --> 0:13:28.079 about this a lot on your show. I think the 0:13:28.200 --> 0:13:31.480 SMP five hundred is not a proxy for the US economy. 0:13:31.480 --> 0:13:36.960 It's a proxy for low interest rates, disinflationary pressure, secular growth. 0:13:37.040 --> 0:13:40.240 It's much more defensively tilted than any other index you 0:13:40.240 --> 0:13:42.720 can look at. So I think the real risks this 0:13:42.800 --> 0:13:44.440 year are going to be in the SMP and even 0:13:44.480 --> 0:13:47.959 more so than NASDACK. But small caps, you know, value 0:13:48.000 --> 0:13:50.920 stocks should still do okay as long as the economic 0:13:50.960 --> 0:13:54.679 recovery remains intact. I do worry as we approached the 0:13:54.760 --> 0:13:56.719 end of the year that the news is going to 0:13:56.840 --> 0:13:59.199 go from you know, kind of pretty good to to 0:13:59.440 --> 0:14:02.120 more negative. And I think what we start to hear 0:14:02.160 --> 0:14:06.160 about is how to fund this this big fiscal stimulus program. 0:14:06.200 --> 0:14:10.400 Maybe we start to hear more rumblings around tats hikes, um, 0:14:10.440 --> 0:14:12.240 you know, I don't you know, in terms of the taper, 0:14:12.280 --> 0:14:14.880 I don't think if the Fed starts talking about tapering 0:14:14.920 --> 0:14:17.560 their their assets purchase program, I think that will be 0:14:17.600 --> 0:14:20.000 negative for risk assets. So those are the factors to 0:14:20.080 --> 0:14:22.400 watch as we as we progress forward in the year. 0:14:22.680 --> 0:14:25.440 But I think what we're watching now is just earnings. 0:14:25.520 --> 0:14:28.440 If inflationary pressure is enough to actually take a dent 0:14:28.560 --> 0:14:31.040 out of earnings, that would be negative. But if companies 0:14:31.040 --> 0:14:33.320 actually get pricing power that I think is the big 0:14:33.360 --> 0:14:35.840 positive here. As you speak, I think about sort of 0:14:35.840 --> 0:14:37.520 a double way at me of risks. We've had a 0:14:37.520 --> 0:14:40.280 lot of investors come on this show and say that 0:14:40.400 --> 0:14:44.240 yields have not responded to the positive sentiment that we've 0:14:44.240 --> 0:14:47.200 seen in equities. Right, they haven't baked in that earnings 0:14:47.240 --> 0:14:51.320 growth of that you're talking about. Now, those yields are 0:14:51.480 --> 0:14:54.280 those are starting to They're creeping up at the same 0:14:54.400 --> 0:14:57.600 gimatically that stocks have already priced those in. And our 0:14:57.680 --> 0:15:00.640 price to perfection and our subject to disappointment. How do 0:15:00.720 --> 0:15:03.320 you walk through those double whammys, the idea that yields 0:15:03.320 --> 0:15:06.280 could rise hitting the relative valuation of stocks at the 0:15:06.400 --> 0:15:12.000 same time that we're still getting disappointments with respect to earnings. Yeah. Absolutely, 0:15:12.040 --> 0:15:14.720 I think that's the way to think about investing this 0:15:14.800 --> 0:15:19.760 year is inflation protected yield and I think they're What 0:15:19.880 --> 0:15:22.200 you want to do is look for dividend growth stocks. 0:15:22.240 --> 0:15:25.000 This is one of the reasons I like financials. Financials 0:15:25.040 --> 0:15:30.040 offers relatively inflation protected dividend yield and cash return. Financials 0:15:30.080 --> 0:15:33.880 participates in economic recoveries, has a low payout ratio, has 0:15:33.960 --> 0:15:36.960 room to raise dividends, UM other stocks like that in 0:15:37.040 --> 0:15:40.320 the consumer sectors and industrials. I think that's the way 0:15:40.320 --> 0:15:43.800 to play the year. Don't get too fancy, um, you know, 0:15:43.880 --> 0:15:47.800 look for cheap inflation protected dividend field because we've already 0:15:47.840 --> 0:15:49.600 seen a run up in a lot of the low 0:15:49.680 --> 0:15:52.600 quality recovery place. Now, I think it gets a little 0:15:52.640 --> 0:15:54.800 bit more difficult in terms of how to how to 0:15:54.840 --> 0:15:59.760 position your portfolio. I do think go ahead, it's likely 0:16:00.000 --> 0:16:03.960 I'm gonna interrupt, Sevina. Tell me about revenue growth stocks. 0:16:04.360 --> 0:16:06.440 I mean, I get the yearnings growth stocks, I get 0:16:06.440 --> 0:16:10.160 the cash flow the dividend outed out of everybody's talking, 0:16:10.240 --> 0:16:14.240 including Ethan Harris and Michelle about you know, a bigger, bigger, 0:16:14.320 --> 0:16:17.360 bigger economy. Am I right that I learned in my 0:16:17.440 --> 0:16:22.960 philosophy a Supermannian that means revenue growth matters well, revenue 0:16:22.960 --> 0:16:25.360 growth and free cash flow growth. Yeah. I think that's 0:16:25.400 --> 0:16:28.080 absolutely right. So we're moving from just a price to 0:16:28.240 --> 0:16:32.440 book driven you know, by the cheapest stocks on on anything, 0:16:32.800 --> 0:16:34.720 to an environment where, like you said, you want to 0:16:34.760 --> 0:16:37.800 see the revenue growers. And I think what's really interesting 0:16:37.840 --> 0:16:40.560 this year is that we are seeing a market change 0:16:40.920 --> 0:16:44.280 in the sales acceleration stories. And it's it's an obvious point, 0:16:44.400 --> 0:16:46.600 but you know, last year was a very different market. 0:16:46.600 --> 0:16:49.360 We had tech as the real revenue growth the stable, 0:16:49.560 --> 0:16:53.440 stable revenue growth stories. This year we're seeing revenue growth 0:16:53.440 --> 0:16:57.080 expectations in very different pockets of the market, and consumer 0:16:57.160 --> 0:17:00.600 services sectors and industrials and cape s been a fish yaries. 0:17:00.800 --> 0:17:02.720 So I think that's going to be the pivot is 0:17:02.800 --> 0:17:06.040 moving from a growth and a tech dominated market under 0:17:06.040 --> 0:17:08.480 this stay at home environment that we've been in to 0:17:08.600 --> 0:17:11.520 a reopening play where you know, some of these smaller, 0:17:11.600 --> 0:17:15.720 more beaten down cyclical companies really have that revenue acceleration 0:17:15.760 --> 0:17:18.640 that's going to drive drive their their stock prices further 0:17:18.720 --> 0:17:24.480 from here. And interestingly, Energy this way up thirty three 0:17:24.840 --> 0:17:27.520 year today, how stretched do you think that story is? Look, 0:17:27.600 --> 0:17:29.879 I think energy is still a buy and the reason 0:17:30.040 --> 0:17:33.040 is that if you look at positioning and valuations, they 0:17:33.119 --> 0:17:37.120 still suggest that your long only institutional fund managers are 0:17:37.240 --> 0:17:40.960 not necessarily moving to even an equal weight position. The 0:17:41.040 --> 0:17:44.600 world is still very very underweight energy. And if the 0:17:44.720 --> 0:17:47.960 FED is willing to accommodate inflation for a longer period 0:17:48.000 --> 0:17:49.720 of time, and we're going to be in this late 0:17:49.800 --> 0:17:52.600 cycle type of market for a longer period of time 0:17:52.640 --> 0:17:55.119 than is normal. Energy is one of the best ways 0:17:55.160 --> 0:17:57.960 to hedge against inflation. So I think the sector is 0:17:58.000 --> 0:17:59.600 still a buy until we get to a point where 0:17:59.600 --> 0:18:01.919 it looks a lot more expensive and the world has 0:18:02.000 --> 0:18:05.040 gotten there Sevida, we were just talking to pre amr 0:18:05.119 --> 0:18:07.680 Over at TV Securities. She predicts a two percent treasury 0:18:07.760 --> 0:18:10.159 yields if we get there. How much more downside is 0:18:10.200 --> 0:18:13.199 there on big tech stocks? Yeah, No, I know, pre 0:18:13.320 --> 0:18:16.159 and I think two percent is achievable. Um, So you know, 0:18:16.240 --> 0:18:20.280 I think the downside to big tech is as potentially, um, 0:18:20.560 --> 0:18:22.960 you know, akin to what we've seen already. I think 0:18:22.960 --> 0:18:25.200 about it. We've seen a pretty dramatic move in rates. 0:18:25.240 --> 0:18:28.160 We've seen tech sel up. Expect kind of another leg 0:18:28.240 --> 0:18:31.080 down similar to what we've seen already. Um, you know, 0:18:31.160 --> 0:18:34.600 I think tech is ultimately longer term, uh, you know, 0:18:34.640 --> 0:18:36.680 a long term growth story. It's a bye. But I 0:18:36.800 --> 0:18:39.160 do think that in the near term, as we see 0:18:39.200 --> 0:18:41.479 that cost of capital increase and some of these long 0:18:41.560 --> 0:18:45.240 duration stocks could get hit by just pricing in that 0:18:45.520 --> 0:18:48.760 new discount rate on a on a DCF basis. Sorry, 0:18:48.800 --> 0:18:54.119 I got to my math side of very good to 0:18:54.720 --> 0:18:58.720 appreciate has always the catchups of eight to supermanti bankf 0:18:58.760 --> 0:19:01.720 America Security's head of you I secuity, anti rit strategy. 0:19:07.480 --> 0:19:10.159 It is time I get less distracted and look at 0:19:10.280 --> 0:19:12.399 jobs today, and I hope you agree. Ellen Setner is 0:19:12.480 --> 0:19:15.560 wonderful to do this with Morgan Stanley. Ellen, you have 0:19:15.720 --> 0:19:19.879 reaffirmed a stronger g dB statistic. Talk about the backdrop 0:19:20.040 --> 0:19:23.200 of jobs is it links into year six and even 0:19:23.320 --> 0:19:28.760 seven economic growth. So the backdrop of jobs is really important. 0:19:28.840 --> 0:19:32.879 I mean, we're passing more fiscal stimulus UH this month, 0:19:33.320 --> 0:19:35.880 and that's going to continue to build the bridge hopefully 0:19:35.960 --> 0:19:38.720 to win jobs are really coming back hand over this 0:19:39.080 --> 0:19:42.480 because you need that bridge in order to have those 0:19:42.560 --> 0:19:47.200 government transfers help households, help workers that are still without 0:19:47.320 --> 0:19:49.800 jobs until we get those jobs back and we can 0:19:49.880 --> 0:19:53.440 replace that with labor income. So the income growth has 0:19:53.520 --> 0:19:56.600 to be there in order to drive consumption in GDP 0:19:56.760 --> 0:19:59.800 as high as we've got it. We don't think today's 0:20:00.000 --> 0:20:02.639 report is going to be more than a trickle of 0:20:02.720 --> 0:20:04.760 jobs back, but I think in a couple of months 0:20:04.800 --> 0:20:07.480 we're going to see that that really barely Okay, well, 0:20:07.520 --> 0:20:09.480 this is really important as we go from a DP 0:20:09.760 --> 0:20:13.240 to claim. So the jobs report many people ellen above 0:20:13.320 --> 0:20:17.280 you at a hundred thousand, How would you perceive and 0:20:17.320 --> 0:20:20.720 how does Morgan Stanley perceive markets will react to a 0:20:20.840 --> 0:20:25.800 Zentner a hundred thousand. So I think the I'm glad 0:20:25.840 --> 0:20:28.800 you asked how markets reacts. Of course, from economist standpoint, 0:20:28.920 --> 0:20:32.320 will borrow you to death. The different statistically between sixty 0:20:32.359 --> 0:20:35.399 thousand and a hundred eight thousand is pretty much nothing 0:20:35.520 --> 0:20:38.560 when you think of the wide standard deviations that are 0:20:38.600 --> 0:20:42.200 in this data. But the market right is looking for 0:20:43.400 --> 0:20:47.320 any positive data uh in order to continue to justify 0:20:47.520 --> 0:20:51.040 this march higher UH in the ten uere And so 0:20:51.840 --> 0:20:54.879 if the if the if we get something above consensus, 0:20:55.040 --> 0:20:58.360 meaning so it goes beyond market expectations. So we get 0:20:58.440 --> 0:21:00.800