1
00:00:05,120 --> 00:00:09,200
Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

2
00:00:09,240 --> 00:00:13,200
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you

3
00:00:13,320 --> 00:00:18,600
Speaker 1: insight from the best and economics, finance, investment, and international relations.

4
00:00:18,960 --> 00:00:23,840
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com,

5
00:00:23,920 --> 00:00:31,080
Speaker 1: and of course on the Bloomberg terminal. Right now, William Dudley,

6
00:00:31,120 --> 00:00:34,440
Speaker 1: the Farmer President of the New York Fed Bloomberg Opinion columnists,

7
00:00:34,479 --> 00:00:37,080
Speaker 1: with the timely essay at this morning. It gets us

8
00:00:37,080 --> 00:00:40,080
Speaker 1: to Wednesday, but far more gets us to the new

9
00:00:40,159 --> 00:00:42,159
Speaker 1: new and the new theory. Bill, I want to go

10
00:00:42,200 --> 00:00:44,880
Speaker 1: back to Berkeley, and I've always had such a respect

11
00:00:44,920 --> 00:00:49,080
Speaker 1: for the interesting faculty that shows a University of California,

12
00:00:49,120 --> 00:00:53,120
Speaker 1: Berkeley over other institutions. And it all wraps around a

13
00:00:53,240 --> 00:00:57,040
Speaker 1: theory of belief of behavior, and that wraps around this

14
00:00:57,200 --> 00:01:01,720
Speaker 1: strange word credibility. What is the character of the FEDS

15
00:01:01,800 --> 00:01:05,600
Speaker 1: credibility in a time where we're making it up as

16
00:01:05,640 --> 00:01:10,320
Speaker 1: we go. Well, there's a risk to their credibility because one,

17
00:01:10,400 --> 00:01:14,800
Speaker 1: inflation is higher for longer to inflation expectations are starting

18
00:01:14,800 --> 00:01:19,160
Speaker 1: to rise, and three they sort of bound bound themselves

19
00:01:19,160 --> 00:01:21,400
Speaker 1: in terms of you know, when they can actually raise race.

20
00:01:21,440 --> 00:01:22,800
Speaker 1: They said they're not going to raise rates at all

21
00:01:22,840 --> 00:01:26,280
Speaker 1: until theyve hit two percent inflation, hitful employment, and our

22
00:01:26,319 --> 00:01:28,320
Speaker 1: confident inflation is going to stay above two percent in

23
00:01:28,319 --> 00:01:31,560
Speaker 1: the future, inflation expectations get an anchored, that's going to

24
00:01:31,640 --> 00:01:35,160
Speaker 1: push inflation up even before we get to maximum sustainable employment.

25
00:01:35,200 --> 00:01:37,399
Speaker 1: So they could be in a tough spot. Be in

26
00:01:37,400 --> 00:01:39,920
Speaker 1: a tough spot. But take it back to like the

27
00:01:40,080 --> 00:01:43,440
Speaker 1: history of Ike and Grain, or maybe the social economics

28
00:01:43,480 --> 00:01:46,440
Speaker 1: of Brad DeLong and the other young turks out at

29
00:01:46,480 --> 00:01:50,040
Speaker 1: your Berkeley Here. Again, we're making it up as we go.

30
00:01:50,160 --> 00:01:53,080
Speaker 1: With the debt dynamics that we have. Now, what is

31
00:01:53,120 --> 00:01:57,720
Speaker 1: the theory that you would propose to maintain this valuable,

32
00:01:57,840 --> 00:02:02,560
Speaker 1: this precious credibility. Well, I think the FET should be

33
00:02:02,560 --> 00:02:04,880
Speaker 1: a little bit more flexible in terms of when they're

34
00:02:04,920 --> 00:02:08,240
Speaker 1: willing to raise long term short term industries. Uh, if

35
00:02:08,280 --> 00:02:11,359
Speaker 1: inflation expectations truly become an anchored, that's a problem for

36
00:02:11,520 --> 00:02:13,960
Speaker 1: actual inflation, and I would think that they would have

37
00:02:14,000 --> 00:02:17,160
Speaker 1: to react to that. The current regime where they don't

38
00:02:17,160 --> 00:02:20,400
Speaker 1: do anything until they reach maximum sustainable employment in their mind,

39
00:02:20,800 --> 00:02:23,720
Speaker 1: might turn out to be too late. How concerned are

40
00:02:23,720 --> 00:02:27,320
Speaker 1: you bill to that point about recent consumers consumer confidence

41
00:02:27,360 --> 00:02:31,800
Speaker 1: surveys that show that consumers expect inflation to be materially

42
00:02:31,880 --> 00:02:35,160
Speaker 1: above the Fed's expectations over the next three to five

43
00:02:35,240 --> 00:02:40,760
Speaker 1: years at a time when this is also dampening their optimism. Well,

44
00:02:40,880 --> 00:02:44,760
Speaker 1: the New York Fed publishes a household survey of expectations

45
00:02:44,800 --> 00:02:47,760
Speaker 1: about inflation, and the most recent reading is really quite

46
00:02:47,960 --> 00:02:52,120
Speaker 1: uh disturbing. The three months inflation expectations are now up

47
00:02:52,120 --> 00:02:55,640
Speaker 1: to four percent, which is essentially double what the Fed's

48
00:02:55,639 --> 00:02:58,880
Speaker 1: actually targeted. Great, So, how concerning is this too? I mean,

49
00:02:59,000 --> 00:03:02,000
Speaker 1: the idea is that can sumers don't always get it right. However,

50
00:03:02,200 --> 00:03:05,840
Speaker 1: this does signal a credibility issue beyond markets for the

51
00:03:05,840 --> 00:03:09,200
Speaker 1: Federal Reserve to address. Well, the key questions whether people

52
00:03:09,200 --> 00:03:11,799
Speaker 1: trust the FED. If people trust the Fed and trust

53
00:03:11,800 --> 00:03:14,799
Speaker 1: the Fed's forecasts and inflations, expectations will come back down

54
00:03:14,840 --> 00:03:18,400
Speaker 1: as inflation moderates. If people don't trust the Fed, inflation

55
00:03:18,520 --> 00:03:21,200
Speaker 1: expectations will stay high, they will push up inflation, and

56
00:03:21,200 --> 00:03:23,040
Speaker 1: the Fed will have a have a problem on scenes.

57
00:03:23,200 --> 00:03:25,640
Speaker 1: So do you think that the market could potentially have

58
00:03:25,840 --> 00:03:28,560
Speaker 1: a problem or a disruption if the FED does not

59
00:03:28,760 --> 00:03:32,240
Speaker 1: signal tapering soon enough, Well, I think the FED is

60
00:03:32,240 --> 00:03:34,640
Speaker 1: going to say single tapering pretty soon. I mean, I

61
00:03:34,639 --> 00:03:38,160
Speaker 1: think that this meeting they'll probably reinforce the idea that

62
00:03:38,160 --> 00:03:41,400
Speaker 1: they're making progress towards their goals, setting up the notion

63
00:03:41,440 --> 00:03:44,360
Speaker 1: that taper infected to be announced at the November f MOC.

64
00:03:44,520 --> 00:03:48,040
Speaker 1: Meaning so, what is the effect of the senior age

65
00:03:48,080 --> 00:03:53,640
Speaker 1: of the US dollar on all of this philosophy and calculus?

66
00:03:54,040 --> 00:03:57,760
Speaker 1: We are different with the US dollar. How does that

67
00:03:57,840 --> 00:04:04,200
Speaker 1: make Chairman Paul's press conference different on Wednesday? Well, having

68
00:04:04,240 --> 00:04:07,760
Speaker 1: the dollar as a reserve currency allows us to attract

69
00:04:07,760 --> 00:04:11,520
Speaker 1: the foreign capital on very attractive terms as long as

70
00:04:11,520 --> 00:04:15,360
Speaker 1: we have credibility. If people start to doubt the FEDS

71
00:04:15,400 --> 00:04:18,640
Speaker 1: commitment to a stable inflation over time, you know, then

72
00:04:18,680 --> 00:04:20,960
Speaker 1: the dollar would start to weaken, and people that if

73
00:04:20,960 --> 00:04:23,720
Speaker 1: that went on for a good period of time, then

74
00:04:23,760 --> 00:04:26,640
Speaker 1: people might start looking around for substitutes to the US dollar.

75
00:04:27,560 --> 00:04:30,200
Speaker 1: But you have been a great optimist on this, you

76
00:04:30,200 --> 00:04:33,520
Speaker 1: you know, within the body of the William Dudley work. Frankly, Bill,

77
00:04:33,560 --> 00:04:36,040
Speaker 1: I'll take it back to Goldman Sex. You've been a

78
00:04:36,080 --> 00:04:41,479
Speaker 1: great optimist on the institutional strength of the American system.

79
00:04:41,520 --> 00:04:45,479
Speaker 1: Do you maintain that that institutional strength is there with

80
00:04:45,600 --> 00:04:49,880
Speaker 1: the fractious Washington that we have. Well, the thing we

81
00:04:49,920 --> 00:04:51,800
Speaker 1: have going for is number one, we have a very

82
00:04:51,839 --> 00:04:54,200
Speaker 1: deep and liquid capital market, and to the FED has

83
00:04:54,200 --> 00:04:56,279
Speaker 1: done a good job keeping inflation and checks, so we

84
00:04:56,320 --> 00:04:58,400
Speaker 1: have credibility with the rest of the world. As long

85
00:04:58,480 --> 00:05:00,919
Speaker 1: as we don't mess up our economy. People are going

86
00:05:01,000 --> 00:05:03,200
Speaker 1: to be willing to continue to use the dollar as

87
00:05:03,240 --> 00:05:06,600
Speaker 1: the reserve currency because there aren't really great alternatives, you know.

88
00:05:06,680 --> 00:05:08,200
Speaker 1: I look, Bill, we've got to get back to the

89
00:05:08,240 --> 00:05:11,760
Speaker 1: markets here as they are. Challenge futures a negative eighty one.

90
00:05:12,240 --> 00:05:14,680
Speaker 1: But Bill, to me, it is just a FED on

91
00:05:14,800 --> 00:05:18,559
Speaker 1: a massive ex post basis will wait and wait and wait.

92
00:05:18,640 --> 00:05:22,320
Speaker 1: We're mentioning Alan Meltzer of Carnegie Mellon earlier. I think

93
00:05:22,320 --> 00:05:25,320
Speaker 1: of timber Lake and the Georgia School, and the answer is,

94
00:05:25,400 --> 00:05:29,080
Speaker 1: when in doubt, wait right. Well, I think it depends

95
00:05:29,080 --> 00:05:30,840
Speaker 1: on what the risks are. I think one thing that

96
00:05:31,000 --> 00:05:33,600
Speaker 1: we will see this this week is the dot plot.

97
00:05:33,720 --> 00:05:37,520
Speaker 1: The forecast of interest rates in two will probably show

98
00:05:37,520 --> 00:05:40,840
Speaker 1: more people being in favor of rate hike in two

99
00:05:40,880 --> 00:05:43,760
Speaker 1: and then may reduce the concerns about the FED being late,

100
00:05:44,640 --> 00:05:47,080
Speaker 1: but you face down the risks out of China many

101
00:05:47,120 --> 00:05:49,560
Speaker 1: times on the f wem C. I'm thinking of the

102
00:05:49,680 --> 00:05:54,320
Speaker 1: summer at I'm thinking of early as well. If we

103
00:05:54,320 --> 00:05:55,920
Speaker 1: were the FED looking at the risks that are playing

104
00:05:55,920 --> 00:05:58,279
Speaker 1: out at the moment building in China, how are you

105
00:05:58,320 --> 00:06:01,280
Speaker 1: processing that, digesting the moment. But I'd love your insight

106
00:06:01,360 --> 00:06:03,560
Speaker 1: on that. I think your experience is really valuable on

107
00:06:03,600 --> 00:06:07,160
Speaker 1: this particular top peg Well. I think you know that

108
00:06:07,200 --> 00:06:10,159
Speaker 1: the Fitter Reserves certainly understands that China's an important player

109
00:06:10,160 --> 00:06:12,320
Speaker 1: in the global economy of the China had had a

110
00:06:12,360 --> 00:06:15,719
Speaker 1: hard landing that would have very serious consequences for the

111
00:06:15,760 --> 00:06:18,680
Speaker 1: rest of the and and for the United States. I

112
00:06:18,720 --> 00:06:21,600
Speaker 1: think at this point it's really premature to reach that conclusion, though,

113
00:06:21,640 --> 00:06:24,760
Speaker 1: that Chinese have tried to tighten things up before, and

114
00:06:24,800 --> 00:06:27,560
Speaker 1: when it starts to actually affect the rate of growth

115
00:06:27,560 --> 00:06:30,479
Speaker 1: and employment, they tend to ease off on the brakes,

116
00:06:30,520 --> 00:06:32,080
Speaker 1: and I think that's what's going to happen this time

117
00:06:32,080 --> 00:06:34,200
Speaker 1: as well. How do you think the Chairman will approach

118
00:06:34,240 --> 00:06:37,919
Speaker 1: that issue in the news conference this Wednesday, Bill, I

119
00:06:37,920 --> 00:06:39,680
Speaker 1: think he'll just say that we take the world as

120
00:06:39,720 --> 00:06:42,120
Speaker 1: it is, and obviously we're updating our views about what's

121
00:06:42,120 --> 00:06:43,920
Speaker 1: happening in the rest of the world as things unfold.

122
00:06:43,960 --> 00:06:45,640
Speaker 1: So I don't think he's going to make a strong

123
00:06:45,680 --> 00:06:48,760
Speaker 1: statement about his views about how China's gonna unfold. Well,

124
00:06:48,760 --> 00:06:50,720
Speaker 1: but do you think Bill, for example, if there is

125
00:06:50,760 --> 00:06:53,919
Speaker 1: a draw down like sum are expecting Mike Wilson in

126
00:06:53,920 --> 00:06:57,000
Speaker 1: particular Morgan Stanley, what does the FED do? Do they

127
00:06:57,000 --> 00:07:01,080
Speaker 1: not taper at all? Well? I deviously, if things happen

128
00:07:01,160 --> 00:07:03,520
Speaker 1: in a way that change the economic outlook in a

129
00:07:03,520 --> 00:07:07,000
Speaker 1: meaningful way, then obviously the Fed world just course. But

130
00:07:07,040 --> 00:07:09,640
Speaker 1: at this point they're not going to react to, you know,

131
00:07:09,680 --> 00:07:13,200
Speaker 1: small market moves and then defer the tap tapering on

132
00:07:13,200 --> 00:07:15,760
Speaker 1: that basis, they have to change their economic focus. That's

133
00:07:15,760 --> 00:07:18,280
Speaker 1: why the summary of economic projections this week is also

134
00:07:18,280 --> 00:07:20,640
Speaker 1: important because it's basically tell you what the FED thinks

135
00:07:20,680 --> 00:07:23,280
Speaker 1: about how the economy is like to evolve, not just

136
00:07:23,360 --> 00:07:26,200
Speaker 1: in one and twenty two, but also twenty three and

137
00:07:26,240 --> 00:07:28,760
Speaker 1: twenty four. Bill, this Fed is a different Fed than

138
00:07:28,760 --> 00:07:30,280
Speaker 1: the one that you are a member of in the

139
00:07:30,320 --> 00:07:32,600
Speaker 1: sense that it's balance sheet is bigger and the stakes

140
00:07:32,640 --> 00:07:35,320
Speaker 1: are higher should there be a disruption, because their ammunition

141
00:07:35,760 --> 00:07:39,239
Speaker 1: is just limited. How much does a nearly nine trillion

142
00:07:39,240 --> 00:07:42,400
Speaker 1: dollar balance sheet tie their hands going forward in terms

143
00:07:42,440 --> 00:07:46,200
Speaker 1: of how much ammunition they can really deploy. There's no

144
00:07:46,280 --> 00:07:49,040
Speaker 1: limit on the size of the FED reserves balance. They

145
00:07:49,040 --> 00:07:51,200
Speaker 1: can make it much bigger than it is right now.

146
00:07:51,240 --> 00:07:53,160
Speaker 1: I mean, it's obviously we're not used to having a

147
00:07:53,160 --> 00:07:56,080
Speaker 1: balance sheet of this magnitude. There's no actual limit on

148
00:07:56,120 --> 00:08:00,920
Speaker 1: how big balanction can get. Bill You've been very vocal,

149
00:08:01,000 --> 00:08:04,119
Speaker 1: you know, with the public responsibilities you've had over the years.

150
00:08:04,160 --> 00:08:08,360
Speaker 1: I really value the Bloomberg opinion essays as well. What

151
00:08:08,600 --> 00:08:12,440
Speaker 1: is the great research mystery now? If you're lined up

152
00:08:12,480 --> 00:08:16,119
Speaker 1: with the people like say Vincent Reinhardt of the time

153
00:08:16,160 --> 00:08:18,160
Speaker 1: of green Span, if you're lined up with the young

154
00:08:18,280 --> 00:08:22,080
Speaker 1: PhDs at the FED, what's the research idea now to

155
00:08:22,280 --> 00:08:27,720
Speaker 1: you that bears immediate and further study. Well, the biggest

156
00:08:27,720 --> 00:08:29,560
Speaker 1: connunter we have right now is how tight is the

157
00:08:29,640 --> 00:08:33,600
Speaker 1: US labor market? On one hand, we still have part

158
00:08:33,600 --> 00:08:35,559
Speaker 1: fall from where we were in February twin twin. On

159
00:08:35,600 --> 00:08:37,960
Speaker 1: the other hand, the number of job openings at a

160
00:08:38,000 --> 00:08:40,360
Speaker 1: record level. So is is layer market loser? Is a

161
00:08:40,400 --> 00:08:42,440
Speaker 1: living Okay? Well, you went right to my third round.

162
00:08:42,440 --> 00:08:45,760
Speaker 1: I'm gonna go there because of your heritage here with Goldman, Saxon, Berkeley,

163
00:08:45,920 --> 00:08:48,760
Speaker 1: Bill Dudley. Do we have a clue what the overlay

164
00:08:48,800 --> 00:08:54,720
Speaker 1: of technology is on our labor share and our labor dynamics. Well,

165
00:08:54,760 --> 00:08:57,000
Speaker 1: the labor market is obviously changing in a pretty rapid

166
00:08:57,080 --> 00:09:00,880
Speaker 1: rate way, and obviously the COVID pandemic accelerated that transformation.

167
00:09:00,920 --> 00:09:03,600
Speaker 1: So I think it does raise questions about, you know,

168
00:09:03,640 --> 00:09:05,600
Speaker 1: the level of uncertain we have about the layer market.

169
00:09:05,640 --> 00:09:07,480
Speaker 1: I think the level of uncertaining about how the labor

170
00:09:07,520 --> 00:09:10,520
Speaker 1: market right now is unusually. But we've got to leave

171
00:09:10,559 --> 00:09:13,480
Speaker 1: it there. An important topic, important conversation got into Wednesday,

172
00:09:13,920 --> 00:09:16,400
Speaker 1: looking forward to that decision, a news conference this coming Wednesday.

173
00:09:16,400 --> 00:09:19,880
Speaker 1: Build don't think that Bloomberg opinion columnist and senior advisors

174
00:09:19,880 --> 00:09:29,200
Speaker 1: to Bloomberg Economics and former New York Fed President. It

175
00:09:29,280 --> 00:09:31,880
Speaker 1: is the volatility that Lori Kvassin has been wasting for

176
00:09:32,240 --> 00:09:34,920
Speaker 1: the OBC Capital Markets head of U Security Strategy joins

177
00:09:35,000 --> 00:09:37,440
Speaker 1: us right now, Laurie, is this it is this the

178
00:09:37,440 --> 00:09:39,360
Speaker 1: set up, the beginning of it, at least that you've

179
00:09:39,360 --> 00:09:42,600
Speaker 1: been waiting for. I think it very well could be John.

180
00:09:42,600 --> 00:09:44,560
Speaker 1: I mean, you know, looking at the futures this morning,

181
00:09:44,600 --> 00:09:46,560
Speaker 1: this is the first time in quite some time that

182
00:09:46,600 --> 00:09:48,960
Speaker 1: we've had a real meaningful break and I think if

183
00:09:48,960 --> 00:09:51,960
Speaker 1: you talk to investors, UM, the fear is starting to

184
00:09:52,000 --> 00:09:54,840
Speaker 1: become palpable, and ultimately, we really do need to see

185
00:09:54,840 --> 00:09:58,800
Speaker 1: a break in institutional investor sentiment and positioning to get

186
00:09:58,840 --> 00:10:02,360
Speaker 1: this pause that ultimately refreshes UM. Look, you know, we've

187
00:10:02,360 --> 00:10:04,280
Speaker 1: been talking a long time about this. You know, we've

188
00:10:04,280 --> 00:10:06,360
Speaker 1: talked a lot about the deceleration and the rate of

189
00:10:06,440 --> 00:10:09,000
Speaker 1: change in SMP earnings growth time and time again. Coming

190
00:10:09,040 --> 00:10:11,400
Speaker 1: out of a recession, it typically leads to a pretty

191
00:10:11,400 --> 00:10:14,400
Speaker 1: meaningful pullback in the stock market. Um, it is natural

192
00:10:14,440 --> 00:10:16,400
Speaker 1: for this kind of pullback to happen, and we've got

193
00:10:16,400 --> 00:10:18,400
Speaker 1: a lot of a lot of other catalysts besides slowing

194
00:10:18,400 --> 00:10:20,760
Speaker 1: earnings growth that are starting to perk up to help

195
00:10:20,840 --> 00:10:24,800
Speaker 1: catalyze that downward move. So look, I am actually somewhat

196
00:10:24,880 --> 00:10:26,560
Speaker 1: hopeful that we can just go ahead and get this

197
00:10:26,600 --> 00:10:28,160
Speaker 1: done and get this out of the way and then

198
00:10:28,200 --> 00:10:30,800
Speaker 1: move on. UM. I never want to see a down market,

199
00:10:30,840 --> 00:10:32,720
Speaker 1: but I do think that this is just a natural

200
00:10:33,320 --> 00:10:35,480
Speaker 1: part of the process. When you come out of a recession,

201
00:10:35,520 --> 00:10:38,120
Speaker 1: that you have to have this digestion period. What is

202
00:10:38,160 --> 00:10:41,319
Speaker 1: the overbought nature of the market right now? Of institutions,

203
00:10:41,400 --> 00:10:46,120
Speaker 1: what's the character of their confidence. I think that it

204
00:10:46,240 --> 00:10:49,080
Speaker 1: is a hope that some of the pressures we have

205
00:10:49,320 --> 00:10:51,520
Speaker 1: on the market and earnings growth, in particular on the

206
00:10:51,520 --> 00:10:54,120
Speaker 1: inflation side, the supply chain side, that those will be

207
00:10:54,600 --> 00:10:57,880
Speaker 1: uh resolved sooner rather than later. I think there's also

208
00:10:57,920 --> 00:11:01,079
Speaker 1: the idea that we are heading into a strong economy

209
00:11:01,120 --> 00:11:03,560
Speaker 1: again next year. I think at the end of the day,

210
00:11:03,679 --> 00:11:07,080
Speaker 1: investors have to ask themselves what's the risk of a recession?

211
00:11:07,160 --> 00:11:09,160
Speaker 1: It really is that simple. Is it yes? Is it no?

212
00:11:09,600 --> 00:11:11,959
Speaker 1: If the answer is no, you are but typically better

213
00:11:12,000 --> 00:11:15,520
Speaker 1: off sitting around waiting and buying the dip. It's really

214
00:11:15,559 --> 00:11:18,920
Speaker 1: only when a true recession fear builds in that institutions

215
00:11:18,920 --> 00:11:21,679
Speaker 1: will take that positioning down and move to a more

216
00:11:21,720 --> 00:11:24,240
Speaker 1: defensive posture. LORI, when do we know that it's the

217
00:11:24,280 --> 00:11:27,920
Speaker 1: dip to buy? I think that we've got to watch

218
00:11:27,920 --> 00:11:30,800
Speaker 1: the sentiment indicators very closely, Lisa, and you know, we

219
00:11:30,840 --> 00:11:33,080
Speaker 1: actually had one take a very good step in the

220
00:11:33,160 --> 00:11:35,120
Speaker 1: right direction last week, which is if you look at

221
00:11:35,160 --> 00:11:38,959
Speaker 1: the a AII Retail Investor survey that comes out every week.

222
00:11:39,240 --> 00:11:42,560
Speaker 1: The net bullishness dipped to about minus seventeen percent, So

223
00:11:42,600 --> 00:11:45,319
Speaker 1: we saw bears pick up pretty quickly, and we also

224
00:11:45,360 --> 00:11:48,320
Speaker 1: saw the bulls just absolutely collapsed. Now that's one week

225
00:11:48,360 --> 00:11:50,640
Speaker 1: of data. We really need to see that hold for

226
00:11:50,640 --> 00:11:53,520
Speaker 1: four weeks on the four week average. But typically when

227
00:11:53,559 --> 00:11:56,040
Speaker 1: you get below ten percent minus ten percent on the

228
00:11:56,040 --> 00:11:58,679
Speaker 1: four week average, that's a very good bye signal for

229
00:11:58,720 --> 00:12:01,320
Speaker 1: the market on a three and twelve month forward basis.

230
00:12:01,600 --> 00:12:04,640
Speaker 1: Now that's just one side of the sentiment puzzle. You

231
00:12:04,720 --> 00:12:07,000
Speaker 1: also have to look at what institutions are doing. And

232
00:12:07,000 --> 00:12:10,200
Speaker 1: the CFTC data, which we get weekly, is showing us

233
00:12:10,200 --> 00:12:12,240
Speaker 1: that we're still sitting around all time highs. If you

234
00:12:12,240 --> 00:12:14,560
Speaker 1: look at SMP five hundred contracts, if you look at

235
00:12:14,600 --> 00:12:19,120
Speaker 1: aggregated smpach are broader US equity market futures positioning. So

236
00:12:19,160 --> 00:12:22,080
Speaker 1: we need to see that institutional positioning come down, and

237
00:12:22,120 --> 00:12:23,840
Speaker 1: we probably need to see a little bit more damage

238
00:12:23,840 --> 00:12:25,760
Speaker 1: on the retail side for a few more weeks. Laura,

239
00:12:25,800 --> 00:12:28,600
Speaker 1: you'll call forty year and forty nine hundred year end

240
00:12:29,000 --> 00:12:31,400
Speaker 1: next year. What it's fed policy fit into this least

241
00:12:31,440 --> 00:12:33,440
Speaker 1: it's home bringing it up this morning once they could

242
00:12:33,440 --> 00:12:35,480
Speaker 1: be interesting given what we're seeing on the screen this morning,

243
00:12:35,600 --> 00:12:38,280
Speaker 1: what's the FED call that goes into that forty next year.

244
00:12:39,200 --> 00:12:42,280
Speaker 1: So the FED call really impacts two things. Is one

245
00:12:42,320 --> 00:12:45,360
Speaker 1: our assumptions on multiples, and second are are how we

246
00:12:45,400 --> 00:12:47,839
Speaker 1: want to be positioned for the broader US equity market.

247
00:12:48,320 --> 00:12:49,960
Speaker 1: Like I think, a lot of the damage to the

248
00:12:50,000 --> 00:12:52,880
Speaker 1: market itself, John was done back in the spring when

249
00:12:52,880 --> 00:12:55,120
Speaker 1: you saw all the economists around the street clamor for

250
00:12:55,120 --> 00:12:57,920
Speaker 1: the FED to start sending those tapering signals, and back

251
00:12:57,960 --> 00:13:01,240
Speaker 1: then we saw small caps really start to underperformed large caps.

252
00:13:01,240 --> 00:13:03,319
Speaker 1: We've also seen the value trade take a pretty big

253
00:13:03,360 --> 00:13:05,840
Speaker 1: hit if you look at two que performance. That is

254
00:13:05,880 --> 00:13:08,720
Speaker 1: important because if you look back at the last tapering episode,

255
00:13:08,960 --> 00:13:11,719
Speaker 1: we saw markets actually ultimately continue to climb, but the

256
00:13:11,800 --> 00:13:14,480
Speaker 1: risk trade took a hit. So value underperformed and small

257
00:13:14,480 --> 00:13:17,400
Speaker 1: cap underperformed. That's that's I think one issue. But the

258
00:13:17,400 --> 00:13:19,520
Speaker 1: other issue, frankly, is that if you look at the

259
00:13:19,520 --> 00:13:23,320
Speaker 1: FED balance sheet, it's really enabled multiple expansions and the

260
00:13:23,320 --> 00:13:25,880
Speaker 1: post financial crisis era. So if you take the balance

261
00:13:25,920 --> 00:13:29,960
Speaker 1: sheet expansion away, you don't get any more multiple expansion.

262
00:13:30,000 --> 00:13:32,880
Speaker 1: That's really gonna be earning strongth griven market going forward. Laura,

263
00:13:32,920 --> 00:13:35,160
Speaker 1: I'm I'm in a complete sweat here this morning with

264
00:13:35,280 --> 00:13:37,559
Speaker 1: futures where they are now. We're in the SPX of

265
00:13:37,679 --> 00:13:41,080
Speaker 1: four point one draw down. I mean a crisis is

266
00:13:41,120 --> 00:13:43,600
Speaker 1: it in the VIX? Isn't even at the thirty We're

267
00:13:43,600 --> 00:13:46,920
Speaker 1: at twenty five point one four. When I decide to

268
00:13:47,000 --> 00:13:51,640
Speaker 1: load the boat, which sector has the most combination of

269
00:13:51,720 --> 00:13:57,360
Speaker 1: persistency and velocity into two thousand twenty two. So I'll

270
00:13:57,400 --> 00:13:59,400
Speaker 1: say the two sectors that I'm gonna be telling people

271
00:13:59,440 --> 00:14:02,120
Speaker 1: to buy this week are going to be financials and technology.

272
00:14:02,160 --> 00:14:04,080
Speaker 1: You've got a big pillar of the value trade, big

273
00:14:04,080 --> 00:14:06,319
Speaker 1: pillar of the growth trade. I think as we as

274
00:14:06,360 --> 00:14:08,800
Speaker 1: we come out of these you know, sort of shorter

275
00:14:08,920 --> 00:14:11,040
Speaker 1: term concerns on the market, I think the value trade

276
00:14:11,040 --> 00:14:13,240
Speaker 1: will do well again. And I think the financials trade,

277
00:14:13,320 --> 00:14:16,360
Speaker 1: it's cheap um, it doesn't have supply chain issues that

278
00:14:16,440 --> 00:14:19,360
Speaker 1: things like industrials have. That's gonna be your cleanest, purest

279
00:14:19,400 --> 00:14:22,280
Speaker 1: way to play that value pop. But longer term, what

280
00:14:22,360 --> 00:14:23,920
Speaker 1: we do know about the FED, and so let's move

281
00:14:23,920 --> 00:14:26,960
Speaker 1: away from tapering and start talking about hikes. But typically

282
00:14:27,000 --> 00:14:30,880
Speaker 1: the FED hiking cycle does end up killing the value

283
00:14:30,880 --> 00:14:33,760
Speaker 1: trade as well. We see that time and time again.

284
00:14:34,120 --> 00:14:36,480
Speaker 1: UM and I think longer term, when we start to

285
00:14:36,520 --> 00:14:40,040
Speaker 1: see economic growth decelerate back towards kind of trend like levels,

286
00:14:40,040 --> 00:14:41,520
Speaker 1: you want to be in the growth trade, and tech

287
00:14:41,640 --> 00:14:44,040
Speaker 1: is probably your best way to play that. LOI thank you.

288
00:14:44,160 --> 00:14:47,120
Speaker 1: Going to catch up as always Lori Kavassin or obviously

289
00:14:47,160 --> 00:14:56,760
Speaker 1: Capital Markets head of US equity Strategy Andrew Holland Horse

290
00:14:56,880 --> 00:15:00,600
Speaker 1: drives for the conversation with City Group, their chief US economists.

291
00:15:00,640 --> 00:15:03,880
Speaker 1: And maybe it's a slowdown Q three, a pickup Q four,

292
00:15:04,440 --> 00:15:07,000
Speaker 1: and then it's a complete mystery. What is the most

293
00:15:07,040 --> 00:15:11,000
Speaker 1: mysterious part of the mystery known as economic two thousand

294
00:15:11,040 --> 00:15:14,360
Speaker 1: and twenty two. I think if there's one big mystery

295
00:15:14,400 --> 00:15:17,000
Speaker 1: out there, and maybe the most important mystery also, it's

296
00:15:17,120 --> 00:15:19,600
Speaker 1: what's going on in the labor market right now? How

297
00:15:19,680 --> 00:15:23,440
Speaker 1: serious are these worker shortages? How long will they continue? Forth?

298
00:15:23,440 --> 00:15:26,080
Speaker 1: So we know that we're in an economy that's constrained

299
00:15:26,080 --> 00:15:29,120
Speaker 1: by the supply side, and the big question is how

300
00:15:29,160 --> 00:15:31,200
Speaker 1: significant is that constraint and how long will it be?

301
00:15:31,280 --> 00:15:34,320
Speaker 1: With us? Well, the constraints there, and it wraps around

302
00:15:34,320 --> 00:15:36,960
Speaker 1: a consumer as well the consumers linked in and supply

303
00:15:37,120 --> 00:15:41,920
Speaker 1: constraints and particularly linked into the challenges and prosperities of China.

304
00:15:42,240 --> 00:15:46,600
Speaker 1: How do you link American consumption of the economy into

305
00:15:46,600 --> 00:15:50,880
Speaker 1: the dynamics we observe out of Hong Kong and Beijing. Yeah,

306
00:15:51,000 --> 00:15:52,920
Speaker 1: it's interesting, Tom, because if you do the kind of

307
00:15:53,040 --> 00:15:58,520
Speaker 1: direct effects that go to three decimal points, yeah you get, yeah,

308
00:15:58,520 --> 00:16:01,960
Speaker 1: you get, you get relatively relatively smaller numbers. The the

309
00:16:01,960 --> 00:16:03,960
Speaker 1: the issue, of course is that if you get a

310
00:16:04,040 --> 00:16:07,120
Speaker 1: general risk off in financial markets, a general concern and

311
00:16:07,160 --> 00:16:10,400
Speaker 1: financial markets, then we find that global economy has become

312
00:16:10,480 --> 00:16:13,000
Speaker 1: much more correlated. We saw that post two thousand eight,

313
00:16:13,000 --> 00:16:16,080
Speaker 1: for instance. So you always have to watch these global risks,

314
00:16:16,160 --> 00:16:17,720
Speaker 1: even if when you kind of run the numbers on

315
00:16:17,800 --> 00:16:20,920
Speaker 1: these things that the direct effects look relatively small. Well

316
00:16:21,000 --> 00:16:23,280
Speaker 1: me through the China issues right now, then as far

317
00:16:23,360 --> 00:16:25,520
Speaker 1: as you see them, Andrews the anot of dice. If

318
00:16:25,520 --> 00:16:27,520
Speaker 1: you're at the Federal Reserve and they faced this a

319
00:16:27,560 --> 00:16:30,760
Speaker 1: few times over the last ten years, risks coming out

320
00:16:30,760 --> 00:16:32,600
Speaker 1: of China, how don't they face this one dawn this

321
00:16:32,640 --> 00:16:36,200
Speaker 1: time around. That's what's so difficult for the Federal Reserve

322
00:16:36,240 --> 00:16:39,880
Speaker 1: of course, as the Federal Reserve, you aren't controlling primarily

323
00:16:39,880 --> 00:16:44,080
Speaker 1: what's happening domestically, and your monetary policy should focus on

324
00:16:44,200 --> 00:16:46,960
Speaker 1: domestic issues, but you have to take into account any

325
00:16:47,000 --> 00:16:50,200
Speaker 1: exogenous shock, right, whether that be concerns about the dead ceiling,

326
00:16:50,200 --> 00:16:52,600
Speaker 1: which you were just talking about, concerns about what's going

327
00:16:52,640 --> 00:16:55,480
Speaker 1: on externally. So I think that's what FED officials are

328
00:16:55,480 --> 00:16:57,520
Speaker 1: trying to navigate here now. I think they deal are

329
00:16:57,560 --> 00:17:00,760
Speaker 1: in a pretty good place because we have very accommodated

330
00:17:00,880 --> 00:17:04,840
Speaker 1: financial conditions right now, So they'll probably still be confident

331
00:17:04,880 --> 00:17:08,240
Speaker 1: in proceeding towards tapering, but you know, as always with

332
00:17:08,240 --> 00:17:11,640
Speaker 1: the FED, probably leaving lots of optionality, lots of contingencies

333
00:17:11,680 --> 00:17:14,199
Speaker 1: there in case something happens down the road. They're not

334
00:17:14,200 --> 00:17:16,600
Speaker 1: going to set themselves on a preset course. Andrew, A

335
00:17:16,600 --> 00:17:19,560
Speaker 1: lot of equity analysts are very focused on whether supply

336
00:17:19,640 --> 00:17:22,480
Speaker 1: chain disruptions are transitory. That's one of the key aspects

337
00:17:22,480 --> 00:17:25,640
Speaker 1: with margin pressures. Does the FED really care how long

338
00:17:25,680 --> 00:17:28,320
Speaker 1: they last? Or is that not the inflationary input that

339
00:17:28,359 --> 00:17:30,359
Speaker 1: they're really focused on. Is it more just the labor

340
00:17:30,400 --> 00:17:33,639
Speaker 1: mismatch that we're seeing. So I think it does matter

341
00:17:33,760 --> 00:17:35,919
Speaker 1: the tightness that you're seeing in product markets. If it

342
00:17:35,960 --> 00:17:38,280
Speaker 1: continues for a longer period of time, and we're talking

343
00:17:38,320 --> 00:17:42,320
Speaker 1: about things like semiconductors where this could be continuing into

344
00:17:42,320 --> 00:17:46,080
Speaker 1: mid two towards the end of two, that's gonna put

345
00:17:46,119 --> 00:17:48,679
Speaker 1: continued opward pressure on prices and that can push up

346
00:17:48,720 --> 00:17:52,680
Speaker 1: inflation expectations, and then the FED becomes concerned. But really, again,

347
00:17:52,840 --> 00:17:55,480
Speaker 1: I would go back to the labor market because ultimately,

348
00:17:55,480 --> 00:17:59,160
Speaker 1: in product markets, you can expand capacity, you can expand supply.

349
00:17:59,760 --> 00:18:03,240
Speaker 1: What it's harder to expand supply of his workers because

350
00:18:03,280 --> 00:18:06,480
Speaker 1: there fundamentally and fixed supply. So so I think that

351
00:18:06,520 --> 00:18:08,840
Speaker 1: would be my concern if I were a FED official. Andrew,

352
00:18:09,119 --> 00:18:12,000
Speaker 1: I'm still trying to understand why it is that the

353
00:18:12,040 --> 00:18:15,320
Speaker 1: FED is continuing with a hundred billion dollars of purchases,

354
00:18:15,359 --> 00:18:18,399
Speaker 1: how it directly feeds into the labor market. Basically, is

355
00:18:18,440 --> 00:18:21,240
Speaker 1: this a statement saying that the FED has not successfully

356
00:18:21,240 --> 00:18:24,160
Speaker 1: divorced the idea of taper from raising rates from tightening,

357
00:18:24,359 --> 00:18:25,840
Speaker 1: and that they will not be able to do that

358
00:18:25,880 --> 00:18:29,720
Speaker 1: no matter what their communication is. So I think you're

359
00:18:29,760 --> 00:18:31,680
Speaker 1: not alonely, so I think there are even some FED

360
00:18:31,720 --> 00:18:33,760
Speaker 1: officials who are with you. That are looking at what's

361
00:18:33,800 --> 00:18:36,600
Speaker 1: going on with very low levels of interest rates, house

362
00:18:36,640 --> 00:18:40,399
Speaker 1: prices that have increased very dramatically, and saying, do we

363
00:18:40,440 --> 00:18:42,280
Speaker 1: really need a hundred and twenty billion a month of

364
00:18:42,320 --> 00:18:45,200
Speaker 1: asset purchases? That is it really doing something for labor

365
00:18:45,240 --> 00:18:48,160
Speaker 1: markets right now, which is the mandate where the FED

366
00:18:48,200 --> 00:18:50,840
Speaker 1: is still trying to make progress. So I think there

367
00:18:50,880 --> 00:18:54,840
Speaker 1: real there are real questions about the kind of marginal

368
00:18:54,960 --> 00:18:58,000
Speaker 1: benefit of doing continued asset purchases at this point, which

369
00:18:58,000 --> 00:19:00,679
Speaker 1: is why they're being papered down now. In terms of

370
00:19:00,920 --> 00:19:04,240
Speaker 1: separating paper from tightening interest rates, yes, I think we're

371
00:19:04,240 --> 00:19:06,480
Speaker 1: gonna hear from Chair Powell these are separate issues. But

372
00:19:06,760 --> 00:19:09,480
Speaker 1: remember FED officials don't want to raise interest rates until

373
00:19:09,520 --> 00:19:12,040
Speaker 1: they've fully tapered purchases. So I think there is a

374
00:19:12,080 --> 00:19:14,800
Speaker 1: sense in which these can never be completely disconnected. It

375
00:19:14,920 --> 00:19:18,000
Speaker 1: it's still a hawkish movement or a less dubbish movement.

376
00:19:18,040 --> 00:19:20,920
Speaker 1: Maybe we should say to wind down the purchase plan

377
00:19:21,280 --> 00:19:22,920
Speaker 1: and it does set you up for rate heights down

378
00:19:22,960 --> 00:19:26,480
Speaker 1: the line. Andrew the linkage here of the great Alan

379
00:19:26,560 --> 00:19:29,520
Speaker 1: Meltzer of Carnegie Mellen back to your U c l A.

380
00:19:29,720 --> 00:19:32,920
Speaker 1: I mean, come on, it's a huge deal. You were

381
00:19:33,000 --> 00:19:36,480
Speaker 1: throwing the two volumes Alan Meltzer History of the FED

382
00:19:36,840 --> 00:19:39,480
Speaker 1: and said, yeah, I'll read the introduction, give me the

383
00:19:39,600 --> 00:19:42,159
Speaker 1: History of the FED right now. And the answer is

384
00:19:42,240 --> 00:19:45,800
Speaker 1: they wait and wait and wait. There's data dependent now

385
00:19:45,960 --> 00:19:49,800
Speaker 1: they've ever been right it. So those those volumes are

386
00:19:49,800 --> 00:19:51,720
Speaker 1: on my book shelf. Tom. I can't say whether or

387
00:19:51,760 --> 00:19:53,800
Speaker 1: not I've read Oh good. I can say I have

388
00:19:53,880 --> 00:19:56,159
Speaker 1: not read them. And I told that the professor Meltzer

389
00:19:56,280 --> 00:19:59,440
Speaker 1: wants go. But but I think that is what the

390
00:19:59,600 --> 00:20:02,520
Speaker 1: fedest trying to do with this flexible average inflation targeting.

391
00:20:02,520 --> 00:20:05,280
Speaker 1: The whole idea is we're gonna wait until we actually

392
00:20:05,320 --> 00:20:08,160
Speaker 1: see the inflation emerging, which we're seeing now. Now maybe

393
00:20:08,160 --> 00:20:10,800
Speaker 1: it's transitory, but we're certainly seeing those numbers now, and

394
00:20:10,840 --> 00:20:13,800
Speaker 1: then we're gonna wait until inflation expectations are moving higher.

395
00:20:13,800 --> 00:20:16,760
Speaker 1: And we have seen those expectations move higher. University of

396
00:20:16,800 --> 00:20:20,159
Speaker 1: Michigan five to ten. Your expectation sitting around three percent.

397
00:20:20,280 --> 00:20:23,159
Speaker 1: Some of the other survey based expectation measures also higher.

398
00:20:23,400 --> 00:20:25,400
Speaker 1: So that that is a sense in which FIT officials,

399
00:20:26,160 --> 00:20:29,520
Speaker 1: relative to their prior policy, that they're essentially trying to

400
00:20:29,640 --> 00:20:32,639
Speaker 1: be behind the curve. Relative to where they would have

401
00:20:32,680 --> 00:20:35,560
Speaker 1: been historically, just because it's been so difficult to get

402
00:20:35,560 --> 00:20:39,040
Speaker 1: inflation higher. Now, when when they start raising interest rates,

403
00:20:39,040 --> 00:20:40,639
Speaker 1: that would say that they should have a lot more

404
00:20:40,640 --> 00:20:43,360
Speaker 1: confidence in continuing to raise interest rates because you've essentially

405
00:20:43,600 --> 00:20:46,000
Speaker 1: waited for inflation to run a little bit stronger, for

406
00:20:46,040 --> 00:20:48,720
Speaker 1: inflation expectations to pick up. And I think that's why

407
00:20:48,760 --> 00:20:51,800
Speaker 1: they're thinking about, you know, another eighteen months or so

408
00:20:51,920 --> 00:20:54,520
Speaker 1: before they're raising rates. You're really waiting until you're you know,

409
00:20:54,600 --> 00:20:57,760
Speaker 1: towards the end of two or the beginning of Andrew.

410
00:20:57,760 --> 00:21:00,680
Speaker 1: How does the dot plot help them achieve us objectives

411
00:21:00,800 --> 00:21:05,199
Speaker 1: this new approachrim question. I'm not sure that every feed

412
00:21:05,280 --> 00:21:07,879
Speaker 1: official would feel that it does help them achieve their

413
00:21:07,880 --> 00:21:10,680
Speaker 1: objectives at this point. I mean, we're gonna get four

414
00:21:10,800 --> 00:21:13,520
Speaker 1: dot in the summary of economic projections. We think it's

415
00:21:13,520 --> 00:21:16,600
Speaker 1: gonna be around one point six percent. Now for for

416
00:21:16,680 --> 00:21:19,879
Speaker 1: the market, of course, this is out in it's a median. Right.

417
00:21:19,920 --> 00:21:22,399
Speaker 1: When I say one that's comedian is going to be

418
00:21:22,400 --> 00:21:25,879
Speaker 1: a wide dispersion, I think, well, you'll you'll really hear

419
00:21:25,960 --> 00:21:29,200
Speaker 1: Chair Powell doing is saying, look, these are far out expectations,

420
00:21:29,200 --> 00:21:32,280
Speaker 1: they're contingent on how the economy performs and market shouldn't

421
00:21:32,320 --> 00:21:34,200
Speaker 1: be kind of reading these is literally what the FED

422
00:21:34,320 --> 00:21:37,600
Speaker 1: is going to do. Lisa Alan Meltzer would have screamed

423
00:21:37,720 --> 00:21:40,280
Speaker 1: about the dots. I know that for certain, and we

424
00:21:40,280 --> 00:21:42,639
Speaker 1: wouldn't read about it or listen to it, clearly because

425
00:21:42,640 --> 00:21:46,320
Speaker 1: nobody else here has actually fully read his occupents. I

426
00:21:46,400 --> 00:21:48,680
Speaker 1: will say, Andrew, just to sort of tithe this altogether,

427
00:21:48,760 --> 00:21:50,719
Speaker 1: and to move from the dots to the real world.

428
00:21:50,800 --> 00:21:54,600
Speaker 1: When is September actually starting? What's your sense looking at

429
00:21:54,680 --> 00:21:57,399
Speaker 1: the real world data in terms of how long the

430
00:21:57,480 --> 00:22:00,159
Speaker 1: reopening has been pushed back by the delta very and

431
00:22:00,200 --> 00:22:02,600
Speaker 1: by the concerns that we're seeing slow some of the

432
00:22:02,640 --> 00:22:05,960
Speaker 1: service sector reopening. So I think you're definitely seeing that

433
00:22:06,000 --> 00:22:08,080
Speaker 1: in the travel sector. That's where it comes through most

434
00:22:08,119 --> 00:22:11,200
Speaker 1: clearly if we look at where we thought not really

435
00:22:11,280 --> 00:22:14,159
Speaker 1: only domestic travel, but also international travel, which has just

436
00:22:14,200 --> 00:22:16,520
Speaker 1: clearly been held back by this. And we're hearing from

437
00:22:16,760 --> 00:22:19,800
Speaker 1: airlines about canceled flights or flights that are pushed out.

438
00:22:19,840 --> 00:22:21,520
Speaker 1: Now some of that may be only pushed out a

439
00:22:21,520 --> 00:22:23,960
Speaker 1: few months, but of course that's contingent on what the

440
00:22:23,960 --> 00:22:26,080
Speaker 1: public health scenario looks like. A few months from now,

441
00:22:26,119 --> 00:22:29,200
Speaker 1: so that's very clear. And travel. Outside of travel, we're

442
00:22:29,200 --> 00:22:31,960
Speaker 1: actually seeing demand holding up relatively well, and a lot

443
00:22:32,000 --> 00:22:34,320
Speaker 1: of the growth that's being pushed out of Q three

444
00:22:34,320 --> 00:22:36,840
Speaker 1: and Q four comes back to those supply side issues.

445
00:22:36,880 --> 00:22:39,119
Speaker 1: If you look at you know, only thirteen million auto

446
00:22:39,200 --> 00:22:41,960
Speaker 1: sales in the month of August at an annualized rate,

447
00:22:42,040 --> 00:22:44,760
Speaker 1: much lower than expected, and that's purely a supply issue.

448
00:22:44,800 --> 00:22:48,320
Speaker 1: At some point that semiconductor situation will normalize, that growth

449
00:22:48,320 --> 00:22:50,800
Speaker 1: will come back. But then as an economist, the question

450
00:22:50,880 --> 00:22:53,159
Speaker 1: is is this you know, Q three growth that's not

451
00:22:53,200 --> 00:22:55,400
Speaker 1: happening and moving into Q four. We're pushing this out

452
00:22:55,400 --> 00:22:58,439
Speaker 1: into two at this point. Andrew, thank you. Andrew Hell

453
00:22:58,480 --> 00:23:00,880
Speaker 1: and host on the Week Ahead, The Year Ahead, City

454
00:23:00,920 --> 00:23:09,880
Speaker 1: Chief US Economists. The issues trying to get back to normal,

455
00:23:10,000 --> 00:23:12,119
Speaker 1: lasist told to back school is getting coming back to

456
00:23:12,119 --> 00:23:14,159
Speaker 1: normal Summon, as we're saying for the first couple of

457
00:23:14,200 --> 00:23:15,920
Speaker 1: ways to school, is trying to get back to normal.

458
00:23:15,960 --> 00:23:19,240
Speaker 1: That's difficult, it is, and the testing continues, and certainly

459
00:23:19,280 --> 00:23:22,000
Speaker 1: it's a really constructive Let's go to Amber to Susan

460
00:23:22,000 --> 00:23:25,120
Speaker 1: now we are hugely advantaged to speak to her right

461
00:23:25,160 --> 00:23:29,360
Speaker 1: after this announcement with Johns Hopkins Bloomberg School of Public Health, Amber.

462
00:23:29,359 --> 00:23:32,600
Speaker 1: This has been expected, but then there's more to come.

463
00:23:33,040 --> 00:23:35,520
Speaker 1: What is more to come now? Is it just more study,

464
00:23:35,920 --> 00:23:39,199
Speaker 1: more testing? Well, we have been waiting to see the

465
00:23:39,320 --> 00:23:42,240
Speaker 1: data and children, so this is really exciting to see

466
00:23:42,280 --> 00:23:45,200
Speaker 1: the beginning day to come out with an infectious disease.

467
00:23:45,320 --> 00:23:49,080
Speaker 1: It's very hard to stop transmission without also vaccinating children

468
00:23:49,240 --> 00:23:52,679
Speaker 1: because they can continue to spread it. So everything we

469
00:23:52,720 --> 00:23:55,719
Speaker 1: know about the biology, it starts COVID to suggest that

470
00:23:55,880 --> 00:23:59,200
Speaker 1: it would likely be effective. These vaccines would likely be

471
00:23:59,240 --> 00:24:01,639
Speaker 1: effective and told in But this is the first data

472
00:24:01,840 --> 00:24:04,800
Speaker 1: and it's uh, it's important to figure out the right dose.

473
00:24:04,920 --> 00:24:07,320
Speaker 1: We need to look through all of the data that's

474
00:24:07,359 --> 00:24:09,480
Speaker 1: provided in the trial. But this seems like a really

475
00:24:09,520 --> 00:24:12,760
Speaker 1: exciting development in the right dose. What are the side

476
00:24:12,760 --> 00:24:15,639
Speaker 1: effects that you're worried about? What are they studying for

477
00:24:15,800 --> 00:24:18,960
Speaker 1: in terms of side effects? Is it simplistic like heart

478
00:24:19,040 --> 00:24:23,200
Speaker 1: inflammation or is it much more subtle? Well, the great

479
00:24:23,200 --> 00:24:25,640
Speaker 1: thing about a trial design is you're open to any

480
00:24:25,880 --> 00:24:30,640
Speaker 1: side effect, even one of those you might not have expected. Right, So, um,

481
00:24:30,760 --> 00:24:33,200
Speaker 1: all the same side effects that are seen in adults

482
00:24:33,240 --> 00:24:35,479
Speaker 1: would be monitored, but there might be other side effects

483
00:24:35,480 --> 00:24:38,760
Speaker 1: and children and those would be captured with the reporting system.

484
00:24:38,800 --> 00:24:43,000
Speaker 1: So these trials have considered different doses. Sometimes with children

485
00:24:43,040 --> 00:24:45,840
Speaker 1: they need the same dose as adults, and sometimes it's

486
00:24:46,119 --> 00:24:48,919
Speaker 1: a smaller dose is the right dosing. So UM, this

487
00:24:49,000 --> 00:24:51,119
Speaker 1: data that's been released today looks like it's for a

488
00:24:51,160 --> 00:24:53,720
Speaker 1: smaller dose and it's shown to boost and a body

489
00:24:53,760 --> 00:24:57,080
Speaker 1: responses and not have high side effects. So we'll have

490
00:24:57,160 --> 00:24:59,360
Speaker 1: to wait and see what the what the other dosing

491
00:24:59,680 --> 00:25:01,920
Speaker 1: sc also their death, but I'm sure that information will

492
00:25:01,920 --> 00:25:05,120
Speaker 1: be submitted for consideration. Amber. What's the time frame from

493
00:25:05,160 --> 00:25:08,359
Speaker 1: seeking emergency approval, from releasing this data for the first

494
00:25:08,400 --> 00:25:12,600
Speaker 1: time to emergency approval and actually getting kids aged five

495
00:25:12,600 --> 00:25:16,040
Speaker 1: to eleven vaccinated? That's a great question. Last time it

496
00:25:16,119 --> 00:25:18,959
Speaker 1: took around a month UM, so that is very fast

497
00:25:19,280 --> 00:25:23,040
Speaker 1: um for normal processes. So it might be a month

498
00:25:23,040 --> 00:25:26,000
Speaker 1: that it might even be a handful of weeks UM

499
00:25:26,040 --> 00:25:30,600
Speaker 1: since this builds on previous data for similar vaccine, same vaccine,

500
00:25:30,680 --> 00:25:34,000
Speaker 1: different does UM, but definitely not this week. It would

501
00:25:34,040 --> 00:25:36,480
Speaker 1: it would take boots. There's also the issue of the

502
00:25:36,520 --> 00:25:39,400
Speaker 1: complicating factor of booster shots and the idea that supplies

503
00:25:39,480 --> 00:25:41,800
Speaker 1: now have to not just meet the millions of kids

504
00:25:41,920 --> 00:25:44,800
Speaker 1: would be eligible, but also people who might be eligible

505
00:25:44,840 --> 00:25:47,720
Speaker 1: for additional shots. How does this sort of work out

506
00:25:47,760 --> 00:25:53,000
Speaker 1: in terms of prioritization and supplies that are currently available. Yeah,

507
00:25:53,000 --> 00:25:55,000
Speaker 1: there has been there have been planning around that at

508
00:25:55,080 --> 00:25:59,000
Speaker 1: that point. Um. If the booster demand for boosters hit

509
00:25:59,040 --> 00:26:02,640
Speaker 1: at the same time as the emergency authorization for children, UM,

510
00:26:02,680 --> 00:26:06,240
Speaker 1: there might be you know, slight challenges getting an appointment

511
00:26:06,359 --> 00:26:09,879
Speaker 1: for further short term um, like we saw with earlier

512
00:26:09,960 --> 00:26:11,879
Speaker 1: rollouts for a week or two. But there has been

513
00:26:11,920 --> 00:26:14,600
Speaker 1: a lot of planning. We have a good amount of vaccine,

514
00:26:15,000 --> 00:26:18,080
Speaker 1: so that would be that would not that situation would

515
00:26:18,119 --> 00:26:20,679
Speaker 1: not last. We definitely have enough vaccine to extend to

516
00:26:20,760 --> 00:26:23,840
Speaker 1: children once there's a new new emergency authorization. On a

517
00:26:23,880 --> 00:26:26,720
Speaker 1: Monday morning in September, as we move inside with a

518
00:26:26,720 --> 00:26:30,080
Speaker 1: bit of a chill, what is a trend of vaccination

519
00:26:30,119 --> 00:26:32,119
Speaker 1: in the country. I mean, we had a benchmark of

520
00:26:32,160 --> 00:26:35,040
Speaker 1: one million a day. It dipped down below that, it

521
00:26:35,119 --> 00:26:39,640
Speaker 1: came back. Where are we on vaccination right now? Dr Susa, Um,

522
00:26:39,680 --> 00:26:43,040
Speaker 1: you know it's very slow. Um. I I don't remember

523
00:26:43,040 --> 00:26:46,200
Speaker 1: the exact number this week, but it's you know, less

524
00:26:46,200 --> 00:26:49,280
Speaker 1: than a percent of Americans every week getting vaccinated. Were

525
00:26:50,280 --> 00:26:53,359
Speaker 1: it's a slow proportion. We are getting additional people, but

526
00:26:53,359 --> 00:26:58,040
Speaker 1: but the progress has been very slow now for months, UM,

527
00:26:58,119 --> 00:27:02,320
Speaker 1: so that people who are currently not vaccinated there's not

528
00:27:02,359 --> 00:27:05,440
Speaker 1: as much appetite. But there is a you know, interest

529
00:27:05,520 --> 00:27:08,200
Speaker 1: by many a younger individuals who have not yet had

530
00:27:08,240 --> 00:27:12,000
Speaker 1: the ability to get vaccinated. So I think once this

531
00:27:12,119 --> 00:27:15,600
Speaker 1: data is reviewed, if emergency authorization is given, it's clear

532
00:27:15,600 --> 00:27:19,040
Speaker 1: that there are many parents and children interested in vaccinations.

533
00:27:19,440 --> 00:27:22,040
Speaker 1: So there might be some parents who are hesitant about

534
00:27:22,119 --> 00:27:24,520
Speaker 1: using a vaccine that is being used under emergency youth

535
00:27:24,560 --> 00:27:27,600
Speaker 1: authorization for someone young as five. What would you say

536
00:27:27,680 --> 00:27:31,160
Speaker 1: to them, Well, the reason that it hasn't been available

537
00:27:31,160 --> 00:27:33,320
Speaker 1: for children is because we've been waiting for this data.

538
00:27:33,440 --> 00:27:37,160
Speaker 1: And so, you know, I think I certainly have confidence

539
00:27:37,200 --> 00:27:41,400
Speaker 1: in this process. And uh, the data seems strong from

540
00:27:41,400 --> 00:27:43,040
Speaker 1: what the headlines have said, but it will have to

541
00:27:43,080 --> 00:27:46,159
Speaker 1: be fully reviewed. If the f d A grants emergency

542
00:27:46,200 --> 00:27:50,159
Speaker 1: Youth authorization, UM, that means they're very confident um in

543
00:27:50,240 --> 00:27:54,199
Speaker 1: its safety and utility and UM every parent will have

544
00:27:54,240 --> 00:27:56,760
Speaker 1: to make the decision. But we know that the mild

545
00:27:56,760 --> 00:27:59,399
Speaker 1: side effects associated with a vaccine, if any and the

546
00:27:59,440 --> 00:28:02,800
Speaker 1: majority of people have no side effects, um, you know,

547
00:28:03,119 --> 00:28:06,000
Speaker 1: pale in comparison to all the other outcomes were seen.

548
00:28:06,080 --> 00:28:08,840
Speaker 1: So I expect there'll be many parents very interested in

549
00:28:08,840 --> 00:28:10,960
Speaker 1: the vaccine village doctor, thank you. We do have to

550
00:28:11,040 --> 00:28:12,879
Speaker 1: leave it that we appreciate time this morning on an

551
00:28:12,920 --> 00:28:16,360
Speaker 1: important story. I'm the Associa that John's Helpkins University, Bloomberg

552
00:28:16,359 --> 00:28:20,040
Speaker 1: School of Public Health, Professor of Epidemology. This is the

553
00:28:20,080 --> 00:28:24,760
Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays

554
00:28:24,760 --> 00:28:28,239
Speaker 1: from seven to ten am Eastern on Bloomberg Radio and

555
00:28:28,359 --> 00:28:32,600
Speaker 1: on Bloomberg Television each day from six to nine am

556
00:28:32,680 --> 00:28:36,439
Speaker 1: for insight from the best in economics, finance, investment, and

557
00:28:36,560 --> 00:28:43,080
Speaker 1: international relations. And subscribe to the Surveillance podcast on Apple, podcast, SoundCloud,

558
00:28:43,240 --> 00:28:46,840
Speaker 1: Bloomberg dot com, and of course on the terminal. I'm

559
00:28:46,880 --> 00:28:49,520
Speaker 1: Tom Keene, and this is Bloomberg