Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jaily. We bring you
Speaker 1: insight from the best and economics, finance, investment, and international relations.
Speaker 1: Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com,
Speaker 1: and of course on the Bloomberg terminal. Right now, William Dudley,
Speaker 1: the Farmer President of the New York Fed Bloomberg Opinion columnists,
Speaker 1: with the timely essay at this morning. It gets us
Speaker 1: to Wednesday, but far more gets us to the new
Speaker 1: new and the new theory. Bill, I want to go
Speaker 1: back to Berkeley, and I've always had such a respect
Speaker 1: for the interesting faculty that shows a University of California,
Speaker 1: Berkeley over other institutions. And it all wraps around a
Speaker 1: theory of belief of behavior, and that wraps around this
Speaker 1: strange word credibility. What is the character of the FEDS
Speaker 1: credibility in a time where we're making it up as
Speaker 1: we go. Well, there's a risk to their credibility because one,
Speaker 1: inflation is higher for longer to inflation expectations are starting
Speaker 1: to rise, and three they sort of bound bound themselves
Speaker 1: in terms of you know, when they can actually raise race.
Speaker 1: They said they're not going to raise rates at all
Speaker 1: until theyve hit two percent inflation, hitful employment, and our
Speaker 1: confident inflation is going to stay above two percent in
Speaker 1: the future, inflation expectations get an anchored, that's going to
Speaker 1: push inflation up even before we get to maximum sustainable employment.
Speaker 1: So they could be in a tough spot. Be in
Speaker 1: a tough spot. But take it back to like the
Speaker 1: history of Ike and Grain, or maybe the social economics
Speaker 1: of Brad DeLong and the other young turks out at
Speaker 1: your Berkeley Here. Again, we're making it up as we go.
Speaker 1: With the debt dynamics that we have. Now, what is
Speaker 1: the theory that you would propose to maintain this valuable,
Speaker 1: this precious credibility. Well, I think the FET should be
Speaker 1: a little bit more flexible in terms of when they're
Speaker 1: willing to raise long term short term industries. Uh, if
Speaker 1: inflation expectations truly become an anchored, that's a problem for
Speaker 1: actual inflation, and I would think that they would have
Speaker 1: to react to that. The current regime where they don't
Speaker 1: do anything until they reach maximum sustainable employment in their mind,
Speaker 1: might turn out to be too late. How concerned are
Speaker 1: you bill to that point about recent consumers consumer confidence
Speaker 1: surveys that show that consumers expect inflation to be materially
Speaker 1: above the Fed's expectations over the next three to five
Speaker 1: years at a time when this is also dampening their optimism. Well,
Speaker 1: the New York Fed publishes a household survey of expectations
Speaker 1: about inflation, and the most recent reading is really quite
Speaker 1: uh disturbing. The three months inflation expectations are now up
Speaker 1: to four percent, which is essentially double what the Fed's
Speaker 1: actually targeted. Great, So, how concerning is this too? I mean,
Speaker 1: the idea is that can sumers don't always get it right. However,
Speaker 1: this does signal a credibility issue beyond markets for the
Speaker 1: Federal Reserve to address. Well, the key questions whether people
Speaker 1: trust the FED. If people trust the Fed and trust
Speaker 1: the Fed's forecasts and inflations, expectations will come back down
Speaker 1: as inflation moderates. If people don't trust the Fed, inflation
Speaker 1: expectations will stay high, they will push up inflation, and
Speaker 1: the Fed will have a have a problem on scenes.
Speaker 1: So do you think that the market could potentially have
Speaker 1: a problem or a disruption if the FED does not
Speaker 1: signal tapering soon enough, Well, I think the FED is
Speaker 1: going to say single tapering pretty soon. I mean, I
Speaker 1: think that this meeting they'll probably reinforce the idea that
Speaker 1: they're making progress towards their goals, setting up the notion
Speaker 1: that taper infected to be announced at the November f MOC.
Speaker 1: Meaning so, what is the effect of the senior age
Speaker 1: of the US dollar on all of this philosophy and calculus?
Speaker 1: We are different with the US dollar. How does that
Speaker 1: make Chairman Paul's press conference different on Wednesday? Well, having
Speaker 1: the dollar as a reserve currency allows us to attract
Speaker 1: the foreign capital on very attractive terms as long as
Speaker 1: we have credibility. If people start to doubt the FEDS
Speaker 1: commitment to a stable inflation over time, you know, then
Speaker 1: the dollar would start to weaken, and people that if
Speaker 1: that went on for a good period of time, then
Speaker 1: people might start looking around for substitutes to the US dollar.
Speaker 1: But you have been a great optimist on this, you
Speaker 1: you know, within the body of the William Dudley work. Frankly, Bill,
Speaker 1: I'll take it back to Goldman Sex. You've been a
Speaker 1: great optimist on the institutional strength of the American system.
Speaker 1: Do you maintain that that institutional strength is there with
Speaker 1: the fractious Washington that we have. Well, the thing we
Speaker 1: have going for is number one, we have a very
Speaker 1: deep and liquid capital market, and to the FED has
Speaker 1: done a good job keeping inflation and checks, so we
Speaker 1: have credibility with the rest of the world. As long
Speaker 1: as we don't mess up our economy. People are going
Speaker 1: to be willing to continue to use the dollar as
Speaker 1: the reserve currency because there aren't really great alternatives, you know.
Speaker 1: I look, Bill, we've got to get back to the
Speaker 1: markets here as they are. Challenge futures a negative eighty one.
Speaker 1: But Bill, to me, it is just a FED on
Speaker 1: a massive ex post basis will wait and wait and wait.
Speaker 1: We're mentioning Alan Meltzer of Carnegie Mellon earlier. I think
Speaker 1: of timber Lake and the Georgia School, and the answer is,
Speaker 1: when in doubt, wait right. Well, I think it depends
Speaker 1: on what the risks are. I think one thing that
Speaker 1: we will see this this week is the dot plot.
Speaker 1: The forecast of interest rates in two will probably show
Speaker 1: more people being in favor of rate hike in two
Speaker 1: and then may reduce the concerns about the FED being late,
Speaker 1: but you face down the risks out of China many
Speaker 1: times on the f wem C. I'm thinking of the
Speaker 1: summer at I'm thinking of early as well. If we
Speaker 1: were the FED looking at the risks that are playing
Speaker 1: out at the moment building in China, how are you
Speaker 1: processing that, digesting the moment. But I'd love your insight
Speaker 1: on that. I think your experience is really valuable on
Speaker 1: this particular top peg Well. I think you know that
Speaker 1: the Fitter Reserves certainly understands that China's an important player
Speaker 1: in the global economy of the China had had a
Speaker 1: hard landing that would have very serious consequences for the
Speaker 1: rest of the and and for the United States. I
Speaker 1: think at this point it's really premature to reach that conclusion, though,
Speaker 1: that Chinese have tried to tighten things up before, and
Speaker 1: when it starts to actually affect the rate of growth
Speaker 1: and employment, they tend to ease off on the brakes,
Speaker 1: and I think that's what's going to happen this time
Speaker 1: as well. How do you think the Chairman will approach
Speaker 1: that issue in the news conference this Wednesday, Bill, I
Speaker 1: think he'll just say that we take the world as
Speaker 1: it is, and obviously we're updating our views about what's
Speaker 1: happening in the rest of the world as things unfold.
Speaker 1: So I don't think he's going to make a strong
Speaker 1: statement about his views about how China's gonna unfold. Well,
Speaker 1: but do you think Bill, for example, if there is
Speaker 1: a draw down like sum are expecting Mike Wilson in
Speaker 1: particular Morgan Stanley, what does the FED do? Do they
Speaker 1: not taper at all? Well? I deviously, if things happen
Speaker 1: in a way that change the economic outlook in a
Speaker 1: meaningful way, then obviously the Fed world just course. But
Speaker 1: at this point they're not going to react to, you know,
Speaker 1: small market moves and then defer the tap tapering on
Speaker 1: that basis, they have to change their economic focus. That's
Speaker 1: why the summary of economic projections this week is also
Speaker 1: important because it's basically tell you what the FED thinks
Speaker 1: about how the economy is like to evolve, not just
Speaker 1: in one and twenty two, but also twenty three and
Speaker 1: twenty four. Bill, this Fed is a different Fed than
Speaker 1: the one that you are a member of in the
Speaker 1: sense that it's balance sheet is bigger and the stakes
Speaker 1: are higher should there be a disruption, because their ammunition
Speaker 1: is just limited. How much does a nearly nine trillion
Speaker 1: dollar balance sheet tie their hands going forward in terms
Speaker 1: of how much ammunition they can really deploy. There's no
Speaker 1: limit on the size of the FED reserves balance. They
Speaker 1: can make it much bigger than it is right now.
Speaker 1: I mean, it's obviously we're not used to having a
Speaker 1: balance sheet of this magnitude. There's no actual limit on
Speaker 1: how big balanction can get. Bill You've been very vocal,
Speaker 1: you know, with the public responsibilities you've had over the years.
Speaker 1: I really value the Bloomberg opinion essays as well. What
Speaker 1: is the great research mystery now? If you're lined up
Speaker 1: with the people like say Vincent Reinhardt of the time
Speaker 1: of green Span, if you're lined up with the young
Speaker 1: PhDs at the FED, what's the research idea now to
Speaker 1: you that bears immediate and further study. Well, the biggest
Speaker 1: connunter we have right now is how tight is the
Speaker 1: US labor market? On one hand, we still have part
Speaker 1: fall from where we were in February twin twin. On
Speaker 1: the other hand, the number of job openings at a
Speaker 1: record level. So is is layer market loser? Is a
Speaker 1: living Okay? Well, you went right to my third round.
Speaker 1: I'm gonna go there because of your heritage here with Goldman, Saxon, Berkeley,
Speaker 1: Bill Dudley. Do we have a clue what the overlay
Speaker 1: of technology is on our labor share and our labor dynamics. Well,
Speaker 1: the labor market is obviously changing in a pretty rapid
Speaker 1: rate way, and obviously the COVID pandemic accelerated that transformation.
Speaker 1: So I think it does raise questions about, you know,
Speaker 1: the level of uncertain we have about the layer market.
Speaker 1: I think the level of uncertaining about how the labor
Speaker 1: market right now is unusually. But we've got to leave
Speaker 1: it there. An important topic, important conversation got into Wednesday,
Speaker 1: looking forward to that decision, a news conference this coming Wednesday.
Speaker 1: Build don't think that Bloomberg opinion columnist and senior advisors
Speaker 1: to Bloomberg Economics and former New York Fed President. It
Speaker 1: is the volatility that Lori Kvassin has been wasting for
Speaker 1: the OBC Capital Markets head of U Security Strategy joins
Speaker 1: us right now, Laurie, is this it is this the
Speaker 1: set up, the beginning of it, at least that you've
Speaker 1: been waiting for. I think it very well could be John.
Speaker 1: I mean, you know, looking at the futures this morning,
Speaker 1: this is the first time in quite some time that
Speaker 1: we've had a real meaningful break and I think if
Speaker 1: you talk to investors, UM, the fear is starting to
Speaker 1: become palpable, and ultimately, we really do need to see
Speaker 1: a break in institutional investor sentiment and positioning to get
Speaker 1: this pause that ultimately refreshes UM. Look, you know, we've
Speaker 1: been talking a long time about this. You know, we've
Speaker 1: talked a lot about the deceleration and the rate of
Speaker 1: change in SMP earnings growth time and time again. Coming
Speaker 1: out of a recession, it typically leads to a pretty
Speaker 1: meaningful pullback in the stock market. Um, it is natural
Speaker 1: for this kind of pullback to happen, and we've got
Speaker 1: a lot of a lot of other catalysts besides slowing
Speaker 1: earnings growth that are starting to perk up to help
Speaker 1: catalyze that downward move. So look, I am actually somewhat
Speaker 1: hopeful that we can just go ahead and get this
Speaker 1: done and get this out of the way and then
Speaker 1: move on. UM. I never want to see a down market,
Speaker 1: but I do think that this is just a natural
Speaker 1: part of the process. When you come out of a recession,
Speaker 1: that you have to have this digestion period. What is
Speaker 1: the overbought nature of the market right now? Of institutions,
Speaker 1: what's the character of their confidence. I think that it
Speaker 1: is a hope that some of the pressures we have
Speaker 1: on the market and earnings growth, in particular on the
Speaker 1: inflation side, the supply chain side, that those will be
Speaker 1: uh resolved sooner rather than later. I think there's also
Speaker 1: the idea that we are heading into a strong economy
Speaker 1: again next year. I think at the end of the day,
Speaker 1: investors have to ask themselves what's the risk of a recession?
Speaker 1: It really is that simple. Is it yes? Is it no?
Speaker 1: If the answer is no, you are but typically better
Speaker 1: off sitting around waiting and buying the dip. It's really
Speaker 1: only when a true recession fear builds in that institutions
Speaker 1: will take that positioning down and move to a more
Speaker 1: defensive posture. LORI, when do we know that it's the
Speaker 1: dip to buy? I think that we've got to watch
Speaker 1: the sentiment indicators very closely, Lisa, and you know, we
Speaker 1: actually had one take a very good step in the
Speaker 1: right direction last week, which is if you look at
Speaker 1: the a AII Retail Investor survey that comes out every week.
Speaker 1: The net bullishness dipped to about minus seventeen percent, So
Speaker 1: we saw bears pick up pretty quickly, and we also
Speaker 1: saw the bulls just absolutely collapsed. Now that's one week
Speaker 1: of data. We really need to see that hold for
Speaker 1: four weeks on the four week average. But typically when
Speaker 1: you get below ten percent minus ten percent on the
Speaker 1: four week average, that's a very good bye signal for
Speaker 1: the market on a three and twelve month forward basis.
Speaker 1: Now that's just one side of the sentiment puzzle. You
Speaker 1: also have to look at what institutions are doing. And
Speaker 1: the CFTC data, which we get weekly, is showing us
Speaker 1: that we're still sitting around all time highs. If you
Speaker 1: look at SMP five hundred contracts, if you look at
Speaker 1: aggregated smpach are broader US equity market futures positioning. So
Speaker 1: we need to see that institutional positioning come down, and
Speaker 1: we probably need to see a little bit more damage
Speaker 1: on the retail side for a few more weeks. Laura,
Speaker 1: you'll call forty year and forty nine hundred year end
Speaker 1: next year. What it's fed policy fit into this least
Speaker 1: it's home bringing it up this morning once they could
Speaker 1: be interesting given what we're seeing on the screen this morning,
Speaker 1: what's the FED call that goes into that forty next year.
Speaker 1: So the FED call really impacts two things. Is one
Speaker 1: our assumptions on multiples, and second are are how we
Speaker 1: want to be positioned for the broader US equity market.
Speaker 1: Like I think, a lot of the damage to the
Speaker 1: market itself, John was done back in the spring when
Speaker 1: you saw all the economists around the street clamor for
Speaker 1: the FED to start sending those tapering signals, and back
Speaker 1: then we saw small caps really start to underperformed large caps.
Speaker 1: We've also seen the value trade take a pretty big
Speaker 1: hit if you look at two que performance. That is
Speaker 1: important because if you look back at the last tapering episode,
Speaker 1: we saw markets actually ultimately continue to climb, but the
Speaker 1: risk trade took a hit. So value underperformed and small
Speaker 1: cap underperformed. That's that's I think one issue. But the
Speaker 1: other issue, frankly, is that if you look at the
Speaker 1: FED balance sheet, it's really enabled multiple expansions and the
Speaker 1: post financial crisis era. So if you take the balance
Speaker 1: sheet expansion away, you don't get any more multiple expansion.
Speaker 1: That's really gonna be earning strongth griven market going forward. Laura,
Speaker 1: I'm I'm in a complete sweat here this morning with
Speaker 1: futures where they are now. We're in the SPX of
Speaker 1: four point one draw down. I mean a crisis is
Speaker 1: it in the VIX? Isn't even at the thirty We're
Speaker 1: at twenty five point one four. When I decide to
Speaker 1: load the boat, which sector has the most combination of
Speaker 1: persistency and velocity into two thousand twenty two. So I'll
Speaker 1: say the two sectors that I'm gonna be telling people
Speaker 1: to buy this week are going to be financials and technology.
Speaker 1: You've got a big pillar of the value trade, big
Speaker 1: pillar of the growth trade. I think as we as
Speaker 1: we come out of these you know, sort of shorter
Speaker 1: term concerns on the market, I think the value trade
Speaker 1: will do well again. And I think the financials trade,
Speaker 1: it's cheap um, it doesn't have supply chain issues that
Speaker 1: things like industrials have. That's gonna be your cleanest, purest
Speaker 1: way to play that value pop. But longer term, what
Speaker 1: we do know about the FED, and so let's move
Speaker 1: away from tapering and start talking about hikes. But typically
Speaker 1: the FED hiking cycle does end up killing the value
Speaker 1: trade as well. We see that time and time again.
Speaker 1: UM and I think longer term, when we start to
Speaker 1: see economic growth decelerate back towards kind of trend like levels,
Speaker 1: you want to be in the growth trade, and tech
Speaker 1: is probably your best way to play that. LOI thank you.
Speaker 1: Going to catch up as always Lori Kavassin or obviously
Speaker 1: Capital Markets head of US equity Strategy Andrew Holland Horse
Speaker 1: drives for the conversation with City Group, their chief US economists.
Speaker 1: And maybe it's a slowdown Q three, a pickup Q four,
Speaker 1: and then it's a complete mystery. What is the most
Speaker 1: mysterious part of the mystery known as economic two thousand
Speaker 1: and twenty two. I think if there's one big mystery
Speaker 1: out there, and maybe the most important mystery also, it's
Speaker 1: what's going on in the labor market right now? How
Speaker 1: serious are these worker shortages? How long will they continue? Forth?
Speaker 1: So we know that we're in an economy that's constrained
Speaker 1: by the supply side, and the big question is how
Speaker 1: significant is that constraint and how long will it be?
Speaker 1: With us? Well, the constraints there, and it wraps around
Speaker 1: a consumer as well the consumers linked in and supply
Speaker 1: constraints and particularly linked into the challenges and prosperities of China.
Speaker 1: How do you link American consumption of the economy into
Speaker 1: the dynamics we observe out of Hong Kong and Beijing. Yeah,
Speaker 1: it's interesting, Tom, because if you do the kind of
Speaker 1: direct effects that go to three decimal points, yeah you get, yeah,
Speaker 1: you get, you get relatively relatively smaller numbers. The the
Speaker 1: the issue, of course is that if you get a
Speaker 1: general risk off in financial markets, a general concern and
Speaker 1: financial markets, then we find that global economy has become
Speaker 1: much more correlated. We saw that post two thousand eight,
Speaker 1: for instance. So you always have to watch these global risks,
Speaker 1: even if when you kind of run the numbers on
Speaker 1: these things that the direct effects look relatively small. Well
Speaker 1: me through the China issues right now, then as far
Speaker 1: as you see them, Andrews the anot of dice. If
Speaker 1: you're at the Federal Reserve and they faced this a
Speaker 1: few times over the last ten years, risks coming out
Speaker 1: of China, how don't they face this one dawn this
Speaker 1: time around. That's what's so difficult for the Federal Reserve
Speaker 1: of course, as the Federal Reserve, you aren't controlling primarily
Speaker 1: what's happening domestically, and your monetary policy should focus on
Speaker 1: domestic issues, but you have to take into account any
Speaker 1: exogenous shock, right, whether that be concerns about the dead ceiling,
Speaker 1: which you were just talking about, concerns about what's going
Speaker 1: on externally. So I think that's what FED officials are
Speaker 1: trying to navigate here now. I think they deal are
Speaker 1: in a pretty good place because we have very accommodated
Speaker 1: financial conditions right now, So they'll probably still be confident
Speaker 1: in proceeding towards tapering, but you know, as always with
Speaker 1: the FED, probably leaving lots of optionality, lots of contingencies
Speaker 1: there in case something happens down the road. They're not
Speaker 1: going to set themselves on a preset course. Andrew, A
Speaker 1: lot of equity analysts are very focused on whether supply
Speaker 1: chain disruptions are transitory. That's one of the key aspects
Speaker 1: with margin pressures. Does the FED really care how long
Speaker 1: they last? Or is that not the inflationary input that
Speaker 1: they're really focused on. Is it more just the labor
Speaker 1: mismatch that we're seeing. So I think it does matter
Speaker 1: the tightness that you're seeing in product markets. If it
Speaker 1: continues for a longer period of time, and we're talking
Speaker 1: about things like semiconductors where this could be continuing into
Speaker 1: mid two towards the end of two, that's gonna put
Speaker 1: continued opward pressure on prices and that can push up
Speaker 1: inflation expectations, and then the FED becomes concerned. But really, again,
Speaker 1: I would go back to the labor market because ultimately,
Speaker 1: in product markets, you can expand capacity, you can expand supply.
Speaker 1: What it's harder to expand supply of his workers because
Speaker 1: there fundamentally and fixed supply. So so I think that
Speaker 1: would be my concern if I were a FED official. Andrew,
Speaker 1: I'm still trying to understand why it is that the
Speaker 1: FED is continuing with a hundred billion dollars of purchases,
Speaker 1: how it directly feeds into the labor market. Basically, is
Speaker 1: this a statement saying that the FED has not successfully
Speaker 1: divorced the idea of taper from raising rates from tightening,
Speaker 1: and that they will not be able to do that
Speaker 1: no matter what their communication is. So I think you're
Speaker 1: not alonely, so I think there are even some FED
Speaker 1: officials who are with you. That are looking at what's
Speaker 1: going on with very low levels of interest rates, house
Speaker 1: prices that have increased very dramatically, and saying, do we
Speaker 1: really need a hundred and twenty billion a month of
Speaker 1: asset purchases? That is it really doing something for labor
Speaker 1: markets right now, which is the mandate where the FED
Speaker 1: is still trying to make progress. So I think there
Speaker 1: real there are real questions about the kind of marginal
Speaker 1: benefit of doing continued asset purchases at this point, which
Speaker 1: is why they're being papered down now. In terms of
Speaker 1: separating paper from tightening interest rates, yes, I think we're
Speaker 1: gonna hear from Chair Powell these are separate issues. But
Speaker 1: remember FED officials don't want to raise interest rates until
Speaker 1: they've fully tapered purchases. So I think there is a
Speaker 1: sense in which these can never be completely disconnected. It
Speaker 1: it's still a hawkish movement or a less dubbish movement.
Speaker 1: Maybe we should say to wind down the purchase plan
Speaker 1: and it does set you up for rate heights down
Speaker 1: the line. Andrew the linkage here of the great Alan
Speaker 1: Meltzer of Carnegie Mellen back to your U c l A.
Speaker 1: I mean, come on, it's a huge deal. You were
Speaker 1: throwing the two volumes Alan Meltzer History of the FED
Speaker 1: and said, yeah, I'll read the introduction, give me the
Speaker 1: History of the FED right now. And the answer is
Speaker 1: they wait and wait and wait. There's data dependent now
Speaker 1: they've ever been right it. So those those volumes are
Speaker 1: on my book shelf. Tom. I can't say whether or
Speaker 1: not I've read Oh good. I can say I have
Speaker 1: not read them. And I told that the professor Meltzer
Speaker 1: wants go. But but I think that is what the
Speaker 1: fedest trying to do with this flexible average inflation targeting.
Speaker 1: The whole idea is we're gonna wait until we actually
Speaker 1: see the inflation emerging, which we're seeing now. Now maybe
Speaker 1: it's transitory, but we're certainly seeing those numbers now, and
Speaker 1: then we're gonna wait until inflation expectations are moving higher.
Speaker 1: And we have seen those expectations move higher. University of
Speaker 1: Michigan five to ten. Your expectation sitting around three percent.
Speaker 1: Some of the other survey based expectation measures also higher.
Speaker 1: So that that is a sense in which FIT officials,
Speaker 1: relative to their prior policy, that they're essentially trying to
Speaker 1: be behind the curve. Relative to where they would have
Speaker 1: been historically, just because it's been so difficult to get
Speaker 1: inflation higher. Now, when when they start raising interest rates,
Speaker 1: that would say that they should have a lot more
Speaker 1: confidence in continuing to raise interest rates because you've essentially
Speaker 1: waited for inflation to run a little bit stronger, for
Speaker 1: inflation expectations to pick up. And I think that's why
Speaker 1: they're thinking about, you know, another eighteen months or so
Speaker 1: before they're raising rates. You're really waiting until you're you know,
Speaker 1: towards the end of two or the beginning of Andrew.
Speaker 1: How does the dot plot help them achieve us objectives
Speaker 1: this new approachrim question. I'm not sure that every feed
Speaker 1: official would feel that it does help them achieve their
Speaker 1: objectives at this point. I mean, we're gonna get four
Speaker 1: dot in the summary of economic projections. We think it's
Speaker 1: gonna be around one point six percent. Now for for
Speaker 1: the market, of course, this is out in it's a median. Right.
Speaker 1: When I say one that's comedian is going to be
Speaker 1: a wide dispersion, I think, well, you'll you'll really hear
Speaker 1: Chair Powell doing is saying, look, these are far out expectations,
Speaker 1: they're contingent on how the economy performs and market shouldn't
Speaker 1: be kind of reading these is literally what the FED
Speaker 1: is going to do. Lisa Alan Meltzer would have screamed
Speaker 1: about the dots. I know that for certain, and we
Speaker 1: wouldn't read about it or listen to it, clearly because
Speaker 1: nobody else here has actually fully read his occupents. I
Speaker 1: will say, Andrew, just to sort of tithe this altogether,
Speaker 1: and to move from the dots to the real world.
Speaker 1: When is September actually starting? What's your sense looking at
Speaker 1: the real world data in terms of how long the
Speaker 1: reopening has been pushed back by the delta very and
Speaker 1: by the concerns that we're seeing slow some of the
Speaker 1: service sector reopening. So I think you're definitely seeing that
Speaker 1: in the travel sector. That's where it comes through most
Speaker 1: clearly if we look at where we thought not really
Speaker 1: only domestic travel, but also international travel, which has just
Speaker 1: clearly been held back by this. And we're hearing from
Speaker 1: airlines about canceled flights or flights that are pushed out.
Speaker 1: Now some of that may be only pushed out a
Speaker 1: few months, but of course that's contingent on what the
Speaker 1: public health scenario looks like. A few months from now,
Speaker 1: so that's very clear. And travel. Outside of travel, we're
Speaker 1: actually seeing demand holding up relatively well, and a lot
Speaker 1: of the growth that's being pushed out of Q three
Speaker 1: and Q four comes back to those supply side issues.
Speaker 1: If you look at you know, only thirteen million auto
Speaker 1: sales in the month of August at an annualized rate,
Speaker 1: much lower than expected, and that's purely a supply issue.
Speaker 1: At some point that semiconductor situation will normalize, that growth
Speaker 1: will come back. But then as an economist, the question
Speaker 1: is is this you know, Q three growth that's not
Speaker 1: happening and moving into Q four. We're pushing this out
Speaker 1: into two at this point. Andrew, thank you. Andrew Hell
Speaker 1: and host on the Week Ahead, The Year Ahead, City
Speaker 1: Chief US Economists. The issues trying to get back to normal,
Speaker 1: lasist told to back school is getting coming back to
Speaker 1: normal Summon, as we're saying for the first couple of
Speaker 1: ways to school, is trying to get back to normal.
Speaker 1: That's difficult, it is, and the testing continues, and certainly
Speaker 1: it's a really constructive Let's go to Amber to Susan
Speaker 1: now we are hugely advantaged to speak to her right
Speaker 1: after this announcement with Johns Hopkins Bloomberg School of Public Health, Amber.
Speaker 1: This has been expected, but then there's more to come.
Speaker 1: What is more to come now? Is it just more study,
Speaker 1: more testing? Well, we have been waiting to see the
Speaker 1: data and children, so this is really exciting to see
Speaker 1: the beginning day to come out with an infectious disease.
Speaker 1: It's very hard to stop transmission without also vaccinating children
Speaker 1: because they can continue to spread it. So everything we
Speaker 1: know about the biology, it starts COVID to suggest that
Speaker 1: it would likely be effective. These vaccines would likely be
Speaker 1: effective and told in But this is the first data
Speaker 1: and it's uh, it's important to figure out the right dose.
Speaker 1: We need to look through all of the data that's
Speaker 1: provided in the trial. But this seems like a really
Speaker 1: exciting development in the right dose. What are the side
Speaker 1: effects that you're worried about? What are they studying for
Speaker 1: in terms of side effects? Is it simplistic like heart
Speaker 1: inflammation or is it much more subtle? Well, the great
Speaker 1: thing about a trial design is you're open to any
Speaker 1: side effect, even one of those you might not have expected. Right, So, um,
Speaker 1: all the same side effects that are seen in adults
Speaker 1: would be monitored, but there might be other side effects
Speaker 1: and children and those would be captured with the reporting system.
Speaker 1: So these trials have considered different doses. Sometimes with children
Speaker 1: they need the same dose as adults, and sometimes it's
Speaker 1: a smaller dose is the right dosing. So UM, this
Speaker 1: data that's been released today looks like it's for a
Speaker 1: smaller dose and it's shown to boost and a body
Speaker 1: responses and not have high side effects. So we'll have
Speaker 1: to wait and see what the what the other dosing
Speaker 1: sc also their death, but I'm sure that information will
Speaker 1: be submitted for consideration. Amber. What's the time frame from
Speaker 1: seeking emergency approval, from releasing this data for the first
Speaker 1: time to emergency approval and actually getting kids aged five
Speaker 1: to eleven vaccinated? That's a great question. Last time it
Speaker 1: took around a month UM, so that is very fast
Speaker 1: um for normal processes. So it might be a month
Speaker 1: that it might even be a handful of weeks UM
Speaker 1: since this builds on previous data for similar vaccine, same vaccine,
Speaker 1: different does UM, but definitely not this week. It would
Speaker 1: it would take boots. There's also the issue of the
Speaker 1: complicating factor of booster shots and the idea that supplies
Speaker 1: now have to not just meet the millions of kids
Speaker 1: would be eligible, but also people who might be eligible
Speaker 1: for additional shots. How does this sort of work out
Speaker 1: in terms of prioritization and supplies that are currently available. Yeah,
Speaker 1: there has been there have been planning around that at
Speaker 1: that point. Um. If the booster demand for boosters hit
Speaker 1: at the same time as the emergency authorization for children, UM,
Speaker 1: there might be you know, slight challenges getting an appointment
Speaker 1: for further short term um, like we saw with earlier
Speaker 1: rollouts for a week or two. But there has been
Speaker 1: a lot of planning. We have a good amount of vaccine,
Speaker 1: so that would be that would not that situation would
Speaker 1: not last. We definitely have enough vaccine to extend to
Speaker 1: children once there's a new new emergency authorization. On a
Speaker 1: Monday morning in September, as we move inside with a
Speaker 1: bit of a chill, what is a trend of vaccination
Speaker 1: in the country. I mean, we had a benchmark of
Speaker 1: one million a day. It dipped down below that, it
Speaker 1: came back. Where are we on vaccination right now? Dr Susa, Um,
Speaker 1: you know it's very slow. Um. I I don't remember
Speaker 1: the exact number this week, but it's you know, less
Speaker 1: than a percent of Americans every week getting vaccinated. Were
Speaker 1: it's a slow proportion. We are getting additional people, but
Speaker 1: but the progress has been very slow now for months, UM,
Speaker 1: so that people who are currently not vaccinated there's not
Speaker 1: as much appetite. But there is a you know, interest
Speaker 1: by many a younger individuals who have not yet had
Speaker 1: the ability to get vaccinated. So I think once this
Speaker 1: data is reviewed, if emergency authorization is given, it's clear
Speaker 1: that there are many parents and children interested in vaccinations.
Speaker 1: So there might be some parents who are hesitant about
Speaker 1: using a vaccine that is being used under emergency youth
Speaker 1: authorization for someone young as five. What would you say
Speaker 1: to them, Well, the reason that it hasn't been available
Speaker 1: for children is because we've been waiting for this data.
Speaker 1: And so, you know, I think I certainly have confidence
Speaker 1: in this process. And uh, the data seems strong from
Speaker 1: what the headlines have said, but it will have to
Speaker 1: be fully reviewed. If the f d A grants emergency
Speaker 1: Youth authorization, UM, that means they're very confident um in
Speaker 1: its safety and utility and UM every parent will have
Speaker 1: to make the decision. But we know that the mild
Speaker 1: side effects associated with a vaccine, if any and the
Speaker 1: majority of people have no side effects, um, you know,
Speaker 1: pale in comparison to all the other outcomes were seen.
Speaker 1: So I expect there'll be many parents very interested in
Speaker 1: the vaccine village doctor, thank you. We do have to
Speaker 1: leave it that we appreciate time this morning on an
Speaker 1: important story. I'm the Associa that John's Helpkins University, Bloomberg
Speaker 1: School of Public Health, Professor of Epidemology. This is the
Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays
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Speaker 1: Tom Keene, and this is Bloomberg