1 00:00:00,120 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,920 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:36,879 Speaker 2: terminal and the Bloomberg Business app. And please to say 10 00:00:36,920 --> 00:00:39,400 Speaker 2: that responding to this economic data now is the Minneapolis 11 00:00:39,400 --> 00:00:41,880 Speaker 2: Fed President Neil Kashgari, President kash Scary. 12 00:00:41,920 --> 00:00:43,479 Speaker 3: Good morning, got to see you again, Good morning, good 13 00:00:43,479 --> 00:00:43,879 Speaker 3: to see you. 14 00:00:43,840 --> 00:00:44,520 Speaker 4: Rate a cats shop. 15 00:00:44,560 --> 00:00:46,400 Speaker 2: I saw some comments from you yesterday, and for our 16 00:00:46,440 --> 00:00:48,040 Speaker 2: audience that might have missed them, I'll share them with 17 00:00:48,080 --> 00:00:48,920 Speaker 2: our audience. 18 00:00:48,600 --> 00:00:49,640 Speaker 4: Now we can pick up on them. 19 00:00:49,760 --> 00:00:51,760 Speaker 2: Then have to be a surprise on the inflation front 20 00:00:51,760 --> 00:00:54,640 Speaker 2: to change the outlook so dramatically. If we saw inflation 21 00:00:54,680 --> 00:00:56,800 Speaker 2: surprises to the upside between now and then, that might 22 00:00:56,840 --> 00:00:59,320 Speaker 2: give us pause for December. It'd be hard to imagine 23 00:00:59,320 --> 00:01:01,760 Speaker 2: the labor market really heat something between now and December. 24 00:01:02,000 --> 00:01:03,760 Speaker 4: That's just not that much time. 25 00:01:03,960 --> 00:01:06,560 Speaker 2: Inflation dates around just months ago, and I think in 26 00:01:06,600 --> 00:01:08,640 Speaker 2: that to disrupt this easing bias that seems to have 27 00:01:08,640 --> 00:01:10,640 Speaker 2: gripped the FED over the last few months. 28 00:01:11,200 --> 00:01:13,600 Speaker 5: Well, first of all, it's very fresh data, so I 29 00:01:13,640 --> 00:01:15,000 Speaker 5: haven't had time to go through it in a lot 30 00:01:15,040 --> 00:01:17,240 Speaker 5: of detail, but at least on the headline level, it 31 00:01:17,280 --> 00:01:19,200 Speaker 5: seems to be confirming the path that we're on. 32 00:01:19,480 --> 00:01:20,280 Speaker 3: We've made a lot of. 33 00:01:20,240 --> 00:01:23,000 Speaker 5: Progress in the last year or so bringing inflation down. 34 00:01:23,720 --> 00:01:25,520 Speaker 5: I need to go through the components of that release, 35 00:01:25,560 --> 00:01:28,320 Speaker 5: which I have not done yet, but generally speaking, goods 36 00:01:28,360 --> 00:01:30,520 Speaker 5: inflation is back down to where we want it to 37 00:01:30,520 --> 00:01:33,640 Speaker 5: be where it was pre pandemic. Services inflation, which is 38 00:01:33,680 --> 00:01:37,039 Speaker 5: tied to wages, is gently trending down. And then finally, 39 00:01:37,080 --> 00:01:40,120 Speaker 5: housing inflation, we know is a lagging indicator. We know 40 00:01:40,240 --> 00:01:41,880 Speaker 5: that it takes a couple of years for the new 41 00:01:41,959 --> 00:01:44,600 Speaker 5: leases to turn over, and the new leases. 42 00:01:44,319 --> 00:01:45,839 Speaker 3: Are showing that we're headed in the right direction. 43 00:01:45,959 --> 00:01:48,880 Speaker 5: So right now I think that inflation is headed in 44 00:01:48,880 --> 00:01:49,480 Speaker 5: the right direction. 45 00:01:49,840 --> 00:01:52,480 Speaker 3: I've got confidence about that, but we need to wait. 46 00:01:52,520 --> 00:01:54,800 Speaker 5: We've got another month or six weeks of data to 47 00:01:55,160 --> 00:01:57,040 Speaker 5: analyze before we make any decisions. 48 00:01:57,200 --> 00:01:59,720 Speaker 6: One of the things that has been very noticeable the 49 00:02:00,240 --> 00:02:03,160 Speaker 6: week is the change in investors' views about where you're 50 00:02:03,200 --> 00:02:05,960 Speaker 6: going to end up. If you're looking at so for 51 00:02:06,080 --> 00:02:09,079 Speaker 6: futures right now, the only price in about seventy five 52 00:02:09,080 --> 00:02:11,320 Speaker 6: basis point cuts between now and the end of twenty 53 00:02:11,440 --> 00:02:14,840 Speaker 6: twenty five. Are we entering a period because we don't 54 00:02:14,880 --> 00:02:18,120 Speaker 6: know what Donald Trump's policies are actually. 55 00:02:17,800 --> 00:02:19,080 Speaker 7: Going to be. 56 00:02:19,120 --> 00:02:22,320 Speaker 6: Where the dot plot, the summary of economic projections are 57 00:02:22,400 --> 00:02:24,680 Speaker 6: kind of off the table, can't really put a lot 58 00:02:24,680 --> 00:02:27,120 Speaker 6: of faith in them, and that maybe you're in the 59 00:02:27,200 --> 00:02:31,560 Speaker 6: layel brainer attenuation phase where you slow down everything and 60 00:02:31,720 --> 00:02:36,600 Speaker 6: people should expect not a lot of guidance from the Fed. 61 00:02:36,880 --> 00:02:39,880 Speaker 5: Well, you know, the dot plot is something that I 62 00:02:40,639 --> 00:02:42,880 Speaker 5: at times I'm glad we have it, and in times 63 00:02:42,919 --> 00:02:44,600 Speaker 5: it's more of a frustration that we have to fill 64 00:02:44,639 --> 00:02:47,240 Speaker 5: it out because there's so much uncertainty about the economic outlook. 65 00:02:47,680 --> 00:02:50,640 Speaker 5: Over the past year or two, I've been surprised at 66 00:02:50,639 --> 00:02:53,360 Speaker 5: the resilience of the US economy in the face of 67 00:02:53,720 --> 00:02:56,920 Speaker 5: seemingly quite high policy rates. Yet the labor market has 68 00:02:56,919 --> 00:03:00,680 Speaker 5: stays strong and the economic growth continues to surprise. So 69 00:03:00,720 --> 00:03:03,120 Speaker 5: for me, I've been asking questions about where's the neutral 70 00:03:03,200 --> 00:03:04,679 Speaker 5: rate for the last year or two. 71 00:03:05,080 --> 00:03:06,239 Speaker 3: That's not about the election. 72 00:03:06,600 --> 00:03:08,919 Speaker 5: That's just about how the economy has been performing over 73 00:03:08,919 --> 00:03:11,400 Speaker 5: the past year or two. And so you know, for example, 74 00:03:11,720 --> 00:03:14,440 Speaker 5: there's been revisions that suggests that productivity is now higher 75 00:03:14,520 --> 00:03:17,440 Speaker 5: that it had been in prior years. If that higher 76 00:03:17,480 --> 00:03:21,079 Speaker 5: productivity environment is maintained, that would tell me we're probably 77 00:03:21,160 --> 00:03:23,600 Speaker 5: in a somewhat higher neutral rate environment. Again, that's not 78 00:03:23,639 --> 00:03:25,960 Speaker 5: about the election. That's just about how the economy has 79 00:03:26,000 --> 00:03:29,079 Speaker 5: actually been performing. And so for me as a policymaker, 80 00:03:29,440 --> 00:03:32,040 Speaker 5: that's what's leading to my own uncertainty about where's our 81 00:03:32,120 --> 00:03:35,320 Speaker 5: ultimate destination. And I think that people are raising questions 82 00:03:35,320 --> 00:03:37,480 Speaker 5: about what is the new administration going to do, what 83 00:03:37,560 --> 00:03:39,160 Speaker 5: is the new Congress going to do? I think that's 84 00:03:39,200 --> 00:03:42,720 Speaker 5: also adding uncertainty about ultimately what's the growth trajectory of 85 00:03:42,720 --> 00:03:43,600 Speaker 5: the US economy. 86 00:03:43,800 --> 00:03:47,400 Speaker 6: Well, Tom Barkin said yesterday your colleague from the Richmond Fed, 87 00:03:47,520 --> 00:03:51,680 Speaker 6: that right now there's no way to know, so one 88 00:03:51,760 --> 00:03:55,040 Speaker 6: has to just kind of assume that things are going 89 00:03:55,080 --> 00:03:58,800 Speaker 6: to be maybe stuck inflation, stuck above two percent. 90 00:03:59,440 --> 00:04:01,280 Speaker 8: Would you join in that sentiment. 91 00:04:01,800 --> 00:04:04,120 Speaker 5: I'm not sure that I'm ready to say that inflation 92 00:04:04,200 --> 00:04:05,960 Speaker 5: is stuck above two percent. I think it's right now 93 00:04:06,040 --> 00:04:07,200 Speaker 5: running in the mid twes on. 94 00:04:07,160 --> 00:04:08,240 Speaker 3: A PCE basis. 95 00:04:09,200 --> 00:04:12,120 Speaker 5: And as I said earlier, goods inflation is backed down. 96 00:04:12,680 --> 00:04:16,719 Speaker 5: Services inflation is tied to wages, and wages are gently 97 00:04:16,760 --> 00:04:19,719 Speaker 5: trending down. And housing inflation, we know, is going to 98 00:04:19,760 --> 00:04:22,560 Speaker 5: take a couple of years before completely before the new 99 00:04:22,640 --> 00:04:24,839 Speaker 5: leases roll all the way through the housing inflation. So 100 00:04:25,200 --> 00:04:27,840 Speaker 5: I have confidence that inflation is headed in the right direction. 101 00:04:28,360 --> 00:04:30,120 Speaker 5: Is it headed there fast enough? Do we want it 102 00:04:30,160 --> 00:04:32,120 Speaker 5: to get there more quickly? You know, we will see. 103 00:04:32,440 --> 00:04:34,560 Speaker 5: But ultimately that and the labor market are going to 104 00:04:34,600 --> 00:04:35,880 Speaker 5: guide our policy decisions. 105 00:04:35,960 --> 00:04:38,120 Speaker 9: Well. Back in September, on the labor market, you said 106 00:04:38,120 --> 00:04:40,840 Speaker 9: that the balance of risks had shifted towards a more 107 00:04:40,839 --> 00:04:43,680 Speaker 9: weakening labor market. Do you think we've backed off that risk? 108 00:04:43,720 --> 00:04:45,839 Speaker 9: Is it not as acute as it was since we've 109 00:04:45,839 --> 00:04:47,080 Speaker 9: had the data since September. 110 00:04:47,160 --> 00:04:47,360 Speaker 7: Yeah. 111 00:04:47,400 --> 00:04:49,880 Speaker 5: We had seen some data piling up up until that 112 00:04:49,920 --> 00:04:52,800 Speaker 5: September meeting, which was pretty much pointed in one direction, 113 00:04:52,880 --> 00:04:55,680 Speaker 5: which was a softening labor market. We then had a 114 00:04:55,800 --> 00:04:58,359 Speaker 5: surprise on the other way, the labor market looks stronger, 115 00:04:58,440 --> 00:05:00,840 Speaker 5: but then a reversal in the subsequent good job report, 116 00:05:00,960 --> 00:05:03,280 Speaker 5: and so I still think the labor market is softening. 117 00:05:03,360 --> 00:05:05,760 Speaker 5: On four point one percent unemployment rate is a good 118 00:05:05,880 --> 00:05:06,600 Speaker 5: unemployment rate. 119 00:05:06,640 --> 00:05:07,840 Speaker 3: It's a good labor market. 120 00:05:08,080 --> 00:05:10,280 Speaker 5: It's not as tight as it was a year ago 121 00:05:10,440 --> 00:05:14,040 Speaker 5: or two years ago. So it's unquestioned that it has 122 00:05:14,120 --> 00:05:16,560 Speaker 5: been softening. And right now we're in a good place 123 00:05:16,560 --> 00:05:18,520 Speaker 5: in the labor market and we want to keep it there. 124 00:05:18,680 --> 00:05:20,720 Speaker 5: You know, I do a lot of outreach to businesses 125 00:05:20,800 --> 00:05:23,560 Speaker 5: large and small around my region, as well as labor 126 00:05:23,640 --> 00:05:27,160 Speaker 5: unions around my region. Generally, what I hear is cautious optimism. 127 00:05:27,240 --> 00:05:29,760 Speaker 5: People feel good about the outlook, but there are some 128 00:05:29,880 --> 00:05:32,560 Speaker 5: trends that it's slowly softening, and we just want to 129 00:05:32,560 --> 00:05:33,480 Speaker 5: watch that carefully. 130 00:05:33,720 --> 00:05:35,719 Speaker 2: Know the election, We've got to talk about the election, 131 00:05:35,800 --> 00:05:37,600 Speaker 2: and I know it's a difficult moment for the Federal Reserve. 132 00:05:37,600 --> 00:05:40,279 Speaker 2: I think it's a difficult moment for managty policy makers 133 00:05:40,279 --> 00:05:42,960 Speaker 2: worldwide for that matter. The Chairman down with it in 134 00:05:43,000 --> 00:05:45,799 Speaker 2: the news conference, and it's pretty clear. We don't speculate, 135 00:05:45,920 --> 00:05:49,360 Speaker 2: we can't make assumptions, but you're in the risk management business, 136 00:05:49,760 --> 00:05:51,839 Speaker 2: and you've been in the risk management business for a 137 00:05:51,839 --> 00:05:54,320 Speaker 2: long time. It predates your experience at the Federal Reserve. 138 00:05:54,560 --> 00:05:57,200 Speaker 2: Do you think we've introduced two way risk in twenty 139 00:05:57,240 --> 00:05:59,839 Speaker 2: twenty five, and when you think about the balance of risk, 140 00:06:00,080 --> 00:06:02,520 Speaker 2: does that call for slow approach to any move in 141 00:06:02,560 --> 00:06:04,400 Speaker 2: monetary policy one way or the other? 142 00:06:04,960 --> 00:06:07,000 Speaker 3: Well, two way risk, I think we've already had two 143 00:06:07,040 --> 00:06:07,440 Speaker 3: way risks. 144 00:06:07,440 --> 00:06:09,680 Speaker 5: So we've got risks of the labor market continuing to 145 00:06:09,720 --> 00:06:12,479 Speaker 5: soften and over softening, and then we've got risks of 146 00:06:12,920 --> 00:06:15,400 Speaker 5: inflation potentially getting stuck. I'm not seeing a lot of 147 00:06:15,520 --> 00:06:17,880 Speaker 5: upside risks yet we don't know what's going to get enacted. 148 00:06:18,160 --> 00:06:20,080 Speaker 5: I'm not seeing a lot of upside risk that inflation 149 00:06:20,160 --> 00:06:21,279 Speaker 5: is going to take off from here. 150 00:06:21,560 --> 00:06:23,200 Speaker 3: The bigger risk that I'd be concerned about. 151 00:06:23,040 --> 00:06:24,919 Speaker 5: In the inflation front is just if we're landing at 152 00:06:24,960 --> 00:06:27,120 Speaker 5: around the two and a half percent level instead of 153 00:06:27,120 --> 00:06:29,240 Speaker 5: back down to two percent level. I think that those 154 00:06:29,360 --> 00:06:32,200 Speaker 5: risks existed before the election, and I think that there 155 00:06:32,279 --> 00:06:34,720 Speaker 5: continues to be uncertainty now and we need to just 156 00:06:34,760 --> 00:06:37,040 Speaker 5: be take our time, let the data come to us, 157 00:06:37,279 --> 00:06:39,640 Speaker 5: and let that guide us. Ultimately, for me, this goes 158 00:06:39,680 --> 00:06:41,800 Speaker 5: back to the discussion we had a moment ago about 159 00:06:41,839 --> 00:06:45,279 Speaker 5: where's the neutral rate. There's tremendous uncertainty in my mind 160 00:06:45,400 --> 00:06:47,560 Speaker 5: about where the neutral rate is, and the longer the 161 00:06:47,600 --> 00:06:51,240 Speaker 5: economy continues to exceed expectations, the more signal I take 162 00:06:51,600 --> 00:06:54,360 Speaker 5: that we must not be as restrictive as I would 163 00:06:54,360 --> 00:06:54,880 Speaker 5: have assumed. 164 00:06:55,160 --> 00:06:58,360 Speaker 1: FED staff analyzed though, during the first iteration of Trump 165 00:06:58,480 --> 00:07:01,760 Speaker 1: the impact of the tariffs, and everyone coalesce around this 166 00:07:01,839 --> 00:07:04,160 Speaker 1: idea that there was a one off increase in inflation. 167 00:07:04,360 --> 00:07:05,200 Speaker 4: You can look through it. 168 00:07:05,200 --> 00:07:07,640 Speaker 1: It wasn't going to be this vicious cycle and ongoing 169 00:07:07,680 --> 00:07:11,040 Speaker 1: inflation threat. Did you agree with that assessment at the time, 170 00:07:11,440 --> 00:07:14,360 Speaker 1: and do you still think that that's what tariffs could 171 00:07:14,400 --> 00:07:15,400 Speaker 1: do in terms of inflation. 172 00:07:15,720 --> 00:07:17,120 Speaker 3: I agree with that assessment at the time. 173 00:07:17,160 --> 00:07:18,960 Speaker 5: I still agree with that, but I think your prior 174 00:07:19,040 --> 00:07:21,560 Speaker 5: guest touched on it, which is it really depends on 175 00:07:21,600 --> 00:07:23,480 Speaker 5: what the other countries end up doing. If there ends 176 00:07:23,520 --> 00:07:26,680 Speaker 5: up being a tit for tat and one country raises terifts, 177 00:07:26,680 --> 00:07:28,920 Speaker 5: they respond and you go back and forth, and definitely 178 00:07:29,280 --> 00:07:32,080 Speaker 5: that could lead to a longer term imprint on inflation 179 00:07:32,200 --> 00:07:35,480 Speaker 5: and potentially inflation expectations and of course, we don't know 180 00:07:35,480 --> 00:07:37,760 Speaker 5: what our own tariffs are going to be, let alone, 181 00:07:37,760 --> 00:07:39,680 Speaker 5: what other countries are going to respond with, and so 182 00:07:39,920 --> 00:07:42,560 Speaker 5: we just need to be patient and see. 183 00:07:41,960 --> 00:07:44,760 Speaker 6: I had a note come in from one of the 184 00:07:44,760 --> 00:07:47,080 Speaker 6: Wall Street analysts that had a line that I thought 185 00:07:47,160 --> 00:07:49,880 Speaker 6: was really valid, and that is that if you're going 186 00:07:49,920 --> 00:07:51,960 Speaker 6: to forecast inflation, you have to have a theory of 187 00:07:51,960 --> 00:07:57,280 Speaker 6: inflation and what's causing inflation. We've got relatively strong labor 188 00:07:57,320 --> 00:08:02,840 Speaker 6: markets right now, and we've got concern about inflation. Real 189 00:08:02,880 --> 00:08:06,080 Speaker 6: interest rates just keep rising and they're working in opposition 190 00:08:06,120 --> 00:08:08,440 Speaker 6: to your rate cuts. What's your theory of inflation and 191 00:08:08,560 --> 00:08:12,040 Speaker 6: how come we're seeing this kind of real rate reaction. 192 00:08:12,600 --> 00:08:15,440 Speaker 5: Well, I've done a lot of soul searching on why 193 00:08:15,560 --> 00:08:17,920 Speaker 5: I missed the inflation run up in the first place. 194 00:08:18,000 --> 00:08:20,119 Speaker 5: I was surprised on the run up. I was also 195 00:08:20,120 --> 00:08:23,320 Speaker 5: surprised on the disinflation that followed it. And the one 196 00:08:23,360 --> 00:08:26,000 Speaker 5: thing that's been content is it was not the labor market. 197 00:08:25,800 --> 00:08:27,360 Speaker 3: On the run up or the disinflation. 198 00:08:27,880 --> 00:08:31,360 Speaker 5: It was mostly supply factors, and so you know, supply 199 00:08:31,440 --> 00:08:32,320 Speaker 5: chains got gummed up. 200 00:08:32,320 --> 00:08:33,319 Speaker 3: That took a lot longer to. 201 00:08:33,280 --> 00:08:36,480 Speaker 5: Resolve the inflation took off, you the war in Ukraine, 202 00:08:36,679 --> 00:08:39,400 Speaker 5: also pushing inflation up, and then many of those factors 203 00:08:39,480 --> 00:08:42,680 Speaker 5: unwound or didn't get worse, bringing inflation back down. So 204 00:08:42,800 --> 00:08:47,120 Speaker 5: monetary policy's role, in my judgment, in this episode, has 205 00:08:47,160 --> 00:08:50,840 Speaker 5: been to keep long run inflation expectations anchored, and it 206 00:08:50,880 --> 00:08:53,800 Speaker 5: has provided some gentle cool into the labor market. I 207 00:08:53,840 --> 00:08:56,360 Speaker 5: don't think the supply factors are what have caused the 208 00:08:56,400 --> 00:08:59,280 Speaker 5: labor market to gently cool. I do think monetary policy 209 00:08:59,280 --> 00:09:01,960 Speaker 5: has been doing that. And so you put all that together, 210 00:09:02,360 --> 00:09:04,480 Speaker 5: it says that when I thought we were applying two 211 00:09:04,480 --> 00:09:06,960 Speaker 5: feet on the breaks of the economy with monetary policy, 212 00:09:07,400 --> 00:09:09,040 Speaker 5: we might only have been applying. 213 00:09:08,640 --> 00:09:09,560 Speaker 3: One foot on the break. 214 00:09:09,880 --> 00:09:12,120 Speaker 5: And so this goes back to where ultimately are we 215 00:09:12,200 --> 00:09:13,880 Speaker 5: going to settle. We're going to have to let the 216 00:09:13,920 --> 00:09:15,000 Speaker 5: economy guide us. 217 00:09:15,200 --> 00:09:17,880 Speaker 6: We are now paying as much attention to CPI again 218 00:09:17,920 --> 00:09:19,320 Speaker 6: as we are to the labor market. 219 00:09:19,360 --> 00:09:20,400 Speaker 4: But the labor market. 220 00:09:20,160 --> 00:09:22,199 Speaker 3: Comes up in early December. 221 00:09:22,800 --> 00:09:26,760 Speaker 6: We had a really really strong September. 222 00:09:26,240 --> 00:09:27,960 Speaker 3: And a really really weak October. 223 00:09:28,640 --> 00:09:31,400 Speaker 4: What do you where is the labor market as far 224 00:09:31,440 --> 00:09:31,880 Speaker 4: as you're. 225 00:09:31,720 --> 00:09:33,720 Speaker 5: Concerned, I think the labor market is in a good 226 00:09:33,720 --> 00:09:34,400 Speaker 5: place right now. 227 00:09:34,440 --> 00:09:36,160 Speaker 3: Again, the anecdotes that I get. 228 00:09:36,160 --> 00:09:38,600 Speaker 5: I look at the data, the official statistics, which always 229 00:09:38,640 --> 00:09:42,360 Speaker 5: have uncertainty. There's even more uncertainty about the labor market statistics, 230 00:09:42,440 --> 00:09:44,720 Speaker 5: not just because of the hurricanes and the Boeing strike, 231 00:09:45,120 --> 00:09:49,000 Speaker 5: but because of the large immigration flows, which are we're 232 00:09:49,040 --> 00:09:52,080 Speaker 5: not exactly sure how big they are and their time varying. 233 00:09:52,480 --> 00:09:54,800 Speaker 3: So what is this month's. 234 00:09:54,480 --> 00:09:56,880 Speaker 5: Break even level of job growth? You know, your guest 235 00:09:56,960 --> 00:09:58,720 Speaker 5: is as good as mine. So I look at the 236 00:09:58,760 --> 00:10:01,560 Speaker 5: official statistics, and then I marry it to what we're 237 00:10:01,559 --> 00:10:03,520 Speaker 5: all here in my colleagues and I from all of 238 00:10:03,520 --> 00:10:06,280 Speaker 5: our contacts around the country. The labor market right now 239 00:10:06,320 --> 00:10:09,079 Speaker 5: is strong. It's a healthy labor market. Jobs are available, 240 00:10:09,400 --> 00:10:10,640 Speaker 5: businesses are feeling good. 241 00:10:11,400 --> 00:10:12,520 Speaker 3: We want to keep it that way. 242 00:10:12,559 --> 00:10:14,280 Speaker 5: And so as we get the data in, I'm going 243 00:10:14,320 --> 00:10:16,640 Speaker 5: to continue to do my own outreach, and all of 244 00:10:16,640 --> 00:10:18,800 Speaker 5: the other presidents are going to do their outreach to 245 00:10:18,880 --> 00:10:21,240 Speaker 5: the businesses large and small, and labor groups to get 246 00:10:21,280 --> 00:10:24,400 Speaker 5: a sense of is the labor market cooling slowly, is 247 00:10:24,400 --> 00:10:26,840 Speaker 5: it heating up, or is it cooling quickly? And that 248 00:10:26,880 --> 00:10:30,840 Speaker 5: will those will be important judgments into our policy deliberations. 249 00:10:31,120 --> 00:10:34,000 Speaker 9: Your former colleague, Bill Dudley wrote a Bloomberg opinion piece 250 00:10:34,040 --> 00:10:37,040 Speaker 9: earlier this week basically saying that there's this possibility that 251 00:10:37,080 --> 00:10:40,080 Speaker 9: Trump enacts policy quickly and forcedly in a way that 252 00:10:40,120 --> 00:10:42,679 Speaker 9: doesn't give the FED enough time to respond and without 253 00:10:42,720 --> 00:10:45,000 Speaker 9: the proper tools to respond. Is that a concern you 254 00:10:45,040 --> 00:10:45,600 Speaker 9: also share? 255 00:10:46,000 --> 00:10:48,920 Speaker 5: I think fiscal policy is always an input into our 256 00:10:49,440 --> 00:10:52,120 Speaker 5: deliberations and into our analysis and assessment of the economy. 257 00:10:52,160 --> 00:10:54,400 Speaker 5: I don't think that's new now, and it's not just 258 00:10:54,520 --> 00:10:57,000 Speaker 5: US fiscal policy. It's what happens with other countries, what 259 00:10:57,000 --> 00:10:59,360 Speaker 5: happens with our trading partners, and so that type of 260 00:10:59,480 --> 00:11:02,560 Speaker 5: uncertainty we're used to dealing with it. Obviously, we would 261 00:11:02,600 --> 00:11:04,600 Speaker 5: like to have less uncertainty. That'd be great, but it's 262 00:11:04,600 --> 00:11:07,199 Speaker 5: the world that we live in, and we will take 263 00:11:07,240 --> 00:11:09,480 Speaker 5: all the information we can as we get it and 264 00:11:09,600 --> 00:11:10,920 Speaker 5: incorporate it into our thinking. 265 00:11:11,040 --> 00:11:13,440 Speaker 1: Speaking of uncertainty, there's been a lot of concern about 266 00:11:13,480 --> 00:11:15,360 Speaker 1: what Trump two point zer would mean in tern of 267 00:11:15,480 --> 00:11:17,680 Speaker 1: job voting, the FED, and how we felt about j. 268 00:11:17,880 --> 00:11:18,240 Speaker 4: Powell. 269 00:11:18,280 --> 00:11:21,920 Speaker 1: The FOMC had this plan during the first iteration of 270 00:11:21,920 --> 00:11:25,080 Speaker 1: Trump that maybe they even move Powell to chair of 271 00:11:25,120 --> 00:11:27,920 Speaker 1: the FOMC if he was going to take over the 272 00:11:28,000 --> 00:11:31,360 Speaker 1: chairmanship of the actual FED. Would you basically all act 273 00:11:31,400 --> 00:11:33,920 Speaker 1: as a group to potentially thwart anything that was coming 274 00:11:33,960 --> 00:11:36,479 Speaker 1: at you that would negate the FED independence. 275 00:11:37,400 --> 00:11:37,920 Speaker 7: We are all. 276 00:11:37,840 --> 00:11:39,400 Speaker 3: Committed to our dual mandate goals. 277 00:11:39,480 --> 00:11:42,960 Speaker 5: Everybody around the table, all of my colleagues, stable prices 278 00:11:43,000 --> 00:11:46,480 Speaker 5: and maximum employment. So number one, we're all committed to 279 00:11:46,480 --> 00:11:50,040 Speaker 5: those goals. Number two, I don't think those goals are controversial. 280 00:11:50,120 --> 00:11:53,679 Speaker 5: I think everybody across the political spectrum wants us to 281 00:11:53,679 --> 00:11:55,600 Speaker 5: get inflation all the way back down to two percent 282 00:11:55,920 --> 00:11:57,720 Speaker 5: and wants to keep a strong labor market. 283 00:11:57,880 --> 00:11:59,960 Speaker 3: So I think that also provides us a lot of support. 284 00:12:00,320 --> 00:12:02,840 Speaker 5: And then there's built in continuity into the structure of 285 00:12:02,840 --> 00:12:06,000 Speaker 5: the FED that Congress designed governors serve up to fourteen 286 00:12:06,080 --> 00:12:09,240 Speaker 5: year terms, the presidents are independent, the presidents of the 287 00:12:09,280 --> 00:12:10,200 Speaker 5: twelve reserve banks. 288 00:12:10,440 --> 00:12:12,520 Speaker 3: These structures help us provide continuity. 289 00:12:12,720 --> 00:12:15,560 Speaker 5: I'm confident that between the people who are there are 290 00:12:15,600 --> 00:12:18,600 Speaker 5: commitment to our dual mandate goals and the structures that 291 00:12:18,760 --> 00:12:21,520 Speaker 5: are in place, I'm confident that we will do the 292 00:12:21,600 --> 00:12:24,960 Speaker 5: right thing and focus on the economy. 293 00:12:25,080 --> 00:12:26,400 Speaker 3: The housing market. 294 00:12:27,040 --> 00:12:29,520 Speaker 6: How do you explain what's going on the fact that 295 00:12:29,640 --> 00:12:33,360 Speaker 6: prices aren't coming down, and if you keep rates higher 296 00:12:33,360 --> 00:12:37,080 Speaker 6: than anticipated, we've already seen mortgage rates go up since 297 00:12:37,080 --> 00:12:38,000 Speaker 6: you started cutting. 298 00:12:38,240 --> 00:12:39,920 Speaker 3: The housing market dead. 299 00:12:40,720 --> 00:12:43,440 Speaker 5: Well, the housing market as I've studied it, and this 300 00:12:43,480 --> 00:12:46,640 Speaker 5: is an issue all around the country, the lack of affordability, 301 00:12:47,280 --> 00:12:49,439 Speaker 5: not just for low income workers, but for middle class 302 00:12:49,480 --> 00:12:53,360 Speaker 5: families and more. It's really one that we've underbuilt housing 303 00:12:53,360 --> 00:12:55,760 Speaker 5: for the last decade following the Great Financial Crisis. We 304 00:12:55,840 --> 00:12:59,360 Speaker 5: just structure the underbuilt housing, so there's a sense of shortage. 305 00:12:59,480 --> 00:13:01,320 Speaker 5: And as I think back to the notion of a 306 00:13:01,360 --> 00:13:04,319 Speaker 5: neutral interest rate, think about a neutral mortgage rate. If 307 00:13:04,320 --> 00:13:07,280 Speaker 5: we have structurally underbuilt housing and there's a lot of 308 00:13:07,320 --> 00:13:10,559 Speaker 5: demand for housing, what interest rate is going to clear 309 00:13:10,640 --> 00:13:13,120 Speaker 5: that market? All else being equal, you would think a 310 00:13:13,200 --> 00:13:15,720 Speaker 5: higher interest rate will clear that market. And so I 311 00:13:15,720 --> 00:13:18,200 Speaker 5: think the housing market has its own unique dynamics that 312 00:13:18,240 --> 00:13:20,600 Speaker 5: are going on that are driving these more than just 313 00:13:20,640 --> 00:13:23,600 Speaker 5: a macroeconomic landscape and more than just monetary policy. 314 00:13:23,760 --> 00:13:26,360 Speaker 6: So the Fed raises its hands and says it's not 315 00:13:26,400 --> 00:13:27,280 Speaker 6: something we can fix. 316 00:13:27,480 --> 00:13:28,280 Speaker 3: Yeah, we can't fix it. 317 00:13:28,280 --> 00:13:30,439 Speaker 5: I mean, if we said we're going to cut interest 318 00:13:30,520 --> 00:13:34,600 Speaker 5: rates to try to support housing affordability, setting aside the 319 00:13:34,640 --> 00:13:35,440 Speaker 5: rest of our goals. 320 00:13:35,960 --> 00:13:37,760 Speaker 3: What would that probably do? That would probably push. 321 00:13:37,679 --> 00:13:40,000 Speaker 5: Up the price of housing, and so would that actually 322 00:13:40,040 --> 00:13:43,120 Speaker 5: improve affordability? And so I don't think monetary policy is 323 00:13:43,120 --> 00:13:46,240 Speaker 5: well suited to address the structural issues that are going 324 00:13:46,280 --> 00:13:47,120 Speaker 5: on in the housing market. 325 00:13:47,160 --> 00:13:50,160 Speaker 2: We've touched on absolutely everything. Can we finish on financial markets? 326 00:13:50,240 --> 00:13:50,480 Speaker 3: Sure? 327 00:13:50,559 --> 00:13:52,559 Speaker 4: You know them? Well? Are you worried about coming into 328 00:13:52,559 --> 00:13:53,320 Speaker 4: an asset bubble? 329 00:13:54,400 --> 00:13:57,760 Speaker 5: You know when I always go back to when chair 330 00:13:58,280 --> 00:14:00,880 Speaker 5: then Chairman Green spent in nineteen ninety five declared irrational 331 00:14:00,920 --> 00:14:03,680 Speaker 5: exuberant nineteen ninety five, you declared it, and the stock 332 00:14:03,720 --> 00:14:06,160 Speaker 5: market went out for the next four years. I look 333 00:14:06,200 --> 00:14:08,199 Speaker 5: at that episode and think if the FED had tried 334 00:14:08,240 --> 00:14:11,520 Speaker 5: to use monetary policy to address that bubble, it would 335 00:14:11,520 --> 00:14:14,360 Speaker 5: have done more harm to the economy than the fairly 336 00:14:14,400 --> 00:14:17,120 Speaker 5: mild recession that followed when the tech bubble burst. And 337 00:14:17,160 --> 00:14:19,440 Speaker 5: so I just think monetary policy is the wrong tool 338 00:14:19,760 --> 00:14:21,280 Speaker 5: to try to address acid bubbles. 339 00:14:21,320 --> 00:14:23,120 Speaker 4: Do you think there's something that needs to be addressed? 340 00:14:24,040 --> 00:14:28,400 Speaker 5: Well, you know, bubbles are easy to spot in hindsight. 341 00:14:28,520 --> 00:14:31,320 Speaker 5: If we really are in a higher productivity environment, if 342 00:14:31,360 --> 00:14:34,720 Speaker 5: we're in a higher growth environment, and corporate earnings are 343 00:14:34,760 --> 00:14:37,720 Speaker 5: going to continue to climb. One might look back and say, hey, 344 00:14:37,720 --> 00:14:40,840 Speaker 5: these asset prices are not irrational. So it's hard to 345 00:14:40,920 --> 00:14:43,440 Speaker 5: judge right now. If I knew where productivity was going, 346 00:14:43,600 --> 00:14:44,480 Speaker 5: I'd be able to give you a. 347 00:14:44,400 --> 00:14:45,200 Speaker 3: More definitive answer. 348 00:14:45,280 --> 00:14:46,880 Speaker 2: Just look in the markets right now. Equity is very 349 00:14:46,880 --> 00:14:49,080 Speaker 2: close to old time highs. We've got credit spreads that 350 00:14:49,160 --> 00:14:53,000 Speaker 2: are at incredibly tight levels for investment grade tights than 351 00:14:53,000 --> 00:14:55,440 Speaker 2: anything we've seen so farbus century for high YELD, I 352 00:14:55,440 --> 00:14:58,080 Speaker 2: think you've got to go back to PREGFC and you 353 00:14:58,120 --> 00:15:00,760 Speaker 2: know what happened next. We kind of get rights into that. 354 00:15:01,280 --> 00:15:04,240 Speaker 2: We have authorities down in Washington, d C. It's some 355 00:15:04,520 --> 00:15:07,840 Speaker 2: second administraction that could be kind of taxes going into 356 00:15:07,880 --> 00:15:09,920 Speaker 2: that as well. What is something you'll write down with 357 00:15:09,960 --> 00:15:12,080 Speaker 2: regards to that, What would you watch to say, actually, 358 00:15:12,560 --> 00:15:14,480 Speaker 2: something coming on here that may be we need to 359 00:15:14,480 --> 00:15:16,040 Speaker 2: pay a little bit more attention to well. 360 00:15:16,040 --> 00:15:20,320 Speaker 5: From a financial stability perspective, traditionally, the biggest sources of 361 00:15:20,360 --> 00:15:25,000 Speaker 5: financial instability are leverage and maturity transformation and the intersection 362 00:15:25,080 --> 00:15:27,920 Speaker 5: of those two. That's why banks are inherently risky. Leverage 363 00:15:27,960 --> 00:15:30,400 Speaker 5: tend to want or more they take overnight money and 364 00:15:30,440 --> 00:15:32,640 Speaker 5: then they lend long into it. So, for example, a 365 00:15:32,680 --> 00:15:34,520 Speaker 5: lot of people have looked at private credit and said, 366 00:15:34,720 --> 00:15:36,480 Speaker 5: this is a huge growing asset class. 367 00:15:36,520 --> 00:15:39,000 Speaker 3: Isn't a scary as I've looked into it. 368 00:15:39,040 --> 00:15:41,520 Speaker 5: They seem to be much less levered than banks, and 369 00:15:41,560 --> 00:15:44,480 Speaker 5: they generally have longer term funding. So in those two 370 00:15:44,640 --> 00:15:49,080 Speaker 5: primary dimension of financial instability, leverage and maturity transformation, it 371 00:15:49,120 --> 00:15:52,520 Speaker 5: doesn't seem to be riskier than banks, probably less risky 372 00:15:52,560 --> 00:15:55,080 Speaker 5: than banks. So we continue to look for leverage, we 373 00:15:55,120 --> 00:15:56,760 Speaker 5: continue to look for maturity transformation. 374 00:15:56,920 --> 00:15:59,040 Speaker 2: No small as I'm going to say it, good to 375 00:15:59,080 --> 00:16:02,040 Speaker 2: see you, thanks me, No cash canry there. The Minneapolis 376 00:16:02,080 --> 00:16:15,560 Speaker 2: Fed President, Johnny guess Now is the JP Morgan chief 377 00:16:15,720 --> 00:16:18,960 Speaker 2: strategist from JP Morgan Asset Management. David Kelly, David Gamon, 378 00:16:19,000 --> 00:16:20,800 Speaker 2: it's your thoughts on this. So were on course for 379 00:16:20,800 --> 00:16:22,120 Speaker 2: a red cut in December? 380 00:16:22,280 --> 00:16:23,480 Speaker 7: I think we probably are. 381 00:16:24,080 --> 00:16:26,160 Speaker 10: I think the key thing here is the Federal Reserve 382 00:16:26,360 --> 00:16:30,320 Speaker 10: is not going to assume or speculate or predict what 383 00:16:30,680 --> 00:16:33,120 Speaker 10: policy on tariffs and fiscal policy is going to be. 384 00:16:33,280 --> 00:16:35,560 Speaker 10: I think they've got an idea where we're headed here, 385 00:16:35,560 --> 00:16:37,400 Speaker 10: but they're just not going to put it into their thinking, 386 00:16:37,680 --> 00:16:39,120 Speaker 10: and I don't think they want to pick a fight 387 00:16:39,160 --> 00:16:39,640 Speaker 10: at this stage. 388 00:16:39,680 --> 00:16:40,880 Speaker 7: They're going to have to have a fight. 389 00:16:40,720 --> 00:16:42,680 Speaker 10: At some stage with the administration, but I don't think 390 00:16:42,680 --> 00:16:44,320 Speaker 10: they want to pick it right now. So what I 391 00:16:44,320 --> 00:16:46,560 Speaker 10: think they'll do is, you know, the markets are pricing 392 00:16:46,600 --> 00:16:48,120 Speaker 10: in a quarter points, So if markets are pricing in 393 00:16:48,120 --> 00:16:49,760 Speaker 10: a quarter point, they'll they'll they'll. 394 00:16:49,480 --> 00:16:50,240 Speaker 7: Do the quarter point. 395 00:16:50,360 --> 00:16:52,080 Speaker 10: But I will say that Marcus at this stage are 396 00:16:52,080 --> 00:16:54,680 Speaker 10: only pricing two more rate cuts next year, and so 397 00:16:54,720 --> 00:16:56,920 Speaker 10: the market are stopping short of the dopplot. The dop 398 00:16:56,960 --> 00:16:59,120 Speaker 10: plot says the Fed keeps going another four rate cuts 399 00:16:59,240 --> 00:17:01,520 Speaker 10: second half of next year or early twenty twenty six, 400 00:17:01,880 --> 00:17:04,879 Speaker 10: and the market saying, look, given this agenda, the different 401 00:17:04,880 --> 00:17:07,320 Speaker 10: pieces of this agenda, there's going to be too much 402 00:17:07,359 --> 00:17:10,240 Speaker 10: inflation potentially the system, and too much debt growth in 403 00:17:10,280 --> 00:17:12,400 Speaker 10: the system to remake that a rational policy. 404 00:17:12,480 --> 00:17:14,840 Speaker 2: The e feed does not speculate, the market does. Which 405 00:17:14,840 --> 00:17:17,080 Speaker 2: explains the daylight that's opened up over the past week 406 00:17:17,160 --> 00:17:19,560 Speaker 2: or so, which you endorse that daylight opening gup? 407 00:17:19,560 --> 00:17:20,840 Speaker 4: Do you think there's a good reason for it. 408 00:17:21,240 --> 00:17:23,320 Speaker 10: I think the way that both the stock market and 409 00:17:23,359 --> 00:17:25,800 Speaker 10: the bond market have acted is logical. 410 00:17:26,520 --> 00:17:26,919 Speaker 7: I think that. 411 00:17:27,000 --> 00:17:29,760 Speaker 10: We're I think the assumption is that we're going to 412 00:17:29,760 --> 00:17:32,639 Speaker 10: get a big fiscal stimulus. Now it's going to have 413 00:17:32,720 --> 00:17:35,600 Speaker 10: to go through the reconciliation processes. They don't have sixty 414 00:17:35,680 --> 00:17:37,359 Speaker 10: votes in the Senate, So I think this is going 415 00:17:37,400 --> 00:17:39,159 Speaker 10: to be a slow moving trade and everybody's going to 416 00:17:39,160 --> 00:17:42,960 Speaker 10: be piling tax cuts on throughout next year, and so 417 00:17:43,160 --> 00:17:44,920 Speaker 10: when it hits in twenty twenty six, it's a lot 418 00:17:44,920 --> 00:17:48,960 Speaker 10: of fiscal stimus and just huge, massive deficits rising over 419 00:17:49,000 --> 00:17:49,560 Speaker 10: the next decade. 420 00:17:49,600 --> 00:17:50,120 Speaker 7: I mean, it's good. 421 00:17:50,240 --> 00:17:53,880 Speaker 10: It is a really kind of scary thing, but that is. 422 00:17:54,240 --> 00:17:56,160 Speaker 10: But that's not there yet. But what's going to happen 423 00:17:56,200 --> 00:17:58,040 Speaker 10: over the next year. The thing that's really important here 424 00:17:58,200 --> 00:18:02,320 Speaker 10: is tariff's just how aggressive and how quickly does it 425 00:18:02,520 --> 00:18:05,680 Speaker 10: do we follow this this tariff agenda. Because the early 426 00:18:05,720 --> 00:18:08,520 Speaker 10: smoke signal suggests that the new Trump administration is going 427 00:18:08,560 --> 00:18:11,040 Speaker 10: to be very serious about putting in big tariffs fast. 428 00:18:11,119 --> 00:18:13,080 Speaker 9: Well, the market has decided to look through it and say, 429 00:18:13,200 --> 00:18:17,159 Speaker 9: maybe we don't expect indiscriminate tariffs, that it'll be more selective. 430 00:18:17,600 --> 00:18:19,359 Speaker 9: If you look at a market like that and you're 431 00:18:19,359 --> 00:18:21,480 Speaker 9: concerned about it and you're concerned with some of the appointments. 432 00:18:21,520 --> 00:18:23,080 Speaker 9: Do you want to push back on some of this 433 00:18:23,160 --> 00:18:23,800 Speaker 9: market pricing? 434 00:18:23,840 --> 00:18:27,520 Speaker 10: Then yeah, I think i'd be I would be nervous 435 00:18:27,800 --> 00:18:29,840 Speaker 10: just in terms of where people's portfolios are because if 436 00:18:29,840 --> 00:18:33,200 Speaker 10: people have not rebalanced, there now way overweight US equity 437 00:18:33,280 --> 00:18:36,480 Speaker 10: is a way of wait megacap US equities. So the 438 00:18:36,520 --> 00:18:38,720 Speaker 10: market has got not only got richer, but it's also 439 00:18:38,760 --> 00:18:40,200 Speaker 10: got more and more on balance over time. So I 440 00:18:40,240 --> 00:18:42,159 Speaker 10: think this is a real time to think. Look, we 441 00:18:42,280 --> 00:18:46,000 Speaker 10: moved from election uncertainty that's over to policy uncertainty, and 442 00:18:46,080 --> 00:18:47,520 Speaker 10: there is a lot of policy uncertainty. 443 00:18:47,520 --> 00:18:50,119 Speaker 7: And I agree with you though, you know, the first. 444 00:18:49,840 --> 00:18:53,040 Speaker 10: Smoke signals suggests that the tariff approach is going to 445 00:18:53,080 --> 00:18:55,919 Speaker 10: be very aggressive. But we'll have to see, because you know, 446 00:18:55,960 --> 00:18:59,119 Speaker 10: there are people in American business who have got huge 447 00:18:59,119 --> 00:19:01,800 Speaker 10: interests in being too aggressive. Here you've got trade agreements 448 00:19:01,800 --> 00:19:03,880 Speaker 10: you've got to deal with and and you know, yeah, 449 00:19:03,880 --> 00:19:06,040 Speaker 10: you're pushing up the price of stuff coming in. Everybody 450 00:19:06,080 --> 00:19:08,800 Speaker 10: likes the tariff on their competitors. Results gonna be tariff 451 00:19:08,800 --> 00:19:11,840 Speaker 10: on your suppliers, and I think that that could, that 452 00:19:11,880 --> 00:19:13,600 Speaker 10: could there's gonna be a lot of conflict. 453 00:19:13,280 --> 00:19:16,680 Speaker 1: Over these tariffs well in terms of the uncertainty personnel's policy, 454 00:19:16,720 --> 00:19:19,120 Speaker 1: and so far Lightheiser has not been given the nod 455 00:19:19,160 --> 00:19:21,080 Speaker 1: to go up to the Treasury Department, which many would 456 00:19:21,119 --> 00:19:24,359 Speaker 1: view as antagonistic and aggressive. In terms of tariffs. We 457 00:19:24,440 --> 00:19:26,919 Speaker 1: had tariffs, though in the first iteration of Trump the 458 00:19:26,960 --> 00:19:29,040 Speaker 1: Biden administration kept some of those tariffs on. Do you 459 00:19:29,240 --> 00:19:32,240 Speaker 1: view them as a one shot head to inflation that 460 00:19:32,520 --> 00:19:34,800 Speaker 1: potentially you see an elevated price level then you can 461 00:19:34,840 --> 00:19:36,879 Speaker 1: look through it, or do you think this could continue 462 00:19:37,080 --> 00:19:39,480 Speaker 1: in the when it comes to reacceleration of inflation. 463 00:19:39,640 --> 00:19:41,800 Speaker 10: Probably continues because you know, if you punch somebody who 464 00:19:41,840 --> 00:19:43,879 Speaker 10: knows guess what, they're gonna punch you back. And so 465 00:19:43,960 --> 00:19:46,080 Speaker 10: if we put on tariffs and they put tariffs on us, 466 00:19:46,119 --> 00:19:48,359 Speaker 10: and you know, then I can't believe they put tariffs on. 467 00:19:48,560 --> 00:19:50,359 Speaker 10: We're gonna put a bigger tariff in that, well you 468 00:19:50,400 --> 00:19:52,600 Speaker 10: know I'm going cycle wells, yeah, I mean, that's why 469 00:19:52,600 --> 00:19:55,280 Speaker 10: they call it a tariff war. You don't just get 470 00:19:55,359 --> 00:19:58,040 Speaker 10: to unilaterally attack them, put tariffs on, expect nothing to 471 00:19:58,240 --> 00:20:00,920 Speaker 10: happen to you. So the and by the way, it's 472 00:20:00,960 --> 00:20:04,040 Speaker 10: not just on inflation. It's also on growth because we sell, 473 00:20:04,160 --> 00:20:07,760 Speaker 10: we export two trillion dollars worth of goods in this 474 00:20:07,840 --> 00:20:10,080 Speaker 10: country and all that is going to be a target 475 00:20:10,119 --> 00:20:13,160 Speaker 10: now for countries around the world say, well, you're gonna 476 00:20:13,160 --> 00:20:14,919 Speaker 10: put terror from us, We're gonna putter from that. 477 00:20:15,040 --> 00:20:17,160 Speaker 2: Isn't that a bigger problem for Europe and China than 478 00:20:17,160 --> 00:20:19,720 Speaker 2: it is in the United States? Relatively spake in Well, yeah, 479 00:20:19,720 --> 00:20:22,760 Speaker 2: because we're on a trade deficit, So yes, it is. 480 00:20:23,359 --> 00:20:24,720 Speaker 7: But you know, a tarif for a tarwerf will make 481 00:20:24,720 --> 00:20:26,639 Speaker 7: the whole world poor. It is. 482 00:20:26,920 --> 00:20:28,800 Speaker 10: You know, there are very few things that will that 483 00:20:28,920 --> 00:20:31,320 Speaker 10: are sort of a stagflation elixir that can actually push 484 00:20:31,320 --> 00:20:33,560 Speaker 10: inflation up and sew the economy down at the same time. 485 00:20:33,800 --> 00:20:35,800 Speaker 10: I mean, I say this as an economist, and I 486 00:20:35,800 --> 00:20:38,280 Speaker 10: think almost all people have been traded as economists over 487 00:20:38,320 --> 00:20:42,639 Speaker 10: the years realize that both academically, you know, in theory 488 00:20:42,680 --> 00:20:45,840 Speaker 10: and in practice, tariffs tend to slow down global trade. 489 00:20:45,840 --> 00:20:50,600 Speaker 10: They make domestic columny companies inefficient, and they push up inflation. 490 00:20:50,640 --> 00:20:52,920 Speaker 7: And they also push up inflation on. 491 00:20:53,119 --> 00:20:57,040 Speaker 10: Lower income individuals because lower income households buy more goods, 492 00:20:57,400 --> 00:20:59,000 Speaker 10: upper income households buy more services. 493 00:20:59,080 --> 00:21:00,119 Speaker 7: This is going to be on goods. 494 00:21:00,960 --> 00:21:02,280 Speaker 4: It sounds incredibly verish. 495 00:21:02,480 --> 00:21:04,720 Speaker 9: But you also started out with saying that the markets 496 00:21:04,760 --> 00:21:06,960 Speaker 9: moves have been logical in stocks. 497 00:21:07,080 --> 00:21:10,240 Speaker 10: Well, yes, because there are all sets for stalks. One 498 00:21:10,240 --> 00:21:12,280 Speaker 10: of them is that we could get a further cut 499 00:21:12,280 --> 00:21:14,120 Speaker 10: in the corporate income tax and that has a huge 500 00:21:14,160 --> 00:21:16,480 Speaker 10: impact on earnings, and nothing is more important for stocks 501 00:21:16,520 --> 00:21:18,600 Speaker 10: than earnings. So if you do see a reduction in 502 00:21:18,600 --> 00:21:20,720 Speaker 10: the corporate income tax rate from twenty one percent to 503 00:21:20,800 --> 00:21:25,040 Speaker 10: fifteen percent for domestic production, that could have a big impact. 504 00:21:25,080 --> 00:21:26,679 Speaker 10: And of course one of the other things beople going 505 00:21:26,720 --> 00:21:29,120 Speaker 10: to be debating is what can I call this production? 506 00:21:29,560 --> 00:21:30,960 Speaker 10: And so there's going to be a lot of debate 507 00:21:30,960 --> 00:21:33,760 Speaker 10: around that. But I think those tax cuts for corporations 508 00:21:34,000 --> 00:21:35,000 Speaker 10: will be positive with stock. 509 00:21:35,080 --> 00:21:37,240 Speaker 1: Libby Cantrove PIMCO had a note about this last night, 510 00:21:37,240 --> 00:21:41,000 Speaker 1: talking about how historically low and slim the margin is 511 00:21:41,040 --> 00:21:43,560 Speaker 1: going to be. The Republicans in the House, no one. 512 00:21:43,400 --> 00:21:44,359 Speaker 7: Can take a day off. 513 00:21:44,960 --> 00:21:47,360 Speaker 1: The President Electrump might need to be careful who else 514 00:21:47,359 --> 00:21:49,639 Speaker 1: he tries to pull from Congress to join his administration. 515 00:21:50,760 --> 00:21:53,280 Speaker 1: Do you have conviction they will actually get that fifteen 516 00:21:53,320 --> 00:21:54,240 Speaker 1: percent tax cut? 517 00:21:55,480 --> 00:21:58,040 Speaker 10: Quite possibly, because I think you've got to look at 518 00:21:58,480 --> 00:22:00,639 Speaker 10: I mean, I think that the you know, I'm not 519 00:22:00,640 --> 00:22:02,600 Speaker 10: a political observer, but it would seem to be the 520 00:22:02,600 --> 00:22:04,120 Speaker 10: Democrats were prett dispirited here. 521 00:22:04,240 --> 00:22:06,200 Speaker 7: This is what the people have voted for, and. 522 00:22:06,480 --> 00:22:08,600 Speaker 1: Democrats will sign up for fifteen percent corperate text. 523 00:22:08,640 --> 00:22:10,360 Speaker 10: Right, Well, they don't have to in the House. You've 524 00:22:10,400 --> 00:22:12,600 Speaker 10: just got to get you've just got to get fifty percent. 525 00:22:12,720 --> 00:22:15,120 Speaker 10: And it looks to me right now if the vote 526 00:22:15,119 --> 00:22:19,040 Speaker 10: stopped today, it will be two twenty two to two thirteen, 527 00:22:19,320 --> 00:22:20,720 Speaker 10: So that's nine seeds. 528 00:22:20,320 --> 00:22:22,200 Speaker 7: That's enough to get the thing through. 529 00:22:22,640 --> 00:22:24,520 Speaker 2: Debad Kelly, A lot to look forward to over the 530 00:22:24,600 --> 00:22:26,399 Speaker 2: next several years. It's got to see you, sir. Thank you, 531 00:22:26,440 --> 00:22:39,040 Speaker 2: Devid Kelly there, JP Morgan, Kevin Gordon of Charles Swamp 532 00:22:39,240 --> 00:22:42,280 Speaker 2: saying monetary policy might be hamstrung in twenty five. Much 533 00:22:42,320 --> 00:22:44,919 Speaker 2: of the policy landscape is still to be decided. But 534 00:22:44,960 --> 00:22:48,679 Speaker 2: if deficits widen out aggressively Hyatts Harris put upward pressure 535 00:22:48,680 --> 00:22:52,320 Speaker 2: on inflation and immigration policy restricts labor force growth, it's 536 00:22:52,320 --> 00:22:55,480 Speaker 2: plausible to see how the terminal rate might be raised. 537 00:22:55,560 --> 00:22:57,520 Speaker 2: Kevin John just now for more, Kevin good Mornick and 538 00:22:57,880 --> 00:23:00,600 Speaker 2: and raising that rate maybe for bad reasons and not 539 00:23:00,640 --> 00:23:01,000 Speaker 2: good ones. 540 00:23:01,080 --> 00:23:01,920 Speaker 4: Is that how you say things? 541 00:23:02,000 --> 00:23:03,800 Speaker 11: Yeah, And I think it's tough because, of course, you know, 542 00:23:03,840 --> 00:23:05,399 Speaker 11: this is all a guess at this point as to 543 00:23:05,440 --> 00:23:08,159 Speaker 11: what policies are going to be put in place. And 544 00:23:08,480 --> 00:23:10,520 Speaker 11: the thing I struggle with right now is if you 545 00:23:10,560 --> 00:23:16,520 Speaker 11: look historically more sort of less aggressive FED easing cycles, 546 00:23:16,560 --> 00:23:18,119 Speaker 11: if they're not going at every single meeting, or if 547 00:23:18,119 --> 00:23:20,320 Speaker 11: they're not cutting by fifty basis points, that actually tends 548 00:23:20,359 --> 00:23:22,520 Speaker 11: to be a healthier backdarp for the equity market. However, 549 00:23:22,560 --> 00:23:25,280 Speaker 11: when you overlay all of the policy of uncertainty, especially 550 00:23:25,320 --> 00:23:27,520 Speaker 11: from a tariff and a labor perspective, I think that 551 00:23:27,560 --> 00:23:30,399 Speaker 11: introduces another set of risks. And you know the unfortunate 552 00:23:30,400 --> 00:23:33,200 Speaker 11: part for the FED. I think you're talking about risks 553 00:23:33,240 --> 00:23:36,000 Speaker 11: to inflation, but also risks to labor. It's not that 554 00:23:36,000 --> 00:23:38,840 Speaker 11: the headwinds for the labor market have just gone away automatically. 555 00:23:38,920 --> 00:23:40,760 Speaker 11: It's the fact that now you have to start thinking 556 00:23:40,760 --> 00:23:42,639 Speaker 11: about and I do think it's early, but you do 557 00:23:42,760 --> 00:23:44,960 Speaker 11: have to start thinking about the fact or the reality 558 00:23:45,320 --> 00:23:47,359 Speaker 11: or really the possibility that you could be in a 559 00:23:47,359 --> 00:23:49,680 Speaker 11: position in twenty twenty five where there are still significant 560 00:23:49,680 --> 00:23:53,960 Speaker 11: headwinds to labor, but then you have some reflationary forces building. 561 00:23:54,200 --> 00:23:56,520 Speaker 11: And I think the difference now is from a labor 562 00:23:56,520 --> 00:24:00,359 Speaker 11: standpoint in particular, if that comes via more restrictions labor 563 00:24:00,359 --> 00:24:02,560 Speaker 11: supply and you do get more of a sort of 564 00:24:02,600 --> 00:24:05,040 Speaker 11: you know, fanning of the embers of from a wage perspective, 565 00:24:05,119 --> 00:24:06,840 Speaker 11: I think that becomes a little bit more of an issue. 566 00:24:06,920 --> 00:24:07,879 Speaker 4: Ken you know how this works. 567 00:24:07,880 --> 00:24:11,000 Speaker 2: In moments of maximum uncertainty and low conviction, we all 568 00:24:11,040 --> 00:24:14,119 Speaker 2: reach for a historical parallel. Yeah, we have a playbook 569 00:24:14,560 --> 00:24:17,400 Speaker 2: the first Trump presidency. How useful is that playbook? 570 00:24:17,440 --> 00:24:17,520 Speaker 6: You know? 571 00:24:17,600 --> 00:24:20,640 Speaker 11: In some ways it's useful. In some ways it's incredibly 572 00:24:20,960 --> 00:24:23,360 Speaker 11: not helpful. And I think the useful standpoint you could 573 00:24:23,400 --> 00:24:25,959 Speaker 11: go back to, Yes, maybe the obsession with using tariffs 574 00:24:26,000 --> 00:24:28,119 Speaker 11: as a tool, the obsession of looking at equity markets 575 00:24:28,160 --> 00:24:29,880 Speaker 11: in particular and how they react to them. 576 00:24:29,920 --> 00:24:31,400 Speaker 8: You could use that as a playbook. 577 00:24:31,440 --> 00:24:33,720 Speaker 11: On the other hand, the economic environment could not be 578 00:24:33,760 --> 00:24:35,600 Speaker 11: more different. I mean, you know, when Trump took office 579 00:24:35,600 --> 00:24:38,320 Speaker 11: the first time, the uneployment rate still had more you know, 580 00:24:38,400 --> 00:24:40,560 Speaker 11: to go to the downside. We were in that secular 581 00:24:40,560 --> 00:24:43,800 Speaker 11: decline for the unemployment rate. You were in a relatively 582 00:24:44,040 --> 00:24:47,080 Speaker 11: you know, healthy growth environment. You had twenty seventeen, which 583 00:24:47,119 --> 00:24:50,399 Speaker 11: was basically the best you could get for across risk assets, 584 00:24:50,400 --> 00:24:52,159 Speaker 11: where everything you know was sort of low ball and 585 00:24:52,200 --> 00:24:55,479 Speaker 11: everything was rallying. The volatility didn't start to show up 586 00:24:55,520 --> 00:24:58,480 Speaker 11: until the following year. There's just such a different setup 587 00:24:58,520 --> 00:25:00,159 Speaker 11: this time. So I think that, you know, it is 588 00:25:00,200 --> 00:25:02,720 Speaker 11: a knee jerk reaction to go back to that one 589 00:25:02,800 --> 00:25:05,080 Speaker 11: era and say, you know, this is exactly how things 590 00:25:05,080 --> 00:25:06,960 Speaker 11: can play out, but we're just facing a different set 591 00:25:06,960 --> 00:25:07,840 Speaker 11: of circumstances. 592 00:25:08,240 --> 00:25:09,880 Speaker 8: I would probably put. 593 00:25:09,720 --> 00:25:12,920 Speaker 11: More emphasis or most emphasis on labor in particular, because 594 00:25:12,960 --> 00:25:14,720 Speaker 11: when you look at the gap that has been filled 595 00:25:14,720 --> 00:25:17,520 Speaker 11: from a labor force perspective over the past four years, 596 00:25:17,760 --> 00:25:19,720 Speaker 11: it has been from the foreign born labor force. It 597 00:25:19,760 --> 00:25:21,560 Speaker 11: hasn't been from the native foreign labor force. So if 598 00:25:21,600 --> 00:25:23,960 Speaker 11: you are putting some sort of restriction on that, or 599 00:25:24,000 --> 00:25:26,439 Speaker 11: if you're taking a chunk of that out, not all 600 00:25:26,480 --> 00:25:29,120 Speaker 11: at once, but phasing that in over time, that does 601 00:25:29,200 --> 00:25:31,560 Speaker 11: put some pressure on the labor market. From a growth 602 00:25:31,600 --> 00:25:34,560 Speaker 11: perspective in terms of overall consumer spending and the power 603 00:25:34,560 --> 00:25:38,120 Speaker 11: associated with it, but also from a wage and inflation perspective, too, But. 604 00:25:38,119 --> 00:25:40,159 Speaker 9: To your point, we kind of have no idea what 605 00:25:40,160 --> 00:25:42,199 Speaker 9: that's going to actually look at, like what form, what 606 00:25:42,359 --> 00:25:45,119 Speaker 9: pace would amount for all of the policies. So in 607 00:25:45,160 --> 00:25:47,600 Speaker 9: the meantime for twenty twenty four, before we have clarity 608 00:25:47,800 --> 00:25:50,040 Speaker 9: on any of that, can you stand in front of 609 00:25:50,040 --> 00:25:52,040 Speaker 9: this bullish train or do you just want to hop on? 610 00:25:52,160 --> 00:25:52,400 Speaker 7: Well? 611 00:25:52,440 --> 00:25:54,480 Speaker 11: I think that, you know, momentum is a powerful thing. 612 00:25:54,720 --> 00:25:57,440 Speaker 11: I was just looking at the SP five hundred momentum index. 613 00:25:57,480 --> 00:26:00,280 Speaker 11: It's having its best year since nineteen ninety eight, since 614 00:26:00,359 --> 00:26:02,080 Speaker 11: nineteen ninety nine, but now we've nudged up. 615 00:26:02,000 --> 00:26:02,800 Speaker 8: Just a little bit more. 616 00:26:02,840 --> 00:26:05,760 Speaker 11: So it's hard to fight against that trend, especially when 617 00:26:05,760 --> 00:26:08,359 Speaker 11: you've got you know, close to seventy five percent of 618 00:26:08,400 --> 00:26:10,280 Speaker 11: members in the S and P trading above their two 619 00:26:10,320 --> 00:26:11,280 Speaker 11: undred day moving average. 620 00:26:11,320 --> 00:26:14,040 Speaker 8: Breadth has improved significantly. 621 00:26:13,359 --> 00:26:15,679 Speaker 11: Down the cab spectrum, especially for the RUST of two 622 00:26:15,720 --> 00:26:17,080 Speaker 11: thousand in particular. 623 00:26:17,440 --> 00:26:19,440 Speaker 8: So you know, on the one hand. 624 00:26:19,359 --> 00:26:20,840 Speaker 11: I wouldn't want to fight the tape that way, but 625 00:26:20,920 --> 00:26:22,959 Speaker 11: on the other hand, I think that you do have 626 00:26:23,040 --> 00:26:26,160 Speaker 11: to to some extent start looking at these policy narratives 627 00:26:26,160 --> 00:26:28,680 Speaker 11: that are that are flying around for twenty twenty five, 628 00:26:28,840 --> 00:26:31,679 Speaker 11: and you know, I've yet to see a model that 629 00:26:31,800 --> 00:26:35,720 Speaker 11: has not suggested that the tariff, you know, the tariff 630 00:26:35,720 --> 00:26:38,080 Speaker 11: implementation as it stands right now, if all of it 631 00:26:38,160 --> 00:26:40,840 Speaker 11: was to be implemented, would not be stagflationary where you 632 00:26:40,840 --> 00:26:42,520 Speaker 11: wouldn't get hit a hit to growth and you wouldn't 633 00:26:42,520 --> 00:26:45,359 Speaker 11: get a boost to inflation. And that to me would 634 00:26:45,359 --> 00:26:49,399 Speaker 11: be probably what comes first before you talk about sequencing earlier. 635 00:26:49,400 --> 00:26:52,240 Speaker 11: I know, in the show of you know, potential fiscal stimulus, 636 00:26:52,280 --> 00:26:55,560 Speaker 11: but also potential tariff policy from a unilateral perspective and 637 00:26:55,600 --> 00:26:57,600 Speaker 11: not having to think about Congress, it would seem that 638 00:26:57,720 --> 00:27:00,639 Speaker 11: everything unilateral from a tariff perspective probably comes first and 639 00:27:00,640 --> 00:27:03,720 Speaker 11: you get maybe some sort of fiscal aid later down 640 00:27:03,760 --> 00:27:06,080 Speaker 11: the road. But that's also harder because you were discussing, 641 00:27:06,080 --> 00:27:07,800 Speaker 11: you know, the slimmer margin in the House. 642 00:27:07,840 --> 00:27:10,080 Speaker 1: That may be, which is why shocking the market is 643 00:27:10,680 --> 00:27:13,760 Speaker 1: pricing in these tax cuts, which do we actually get 644 00:27:13,800 --> 00:27:15,919 Speaker 1: them if you have a one seat two seat majority. 645 00:27:15,960 --> 00:27:18,480 Speaker 11: Even this discussion about pricing things in, you know, I 646 00:27:18,920 --> 00:27:20,680 Speaker 11: find it hard to believe that over the past week 647 00:27:20,720 --> 00:27:22,760 Speaker 11: the market is pricing in the next four years, you know, 648 00:27:22,920 --> 00:27:26,120 Speaker 11: I think to me, just because the overwhelming consensus heading 649 00:27:26,160 --> 00:27:27,600 Speaker 11: into the election was that it was going to be 650 00:27:27,640 --> 00:27:29,560 Speaker 11: this drawn out process where we weren't going to know 651 00:27:29,600 --> 00:27:31,840 Speaker 11: who the winner was for several weeks. The fact that 652 00:27:31,840 --> 00:27:34,000 Speaker 11: you got such a decisive result, I think the market 653 00:27:34,040 --> 00:27:37,080 Speaker 11: really treated as a clearing event and took that huge, 654 00:27:37,160 --> 00:27:38,679 Speaker 11: you know, uncertainty chip off the table. 655 00:27:38,760 --> 00:27:40,720 Speaker 8: So I don't think that we should. 656 00:27:40,480 --> 00:27:42,560 Speaker 11: Be looking at, you know, the moves over the past 657 00:27:42,600 --> 00:27:45,840 Speaker 11: week and thinkings that somehow suggests that this is what's 658 00:27:45,880 --> 00:27:48,679 Speaker 11: going to be, you know, the dominant market force, or 659 00:27:48,760 --> 00:27:50,760 Speaker 11: these are going to be the dominant parts of leadership 660 00:27:50,760 --> 00:27:51,359 Speaker 11: within the market. 661 00:27:51,359 --> 00:27:53,200 Speaker 8: And you know, just as a as a as a 662 00:27:53,240 --> 00:27:53,640 Speaker 8: store of. 663 00:27:53,720 --> 00:27:57,080 Speaker 11: Historical anecdote, if you go back to twenty sixteen, from 664 00:27:57,200 --> 00:28:00,399 Speaker 11: election day to inauguration day of twenty seventeen, the market 665 00:28:00,400 --> 00:28:02,600 Speaker 11: that we're rallying and that we're leading or are similar 666 00:28:02,600 --> 00:28:05,639 Speaker 11: to what has been leading this time. But actually in 667 00:28:05,720 --> 00:28:07,440 Speaker 11: the ultimate irony of it is that if you look 668 00:28:07,440 --> 00:28:09,840 Speaker 11: at those groups and what their performance was in the 669 00:28:09,840 --> 00:28:12,880 Speaker 11: following year, they ended up underperforming the so called Trump losers, 670 00:28:12,880 --> 00:28:15,880 Speaker 11: which lagged from election day twenty sixteen to inauguration day 671 00:28:15,880 --> 00:28:18,000 Speaker 11: twenty seventeen. So not to say that we get a 672 00:28:18,040 --> 00:28:20,080 Speaker 11: perfect repeat this time. But I think you have to 673 00:28:20,119 --> 00:28:22,200 Speaker 11: sort of take a step back as an investor and 674 00:28:22,240 --> 00:28:24,159 Speaker 11: not get caught up in the election narrative and focus 675 00:28:24,200 --> 00:28:25,800 Speaker 11: more on what macro forces are at play. 676 00:28:25,840 --> 00:28:27,480 Speaker 9: Does that mean that this is a great opportunity to 677 00:28:27,520 --> 00:28:29,520 Speaker 9: take some profits in some areas and where would that be? 678 00:28:29,680 --> 00:28:31,840 Speaker 11: I mean, we've been in the camp that, you know, 679 00:28:32,200 --> 00:28:36,040 Speaker 11: starting Midsummer that if you had seen some opportunities from 680 00:28:36,040 --> 00:28:38,400 Speaker 11: the high flyers that had done really well, not just 681 00:28:38,480 --> 00:28:40,480 Speaker 11: year to date, but over the past several years, and 682 00:28:40,560 --> 00:28:42,440 Speaker 11: at that point it was more in the tech communication 683 00:28:42,520 --> 00:28:45,320 Speaker 11: services parts of the market, then it made sense to 684 00:28:45,360 --> 00:28:48,600 Speaker 11: do so, especially if you're more nervous about higher valuation 685 00:28:48,760 --> 00:28:51,560 Speaker 11: and valuations just looking stretched in general. Those were a 686 00:28:51,600 --> 00:28:53,320 Speaker 11: lot of the culprits or a lot of the culprits 687 00:28:53,320 --> 00:28:55,280 Speaker 11: were in those sectors. So it had made sense from 688 00:28:55,320 --> 00:28:58,400 Speaker 11: our perspective to start adding into maybe you know, deeper 689 00:28:58,400 --> 00:29:00,680 Speaker 11: cyclical areas that hadn't done as well. 690 00:29:00,800 --> 00:29:02,800 Speaker 8: And you know, for sort of all of the. 691 00:29:03,160 --> 00:29:06,040 Speaker 11: Stress associated with the aggressive move in the market over 692 00:29:06,040 --> 00:29:09,280 Speaker 11: the past week and how cyclicals have really started to rally, 693 00:29:09,640 --> 00:29:12,000 Speaker 11: a lot of those areas were doing well before, so 694 00:29:12,320 --> 00:29:14,480 Speaker 11: It's not as if there was this massive leadership shift 695 00:29:14,480 --> 00:29:15,840 Speaker 11: where you now all of a sudden have to be 696 00:29:15,880 --> 00:29:18,240 Speaker 11: concerned about what might do well in the next several 697 00:29:18,280 --> 00:29:20,280 Speaker 11: months because the election somehow changed it. 698 00:29:20,520 --> 00:29:22,120 Speaker 8: That isn't the case. So I view that as a 699 00:29:22,120 --> 00:29:23,520 Speaker 8: relatively constructive backdrop. 700 00:29:23,560 --> 00:29:24,520 Speaker 4: What do I do with the banks? 701 00:29:24,840 --> 00:29:28,080 Speaker 2: Everyone's built up, Goldman's up by fifty four percent year today, 702 00:29:28,120 --> 00:29:30,080 Speaker 2: Morgan Stanley's up by more than forty. I mean, pick 703 00:29:30,080 --> 00:29:32,280 Speaker 2: a bank right now. They've absolutely ripped as well over 704 00:29:32,280 --> 00:29:34,120 Speaker 2: the last week. What's I do with those names now? 705 00:29:34,200 --> 00:29:36,920 Speaker 11: I mean, the momentum is strong for a sector like financials, 706 00:29:36,920 --> 00:29:39,160 Speaker 11: The breadth is strong for a sector like financials, you know, 707 00:29:39,200 --> 00:29:41,760 Speaker 11: for banks in particular. That's another area where I would 708 00:29:41,760 --> 00:29:46,200 Speaker 11: be careful about drawing some sort of election related, you know, conclusion, 709 00:29:46,280 --> 00:29:48,600 Speaker 11: because and again I don't want to just look at 710 00:29:48,640 --> 00:29:50,480 Speaker 11: the first Trump administration and say it's going to be 711 00:29:50,640 --> 00:29:54,040 Speaker 11: a similar or the repeat of what had happened, because 712 00:29:54,120 --> 00:29:56,520 Speaker 11: the dynamic in the environment is different. But banks were 713 00:29:56,520 --> 00:29:59,840 Speaker 11: the sixth worst performing sector during his administration. So it's 714 00:29:59,880 --> 00:30:01,920 Speaker 11: not as if you can just say, oh, it's a 715 00:30:01,920 --> 00:30:04,680 Speaker 11: pro growth administration or it's an anti growth or pro regulatory, 716 00:30:04,720 --> 00:30:08,120 Speaker 11: anti regulatory, and tie that to what sector or what 717 00:30:08,200 --> 00:30:10,280 Speaker 11: industry is going to outperform. So I would pay attention 718 00:30:10,360 --> 00:30:13,000 Speaker 11: more to the underlying environment. And right now things look 719 00:30:13,040 --> 00:30:15,640 Speaker 11: relatively strong. I think a year from now, if we 720 00:30:15,680 --> 00:30:17,880 Speaker 11: do start to see more material hits from tariff policy 721 00:30:17,920 --> 00:30:19,840 Speaker 11: or immigration policy, then I think it's a little bit. 722 00:30:19,960 --> 00:30:21,760 Speaker 1: But when it comes to the banks, Trump is winning. 723 00:30:22,040 --> 00:30:24,680 Speaker 1: When there's a time where you see the regulators at 724 00:30:24,720 --> 00:30:27,600 Speaker 1: play under a Biden administration, if Kamala Harris did win, 725 00:30:27,640 --> 00:30:29,160 Speaker 1: do you think we actually would see these move in 726 00:30:29,200 --> 00:30:29,680 Speaker 1: these banks. 727 00:30:29,920 --> 00:30:31,800 Speaker 8: It's out, you know, ultimate counterfactual. 728 00:30:31,880 --> 00:30:35,400 Speaker 11: I think that, you know, regardless of what the who 729 00:30:35,400 --> 00:30:37,480 Speaker 11: the winner was, I do think that if it was 730 00:30:37,560 --> 00:30:40,000 Speaker 11: as decisive, if it was still as decisive, even if 731 00:30:40,040 --> 00:30:41,880 Speaker 11: it went the other way, you would probably still have 732 00:30:41,920 --> 00:30:44,920 Speaker 11: a similar reaction, maybe not as strong in the bond market, 733 00:30:44,960 --> 00:30:46,240 Speaker 11: but that that's still to me. 734 00:30:46,280 --> 00:30:47,360 Speaker 8: Is a really interesting move. 735 00:30:47,400 --> 00:30:49,640 Speaker 11: The initial knee jerk move with the rise and yields 736 00:30:49,680 --> 00:30:51,680 Speaker 11: and the rise in equities. You typically don't see that 737 00:30:51,760 --> 00:30:54,440 Speaker 11: kind of move inequities. If yields were you know, shooting up. 738 00:30:54,320 --> 00:30:56,120 Speaker 2: That much, and we can debank this because no one's 739 00:30:56,120 --> 00:30:57,840 Speaker 2: wrong just by definition. We've got to look back and 740 00:30:57,840 --> 00:31:00,160 Speaker 2: try and figure it out. At a guess, Harris Win 741 00:31:00,200 --> 00:31:02,800 Speaker 2: a blue sweep, a big warrant influence. I don't think 742 00:31:02,800 --> 00:31:05,440 Speaker 2: apollows up like almost twenty percent and six sessions, and 743 00:31:05,480 --> 00:31:07,200 Speaker 2: I think you see that big run in region always 744 00:31:07,240 --> 00:31:08,880 Speaker 2: all for the banks, Well, they would arrive that. 745 00:31:08,720 --> 00:31:11,920 Speaker 1: They'd be doubling down on regulation, not this idea that 746 00:31:11,960 --> 00:31:13,840 Speaker 1: the valve is going to open and maybe there will 747 00:31:13,880 --> 00:31:16,680 Speaker 1: be this m and a activity of what Jane Frazier said. 748 00:31:16,720 --> 00:31:19,160 Speaker 1: They're all game on, waiting on the sidelines and excited 749 00:31:19,200 --> 00:31:19,520 Speaker 1: to get in. 750 00:31:19,640 --> 00:31:22,360 Speaker 2: I think Kevin's absolutely right just clearing the event because 751 00:31:22,360 --> 00:31:23,800 Speaker 2: the base case for a lot of people was this 752 00:31:23,880 --> 00:31:25,640 Speaker 2: might take a while, and it didn't take it. While 753 00:31:25,680 --> 00:31:27,400 Speaker 2: it was over by the time the sun rose the 754 00:31:27,440 --> 00:31:28,040 Speaker 2: following morning. 755 00:31:28,200 --> 00:31:32,400 Speaker 9: It is quite remarkable to literally pull up any volatility index, 756 00:31:32,520 --> 00:31:36,200 Speaker 9: any volatility index on any asset class, a straight nose 757 00:31:36,280 --> 00:31:38,480 Speaker 9: dive down. That's basically a green light to say, if 758 00:31:38,480 --> 00:31:40,360 Speaker 9: you are a bull and you want to buy, you're 759 00:31:40,360 --> 00:31:42,360 Speaker 9: an asset manager and you were scared of volatility, you 760 00:31:42,440 --> 00:31:44,000 Speaker 9: can jump in now. And that's what we've seen. 761 00:31:44,240 --> 00:31:46,280 Speaker 2: So what we saw overnight Kevin. It's good to see 762 00:31:46,280 --> 00:31:49,280 Speaker 2: you overnight on election night. Just straight down, Kevin Golden. 763 00:31:49,320 --> 00:31:53,320 Speaker 2: There of chowgh Swap. This is the Bloomberg Sevenants podcast, 764 00:31:53,440 --> 00:31:57,000 Speaker 2: bringing you the best in markets, economics, and gie of politics. 765 00:31:57,280 --> 00:31:59,719 Speaker 2: You can watch the show live on Bloomberg TV weekday 766 00:31:59,760 --> 00:32:03,000 Speaker 2: morning from six am to nine am Eastern. Subscribe to 767 00:32:03,040 --> 00:32:06,240 Speaker 2: the podcast on Apple, Spotify or anywhere else you listen, 768 00:32:06,520 --> 00:32:08,640 Speaker 2: and as always, on the bloom Blog terminal and the 769 00:32:08,640 --> 00:32:09,720 Speaker 2: Bloomberg Business app 770 00:32:13,680 --> 00:32:14,080 Speaker 9: M HM