1 00:00:00,840 --> 00:00:04,000 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 2 00:00:04,040 --> 00:00:05,240 Speaker 1: my co host Matt Miller. 3 00:00:05,640 --> 00:00:09,600 Speaker 2: Every business day we bring you interviews from CEOs, market pros, 4 00:00:09,720 --> 00:00:13,600 Speaker 2: and Bloomberg experts, along with essential market moven news. 5 00:00:14,160 --> 00:00:17,279 Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 6 00:00:17,360 --> 00:00:20,520 Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast. 7 00:00:21,040 --> 00:00:22,440 Speaker 3: We got some eco data today. 8 00:00:22,640 --> 00:00:24,439 Speaker 1: I've had a lot of economic data early over the 9 00:00:24,520 --> 00:00:27,240 Speaker 1: last week, week and a half, a lot for the 10 00:00:27,280 --> 00:00:29,520 Speaker 1: Federal Reserve to chew on as that thinks about its 11 00:00:29,960 --> 00:00:33,680 Speaker 1: net next rate decision springing. Ira Jersey covers all that 12 00:00:33,760 --> 00:00:37,320 Speaker 1: interest rate stuff for Bloomberg Intelligence. He's down in the 13 00:00:37,320 --> 00:00:44,080 Speaker 1: Princeton campus of Bloomberg Intelligence the Core HQ for bi Ira. Again, 14 00:00:44,080 --> 00:00:46,600 Speaker 1: we had some retail sales number today, some industrial production 15 00:00:47,040 --> 00:00:49,519 Speaker 1: numbers came in. I guess a little bit weaker than expected. 16 00:00:49,840 --> 00:00:52,600 Speaker 1: Anything here over the last several days changes your opinion 17 00:00:52,680 --> 00:00:55,640 Speaker 1: that this Federal Reserve is probably going to raise rates 18 00:00:55,720 --> 00:00:56,600 Speaker 1: here at the end of the month. 19 00:00:56,640 --> 00:00:59,560 Speaker 3: But and then after that, it's a I guess, still 20 00:00:59,560 --> 00:01:00,200 Speaker 3: a guessing. 21 00:01:01,760 --> 00:01:05,600 Speaker 4: Yeah, it is probably still a guessing game pall afterward, 22 00:01:05,920 --> 00:01:09,440 Speaker 4: especially since before the September meeting, we effectively get two 23 00:01:09,640 --> 00:01:11,480 Speaker 4: months worth of data, right, so it's not just a 24 00:01:11,520 --> 00:01:14,560 Speaker 4: single month like we kind of have now. In between 25 00:01:14,840 --> 00:01:17,399 Speaker 4: the June and July meetings, you know, the data has 26 00:01:17,440 --> 00:01:21,520 Speaker 4: been pretty mixed. Today's data is just proof of that. 27 00:01:21,640 --> 00:01:25,560 Speaker 4: We had pretty weak industrial production numbers that doesn't look good. 28 00:01:25,600 --> 00:01:28,760 Speaker 4: The good sector of manufacturing is not doing well in 29 00:01:28,800 --> 00:01:33,560 Speaker 4: the United States, and indeed globally there's a slowdown in manufacturing. 30 00:01:33,560 --> 00:01:36,039 Speaker 4: And then but on the other side, spending was really 31 00:01:36,040 --> 00:01:38,040 Speaker 4: good when you look at the control group. So this 32 00:01:38,120 --> 00:01:41,440 Speaker 4: is the GDP input from the retail sales numbers this morning, 33 00:01:41,440 --> 00:01:45,720 Speaker 4: and that was solid. So you have very mixed data 34 00:01:46,000 --> 00:01:48,960 Speaker 4: in terms of what's gone on business sector and maybe 35 00:01:48,960 --> 00:01:52,240 Speaker 4: setting up for a recession versus you know, actual spending 36 00:01:52,320 --> 00:01:53,840 Speaker 4: data which looks pretty good. 37 00:01:54,040 --> 00:01:56,480 Speaker 5: So IRA, in terms of what you anticipate the meetings 38 00:01:56,520 --> 00:01:58,840 Speaker 5: look the meeting minutes looking like coming out of this 39 00:01:59,560 --> 00:02:03,080 Speaker 5: next FED meeting next week, do you anticipate the majority 40 00:02:03,080 --> 00:02:05,440 Speaker 5: of the conversation being about what the FED is going 41 00:02:05,480 --> 00:02:09,359 Speaker 5: to do in the fall versus a justification for what 42 00:02:09,400 --> 00:02:11,079 Speaker 5: we expect to be a hike next week. 43 00:02:12,200 --> 00:02:14,600 Speaker 4: Yes, So I don't think the minutes of this meeting 44 00:02:14,639 --> 00:02:17,320 Speaker 4: will be particularly interesting because there's not a summary of 45 00:02:17,320 --> 00:02:20,120 Speaker 4: economic projections that are coming out, so they don't you know, 46 00:02:20,160 --> 00:02:22,880 Speaker 4: they always tweak, you know, in the inter meeting period 47 00:02:22,960 --> 00:02:26,640 Speaker 4: kind of here's what happened. But those big discussions about 48 00:02:27,080 --> 00:02:31,880 Speaker 4: more forward looking information will come more from the September 49 00:02:31,919 --> 00:02:34,440 Speaker 4: meeting when we do get a new dot plot summary 50 00:02:34,480 --> 00:02:37,560 Speaker 4: of economic projections, where do we think unemployment and GDP 51 00:02:37,760 --> 00:02:40,359 Speaker 4: and everything else is going to be? So I think 52 00:02:40,400 --> 00:02:43,960 Speaker 4: September will be much more telling in that regard. You know, 53 00:02:44,240 --> 00:02:47,000 Speaker 4: my feeling is is that the Fed this week is 54 00:02:47,040 --> 00:02:49,960 Speaker 4: going to say, Okay, we're hiking again. They basically promised 55 00:02:49,960 --> 00:02:52,200 Speaker 4: that they were going to and they'll say, but we're 56 00:02:52,200 --> 00:02:55,240 Speaker 4: going to reevaluate meeting by meeting, and they'll continue with 57 00:02:55,280 --> 00:02:58,280 Speaker 4: that type of discussion. You know, you go back to 58 00:02:58,560 --> 00:03:02,120 Speaker 4: this time last year, and the Fed was still saying, 59 00:03:02,160 --> 00:03:05,120 Speaker 4: we're continuing to increase interest rates, right, so they were 60 00:03:05,120 --> 00:03:07,880 Speaker 4: almost promising that they're going to keep going, not necessarily 61 00:03:07,919 --> 00:03:09,560 Speaker 4: at what pace, but that they were going to keep 62 00:03:09,639 --> 00:03:13,000 Speaker 4: hiking rates. And and now they're they're significantly more data 63 00:03:13,040 --> 00:03:16,560 Speaker 4: dependent than they were a year ago. For each in 64 00:03:16,600 --> 00:03:20,560 Speaker 4: between each individual meeting. So so so this is kind 65 00:03:20,600 --> 00:03:22,440 Speaker 4: of like a placeholder meeting, I think in a way 66 00:03:22,520 --> 00:03:24,840 Speaker 4: where September can be much more telling us to the 67 00:03:24,880 --> 00:03:26,000 Speaker 4: future of interest rates. 68 00:03:26,560 --> 00:03:28,040 Speaker 1: Is this fed a reserve ever going to come out 69 00:03:28,040 --> 00:03:30,880 Speaker 1: and say basically, hey, we did a good job. We 70 00:03:30,960 --> 00:03:33,800 Speaker 1: got inflation down, it's going in the right direction. You know, 71 00:03:33,880 --> 00:03:36,240 Speaker 1: we were aggressive, but it's working. 72 00:03:37,800 --> 00:03:37,960 Speaker 6: Well. 73 00:03:38,120 --> 00:03:40,600 Speaker 4: They've already started to say that that. You know, Jay 74 00:03:40,680 --> 00:03:43,720 Speaker 4: Powell during his press conference and in some of the 75 00:03:43,760 --> 00:03:47,600 Speaker 4: other conferences and and and and meetings that he's had 76 00:03:47,640 --> 00:03:50,560 Speaker 4: in between, whether it was before Congress or over in 77 00:03:50,600 --> 00:03:55,200 Speaker 4: Portugal at at at the ECB summit, he's basically said, look, 78 00:03:55,840 --> 00:03:58,760 Speaker 4: inflation is trending in a direction that we like, but 79 00:03:58,760 --> 00:04:02,880 Speaker 4: but the job's not done. So I think from his standpoint, 80 00:04:02,920 --> 00:04:05,760 Speaker 4: from their standpoint, that they can they'll they'll won't say 81 00:04:05,800 --> 00:04:09,360 Speaker 4: anything like that until it's very clear that say that 82 00:04:09,440 --> 00:04:12,800 Speaker 4: the PC deflator is below three percent. Once you get there, 83 00:04:12,840 --> 00:04:15,360 Speaker 4: I think they can say that like, we're approaching our target, 84 00:04:15,520 --> 00:04:18,320 Speaker 4: and and then they'll pat themselves in the back maybe 85 00:04:18,360 --> 00:04:21,520 Speaker 4: a little bit, and and basically say, you know, job's done, 86 00:04:21,560 --> 00:04:22,880 Speaker 4: but we're being cautious. 87 00:04:23,440 --> 00:04:26,039 Speaker 5: And what's your timeline these days, Ira for when we 88 00:04:26,080 --> 00:04:27,800 Speaker 5: can anticipate that celebration. 89 00:04:29,440 --> 00:04:31,480 Speaker 4: Yeah, so I think before the end of the year 90 00:04:31,600 --> 00:04:34,400 Speaker 4: that the FED is going to be able to say, 91 00:04:34,440 --> 00:04:38,200 Speaker 4: you know, we've gotten inflation back toward we're near our 92 00:04:39,120 --> 00:04:42,479 Speaker 4: our target level of two percent. So because of that, 93 00:04:42,520 --> 00:04:45,880 Speaker 4: we can remain on hold, and you know, they'll always 94 00:04:45,920 --> 00:04:49,320 Speaker 4: continue to use the buzzwords of we're continuing to watch 95 00:04:49,520 --> 00:04:52,800 Speaker 4: you know, economic activity and inflation and jobs and everything else. 96 00:04:53,720 --> 00:04:55,960 Speaker 4: I don't think that they're going to cut rates until 97 00:04:56,640 --> 00:04:59,240 Speaker 4: later next year, so a little bit beyond what's what's 98 00:04:59,240 --> 00:05:02,240 Speaker 4: being priced, it's still pricing for cuts in the first 99 00:05:02,279 --> 00:05:03,919 Speaker 4: quarter of next year, or the first cut in the 100 00:05:03,920 --> 00:05:07,080 Speaker 4: first quarter of next year. I think it's gonna they're 101 00:05:07,120 --> 00:05:10,159 Speaker 4: not going to ultimately cut until later next year. Once 102 00:05:10,200 --> 00:05:12,320 Speaker 4: they do, I think that the economy is going to 103 00:05:12,360 --> 00:05:15,040 Speaker 4: be weak enough that they'll have to cut much more aggressively, 104 00:05:15,080 --> 00:05:16,520 Speaker 4: maybe than what the market's pricing. 105 00:05:16,800 --> 00:05:20,440 Speaker 5: Well to Paul's point about when they can start to celebrate, 106 00:05:20,560 --> 00:05:24,000 Speaker 5: I wonder when we might have a FED that does 107 00:05:24,040 --> 00:05:26,279 Speaker 5: a little bit of a post mortem and looks at 108 00:05:26,800 --> 00:05:30,080 Speaker 5: the lag in raising interest rates and maybe is open 109 00:05:30,120 --> 00:05:33,320 Speaker 5: to discussing and an effort to build some credibility that 110 00:05:33,320 --> 00:05:35,920 Speaker 5: they maybe drop the ball a little bit too early on. 111 00:05:35,960 --> 00:05:37,880 Speaker 5: Do you anticipate anything like that happening. 112 00:05:39,680 --> 00:05:43,080 Speaker 4: Well, you know, I think everyone and the Federal Reserve 113 00:05:43,320 --> 00:05:46,039 Speaker 4: always does some self reflection, and certainly they can be 114 00:05:46,080 --> 00:05:49,560 Speaker 4: criticized for, you know, not even the rate hikes. Like 115 00:05:49,880 --> 00:05:53,080 Speaker 4: if I were to do a post mortem on what 116 00:05:53,160 --> 00:05:56,080 Speaker 4: the Federal Reserve did and the actions that it took, 117 00:05:56,160 --> 00:05:58,400 Speaker 4: I think the single biggest thing that they did was 118 00:05:58,400 --> 00:06:01,760 Speaker 4: a continued quantitative easing to long. You know, they could 119 00:06:01,760 --> 00:06:04,239 Speaker 4: have ended quantitative easing in the spring of twenty twenty 120 00:06:04,279 --> 00:06:09,080 Speaker 4: one and you know, started to hike in early twenty 121 00:06:09,120 --> 00:06:11,919 Speaker 4: twenty two, similar to what they did, but they didn't 122 00:06:11,960 --> 00:06:14,640 Speaker 4: take any hawkish actions until maybe it was a little 123 00:06:14,640 --> 00:06:17,680 Speaker 4: bit too late. Now once they got going, they obviously, 124 00:06:17,720 --> 00:06:20,839 Speaker 4: as we know, they really got going and you know, 125 00:06:21,040 --> 00:06:24,040 Speaker 4: kind of played catch up. So and it's not unusual 126 00:06:24,040 --> 00:06:26,039 Speaker 4: for central banks to do that because they don't want 127 00:06:26,080 --> 00:06:29,719 Speaker 4: to be seen as hiking and tightening monetary. 128 00:06:29,240 --> 00:06:30,240 Speaker 3: Policy too early. 129 00:06:31,200 --> 00:06:33,479 Speaker 4: But there's other actions now that they can take other 130 00:06:33,520 --> 00:06:37,160 Speaker 4: than the blunt instrument of actually hiking interest rates, you know, 131 00:06:37,279 --> 00:06:39,920 Speaker 4: especially when they have balance sheet policy that they can 132 00:06:39,960 --> 00:06:41,960 Speaker 4: play with IRA. 133 00:06:42,040 --> 00:06:46,279 Speaker 1: When you know, talk to institutional investors, what's the recession 134 00:06:46,279 --> 00:06:48,640 Speaker 1: talk these days? And people think it's kind of off 135 00:06:48,640 --> 00:06:50,720 Speaker 1: the table or at the very very least it can 136 00:06:50,760 --> 00:06:52,120 Speaker 1: be short and shallow. 137 00:06:53,240 --> 00:06:54,960 Speaker 4: Yeah, most of the people that I talked to think 138 00:06:54,960 --> 00:06:57,279 Speaker 4: that we're going to have some form of soft landing. 139 00:06:58,160 --> 00:07:00,600 Speaker 4: I you know, I don't know if it's a recession, 140 00:07:00,640 --> 00:07:03,520 Speaker 4: like you know, how you define a recession obviously matters 141 00:07:03,560 --> 00:07:05,880 Speaker 4: a lot. Whether whether we get a recession that the 142 00:07:06,000 --> 00:07:09,880 Speaker 4: NBER you know, classifies as one I think is still 143 00:07:10,000 --> 00:07:11,400 Speaker 4: very much up in the air, and a lot of 144 00:07:11,440 --> 00:07:14,400 Speaker 4: investors are kind of looking past that and saying, okay, 145 00:07:14,560 --> 00:07:16,560 Speaker 4: look when we look at the hard data, when we 146 00:07:16,560 --> 00:07:18,400 Speaker 4: look at the retail sales data, which is a hard 147 00:07:18,480 --> 00:07:22,120 Speaker 4: data point because it's actual sales in the economy, that 148 00:07:22,160 --> 00:07:26,720 Speaker 4: looks pretty good, and employment is hasn't yet completely rolled over. 149 00:07:26,760 --> 00:07:29,560 Speaker 4: Although we have slowing job growth, we don't have yet 150 00:07:29,560 --> 00:07:33,160 Speaker 4: have job losses, you know, we've it's pretty rare to 151 00:07:33,200 --> 00:07:36,080 Speaker 4: have a recession and no job losses. So so I 152 00:07:36,080 --> 00:07:38,440 Speaker 4: think a lot of people are very hopeful that we'll 153 00:07:38,480 --> 00:07:42,400 Speaker 4: have a soft landing. You know, I think rates investors 154 00:07:42,400 --> 00:07:44,920 Speaker 4: are a little more skeptical and a little more pessimistic 155 00:07:45,520 --> 00:07:49,920 Speaker 4: than say equity investors that I've spoken to. But there's 156 00:07:49,920 --> 00:07:52,720 Speaker 4: a lot of people who are confused because we do 157 00:07:52,800 --> 00:07:55,840 Speaker 4: have this variety of data. Like I said that that, 158 00:07:56,040 --> 00:07:58,040 Speaker 4: you know, you look at the ism surveys and they're 159 00:07:58,040 --> 00:08:00,600 Speaker 4: suggesting that we're going to have a significant slow down. 160 00:08:00,920 --> 00:08:03,120 Speaker 4: But at the same time, you get retail sales numbers 161 00:08:03,120 --> 00:08:04,800 Speaker 4: like we have this morning, and people are like, yeah, 162 00:08:04,800 --> 00:08:06,600 Speaker 4: you know, maybe the survey data is not going to 163 00:08:06,640 --> 00:08:06,960 Speaker 4: be right. 164 00:08:07,280 --> 00:08:10,960 Speaker 1: All right, We're going to be on alert for more data. 165 00:08:11,000 --> 00:08:14,400 Speaker 1: We obviously have at the FED next week with their announcement, 166 00:08:14,440 --> 00:08:18,000 Speaker 1: our Jersey chief UoS interest rates strategist for Bloomberg Intelligence 167 00:08:18,080 --> 00:08:18,960 Speaker 1: joining us there. 168 00:08:20,000 --> 00:08:23,360 Speaker 7: You're listening to the team Ken's are Live program Bloomberg 169 00:08:23,480 --> 00:08:26,880 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot com, 170 00:08:26,920 --> 00:08:30,040 Speaker 7: the iHeartRadio app, and the Bloomberg Business App, or listen 171 00:08:30,120 --> 00:08:32,240 Speaker 7: on demand wherever you get your podcasts. 172 00:08:34,080 --> 00:08:36,840 Speaker 1: After a brutal twenty twenty two in equities and Fixing Income, 173 00:08:37,400 --> 00:08:39,880 Speaker 1: twenty twenty three is treating investors a lot better. Here 174 00:08:40,000 --> 00:08:41,959 Speaker 1: started the first half of the year, SMP up about 175 00:08:41,960 --> 00:08:43,800 Speaker 1: fifteen percent or so. We've added a little bit more 176 00:08:43,800 --> 00:08:46,520 Speaker 1: to that since here in July. The question for a 177 00:08:46,559 --> 00:08:48,640 Speaker 1: lot of folks is now, what do we do? So 178 00:08:48,720 --> 00:08:50,160 Speaker 1: let's check in with somebody who does this stuff for 179 00:08:50,200 --> 00:08:53,720 Speaker 1: a living. Karen Murphy, CIO of Kestra Investment Management. She 180 00:08:53,800 --> 00:08:56,840 Speaker 1: joins us live here in our Bloomberg Interactive Brokers studio, 181 00:08:56,880 --> 00:09:00,200 Speaker 1: no phoning, and in today. So Caraen, you know, a 182 00:09:00,240 --> 00:09:02,359 Speaker 1: good first half of the year for a lot of investors, 183 00:09:03,000 --> 00:09:05,480 Speaker 1: particularly those that on Apple and an Amazon and Meta 184 00:09:05,520 --> 00:09:07,600 Speaker 1: and things like that. What are you telling your clients 185 00:09:07,600 --> 00:09:10,719 Speaker 1: here as we kind of kick off the second half, Well, thanks. 186 00:09:10,440 --> 00:09:12,800 Speaker 6: So much for having me here. And we've called twenty 187 00:09:12,880 --> 00:09:16,240 Speaker 6: twenty three the revenge of the growth stocks. So there's 188 00:09:16,280 --> 00:09:19,319 Speaker 6: all those stocks that underperformed so much in twenty twenty 189 00:09:19,320 --> 00:09:21,720 Speaker 6: two came back with a vengeance and really turned on 190 00:09:21,760 --> 00:09:24,120 Speaker 6: a dime in the first half. But when you think 191 00:09:24,160 --> 00:09:27,679 Speaker 6: about you know, largest seven stocks in the SMP were 192 00:09:27,760 --> 00:09:31,880 Speaker 6: up about ninety percent year to date. Just mathematically speaking, 193 00:09:31,880 --> 00:09:34,840 Speaker 6: that can't continue forever. So we've started to see the 194 00:09:34,840 --> 00:09:37,920 Speaker 6: market broaden out a little bit. Russell two is coming 195 00:09:37,960 --> 00:09:40,120 Speaker 6: back a little bit, seeing some big caps do better, 196 00:09:40,520 --> 00:09:44,040 Speaker 6: so that's healthy for the market, so, you know, and 197 00:09:44,280 --> 00:09:46,720 Speaker 6: there's a fair amount of economic momentum as well. You know, 198 00:09:46,720 --> 00:09:48,480 Speaker 6: we're still cautious on kind of where we are in 199 00:09:48,480 --> 00:09:52,040 Speaker 6: the economic cycle, but consumers remain really strong. Balancees are 200 00:09:52,040 --> 00:09:54,520 Speaker 6: relatively hefty, so you know, in my mind, it's kind 201 00:09:54,520 --> 00:09:56,120 Speaker 6: of a back to basics where you want to be 202 00:09:56,120 --> 00:09:58,719 Speaker 6: able to have a diversified portfolio because nobody can call 203 00:09:58,760 --> 00:10:01,120 Speaker 6: those big turning points and you can't be stuck in 204 00:10:01,160 --> 00:10:02,959 Speaker 6: a handful of stocks that are suddenly going to turn 205 00:10:03,000 --> 00:10:03,720 Speaker 6: around the wrong way. 206 00:10:04,120 --> 00:10:07,400 Speaker 5: You mentioned the Russell two K and they broke out 207 00:10:07,440 --> 00:10:10,560 Speaker 5: of that key resistance level last week. I wonder to 208 00:10:10,600 --> 00:10:14,160 Speaker 5: what extent you look at that versus the Dow breaking 209 00:10:14,200 --> 00:10:16,240 Speaker 5: out of its key levels as well. What are you 210 00:10:16,640 --> 00:10:19,199 Speaker 5: thinking in terms of the comparison of the two endses. 211 00:10:19,640 --> 00:10:22,200 Speaker 6: Well, Frankly, as a practitioner, the Dow we don't pay 212 00:10:22,240 --> 00:10:25,040 Speaker 6: all that much attention to because it's a fairly concentrated 213 00:10:25,080 --> 00:10:27,400 Speaker 6: measure of what's happening in the market. The Russell two 214 00:10:27,440 --> 00:10:29,560 Speaker 6: is a pretty good representation of what's happening on the 215 00:10:29,600 --> 00:10:32,319 Speaker 6: smaller side of the market. S and P six is 216 00:10:32,360 --> 00:10:34,800 Speaker 6: also a very helpful indicator because you take out some 217 00:10:34,840 --> 00:10:37,319 Speaker 6: of those really small cap names in the Russell two 218 00:10:37,320 --> 00:10:40,120 Speaker 6: thousand that are not that meaningful. So all of those 219 00:10:40,200 --> 00:10:42,520 Speaker 6: again are starting to see a little bit more life. 220 00:10:42,559 --> 00:10:45,080 Speaker 6: But remember, like small caps have been beaten up for years, 221 00:10:45,600 --> 00:10:48,800 Speaker 6: we really have never had that long kind of streak 222 00:10:49,440 --> 00:10:52,200 Speaker 6: of small caps outperforming, at least not in recent history. 223 00:10:52,320 --> 00:10:54,920 Speaker 6: So this could be a sign of some more resiliency 224 00:10:55,000 --> 00:10:56,080 Speaker 6: in those smaller names. 225 00:10:56,840 --> 00:10:58,960 Speaker 1: On the fixing cob side, I mean, you know it 226 00:10:59,040 --> 00:11:02,240 Speaker 1: was brutal, there was nowhere to hide, and fixed income 227 00:11:02,559 --> 00:11:04,280 Speaker 1: this year I can just go sit in to your 228 00:11:04,280 --> 00:11:06,400 Speaker 1: treasury and get four point seven percent. That feels like, 229 00:11:06,679 --> 00:11:09,480 Speaker 1: you know, just paradise. What should I do in a 230 00:11:09,480 --> 00:11:11,480 Speaker 1: fixed income? Should I be taking a little bit more 231 00:11:11,520 --> 00:11:12,640 Speaker 1: risk than into your treasury? 232 00:11:12,760 --> 00:11:15,560 Speaker 6: Well, it's been so interesting to watch investor psychology with 233 00:11:15,640 --> 00:11:18,320 Speaker 6: As you said, twenty twenty two, fixed income was left 234 00:11:18,320 --> 00:11:20,679 Speaker 6: for dead. I mean, it was really an existential crisis, 235 00:11:20,720 --> 00:11:22,200 Speaker 6: and we had a lot of clients who were coming 236 00:11:22,280 --> 00:11:24,920 Speaker 6: to us saying, why do I own fixed income at all? 237 00:11:25,679 --> 00:11:27,280 Speaker 6: This year is a very different story where all of 238 00:11:27,280 --> 00:11:28,920 Speaker 6: a sudden people are very happy sitting in it too. 239 00:11:29,000 --> 00:11:31,720 Speaker 6: Your treasury or a money market earning attractive returns that 240 00:11:31,800 --> 00:11:35,760 Speaker 6: we haven't seen in decades. So the reality somewhere in between, 241 00:11:35,800 --> 00:11:38,840 Speaker 6: fixed income is still a really important asset class. You 242 00:11:38,880 --> 00:11:41,280 Speaker 6: can still build a really great, diverse side portfolio that 243 00:11:41,320 --> 00:11:44,080 Speaker 6: will do well over time, but it's hard to kind 244 00:11:44,120 --> 00:11:46,959 Speaker 6: of draw people out of that very safe place after 245 00:11:46,960 --> 00:11:49,920 Speaker 6: the volatility that we had last year. So eventually, as 246 00:11:49,960 --> 00:11:52,560 Speaker 6: we start to see the Yuell curve kind of revert 247 00:11:52,559 --> 00:11:55,079 Speaker 6: get to a more normal position, I think gradually investors 248 00:11:55,120 --> 00:11:57,200 Speaker 6: will be drawn out the curve and into some other 249 00:11:57,240 --> 00:12:00,800 Speaker 6: asset classes. But you're right, right now, they're pretty comfortab Yeah. 250 00:12:00,840 --> 00:12:05,360 Speaker 5: And in terms of that volatility, obviously the banking turmoil, crisis, 251 00:12:05,360 --> 00:12:07,680 Speaker 5: whatever term you want to use there comes to mind. 252 00:12:08,000 --> 00:12:10,959 Speaker 5: How are you thinking about the long term effects of that. 253 00:12:11,160 --> 00:12:13,199 Speaker 5: Do you think that it was overblown a little bit? 254 00:12:13,440 --> 00:12:15,640 Speaker 5: Or did we underprice the impact? 255 00:12:16,280 --> 00:12:17,840 Speaker 6: I think there was a moment there where we were 256 00:12:17,920 --> 00:12:20,800 Speaker 6: kind of looking across the financial abyss right, like we 257 00:12:20,840 --> 00:12:25,040 Speaker 6: had three very large financial institutions that failed very quickly. 258 00:12:25,520 --> 00:12:28,040 Speaker 6: The good news is that regulators already had a pretty 259 00:12:28,040 --> 00:12:30,960 Speaker 6: good playbook from the financial crisis. They moved in size 260 00:12:31,000 --> 00:12:34,520 Speaker 6: and force, and it was coordinated, so it worked out okay. 261 00:12:34,559 --> 00:12:37,400 Speaker 6: From a systemic perspective, it didn't have to be that way, 262 00:12:37,480 --> 00:12:41,400 Speaker 6: and I credit regulators with managing through that. But there 263 00:12:41,440 --> 00:12:44,960 Speaker 6: are lasting implications, and the big one is tighter lending standards, 264 00:12:45,000 --> 00:12:47,320 Speaker 6: and we're seeing that come through in force. Small businesses 265 00:12:47,360 --> 00:12:51,400 Speaker 6: can't get loans. Loan officers are really tightening up, and 266 00:12:51,440 --> 00:12:53,400 Speaker 6: that will be a drag on economic growth for the 267 00:12:53,400 --> 00:12:54,320 Speaker 6: foreseeable future. 268 00:12:54,960 --> 00:12:58,440 Speaker 1: How about outside of the US are you suggesting your 269 00:12:58,480 --> 00:13:01,920 Speaker 1: clients look at I don't know. For example, we've got 270 00:13:02,559 --> 00:13:05,400 Speaker 1: the dollar pulling back off of its recent strength. 271 00:13:05,440 --> 00:13:06,880 Speaker 3: How do you think about outside of the US? 272 00:13:07,240 --> 00:13:09,640 Speaker 6: Yeah, similar to fixed income, you know, a lot of 273 00:13:09,679 --> 00:13:11,719 Speaker 6: non US equity markets had kind of been left for 274 00:13:11,800 --> 00:13:13,600 Speaker 6: dead because the S and P five hundred was the 275 00:13:13,600 --> 00:13:16,240 Speaker 6: best performing asset class for a year after year. So 276 00:13:16,320 --> 00:13:19,439 Speaker 6: we've been encouraging people to remember that non US stocks 277 00:13:19,480 --> 00:13:22,760 Speaker 6: are still a really important part of a portfolio. In particular, 278 00:13:22,960 --> 00:13:25,480 Speaker 6: you mentioned the dollar, So the dollar has started to 279 00:13:25,520 --> 00:13:28,720 Speaker 6: retreat a little bit. If we have inflation licked here 280 00:13:29,240 --> 00:13:31,920 Speaker 6: and Europe is still battling it, that will also be 281 00:13:31,960 --> 00:13:34,400 Speaker 6: a drag on the dollar. So that is good for 282 00:13:34,480 --> 00:13:37,320 Speaker 6: non US investments. But then also when we look at 283 00:13:37,440 --> 00:13:40,800 Speaker 6: IFA valuations versus the US, US tends to trade at 284 00:13:40,800 --> 00:13:43,760 Speaker 6: a higher evaluation relative to EFA in general, but that 285 00:13:43,840 --> 00:13:45,840 Speaker 6: has gotten to like two and a half standard deviations 286 00:13:45,880 --> 00:13:49,640 Speaker 6: above the norm. So it definitely looks like the valuation differential. 287 00:13:49,679 --> 00:13:51,559 Speaker 6: You're being paid to take a little bit more risk 288 00:13:51,600 --> 00:13:52,640 Speaker 6: outside the US. 289 00:13:53,280 --> 00:13:56,360 Speaker 5: And then okay, if you're getting paid to take on 290 00:13:56,520 --> 00:14:00,319 Speaker 5: risk outside of the US, what is the allocation looking 291 00:14:00,440 --> 00:14:02,400 Speaker 5: like then for those emerging markets? 292 00:14:03,160 --> 00:14:06,240 Speaker 6: So emerging markets is a little trickier because those have 293 00:14:06,640 --> 00:14:09,520 Speaker 6: much larger kind of cycles. You know, there's been a 294 00:14:09,559 --> 00:14:12,200 Speaker 6: lot of talk about China just not coming back online 295 00:14:12,240 --> 00:14:16,120 Speaker 6: like it was expected. Some of those Asian emerging markets 296 00:14:16,120 --> 00:14:17,959 Speaker 6: that rely a lot on China have actually been more 297 00:14:18,000 --> 00:14:21,160 Speaker 6: resilient than expected. So emerging markets, I think is an 298 00:14:21,200 --> 00:14:23,240 Speaker 6: important allocation to be able to have in a portfolio, 299 00:14:23,320 --> 00:14:25,520 Speaker 6: but you want to size it appropriately. You know, if 300 00:14:25,520 --> 00:14:27,560 Speaker 6: you're a very conservative investor, you don't want a huge 301 00:14:27,560 --> 00:14:28,840 Speaker 6: amount of allocation there. 302 00:14:29,600 --> 00:14:31,480 Speaker 1: All right, we're just starting to really get into the 303 00:14:31,520 --> 00:14:34,680 Speaker 1: teeth of earnings here. What are you guys and your teams, 304 00:14:35,080 --> 00:14:37,200 Speaker 1: what are they kind of looking for this earning season? 305 00:14:37,200 --> 00:14:39,440 Speaker 1: What are you kind of listening for on Ernie's calls? 306 00:14:39,800 --> 00:14:41,840 Speaker 6: So certainly the banks are going to be really important. 307 00:14:41,880 --> 00:14:44,640 Speaker 6: We started to see some come out today. We talked 308 00:14:44,640 --> 00:14:48,240 Speaker 6: about lending standards. So how cautious are companies or banks 309 00:14:48,240 --> 00:14:51,400 Speaker 6: in particular being in terms of writing new credit? Also 310 00:14:51,480 --> 00:14:53,920 Speaker 6: what about the credit that's already on their balance sheets? 311 00:14:53,920 --> 00:14:56,720 Speaker 6: So consumers, you know, we're starting to see delinquencies tick 312 00:14:56,800 --> 00:14:59,160 Speaker 6: up a little bit, what kind of behavior are they seeing? 313 00:15:00,000 --> 00:15:02,560 Speaker 6: And then also commercial real estate office in particular, right 314 00:15:02,600 --> 00:15:06,160 Speaker 6: We've we've seen a lot of concern there and it 315 00:15:06,400 --> 00:15:08,800 Speaker 6: hogs up a lot of balance sheet on regional banks. 316 00:15:08,840 --> 00:15:11,120 Speaker 6: So that's going to be very important. And I think 317 00:15:11,160 --> 00:15:15,000 Speaker 6: more generally looking at consumer behavior, so are people starting 318 00:15:15,040 --> 00:15:17,240 Speaker 6: to trade down a little bit? We're certainly seeing it 319 00:15:17,320 --> 00:15:20,040 Speaker 6: outside the US, or people are trading too, you know, 320 00:15:20,120 --> 00:15:23,840 Speaker 6: more private label, cheaper goods, and so how are people reacting, 321 00:15:23,880 --> 00:15:27,400 Speaker 6: particularly in anticipation of things like student loan payments coming back? 322 00:15:27,440 --> 00:15:27,720 Speaker 3: Again? 323 00:15:28,560 --> 00:15:31,200 Speaker 5: When you think about trading down specifically, I feel like 324 00:15:31,240 --> 00:15:34,200 Speaker 5: in the last earning cycle, on the consumer discretionary side, 325 00:15:34,200 --> 00:15:36,480 Speaker 5: at least, it was kind of a mixed picture of 326 00:15:36,520 --> 00:15:40,040 Speaker 5: the consumer like Target, Bad, Walmart, obviously good. How do 327 00:15:40,120 --> 00:15:43,720 Speaker 5: you suss out the information that you're getting throughout and 328 00:15:43,800 --> 00:15:46,840 Speaker 5: earning cycle to come to one conclusion about the consumer? 329 00:15:47,160 --> 00:15:51,920 Speaker 6: Yeah, it's a challenge your job because, as you point out, 330 00:15:51,960 --> 00:15:55,760 Speaker 6: there wasn't a single tune right in the last earning season. 331 00:15:56,160 --> 00:15:58,720 Speaker 6: You heard some areas of caution, some areas like no, 332 00:15:58,880 --> 00:16:01,200 Speaker 6: we're good. Kind of have to put it all together, 333 00:16:01,360 --> 00:16:03,360 Speaker 6: you know, like studying for the CFA, you're talking about 334 00:16:03,400 --> 00:16:05,800 Speaker 6: mosaic theory. So that's really what it is. Taking all 335 00:16:05,800 --> 00:16:07,880 Speaker 6: these little pieces and then stepping back to see what 336 00:16:07,920 --> 00:16:10,200 Speaker 6: picture is forming. So I think we'll know a little 337 00:16:10,200 --> 00:16:11,360 Speaker 6: bit more in a couple of weeks. 338 00:16:12,040 --> 00:16:14,080 Speaker 3: You're based in Austin, right, I am how long have 339 00:16:14,120 --> 00:16:14,520 Speaker 3: you been there? 340 00:16:14,680 --> 00:16:14,960 Speaker 7: Cool? 341 00:16:15,320 --> 00:16:15,960 Speaker 6: Only a year? 342 00:16:16,160 --> 00:16:18,080 Speaker 3: Right, so you're one of those five I've been a Texas. 343 00:16:18,080 --> 00:16:20,640 Speaker 1: I'm just wondering where is Austin putting all these people 344 00:16:20,640 --> 00:16:21,000 Speaker 1: that are you. 345 00:16:20,960 --> 00:16:24,640 Speaker 3: Putting like trailers or something? I mean, can Austin handle 346 00:16:24,680 --> 00:16:25,680 Speaker 3: all these people coming down? 347 00:16:26,000 --> 00:16:28,360 Speaker 6: It has been a challenge. It is very difficult to 348 00:16:28,360 --> 00:16:30,200 Speaker 6: get a dinner reservation on a Friday night. 349 00:16:30,280 --> 00:16:31,400 Speaker 3: How about how about traffic? 350 00:16:31,520 --> 00:16:33,560 Speaker 1: Is what we've seen in some of these southern cities 351 00:16:33,560 --> 00:16:37,000 Speaker 1: even Atlanta hasn't been able to, you know, several decades 352 00:16:37,040 --> 00:16:38,840 Speaker 1: after it exploded and growth to deal with the traffic. 353 00:16:38,920 --> 00:16:41,200 Speaker 6: Well, I always laugh when I hear Austin Nights complaining 354 00:16:41,240 --> 00:16:43,800 Speaker 6: about the traffic. I mean, like, no offense, Austin Nights. 355 00:16:43,840 --> 00:16:46,080 Speaker 6: I love you guys, but you know nothing about traffic. 356 00:16:46,200 --> 00:16:46,800 Speaker 8: I do not know. 357 00:16:46,920 --> 00:16:49,360 Speaker 6: I spent most of my life in New York City. Yeah, 358 00:16:49,440 --> 00:16:51,280 Speaker 6: traffic in Austin is just fine. 359 00:16:51,640 --> 00:16:54,240 Speaker 1: And so is there. Now are people are they? What's 360 00:16:54,320 --> 00:16:56,520 Speaker 1: that back to office situation in Austin? What are people 361 00:16:56,560 --> 00:16:57,120 Speaker 1: generally doing? 362 00:16:57,240 --> 00:16:58,840 Speaker 6: So much more than what you would see here in 363 00:16:58,840 --> 00:17:00,760 Speaker 6: New York City. So we're back four days a week 364 00:17:00,760 --> 00:17:03,200 Speaker 6: and we haven't for a year, and so there's certainly 365 00:17:03,240 --> 00:17:05,680 Speaker 6: a fair amount of people still remote and will probably 366 00:17:05,720 --> 00:17:08,560 Speaker 6: remain that way, but simply because you know, commute times 367 00:17:08,600 --> 00:17:10,200 Speaker 6: are much less than what you find in a place 368 00:17:10,240 --> 00:17:12,280 Speaker 6: like New York. So a lot of people are back 369 00:17:12,320 --> 00:17:13,400 Speaker 6: in the office at least a few. 370 00:17:13,320 --> 00:17:15,119 Speaker 3: Days a week. Is Austin still weird? 371 00:17:15,600 --> 00:17:16,240 Speaker 6: Oh for sure? 372 00:17:16,440 --> 00:17:17,960 Speaker 3: For sure. Yeah, keep Austin. 373 00:17:18,080 --> 00:17:18,439 Speaker 1: I love it. 374 00:17:18,520 --> 00:17:20,360 Speaker 3: Yeah, it's kind of loves a funny tag line. 375 00:17:20,400 --> 00:17:21,919 Speaker 5: No, Austin, Austin is amazing. 376 00:17:22,000 --> 00:17:23,200 Speaker 8: It's like the best and. 377 00:17:23,160 --> 00:17:24,640 Speaker 3: They have a schooler. I think right there, you. 378 00:17:24,560 --> 00:17:26,680 Speaker 8: Know, think got a small one. 379 00:17:26,960 --> 00:17:28,720 Speaker 1: All right, Karen Murphy, thanks so much for joining us. 380 00:17:28,760 --> 00:17:31,400 Speaker 1: Kara Murphy's the CIO at Kestra Investment Management. She's based 381 00:17:31,440 --> 00:17:33,480 Speaker 1: in Austin, Texas, but we got her live here in 382 00:17:33,480 --> 00:17:36,560 Speaker 1: the Bloomberg Interactive Broker Studio, so we just appreciate that. 383 00:17:36,560 --> 00:17:37,800 Speaker 1: Thank you very much for joining us. 384 00:17:37,880 --> 00:17:40,960 Speaker 7: Careen, you're listening to the tape cans Are Live program 385 00:17:41,000 --> 00:17:44,960 Speaker 7: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, 386 00:17:45,119 --> 00:17:47,840 Speaker 7: the tune in app, Bloomberg dot Com, and the Bloomberg 387 00:17:47,880 --> 00:17:50,960 Speaker 7: Business App. You can also listen live on Amazon Alexa 388 00:17:51,040 --> 00:17:54,320 Speaker 7: from our flagship New York station. Just say Alexa play 389 00:17:54,440 --> 00:17:56,400 Speaker 7: Bloomberg eleven thirty. 390 00:17:57,359 --> 00:17:59,720 Speaker 1: All right, I'm looking at the work function here. We 391 00:17:59,760 --> 00:18:03,280 Speaker 1: have the FED obviously next week Wednesday, I think ninety 392 00:18:03,280 --> 00:18:07,159 Speaker 1: three point six percent percentage likelihood of raising rates. 393 00:18:07,359 --> 00:18:08,320 Speaker 3: What do you do after that? 394 00:18:08,359 --> 00:18:08,520 Speaker 7: Though? 395 00:18:08,560 --> 00:18:11,520 Speaker 1: I mean, I think inflation is whipped here in the US, 396 00:18:11,520 --> 00:18:14,160 Speaker 1: but nobody asked me my opinion, certainly not at the FED. 397 00:18:14,440 --> 00:18:17,280 Speaker 1: I wonder how things are going around the world. Anakatrion 398 00:18:17,440 --> 00:18:21,000 Speaker 1: joins US. She's a chief economist international for Van Longshot 399 00:18:21,080 --> 00:18:25,520 Speaker 1: Kempen based in Amsterdam. So Anika give us a sense 400 00:18:25,560 --> 00:18:28,560 Speaker 1: of I think inflation's whipped here in the US, I 401 00:18:28,560 --> 00:18:31,120 Speaker 1: don't know. Talk to us about Europe. How are things? 402 00:18:31,320 --> 00:18:33,200 Speaker 1: How's the inflation story playing out there? 403 00:18:35,680 --> 00:18:38,160 Speaker 9: Well, inflation is not whipped yet in Europe, and it's 404 00:18:38,200 --> 00:18:40,520 Speaker 9: it's typical, you know, situation that Europe is behind the 405 00:18:40,600 --> 00:18:43,440 Speaker 9: caa versus the US. So we hope that Europe will 406 00:18:43,440 --> 00:18:46,760 Speaker 9: continue its pass But I guess the main issue is 407 00:18:46,800 --> 00:18:54,240 Speaker 9: that especially services inflation, especially core inflation, it's remaining stubbornly high. 408 00:18:54,320 --> 00:18:58,160 Speaker 9: And that's why Leguard, unlike Powell, actually has been very 409 00:18:58,280 --> 00:19:02,479 Speaker 9: very outspoken. We are not done yet. So we can 410 00:19:02,600 --> 00:19:05,320 Speaker 9: definitely expect more rate hikes from the ECB. 411 00:19:06,320 --> 00:19:08,400 Speaker 5: And when you look at what's going to happen here 412 00:19:08,600 --> 00:19:12,320 Speaker 5: in the States, the next FED meeting is a kind 413 00:19:12,320 --> 00:19:15,280 Speaker 5: of foregone conclusion of another hike. The real question is 414 00:19:15,280 --> 00:19:17,480 Speaker 5: what's going to happen in the fall. What are you 415 00:19:17,600 --> 00:19:20,280 Speaker 5: going to be looking at to suss out what the 416 00:19:20,320 --> 00:19:23,240 Speaker 5: Fed might be doing come September? Are you're going to 417 00:19:23,320 --> 00:19:26,960 Speaker 5: be looking at J Powell's commentary next week? Other FEDS speak. 418 00:19:27,600 --> 00:19:29,120 Speaker 5: What's your input there? 419 00:19:32,359 --> 00:19:34,359 Speaker 9: Yeah, Well, the minutes are always fascinating because in the 420 00:19:34,400 --> 00:19:36,080 Speaker 9: last set of minutes, I think there was a slip 421 00:19:36,119 --> 00:19:38,639 Speaker 9: of the tongue that we saw using between the language 422 00:19:38,640 --> 00:19:41,479 Speaker 9: of pause and skip, because initially it was paused, then 423 00:19:41,480 --> 00:19:43,560 Speaker 9: suddenly the word skip came out, and then oh gosh, no, 424 00:19:43,680 --> 00:19:45,760 Speaker 9: you know, pause again. So I think the minutes are 425 00:19:45,760 --> 00:19:48,000 Speaker 9: interesting also looking at what the consensus is, what are 426 00:19:48,040 --> 00:19:50,440 Speaker 9: the other officials saying? And that was interesting last time 427 00:19:50,800 --> 00:19:54,480 Speaker 9: because the majority we're talking about two hikes from here, 428 00:19:54,840 --> 00:19:57,800 Speaker 9: whereas a couple of months ago that absolutely wasn't the case. 429 00:19:57,840 --> 00:20:00,399 Speaker 9: So that incremental change in language. 430 00:20:00,080 --> 00:20:01,640 Speaker 8: Across the whole board is interesting. 431 00:20:02,040 --> 00:20:04,840 Speaker 9: But by far the most important thing is also in 432 00:20:04,880 --> 00:20:08,160 Speaker 9: the US, what is going to happen to core inflation? 433 00:20:08,600 --> 00:20:11,320 Speaker 9: And yes, you know, it looked less bad than expected 434 00:20:11,320 --> 00:20:14,760 Speaker 9: in the last print, but we're still nowhere near the 435 00:20:14,840 --> 00:20:18,680 Speaker 9: two percent targeted number, and maybe last point, if I may, 436 00:20:19,160 --> 00:20:22,000 Speaker 9: the two percent targeted number, I don't think you know 437 00:20:22,040 --> 00:20:23,800 Speaker 9: you're going to see that coming at this stage, but 438 00:20:23,920 --> 00:20:28,760 Speaker 9: you could argue is two percent even irrelevant target? Probably 439 00:20:28,840 --> 00:20:30,880 Speaker 9: too early for that discussion to come up. 440 00:20:31,200 --> 00:20:34,000 Speaker 1: ANAKA, are you concerned that here in the US to 441 00:20:34,080 --> 00:20:36,879 Speaker 1: FED either has gone or will go too far in 442 00:20:37,400 --> 00:20:40,160 Speaker 1: push this economy into recession either late this year into 443 00:20:40,240 --> 00:20:40,640 Speaker 1: next year. 444 00:20:40,680 --> 00:20:42,480 Speaker 3: That maybe could be avoided. 445 00:20:45,800 --> 00:20:47,760 Speaker 9: Yeah, I think I think the biggest concern is the following. 446 00:20:48,200 --> 00:20:51,560 Speaker 9: Let's let's zoom out again. We've spent almost ten years 447 00:20:51,600 --> 00:20:54,399 Speaker 9: massively under shooting the inflation target, and now you know, 448 00:20:54,440 --> 00:20:57,560 Speaker 9: the last period we're massively over and shooting the inflation targets. 449 00:20:57,920 --> 00:20:59,399 Speaker 9: So if you took a step back and said, well, 450 00:20:59,440 --> 00:21:02,560 Speaker 9: look to tolerate this overshoot period because you know, apparently 451 00:21:02,600 --> 00:21:05,119 Speaker 9: at ebbs and flows, fine, and then you know we 452 00:21:05,119 --> 00:21:07,199 Speaker 9: don't need to be so aggressive on monetary policy. We 453 00:21:07,200 --> 00:21:09,919 Speaker 9: don't need to keep aggressively hiking. Maybe we can avoid 454 00:21:09,960 --> 00:21:12,199 Speaker 9: this hard landing. That's what the data was telling us 455 00:21:12,359 --> 00:21:15,000 Speaker 9: last part, not the leading indicators, but the actual data. 456 00:21:15,480 --> 00:21:19,000 Speaker 9: And we shouldn't be too worried. However, if also part 457 00:21:19,000 --> 00:21:22,240 Speaker 9: of the credibility restoration that they're busy with, if they're 458 00:21:22,359 --> 00:21:25,880 Speaker 9: extremely adamant we said two percent, we have to get 459 00:21:25,920 --> 00:21:28,959 Speaker 9: to the two percent. If we don't get there, we 460 00:21:29,040 --> 00:21:33,280 Speaker 9: keep on hiking, then yes, that could be really painful 461 00:21:34,000 --> 00:21:37,040 Speaker 9: for the economy because the transition mechanism takes time. 462 00:21:38,520 --> 00:21:43,040 Speaker 5: Well, and it takes time, especially in a country like 463 00:21:43,080 --> 00:21:46,080 Speaker 5: the US where we have so much spending going on, 464 00:21:47,080 --> 00:21:50,480 Speaker 5: particularly from the government when we look at Bidenomics and 465 00:21:50,520 --> 00:21:53,080 Speaker 5: the infrastructure Bill. I kept making the joke this weekend 466 00:21:53,080 --> 00:21:54,679 Speaker 5: because I was on a road trip that I was 467 00:21:54,720 --> 00:21:58,560 Speaker 5: really seen biden armics in action, because the amount of 468 00:21:58,600 --> 00:22:03,800 Speaker 5: construction there was in on the highways was absolutely unhinged. So, Anaga, 469 00:22:03,880 --> 00:22:08,280 Speaker 5: when you think about the spending that's happening from the 470 00:22:08,440 --> 00:22:12,600 Speaker 5: US government pumping that money into the economy, how does 471 00:22:12,680 --> 00:22:15,160 Speaker 5: that square with the moves we're seen from the Federal 472 00:22:15,240 --> 00:22:20,000 Speaker 5: Reserve to try and fight inflation. Can the two come together? 473 00:22:22,640 --> 00:22:25,040 Speaker 9: Well, this is exactly the problem we're dealing with. And 474 00:22:25,080 --> 00:22:27,239 Speaker 9: I'm sure it wasn't a fun road for having all 475 00:22:27,280 --> 00:22:30,920 Speaker 9: that infrastructure work being put to play, but that's exactly 476 00:22:30,960 --> 00:22:32,840 Speaker 9: the problem. So why is it that we believe that 477 00:22:32,880 --> 00:22:35,040 Speaker 9: inflation is going to be high at structurally for longer. 478 00:22:35,280 --> 00:22:37,520 Speaker 9: Partly it's because of what you just mentioned. You know, 479 00:22:37,560 --> 00:22:40,520 Speaker 9: if you add up the Inflation Reduction Act, which ironically 480 00:22:40,600 --> 00:22:43,399 Speaker 9: is actually resulting in more inflation, if you add up 481 00:22:43,440 --> 00:22:46,280 Speaker 9: the infrastructure Bill, if you add up potential student forgiveness, 482 00:22:46,280 --> 00:22:49,040 Speaker 9: et cetera, et cetera. That's more than a trillion dollars. 483 00:22:49,080 --> 00:22:53,439 Speaker 9: That's just literally being pumped into an economy. We're at 484 00:22:53,440 --> 00:22:55,560 Speaker 9: the other side of the table. You've got the monetary 485 00:22:55,600 --> 00:22:58,879 Speaker 9: policy makers saying, gosh, we're trying to squeeze out the 486 00:22:58,920 --> 00:23:01,760 Speaker 9: oxygen from the market. We want to reduce our balance sheets, 487 00:23:01,800 --> 00:23:06,080 Speaker 9: we want to increase interest rates. And that's just a juxtaposition. 488 00:23:06,240 --> 00:23:08,600 Speaker 9: It's very messy. So that's why you know, there's a 489 00:23:08,640 --> 00:23:11,440 Speaker 9: fair chance inflation lasts for longer, and the two parties 490 00:23:11,440 --> 00:23:13,920 Speaker 9: on the same table should figure out, you know, which 491 00:23:13,960 --> 00:23:15,760 Speaker 9: direction are we going to let this thing going? 492 00:23:16,760 --> 00:23:19,560 Speaker 1: Hey, Anika, the China. I'm going to talk a little 493 00:23:19,560 --> 00:23:22,159 Speaker 1: bit about China the reopening. I think the expectations were 494 00:23:22,200 --> 00:23:25,400 Speaker 1: quite high what that would mean maybe for the global economy, 495 00:23:25,440 --> 00:23:28,520 Speaker 1: and we're seeing some weaker than expected data coming out 496 00:23:28,520 --> 00:23:30,359 Speaker 1: of China. And I think about the exposure obviously in 497 00:23:30,359 --> 00:23:33,160 Speaker 1: the US big trading partner, but also think about Europe 498 00:23:33,400 --> 00:23:35,720 Speaker 1: because I think about some of these big European industrial 499 00:23:35,720 --> 00:23:38,200 Speaker 1: companies and all the big equipment and stuff that they 500 00:23:38,240 --> 00:23:41,240 Speaker 1: make they sell into China. Talk to us about kind 501 00:23:41,240 --> 00:23:46,159 Speaker 1: of how you know European manufacturers in European industry are 502 00:23:46,160 --> 00:23:49,000 Speaker 1: thinking about China and the pace of the reopening there. 503 00:23:50,359 --> 00:23:52,480 Speaker 9: Yeah, and to your point, you know the pace of reopening. 504 00:23:52,480 --> 00:23:55,240 Speaker 9: We were very excited in the beginning, and that excitement 505 00:23:55,280 --> 00:23:58,080 Speaker 9: got abated because we see that things are really slowing down. 506 00:23:58,200 --> 00:24:01,560 Speaker 9: And to what extents will the cent bank they're put more, 507 00:24:01,640 --> 00:24:03,959 Speaker 9: as said, oxygen into the markets. We don't know, but 508 00:24:04,000 --> 00:24:06,160 Speaker 9: I think that the company's issue is twofold. So on 509 00:24:06,160 --> 00:24:08,200 Speaker 9: one fold, it's producing goods that are sold to China 510 00:24:08,240 --> 00:24:11,120 Speaker 9: and looking at the disposable income and is that demand 511 00:24:11,200 --> 00:24:14,320 Speaker 9: going to be robust enough to keep up those expoarded sales. 512 00:24:14,920 --> 00:24:17,040 Speaker 9: But I think the other side is maybe more interesting, 513 00:24:17,160 --> 00:24:21,280 Speaker 9: which is because of geopolitics, because of rewiring of supply chains, 514 00:24:21,320 --> 00:24:25,280 Speaker 9: et cetera. Companies also European companies that were relying on 515 00:24:25,560 --> 00:24:28,720 Speaker 9: part of their manufacturing footprint to be situated in China 516 00:24:29,080 --> 00:24:32,920 Speaker 9: that have now got to find other locations. That's structurally 517 00:24:33,000 --> 00:24:36,359 Speaker 9: inflationary in most cases. So you know, your cost of 518 00:24:36,400 --> 00:24:40,959 Speaker 9: good souls are shooting up, and are you able to 519 00:24:41,000 --> 00:24:43,680 Speaker 9: pass those you know, higher cost to your customers? Yes 520 00:24:43,760 --> 00:24:45,639 Speaker 9: or no? You've already passed on quite a bit. Are 521 00:24:45,680 --> 00:24:47,280 Speaker 9: consumers willing to pay those prices? 522 00:24:47,320 --> 00:24:47,800 Speaker 8: Et cetera? 523 00:24:48,320 --> 00:24:50,159 Speaker 9: That just exacerbates the issue. 524 00:24:50,320 --> 00:24:53,640 Speaker 5: Yeah, and aga final thirty seconds here soft landing, how 525 00:24:53,840 --> 00:24:55,639 Speaker 5: likely is that in your scenarios? 526 00:24:56,280 --> 00:24:59,639 Speaker 9: It's well, it all depends on I think it's thirty seconds. 527 00:25:00,000 --> 00:25:03,240 Speaker 9: Most important thing is how stubborn are central banks going 528 00:25:03,280 --> 00:25:05,439 Speaker 9: to be on this two percent inflation targets? If we're 529 00:25:05,480 --> 00:25:09,000 Speaker 9: willing to accept inflation being in the three four percent 530 00:25:09,119 --> 00:25:12,000 Speaker 9: for longer than expected, and they won't be too aggressive 531 00:25:12,040 --> 00:25:14,600 Speaker 9: the soft land who could very well happen if we 532 00:25:14,760 --> 00:25:17,600 Speaker 9: stick to it and have to keep pushing policy according 533 00:25:17,720 --> 00:25:21,480 Speaker 9: to the rule book. It could get more thankful. 534 00:25:21,080 --> 00:25:23,400 Speaker 1: Anaka, thanks so much for joining us. We always appreciate 535 00:25:23,520 --> 00:25:26,520 Speaker 1: getting your global view, your global perspective. Anika is the 536 00:25:26,600 --> 00:25:30,720 Speaker 1: chief ec Commerce International for von launchhot Kempen, joining us 537 00:25:30,800 --> 00:25:34,040 Speaker 1: via zoom from Amsterdam, giving us the global view. 538 00:25:35,040 --> 00:25:38,400 Speaker 7: You're listening to the team. Can's our live program Bloomberg 539 00:25:38,520 --> 00:25:41,919 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot com, 540 00:25:41,960 --> 00:25:45,080 Speaker 7: the iHeartRadio app and the Bloomberg Business App, or listen 541 00:25:45,160 --> 00:25:47,280 Speaker 7: on demand wherever you get your podcasts. 542 00:25:49,480 --> 00:25:51,600 Speaker 1: Let's talk big banks, right, smack in the middle of 543 00:25:51,640 --> 00:25:54,600 Speaker 1: earning season for the banks, the regional banks, the big 544 00:25:54,640 --> 00:25:58,119 Speaker 1: money centers, all reporting numbers here. So let's round table 545 00:25:58,160 --> 00:26:01,479 Speaker 1: this thing like we like to do. Alison Williams, She 546 00:26:01,560 --> 00:26:03,919 Speaker 1: joins u Via Zoom and Herman Chen. We got them 547 00:26:04,000 --> 00:26:07,320 Speaker 1: last owed here into our Bloomberg studio here in New York. Herman, 548 00:26:07,400 --> 00:26:09,280 Speaker 1: let's start with you, because you were the source of 549 00:26:09,280 --> 00:26:11,960 Speaker 1: all this problem several months ago, you in your regional banks, 550 00:26:12,520 --> 00:26:16,760 Speaker 1: big super regional bank reported today P and C it 551 00:26:16,800 --> 00:26:17,400 Speaker 1: stocks up. 552 00:26:17,680 --> 00:26:19,800 Speaker 3: Yeah, what are you see from P and C A 553 00:26:19,800 --> 00:26:20,560 Speaker 3: bit of a surprise. 554 00:26:20,600 --> 00:26:23,760 Speaker 10: I think it's just PNC is getting caught up with 555 00:26:23,800 --> 00:26:28,159 Speaker 10: some of the more positive tone from some of the 556 00:26:28,200 --> 00:26:31,160 Speaker 10: other banks that reported today. But for P and C itself, 557 00:26:31,800 --> 00:26:36,280 Speaker 10: the earnings missed estaments and the guidance was a bit 558 00:26:36,320 --> 00:26:42,680 Speaker 10: weak relative to both net interest income and some other areas. 559 00:26:42,680 --> 00:26:45,240 Speaker 10: So it's a bit of a challenge for regional banks. 560 00:26:45,240 --> 00:26:47,920 Speaker 10: I think this will be sort of reflective across the group. 561 00:26:48,000 --> 00:26:52,040 Speaker 10: Where the positive costser continue to rise, banks will continue 562 00:26:52,080 --> 00:26:54,919 Speaker 10: to offer weaker guidance with respect to net interest income. 563 00:26:55,400 --> 00:26:57,080 Speaker 10: Lonkre's going to be a bit of a challenge for 564 00:26:57,119 --> 00:26:59,160 Speaker 10: the regional. It's because they don't have a lot of 565 00:26:59,200 --> 00:27:02,480 Speaker 10: the areas that are growing, like credit cards, so it's 566 00:27:02,520 --> 00:27:03,840 Speaker 10: going to be a bit of a slog over the 567 00:27:03,840 --> 00:27:04,520 Speaker 10: next three quarters. 568 00:27:04,880 --> 00:27:07,320 Speaker 5: Well, it seems like wealth management is the thing that's 569 00:27:07,400 --> 00:27:10,959 Speaker 5: kind of keeping a lot of these banks from having 570 00:27:11,359 --> 00:27:14,919 Speaker 5: less than great earnings this season. Allison, to what extent 571 00:27:15,040 --> 00:27:18,080 Speaker 5: do you think that the wealth management side of these 572 00:27:18,119 --> 00:27:21,479 Speaker 5: firms is going to be able to keep them from 573 00:27:22,800 --> 00:27:27,200 Speaker 5: experiencing more of these headwinds from things like deposits and 574 00:27:27,280 --> 00:27:28,320 Speaker 5: money market funds. 575 00:27:28,480 --> 00:27:32,080 Speaker 11: Certainly for Morgan, Stanley was very strong of clows came 576 00:27:32,080 --> 00:27:36,000 Speaker 11: in better than expected, their fee base flows better, investment 577 00:27:36,040 --> 00:27:40,480 Speaker 11: management flows also better, and in fact revenue for them 578 00:27:41,000 --> 00:27:42,320 Speaker 11: also came in a bit better. 579 00:27:42,520 --> 00:27:46,080 Speaker 8: The net interest income side within. 580 00:27:45,920 --> 00:27:48,720 Speaker 11: Wealth tends to feel a little bit more pressure than 581 00:27:49,040 --> 00:27:51,200 Speaker 11: some of the core business, and that really is because 582 00:27:51,200 --> 00:27:54,440 Speaker 11: those customers are a little bit more presensitive, the boundsies 583 00:27:54,480 --> 00:27:57,760 Speaker 11: are higher, and the cost of deposits tends to rise 584 00:27:57,880 --> 00:28:01,200 Speaker 11: faster there. But I think what we're seeing across the banks, 585 00:28:02,320 --> 00:28:04,520 Speaker 11: if anything, is a little bit of a relief rally 586 00:28:04,560 --> 00:28:08,119 Speaker 11: in the sense that deposit posts are going up. We 587 00:28:08,240 --> 00:28:11,720 Speaker 11: are seeing that migration but it's not as bad as feared. 588 00:28:12,560 --> 00:28:14,359 Speaker 8: Bag America did. 589 00:28:15,160 --> 00:28:17,320 Speaker 11: Come in about in line, so that was not as 590 00:28:17,359 --> 00:28:21,199 Speaker 11: positive as what we saw JP Morgan and City, but 591 00:28:21,280 --> 00:28:24,360 Speaker 11: they did up their guidance for next quarter a little bit, 592 00:28:24,480 --> 00:28:26,720 Speaker 11: and so I think that's a key positive and is 593 00:28:26,760 --> 00:28:28,200 Speaker 11: helping the shares a little bit today. 594 00:28:28,920 --> 00:28:30,960 Speaker 1: Hey Hermer, what have you heard so far and what 595 00:28:31,000 --> 00:28:33,200 Speaker 1: do you expect to hear about? I know that you 596 00:28:33,440 --> 00:28:36,400 Speaker 1: mentioned and also mentioned the cost of deposits going up, obviously, 597 00:28:37,600 --> 00:28:40,320 Speaker 1: but how about just the deposits in general at these 598 00:28:40,360 --> 00:28:43,280 Speaker 1: regional banks are concerned that they would be that they'd 599 00:28:43,320 --> 00:28:44,320 Speaker 1: be losing deposits. 600 00:28:44,760 --> 00:28:45,960 Speaker 3: What are you hearing so for yees? 601 00:28:46,000 --> 00:28:49,240 Speaker 10: So deposits, actually, the overawhill balances have been pretty stable 602 00:28:49,280 --> 00:28:52,360 Speaker 10: if you look at the reporting. But what's interesting is 603 00:28:52,400 --> 00:28:56,560 Speaker 10: the remixing of those deposits, So the non interest sparing accounts, 604 00:28:56,800 --> 00:28:59,080 Speaker 10: those are continuing to fall, so they're down about six 605 00:28:59,160 --> 00:29:01,880 Speaker 10: seven percent across the group so far that have reported, 606 00:29:02,840 --> 00:29:08,200 Speaker 10: and that's just indicative of the repricing pressures as folks 607 00:29:08,200 --> 00:29:12,040 Speaker 10: that have checking accounts, they're moving their money to CDs 608 00:29:12,120 --> 00:29:14,120 Speaker 10: and so the banks have to pay up for those. 609 00:29:14,160 --> 00:29:17,520 Speaker 10: So that's another reason why we're seeing headwinds across the group. 610 00:29:17,720 --> 00:29:21,880 Speaker 5: But it doesn't necessarily feel to consumers like they're getting 611 00:29:22,000 --> 00:29:23,880 Speaker 5: a lot of bang for their buck when it comes 612 00:29:23,960 --> 00:29:26,480 Speaker 5: to these deposits. Do you think that we're going to 613 00:29:26,600 --> 00:29:29,840 Speaker 5: need to see a Bank of America offering better returns 614 00:29:29,840 --> 00:29:31,800 Speaker 5: for people to keep their money in their bank accounts. 615 00:29:32,120 --> 00:29:34,280 Speaker 10: Well, the banks are not going to give you the 616 00:29:34,320 --> 00:29:37,120 Speaker 10: money the higher interst right, you have to take your 617 00:29:37,160 --> 00:29:39,720 Speaker 10: money out of your deposit accounts open up a CD. 618 00:29:39,880 --> 00:29:42,760 Speaker 10: So it takes a bit of some wherewith off from 619 00:29:42,800 --> 00:29:45,280 Speaker 10: your consumer to do that. And the banks are just 620 00:29:45,920 --> 00:29:49,520 Speaker 10: banking on folks just keeping their money and they're checking accounts. 621 00:29:50,040 --> 00:29:52,520 Speaker 10: So that's that's really the dynamics that's playing out right now. 622 00:29:52,720 --> 00:29:55,360 Speaker 1: Hey, Allison, what are we going to see from a 623 00:29:55,400 --> 00:29:57,920 Speaker 1: gold and Sacks just tomorrow? What will you be looking for? 624 00:29:57,920 --> 00:29:59,200 Speaker 1: What do you think the market's looking for? 625 00:29:59,600 --> 00:30:02,520 Speaker 11: So we are going to see some charges at Goldman 626 00:30:02,640 --> 00:30:05,440 Speaker 11: Sachs that we saw some severance costs at Morgan Stanley today, 627 00:30:05,440 --> 00:30:07,680 Speaker 11: We're also going to see that at Goldman and we're 628 00:30:07,720 --> 00:30:10,080 Speaker 11: also going to see the higher impairment. So that's definitely 629 00:30:10,080 --> 00:30:13,920 Speaker 11: going to lead to some pressure on the reported numbers 630 00:30:14,320 --> 00:30:18,440 Speaker 11: on a core basis, trading fees are down and despite 631 00:30:18,560 --> 00:30:21,120 Speaker 11: things coming in a little bit better than expected, and 632 00:30:21,160 --> 00:30:26,240 Speaker 11: there's you know, talk of constructive view those that revenue 633 00:30:26,360 --> 00:30:28,720 Speaker 11: is going to be lower for Golden Sacks, they do 634 00:30:29,040 --> 00:30:32,600 Speaker 11: they are the revenue leader and EM and I and 635 00:30:32,640 --> 00:30:35,840 Speaker 11: that's a big headwind for the quarter. So for the bank, 636 00:30:36,040 --> 00:30:39,000 Speaker 11: we're really going to be looking to see how they 637 00:30:39,200 --> 00:30:42,400 Speaker 11: stacked up competitively on those revenue trends and then costs 638 00:30:42,680 --> 00:30:44,680 Speaker 11: beyond some of the items I talked about, what is 639 00:30:44,680 --> 00:30:46,520 Speaker 11: the core trend there? 640 00:30:46,560 --> 00:30:48,960 Speaker 8: Because they really are working to improve their efficiency. 641 00:30:49,600 --> 00:30:52,960 Speaker 1: Hellison, is there am I imagining this or is there 642 00:30:53,000 --> 00:30:56,240 Speaker 1: any pressure from shareholders or any other external stakeholders on 643 00:30:57,200 --> 00:31:00,080 Speaker 1: David Solomon right now? Given maybe what happened with the 644 00:31:00,120 --> 00:31:01,320 Speaker 1: Consumer Bank for example. 645 00:31:01,560 --> 00:31:02,320 Speaker 8: I mean, I think. 646 00:31:02,120 --> 00:31:05,280 Speaker 11: There's a lot of talk and headlines around the Consumer Bank, 647 00:31:05,320 --> 00:31:09,760 Speaker 11: but keep in mind that was not started under his review, 648 00:31:09,840 --> 00:31:12,320 Speaker 11: so it was something sort of that he inherited, and 649 00:31:12,400 --> 00:31:14,680 Speaker 11: it was you know, they took a shot. 650 00:31:14,760 --> 00:31:16,560 Speaker 8: It was something different for Goldman Sachs. 651 00:31:16,920 --> 00:31:20,600 Speaker 11: I would say that investors never really had a lot 652 00:31:20,600 --> 00:31:23,800 Speaker 11: of faith in that strategy. It's certainly not why people 653 00:31:24,000 --> 00:31:26,840 Speaker 11: bought the stock. It was more something that they tried 654 00:31:26,880 --> 00:31:28,880 Speaker 11: out and could help over time. 655 00:31:29,480 --> 00:31:31,200 Speaker 8: They are continuing with the. 656 00:31:31,040 --> 00:31:34,040 Speaker 11: Consumer deposits side of the business, so there is, you know, 657 00:31:34,160 --> 00:31:37,600 Speaker 11: something there, but certainly the lending strategy is something that 658 00:31:39,320 --> 00:31:41,520 Speaker 11: they've decided it is just not something they're going to 659 00:31:41,600 --> 00:31:44,840 Speaker 11: move forward with. They don't really have the competitive advantage there. 660 00:31:45,520 --> 00:31:47,920 Speaker 5: And when it comes to the consumer Hermann, I want 661 00:31:47,960 --> 00:31:50,120 Speaker 5: to bring you back in here because we talked a 662 00:31:50,120 --> 00:31:54,600 Speaker 5: lot about the impact of credit tightening on consumers small businesses. 663 00:31:55,320 --> 00:31:58,240 Speaker 5: So far with the PNC earnings, are we getting any 664 00:31:58,280 --> 00:32:02,120 Speaker 5: indication as to how tight the credit is getting for 665 00:32:02,360 --> 00:32:06,160 Speaker 5: those smaller consumers small businesses across the country. 666 00:32:06,600 --> 00:32:12,160 Speaker 10: Yeah. So we're seeing actually consumer growth still fairly strong 667 00:32:12,400 --> 00:32:16,440 Speaker 10: across the board, and where the demand has has fallen 668 00:32:16,440 --> 00:32:18,760 Speaker 10: a bit is on the business side of the commercial side, 669 00:32:19,560 --> 00:32:23,600 Speaker 10: and Allison Spanks have seen some strengthen credit card lending, 670 00:32:23,720 --> 00:32:27,720 Speaker 10: so that's something that is helping some of the money 671 00:32:27,720 --> 00:32:31,880 Speaker 10: center banks relative to the regionals, But the tighter underwriting 672 00:32:32,000 --> 00:32:34,440 Speaker 10: is probably going to happen more on the commercial side 673 00:32:34,440 --> 00:32:37,040 Speaker 10: of things, which really is a detriment to the regionals 674 00:32:37,080 --> 00:32:39,320 Speaker 10: because they are more focused on commercial lending. 675 00:32:39,800 --> 00:32:42,840 Speaker 1: Allison, are we seeing any share shifts in you know, 676 00:32:42,880 --> 00:32:46,520 Speaker 1: the I think about the classic fixed income trading businesses 677 00:32:46,720 --> 00:32:49,440 Speaker 1: is it. Are we seeing any big shifts there? There's 678 00:32:49,560 --> 00:32:52,240 Speaker 1: still kind of Goldman, Sachs, Morgans, Stanley, Bank of America 679 00:32:52,240 --> 00:32:53,040 Speaker 1: that the big players. 680 00:32:54,600 --> 00:32:56,280 Speaker 8: I mean, it still is the big players. 681 00:32:56,280 --> 00:32:59,400 Speaker 11: But what we have seen I mean over the last 682 00:32:59,400 --> 00:33:03,280 Speaker 11: decade or so is market share games from the largest 683 00:33:03,400 --> 00:33:04,440 Speaker 11: US competitors. 684 00:33:04,480 --> 00:33:05,680 Speaker 8: In this particular quarter. 685 00:33:06,360 --> 00:33:09,120 Speaker 11: Bank of America is really the standout showing more resilient 686 00:33:10,120 --> 00:33:13,800 Speaker 11: ten percent growth. However, I would also point out that 687 00:33:13,960 --> 00:33:17,880 Speaker 11: you know, Morgan Stanley and Globe and Sachs, who stills 688 00:33:17,880 --> 00:33:20,000 Speaker 11: you well in the commodities business, are up some really 689 00:33:20,520 --> 00:33:24,600 Speaker 11: against some really tough comparison. Morgan Stanley, you know, coming 690 00:33:24,600 --> 00:33:28,360 Speaker 11: in even worse than than than had been expected. But 691 00:33:28,800 --> 00:33:32,760 Speaker 11: if you looked, I think across the different verticals, the 692 00:33:32,760 --> 00:33:35,280 Speaker 11: big getting bigger, and Bank of America really I think 693 00:33:35,360 --> 00:33:38,080 Speaker 11: seeing the fruits of some of their investments in terms 694 00:33:38,120 --> 00:33:40,840 Speaker 11: of the rates trading business and equities trading business. 695 00:33:41,200 --> 00:33:44,440 Speaker 5: Alison really quickly here though, with Bank of America the 696 00:33:44,480 --> 00:33:48,479 Speaker 5: bond losses hitting one hundred and six billion dollars is 697 00:33:48,520 --> 00:33:52,240 Speaker 5: that going to weigh on the bank moving forward, heading 698 00:33:52,280 --> 00:33:53,840 Speaker 5: into the next quarter. 699 00:33:55,120 --> 00:33:59,240 Speaker 11: I think that the bank has sort of give keeps 700 00:33:59,240 --> 00:34:02,680 Speaker 11: giving a lot more granular information about its on portfolio. 701 00:34:03,680 --> 00:34:07,320 Speaker 11: Certainly that's just going to take time to manage that 702 00:34:07,480 --> 00:34:12,360 Speaker 11: over time. And I think that the fact, as we 703 00:34:12,520 --> 00:34:14,960 Speaker 11: learned with these banks, it's not just about the losses 704 00:34:15,000 --> 00:34:17,480 Speaker 11: that you carry, but it's sort of about the strength 705 00:34:17,560 --> 00:34:21,600 Speaker 11: of the deposits and the asset liability management that supports them. 706 00:34:22,160 --> 00:34:26,319 Speaker 11: And what we are seeing at Bank of America deposits 707 00:34:26,360 --> 00:34:30,200 Speaker 11: down with the industry, but certainly that broad based strength 708 00:34:30,440 --> 00:34:33,800 Speaker 11: and especially on the new account side. 709 00:34:34,480 --> 00:34:36,720 Speaker 1: All right, guys, what you just heard is some smart, 710 00:34:36,760 --> 00:34:39,720 Speaker 1: smart analysis from some of our leading voices at Bloomberg 711 00:34:39,760 --> 00:34:42,480 Speaker 1: Intelligence covering the banks. Alison Williams, she covers a big 712 00:34:42,520 --> 00:34:46,120 Speaker 1: global banks, the investment banks. Herman Chan covers the regional banks, 713 00:34:46,120 --> 00:34:48,160 Speaker 1: which have really come into focus really over the last 714 00:34:48,360 --> 00:34:51,160 Speaker 1: several months. And we love getting those two smart people 715 00:34:51,160 --> 00:34:53,359 Speaker 1: together help us kind of walk through what's happening out 716 00:34:53,400 --> 00:34:56,680 Speaker 1: there with the banking system. So Alon Williams and Herman Chan, 717 00:34:56,680 --> 00:34:58,440 Speaker 1: thank you so much for joining us here. 718 00:34:58,640 --> 00:35:01,719 Speaker 7: You're listening to the tape cancer O live program Bloomberg 719 00:35:01,840 --> 00:35:05,440 Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the 720 00:35:05,480 --> 00:35:08,719 Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App. 721 00:35:08,760 --> 00:35:11,560 Speaker 7: You can also listen live on Amazon Alexa from our 722 00:35:11,600 --> 00:35:16,640 Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven thirty. 723 00:35:17,480 --> 00:35:20,640 Speaker 1: I love biotech stocks because they are it seems like 724 00:35:20,640 --> 00:35:23,920 Speaker 1: it's a binary situation. You hit it and a boom, 725 00:35:24,360 --> 00:35:26,480 Speaker 1: or you don't and then it goes to zero. I mean, 726 00:35:26,680 --> 00:35:29,479 Speaker 1: I do not have the stomach to trade these things, 727 00:35:29,480 --> 00:35:31,360 Speaker 1: but a lot of folks do and they do it successfully. 728 00:35:31,400 --> 00:35:35,640 Speaker 1: But one of the bio tech companies, by a farmer companies, 729 00:35:35,719 --> 00:35:37,160 Speaker 1: is Recursion Pharmaceuticals. 730 00:35:37,320 --> 00:35:39,759 Speaker 3: And we have the CEO Chris Gibson. He joins us. 731 00:35:39,880 --> 00:35:43,239 Speaker 1: He's a CEO and co founder of Recursion Pharmaceuticals. Hey, Chris, 732 00:35:43,320 --> 00:35:45,920 Speaker 1: thanks so much for joining us here. First of all, 733 00:35:46,200 --> 00:35:49,600 Speaker 1: tell us what you guys do. What's your focus ad Recursion? 734 00:35:50,520 --> 00:35:53,120 Speaker 12: Well, thanks, Paul high Madison. Yeah, our focus is to 735 00:35:53,200 --> 00:35:56,600 Speaker 12: eliminate that bimodal worry that you just talked about, Paul. 736 00:35:57,200 --> 00:36:01,040 Speaker 12: So we're bringing together the world of automation and computation 737 00:36:01,680 --> 00:36:05,400 Speaker 12: to try and turn this artisanal, bespoke process of discovering 738 00:36:05,440 --> 00:36:08,920 Speaker 12: medicines that takes ten to fifteen years and costs billions 739 00:36:08,960 --> 00:36:11,440 Speaker 12: of dollars for each new approved drug, and turn it 740 00:36:11,480 --> 00:36:14,239 Speaker 12: into something that looks more like an assembly line, that's 741 00:36:14,320 --> 00:36:16,880 Speaker 12: much more predictable, that has much lower failure rates. And 742 00:36:16,920 --> 00:36:19,759 Speaker 12: so we're using the latest in mL and AI that 743 00:36:19,800 --> 00:36:22,320 Speaker 12: we build here with our team, using a lot of 744 00:36:22,400 --> 00:36:26,680 Speaker 12: robots to do our experiments and exploring and mapping biology 745 00:36:26,719 --> 00:36:29,719 Speaker 12: to try and discover new medicines at scale and one 746 00:36:29,760 --> 00:36:31,160 Speaker 12: day bring down the price as well. 747 00:36:31,800 --> 00:36:33,759 Speaker 5: Okay, so you know what I have to ask you 748 00:36:33,760 --> 00:36:36,839 Speaker 5: about is the investment from Nvidia. I got a hit 749 00:36:36,880 --> 00:36:39,719 Speaker 5: it at the top here, fifty million dollar private investment, 750 00:36:40,040 --> 00:36:44,080 Speaker 5: and I had covered Recursion slightly previously, but I hadn't 751 00:36:44,080 --> 00:36:47,400 Speaker 5: looked into your company as much, to be honest, until 752 00:36:47,800 --> 00:36:50,759 Speaker 5: the news of that deal. To what extent do you 753 00:36:51,040 --> 00:36:55,640 Speaker 5: see that infusion of investment as a game changer for 754 00:36:55,680 --> 00:36:57,880 Speaker 5: what you're going to be able to do moving forward 755 00:36:57,920 --> 00:36:58,560 Speaker 5: with Recursion. 756 00:37:00,000 --> 00:37:02,279 Speaker 12: I think what's important for us about the investment and 757 00:37:02,360 --> 00:37:06,200 Speaker 12: partnership with Nvidia is that we've been working together with 758 00:37:06,239 --> 00:37:08,359 Speaker 12: them for the past three or four years. We run 759 00:37:08,400 --> 00:37:11,200 Speaker 12: one of the fastest supercomputers in the world. I think 760 00:37:11,200 --> 00:37:13,840 Speaker 12: it's number one thirty or something in the fastest computers 761 00:37:13,880 --> 00:37:15,200 Speaker 12: in the world right now, and it's built on the 762 00:37:15,320 --> 00:37:18,200 Speaker 12: Nvidia infrastructure. And what this thing, what I think this 763 00:37:18,280 --> 00:37:21,120 Speaker 12: does is more signals to the rest of the world 764 00:37:21,280 --> 00:37:24,640 Speaker 12: that in Vidia is excited about the biopharma market and 765 00:37:24,640 --> 00:37:27,320 Speaker 12: that they see us as as a leader and someone 766 00:37:27,360 --> 00:37:30,120 Speaker 12: to partner with. And so we're very excited to not 767 00:37:30,239 --> 00:37:33,480 Speaker 12: only continue discovering new medicines internally here at Recursion, to 768 00:37:33,560 --> 00:37:36,840 Speaker 12: continue our partnerships with Buyer and Roach Genentech in the 769 00:37:36,840 --> 00:37:40,319 Speaker 12: fields of fibrosis and neuroscience, but now with Nvidia, to 770 00:37:40,360 --> 00:37:42,520 Speaker 12: actually start to take some of the neural networks that 771 00:37:42,560 --> 00:37:45,200 Speaker 12: we're building here at Recursion that we apply to our 772 00:37:45,200 --> 00:37:50,160 Speaker 12: own data and to actually serve those on their marketplace Bioonemo, 773 00:37:50,360 --> 00:37:53,520 Speaker 12: where other pharma companies who aren't yet our close partners 774 00:37:53,520 --> 00:37:56,480 Speaker 12: can actually start to access those neural nets to advance 775 00:37:56,560 --> 00:37:58,719 Speaker 12: their own research. And so we're very excited about that 776 00:37:58,760 --> 00:38:00,520 Speaker 12: collaboration broadly. 777 00:38:00,520 --> 00:38:03,160 Speaker 5: I wonder if you think that AI and the mania 778 00:38:03,200 --> 00:38:08,359 Speaker 5: around AI is enough to help the biopharma industry kind 779 00:38:08,360 --> 00:38:12,120 Speaker 5: of recover from some of the FED rate hiking impacts 780 00:38:12,120 --> 00:38:14,920 Speaker 5: and headwinds that have impacted your industry over the past 781 00:38:14,920 --> 00:38:15,600 Speaker 5: couple of years. 782 00:38:16,680 --> 00:38:19,120 Speaker 12: Well, look, it's always hard in biopharma because our revenues 783 00:38:19,200 --> 00:38:21,920 Speaker 12: are so deferred, and as Paul mentioned at the beginning, 784 00:38:21,960 --> 00:38:24,520 Speaker 12: and really in the past, has been pretty bimodal, especially 785 00:38:24,560 --> 00:38:27,600 Speaker 12: for startups. But I think in this particular case, mL 786 00:38:27,640 --> 00:38:31,520 Speaker 12: andai is starting to give people an appreciation for how 787 00:38:31,560 --> 00:38:34,200 Speaker 12: that could change. And you know, three or four years ago, 788 00:38:34,360 --> 00:38:37,680 Speaker 12: even we in the biopharma industry hadn't fully accepted the 789 00:38:37,680 --> 00:38:40,760 Speaker 12: potential of mL and ai. But Recursion was founded almost 790 00:38:40,760 --> 00:38:43,959 Speaker 12: ten years ago specifically to bring these tools to bear. 791 00:38:44,320 --> 00:38:46,960 Speaker 12: And like many founding stories, this is a company I 792 00:38:47,000 --> 00:38:50,680 Speaker 12: founded out of graduate school. We were really going against 793 00:38:50,719 --> 00:38:52,720 Speaker 12: the current in the early days. I would say now 794 00:38:53,000 --> 00:38:56,040 Speaker 12: in every executive team in biopharma of the largest companies 795 00:38:56,080 --> 00:38:58,880 Speaker 12: in the boardroom, all of them are thinking about the 796 00:38:58,880 --> 00:39:01,200 Speaker 12: ways that mL and ai going to change this industry, 797 00:39:01,400 --> 00:39:04,000 Speaker 12: and they're looking to companies like us who've been doing 798 00:39:04,000 --> 00:39:06,239 Speaker 12: this for years to give them clues as to which 799 00:39:06,239 --> 00:39:08,279 Speaker 12: direction things are going. Will it pull us out of 800 00:39:08,320 --> 00:39:11,759 Speaker 12: the broader macrocycle? I have no idea. I learned a 801 00:39:11,760 --> 00:39:14,319 Speaker 12: lot from our board chair Martin Chavez, who said not 802 00:39:14,400 --> 00:39:16,319 Speaker 12: to make predictions about the future of the market, So 803 00:39:16,360 --> 00:39:17,600 Speaker 12: I won't do that, all right. 804 00:39:17,640 --> 00:39:20,759 Speaker 1: Recursion Pharmaceuticals is a publicly traded company. Our x r 805 00:39:21,080 --> 00:39:24,000 Speaker 1: X is a very cool ticker symbol. It's got a 806 00:39:24,040 --> 00:39:26,839 Speaker 1: market cap two point six billion stocks up seventy six 807 00:39:26,880 --> 00:39:29,680 Speaker 1: percent year to date, in large part on that investment 808 00:39:29,719 --> 00:39:32,000 Speaker 1: by Nvidia. Anything in Vidia touches seems to turn to 809 00:39:32,040 --> 00:39:36,319 Speaker 1: gold here. So just to understand your company, Chris, does 810 00:39:36,360 --> 00:39:40,360 Speaker 1: Recursion develop any drugs treatments on its own or do 811 00:39:40,400 --> 00:39:44,080 Speaker 1: you license your technology to other biotech companies? 812 00:39:44,880 --> 00:39:47,240 Speaker 12: All of the above, Paul. So, we've got five drugs 813 00:39:47,320 --> 00:39:50,160 Speaker 12: in clinical trials right now. Three of those are in 814 00:39:50,239 --> 00:39:52,879 Speaker 12: phase two or phase two to three trials. In fact, 815 00:39:52,880 --> 00:39:55,279 Speaker 12: we fully enrolled our first phase two trial just a 816 00:39:55,320 --> 00:40:00,000 Speaker 12: few weeks ago. We focus internally on rare genetic disease 817 00:40:00,400 --> 00:40:02,920 Speaker 12: and precision oncology, where a company of our size and 818 00:40:02,960 --> 00:40:06,520 Speaker 12: scale could run five, six, maybe one day ten twenty 819 00:40:06,560 --> 00:40:10,200 Speaker 12: clinical programs, and then we partner with large companies like 820 00:40:10,280 --> 00:40:13,920 Speaker 12: Bayer and Roch Genentech to go after huge intractable areas 821 00:40:13,960 --> 00:40:17,680 Speaker 12: of biology like neuroscience, where you really need the capital, 822 00:40:17,680 --> 00:40:20,360 Speaker 12: the resources, and the expertise of a large pharma company 823 00:40:20,400 --> 00:40:24,120 Speaker 12: to go after Alzheimer's parkins at some of these big neurodiseases. 824 00:40:24,560 --> 00:40:27,719 Speaker 12: And then I think what's exciting people recently about the 825 00:40:27,800 --> 00:40:31,080 Speaker 12: Nvidia news is there's now this third value driver beyond 826 00:40:31,080 --> 00:40:34,440 Speaker 12: our own pipeline, beyond our own partnerships to discover medicines. 827 00:40:34,640 --> 00:40:36,840 Speaker 12: We're now starting to leverage some of the tools we 828 00:40:36,960 --> 00:40:39,400 Speaker 12: built for mL and AI to look at a different 829 00:40:39,400 --> 00:40:41,560 Speaker 12: part of the demand curve and start to partner with 830 00:40:41,600 --> 00:40:44,680 Speaker 12: the rest of the biopharma industry to leverage our tools 831 00:40:44,719 --> 00:40:46,279 Speaker 12: on some of their own data. And there will be 832 00:40:46,360 --> 00:40:49,800 Speaker 12: more coming about this in the coming quarters, but certainly 833 00:40:49,800 --> 00:40:51,560 Speaker 12: that's the plan with our friends at Nvidia. 834 00:40:52,640 --> 00:40:55,680 Speaker 5: Talk to me about something that my mom would want 835 00:40:55,760 --> 00:40:58,160 Speaker 5: to know that AI could help with when it comes 836 00:40:58,200 --> 00:40:59,279 Speaker 5: to drug discovery. 837 00:41:01,160 --> 00:41:05,759 Speaker 12: So today scientists are trying to understand this incredibly complex 838 00:41:06,239 --> 00:41:11,120 Speaker 12: space of biology and chemistry using really, really old tools. 839 00:41:11,560 --> 00:41:14,400 Speaker 12: And what we're doing at Recursion is the equivalent of 840 00:41:14,480 --> 00:41:18,280 Speaker 12: building Google Maps, but for biology. So instead of focusing 841 00:41:18,280 --> 00:41:20,720 Speaker 12: on one disease at a time, we're looking at every 842 00:41:20,719 --> 00:41:23,120 Speaker 12: gene in the genome and millions of molecules in many 843 00:41:23,120 --> 00:41:26,920 Speaker 12: different human cell types, using robots and sophisticated computational tools 844 00:41:27,440 --> 00:41:31,080 Speaker 12: to literally give a map on a web interface for 845 00:41:31,160 --> 00:41:34,120 Speaker 12: biologists and chemists to use, and it will look very 846 00:41:34,200 --> 00:41:36,200 Speaker 12: much like Google Maps, but instead of looking at a 847 00:41:36,239 --> 00:41:40,239 Speaker 12: street in your neighborhood or looking at a street view 848 00:41:40,280 --> 00:41:42,400 Speaker 12: of a restaurant that you want to go to, this 849 00:41:42,480 --> 00:41:44,920 Speaker 12: map will give the equivalent of that to biologists and 850 00:41:45,000 --> 00:41:48,760 Speaker 12: chemists to understand things about biology and chemistry that until 851 00:41:48,800 --> 00:41:50,880 Speaker 12: now we haven't been able to see, to understand the 852 00:41:50,920 --> 00:41:53,680 Speaker 12: complexity of all around us. And we think by providing 853 00:41:53,719 --> 00:41:57,440 Speaker 12: that map, people will be able to blotter better plot 854 00:41:57,440 --> 00:42:00,319 Speaker 12: the course from disease to healthy, not just for one 855 00:42:00,320 --> 00:42:02,480 Speaker 12: disease at a time, but for many. And that's what 856 00:42:02,480 --> 00:42:04,279 Speaker 12: we'll be working on for the last ten years here 857 00:42:04,280 --> 00:42:04,720 Speaker 12: in Madison. 858 00:42:05,200 --> 00:42:07,080 Speaker 1: All right, Chris, fascinating stuff. And I guess I mean, 859 00:42:07,160 --> 00:42:10,600 Speaker 1: when you get your undergraduate degree in bioengineering and biomedical 860 00:42:10,600 --> 00:42:13,560 Speaker 1: engineering from Rice University, and if that's not enough, then 861 00:42:13,600 --> 00:42:16,440 Speaker 1: you go get a PhD in bioengineering from the University 862 00:42:16,440 --> 00:42:19,680 Speaker 1: of Utah, you better do something really important. I think 863 00:42:19,680 --> 00:42:22,400 Speaker 1: that's what these folks are doing here. Chris Gibson, CEO 864 00:42:22,440 --> 00:42:25,839 Speaker 1: and co founder of Recursion to Pharmaceuticals. The ticker is 865 00:42:26,280 --> 00:42:29,360 Speaker 1: a great ticker for a drug maker r x RX 866 00:42:30,080 --> 00:42:32,680 Speaker 1: and doing some interesting work there, really interesting work in 867 00:42:32,680 --> 00:42:35,560 Speaker 1: the biopharma space. We appreciate getting a few minutes of 868 00:42:35,640 --> 00:42:36,279 Speaker 1: Chris's time. 869 00:42:36,480 --> 00:42:39,600 Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can 870 00:42:39,640 --> 00:42:43,400 Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever 871 00:42:43,480 --> 00:42:47,240 Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter 872 00:42:47,400 --> 00:42:49,359 Speaker 2: at Matt Miller nineteen seventy three. 873 00:42:49,800 --> 00:42:52,160 Speaker 1: And I'm fall Sweeney. I'm on Twitter at pt Sweeney. 874 00:42:52,280 --> 00:42:54,960 Speaker 1: Before the podcast, you can always catch us worldwide at 875 00:42:54,960 --> 00:42:56,760 Speaker 1: Bloomberg Radio