WEBVTT - Fed Minutes Show Most Official Noted Risks of Cutting Too Quickly 0:00:02.920 --> 0:00:08.560 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.400 --> 0:00:13.800 This is Bloomberg Business Wait inside from the reporters and 0:00:13.960 --> 0:00:17.520 editors who bring you America's most trusted business magazine, plus 0:00:17.600 --> 0:00:21.720 global business, finance and tech news. The Bloomberg Business Week 0:00:21.760 --> 0:00:26.720 Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio. 0:00:28.160 --> 0:00:30.240 We're just counting down, folks, just about a minute to 0:00:30.360 --> 0:00:33.000 those Fed minutes. Of course, it was related to the 0:00:33.000 --> 0:00:35.519 first FED meeting of twenty twenty four at the end 0:00:35.760 --> 0:00:40.000 of the month of January. Probably no surprises expected, Jennifer, 0:00:40.080 --> 0:00:42.600 but nonetheless we'll see there's some consensus in terms of 0:00:42.640 --> 0:00:45.199 what the Fed officials need to actually cut rates. 0:00:45.360 --> 0:00:47.239 And then you know, if there's anything that we can 0:00:47.280 --> 0:00:49.880 read amongst the lines about how to read the latest 0:00:49.920 --> 0:00:52.160 CPI figures, which were much higher than anyone had thought. 0:00:52.240 --> 0:00:53.760 All right ahead of that, folks, you've got a ten 0:00:53.840 --> 0:00:55.800 year note at four thirty one, a two year note 0:00:55.800 --> 0:00:57.160 at the shorter end of the you'll curve at four 0:00:57.320 --> 0:01:00.240 sixty five. Taking a look at the equity trade, it's 0:01:00.240 --> 0:01:02.760 been a muted trade down across the board, just down 0:01:02.760 --> 0:01:04.880 about twelve on the S and P five hundred and 0:01:04.920 --> 0:01:07.080 a decline of about one hundred and sixteen points on 0:01:07.160 --> 0:01:09.760 the NAZAQ, so down the most under percentage basis. We 0:01:09.800 --> 0:01:12.520 do want to get to the latest those Fed meeting minutes. 0:01:12.720 --> 0:01:15.240 We want to head to DC. Bloomberg News International Economics 0:01:15.240 --> 0:01:18.080 and Policy correspondent Michael McKee is live at the Federal 0:01:18.120 --> 0:01:21.120 Reserve breaking down them as they crossed the Bloomberg. 0:01:23.080 --> 0:01:23.280 Well. 0:01:23.319 --> 0:01:26.520 As of January thirty, first Fed officials did not see 0:01:26.560 --> 0:01:29.640 any kind of a rate increase in their future, agreeing 0:01:29.720 --> 0:01:32.720 at their meeting the policy rate was likely at its 0:01:32.760 --> 0:01:36.080 peak for this tightening cycle, but there was no consensus 0:01:36.200 --> 0:01:38.959 on when they might start cutting and no real hints 0:01:39.000 --> 0:01:41.600 in the minutes about what they would be looking at 0:01:41.640 --> 0:01:44.839 to decide the future path of the policy rate would 0:01:44.840 --> 0:01:48.720 depend on incoming data, the evolving outlook, and the balance 0:01:48.760 --> 0:01:52.280 of risks. The minutes say cutting too soon was seen 0:01:52.400 --> 0:01:55.560 as a bigger risk than waiting too long. According to 0:01:55.600 --> 0:01:58.960 the minutes quote, most participants noted the risks of moving 0:01:59.200 --> 0:02:02.880 too quickly to ease the stance of policy and emphasize 0:02:02.920 --> 0:02:06.800 the importance of carefully assessing incoming data in judging whether 0:02:06.840 --> 0:02:11.080 inflation's moving down sustainably to two percent, but not all 0:02:11.120 --> 0:02:13.919 felt that way, suggesting at least a small split in 0:02:14.000 --> 0:02:18.000 the committee. A couple of participants pointed to downside risks 0:02:18.040 --> 0:02:22.400 to the economy associated with maintaining an overly restrictive stance 0:02:22.440 --> 0:02:25.920 for too long. Although they did not have January's stronger 0:02:26.000 --> 0:02:31.040 jobs and consumer price inflation data numbers, participants noted momentum 0:02:31.040 --> 0:02:35.919 and aggregate demand might be stronger than currently assessed. Several 0:02:35.960 --> 0:02:40.120 also worried the risk that financial conditions could become less restrictive, 0:02:40.600 --> 0:02:45.480 could add undue momentum to aggregate demand and cause progress 0:02:45.600 --> 0:02:50.240 on inflation to stall. Geopolitical considerations got a small nod, 0:02:50.360 --> 0:02:54.079 as did slower growth in some foreign economies. And then, finally, 0:02:54.120 --> 0:02:56.720 on the balance sheet, members agreed it was important to 0:02:56.880 --> 0:03:00.760 continue balance sheet reduction at its current pay, feeling so 0:03:00.880 --> 0:03:04.679 far it had proceeded smoothly. Many of them said it 0:03:04.720 --> 0:03:08.080 would be appropriate to begin in depth discussions on the 0:03:08.120 --> 0:03:11.680 ballot sheet at the March meeting, something Chairman J. Powell 0:03:11.800 --> 0:03:16.079 had confirmed in his January thirty first news conference. 0:03:16.520 --> 0:03:18.880 All right, Michael McKee, of course, our Bloomberg News International 0:03:18.919 --> 0:03:21.320 Economics and Policy correspondent live there at the Federal Reserve. 0:03:21.360 --> 0:03:23.800 Mike do not go anywhere. Quick check on the markets everyone, 0:03:23.840 --> 0:03:26.720 and a slight uptick, very slight when I look at 0:03:26.760 --> 0:03:28.960 the US Treasury trade that to year note right now 0:03:29.160 --> 0:03:32.600 yielding four to sixty six, which was just pretty much 0:03:32.600 --> 0:03:34.680 where it was right before the minutes release. Ten year 0:03:34.720 --> 0:03:36.880 note going the longer end of the yield curve four 0:03:36.840 --> 0:03:39.160 to thirty two, which is pretty much where we saw 0:03:39.200 --> 0:03:41.320 that prior to the release of the minutes. Quick check 0:03:41.400 --> 0:03:43.480 on the equity side of things, of course, the focus 0:03:43.560 --> 0:03:46.400 very much on Nvidia of reporting after the close, and 0:03:46.480 --> 0:03:50.040 we are seeing equities move a little bit lower here 0:03:50.080 --> 0:03:53.080 on that news, so we'll continue to track that in 0:03:53.120 --> 0:03:56.000 the meantime. I do want to get back to Mike here. Mike, 0:03:56.120 --> 0:03:59.240 it doesn't sound like there were many surprises here of any. 0:04:00.640 --> 0:04:02.880 No, and one of the problems that the minutes have 0:04:03.000 --> 0:04:06.480 now is most of what we have heard in the 0:04:06.520 --> 0:04:10.160 minutes has already been discussed by Fed officials between now 0:04:10.520 --> 0:04:13.080 and their meeting that was three weeks ago, so we 0:04:13.120 --> 0:04:14.960 have a pretty good idea of what they were thinking. 0:04:15.720 --> 0:04:18.640 There isn't much in here except maybe the idea that 0:04:18.920 --> 0:04:21.960 there are more people leaning against the idea of cutting 0:04:22.000 --> 0:04:26.960 too quickly than moving too slowly. That that is the 0:04:27.440 --> 0:04:30.120 one major concern that comes through here. But I know 0:04:30.160 --> 0:04:32.640 a lot of people are looking for guidance on what 0:04:32.720 --> 0:04:35.120 they're going to look at when they decide they're going 0:04:35.200 --> 0:04:38.080 to start cutting rates, and that's not in these minutes. 0:04:38.520 --> 0:04:40.560 And you know, another thing that's not in those minutes 0:04:40.640 --> 0:04:43.479 is that very disappointing CPI number that's really changed the 0:04:43.480 --> 0:04:45.919 way market participants are thinking about the timing of the 0:04:46.000 --> 0:04:48.240 rate cuts. And you know, Mike, I wonder if you 0:04:48.360 --> 0:04:51.640 see anything in the minutes that policymakers, knowing what they 0:04:51.680 --> 0:04:55.080 now do about that latest CPI print, would perhaps go 0:04:55.120 --> 0:04:56.800 back and rethink or reassess. 0:04:58.240 --> 0:04:58.960 Well, there were. 0:04:58.839 --> 0:05:02.080 Hens, especially in that line, that the economy might be 0:05:02.120 --> 0:05:06.640 stronger than anticipated, that they were concerned these sorts of 0:05:06.720 --> 0:05:09.680 things could happen. But of course this meeting was two 0:05:09.720 --> 0:05:12.400 weeks before that CPI report came out, and it was 0:05:12.400 --> 0:05:16.680 three days before the employment numbers came out, so they 0:05:16.720 --> 0:05:20.159 didn't really know what was going to be happening. There 0:05:20.200 --> 0:05:23.159 has been a concern all along among Fed officials that 0:05:23.200 --> 0:05:27.400 the economy was stronger than anticipated and that could be 0:05:27.480 --> 0:05:31.040 an inflation problem down the road, but it's not specifically 0:05:31.040 --> 0:05:32.159 reflected in these minutes. 0:05:32.200 --> 0:05:33.839 All right, I do want to bring into our conversation 0:05:33.880 --> 0:05:36.599 Bloomberg Economics chief US economist to Anna Wong. She is 0:05:36.680 --> 0:05:39.880 joining us as well. She's joining us from our DC 0:05:40.000 --> 0:05:43.080 bureau also there at the nation's capital. Anna, what jumped 0:05:43.120 --> 0:05:45.840 out for you in the FOMC minutes? As might kind 0:05:45.839 --> 0:05:47.880 of laid out, It doesn't feel like too many surprises, 0:05:47.920 --> 0:05:49.640 But give us your take on this. 0:05:50.560 --> 0:05:53.320 Yeah, So, you know what has puzzled me over the 0:05:53.320 --> 0:05:56.960 past couple months is why did the Fed feel like 0:05:57.040 --> 0:05:59.839 they need to hold higher for longer? Even though because 0:06:00.040 --> 0:06:03.440 if we looked at the reaction function which we estimated 0:06:03.520 --> 0:06:07.600 and which is that basically they followed the inertial tailor rule. 0:06:07.880 --> 0:06:11.880 This rule has very precisely predicted that what they had 0:06:11.920 --> 0:06:15.320 done in the past two years with monetary policy. So 0:06:15.360 --> 0:06:18.600 why are they choosing this moment to deviate from it? 0:06:18.760 --> 0:06:21.640 And I think these minutes reveal why. I think part 0:06:21.680 --> 0:06:25.560 of it is that they have been surprised by how 0:06:25.600 --> 0:06:29.240 strong the economy is relative to what they expected. And 0:06:29.279 --> 0:06:32.520 recall that a couple of days before the FOMC meeting 0:06:32.640 --> 0:06:35.960 in January, they received the Q four GDP number, which 0:06:36.040 --> 0:06:39.320 really surprised to the upside, and I think based on 0:06:39.360 --> 0:06:42.800 that assessment, they're thinking that maybe the neutral rate is 0:06:42.839 --> 0:06:46.080 in fact higher than what they thought it would be 0:06:46.080 --> 0:06:50.320 before the pandemic. And this is why that the tailor 0:06:50.440 --> 0:06:53.560 rule that they're the reaction function they're following, in fact 0:06:53.640 --> 0:06:57.320 is experiencing a level shift upwards, and that could explain 0:06:57.400 --> 0:07:00.720 the rationale for why they are choosing a hold rates 0:07:00.800 --> 0:07:01.520 higher for longer. 0:07:01.640 --> 0:07:03.240 Mike, come on in on this in terms of you know, 0:07:03.240 --> 0:07:04.920 we've talked a lot about the new tool rate. Your 0:07:04.960 --> 0:07:07.240 take on what Anna is saying, and maybe there is 0:07:07.279 --> 0:07:08.240 a reassessment here. 0:07:09.640 --> 0:07:12.760 Well, there's definitely, if not a reassessment, certainly a focus 0:07:12.840 --> 0:07:15.480 on it. We've heard from several members of the committee 0:07:15.520 --> 0:07:18.880 since the meeting that they are looking at the possibility 0:07:18.920 --> 0:07:21.680 that the neutral rate has gotten higher our star as 0:07:21.920 --> 0:07:24.320 they like to call it, an eco nerd talk, that 0:07:24.400 --> 0:07:27.960 the economy is stronger and they will need to react 0:07:28.040 --> 0:07:30.320 to that. But the minutes make it clear at the 0:07:30.640 --> 0:07:33.880 least as of January thirty first, that they would do 0:07:33.960 --> 0:07:39.680 that by leaning against faster growth at the same policy rate. 0:07:39.720 --> 0:07:42.400 They weren't going to raise rates going forward. They would 0:07:42.400 --> 0:07:45.240 just leave rates where they were for longer, you know. 0:07:45.280 --> 0:07:47.280 I did for both of you. Actually we'll start with 0:07:47.320 --> 0:07:50.240 Anna on this, but one thing that has really struck 0:07:50.280 --> 0:07:52.720 me is that the chat has indeed turned to the 0:07:52.760 --> 0:07:56.800 possibility of interest rate increases, obviously since this FOMC decision, 0:07:56.840 --> 0:08:00.680 since the CPI announcement, since the jobs numbers, And I wondered, 0:08:00.680 --> 0:08:02.880 for both of you, do you see that more as 0:08:02.920 --> 0:08:06.000 a possibility, especially you, and if you wouldn't mind starting 0:08:06.200 --> 0:08:08.760 giving your assessment of where the FED thinks the new 0:08:08.800 --> 0:08:09.400 to rate is. 0:08:11.880 --> 0:08:16.200 Yeah, so I think that the likelihood is still tilted 0:08:16.240 --> 0:08:20.800 toward rate cuts rather than rate hikes. Our nop FED 0:08:20.920 --> 0:08:23.840 speak model does suggest that the probability of a rate 0:08:23.920 --> 0:08:26.880 hike is thirteen point three percent, and that is quite 0:08:26.920 --> 0:08:30.440 similar to the assessment of former Treasury Secretary of Larry Summers. 0:08:30.680 --> 0:08:34.080 But I think that given all the range of policy 0:08:34.160 --> 0:08:37.559 tailor rules that the FED follows, none of them would 0:08:37.559 --> 0:08:39.800 say that the FED should be hiking at this point. 0:08:40.240 --> 0:08:42.440 And then, Mike, what do you think about the possibility 0:08:42.440 --> 0:08:43.360 of a hike at this point? 0:08:44.720 --> 0:08:47.960 I agree with Anna, the rules and also what FED 0:08:48.000 --> 0:08:50.880 officials are saying rule out any kind of rate hike 0:08:50.960 --> 0:08:53.520 at this point, if they felt the economy was accelerating 0:08:53.520 --> 0:08:56.480 too much and an inflation was starting to become more 0:08:56.480 --> 0:08:58.880 of an issue, they would just leave rates higher for 0:08:58.960 --> 0:09:01.920 longer to see what happen. It's not on the table. 0:09:02.040 --> 0:09:05.520 Larry Summers put it there. An interesting discussion point, but 0:09:05.600 --> 0:09:08.280 it's not something that FED officials are considering right now. 0:09:08.320 --> 0:09:10.160 Well, I go back to Mike, some of the conversations 0:09:10.160 --> 0:09:12.720 we've had around this table. That is, the FED gets, 0:09:12.760 --> 0:09:14.680 you know, to the end of its cycle, and we 0:09:14.679 --> 0:09:16.920 think we've picked out here in terms of rate increases 0:09:16.960 --> 0:09:19.480 according to what we got from the FED chare. But 0:09:19.600 --> 0:09:22.360 having said that that it is more difficult towards the end. 0:09:22.440 --> 0:09:25.319 Is there some truth to it? Truth to this as 0:09:25.320 --> 0:09:27.600 we continue to see data points that come in stronger 0:09:27.600 --> 0:09:29.560 that make you think, well, wait a minute, you know, 0:09:29.679 --> 0:09:31.600 is it just a case of staying higher for longer 0:09:31.720 --> 0:09:35.280 or the possibility that we could, considering some of the 0:09:35.360 --> 0:09:37.640 data points we could get down the road, that the 0:09:37.640 --> 0:09:39.640 FED would have to raise rates. I mean, is it 0:09:39.760 --> 0:09:41.720 silly for us to rule it out completely. 0:09:43.920 --> 0:09:46.640 I wouldn't rule anything out completely. We don't know what's 0:09:46.679 --> 0:09:48.559 going to happen down the road, but it's going to 0:09:48.600 --> 0:09:51.920 be some time before that even becomes would even become 0:09:52.360 --> 0:09:55.600 an issue to be considered. The strength of the economy sure, 0:09:55.640 --> 0:09:58.600 and the fact that we haven't had an effort to 0:09:58.679 --> 0:10:01.560 try to get down to a two percent level before. 0:10:03.120 --> 0:10:05.080 It could be very hard to do that, get that 0:10:05.160 --> 0:10:10.040 last mile, that last percentage into out of inflation rather 0:10:10.120 --> 0:10:12.880 down to two percent. So FED officials are going to 0:10:13.080 --> 0:10:15.640 be making a decision on when to start cutting based 0:10:15.679 --> 0:10:18.800 on what progress they see in that regard, but they're 0:10:18.840 --> 0:10:21.600 not at this point looking to raise rates to push 0:10:21.640 --> 0:10:22.880 down inflation any faster. 0:10:23.520 --> 0:10:25.120 Mike, if we could just stick with you for a second, 0:10:25.120 --> 0:10:26.520 because I want to go back to the text of 0:10:26.559 --> 0:10:28.040 the minutes, and I wondered if you could talk a 0:10:28.120 --> 0:10:31.480 little bit more about what officials were thinking about their 0:10:31.559 --> 0:10:34.559 quantitative using slash quantitative tightening program. 0:10:35.360 --> 0:10:37.640 Well, they don't go into a lot of detail about it, 0:10:37.640 --> 0:10:40.320 but they do say that it's been proceeding smoothly at 0:10:40.360 --> 0:10:43.240 the pace they've been going at and that at some 0:10:43.360 --> 0:10:45.559 point they would make a decision, but they don't put 0:10:45.559 --> 0:10:47.839 any timing on that. They will have an in depth 0:10:47.880 --> 0:10:52.320 discussion in March towards end eventual decision is the way 0:10:52.360 --> 0:10:55.040 they said it, but it has been working all right, 0:10:55.120 --> 0:11:00.600 and they have been seeing the reverse repo funds decline 0:11:00.679 --> 0:11:04.640 as that's become less important. And so it's all pointing 0:11:04.679 --> 0:11:07.680 towards the fact that sometime in the future, maybe not 0:11:07.760 --> 0:11:11.079 too long from now, they will start a taper. They 0:11:11.120 --> 0:11:16.280 did suggest that a gradual reduction in the balance sheet. 0:11:17.679 --> 0:11:18.360 Sell off is. 0:11:19.920 --> 0:11:24.199 Appropriate and that they would make that decision down the road. 0:11:24.160 --> 0:11:26.079 All right, So not a ton of market reaction as 0:11:26.080 --> 0:11:28.319 we've gone over Having said that, and I want to 0:11:28.320 --> 0:11:30.760 go over to you in terms of what's your next 0:11:30.840 --> 0:11:34.280 focal point when it comes to thinking about FED policy 0:11:34.320 --> 0:11:37.160 moving forward and really the health of the overall US economy. 0:11:38.240 --> 0:11:40.880 Yeah, I think that a next focal point would be 0:11:41.080 --> 0:11:45.720 the core PCE. We got CPI and PPI data last week, 0:11:45.760 --> 0:11:49.600 and that seems to imply that the January's core PCE 0:11:49.920 --> 0:11:55.079 and Powell's preferred supercore would be running pretty hot. And 0:11:56.160 --> 0:12:00.439 if it's true that the January readings is just noiselecting 0:12:00.640 --> 0:12:06.679 seasonality factors, then it could be possible that the February 0:12:06.720 --> 0:12:10.560 inflation reading would be ugly as well, because typically these 0:12:10.559 --> 0:12:15.120 seasonal factors also repeat itself as January in February. So 0:12:15.200 --> 0:12:20.320 it is really only in after the February inflation data 0:12:20.440 --> 0:12:23.880 that do you really get good signal of what really 0:12:23.960 --> 0:12:27.760 is happening to inflation. So I would say markets should 0:12:27.760 --> 0:12:32.559 be ready for a wild ride even for February's CPI. 0:12:32.280 --> 0:12:35.319 Data shocking as we've often talked about the volatility that 0:12:35.320 --> 0:12:37.720 we've seen, certainly in the rates market and the treasury trade. Hey, Mike, 0:12:37.760 --> 0:12:40.599 also to you last question, I got to cheat a 0:12:40.640 --> 0:12:43.720 little bit. Heard earlier on television. You are looking ahead 0:12:43.720 --> 0:12:46.760 to when fetch your J. Powell is up on Capitol Hill. 0:12:46.840 --> 0:12:49.319 That's important, That's. 0:12:49.120 --> 0:12:50.440 Going to be important. We have a lot of Feds 0:12:50.440 --> 0:12:52.560 speak between now and the end of the month, but 0:12:52.640 --> 0:12:54.199 a lot of it will just kind of go away 0:12:54.280 --> 0:12:57.079 in the sense that J. Powell rules all and March 0:12:57.120 --> 0:13:00.560 sixth is the first day of his said by annual 0:13:00.640 --> 0:13:03.560 testimony to Capital Hill. He'll be talking to the House 0:13:03.600 --> 0:13:06.360 Financial Services Committee, and that's the one that the markets 0:13:06.360 --> 0:13:08.480 are going to focus on. That's where they're going to 0:13:08.520 --> 0:13:11.320 expect to get some guidance. Don't know what he'll give them, 0:13:11.640 --> 0:13:13.440 but that is going to be a day where we 0:13:13.559 --> 0:13:16.480 will probably see markets move in terms of the FED 0:13:16.640 --> 0:13:17.400 and not in videos. 0:13:17.440 --> 0:13:19.600 All right, net net it's stated point to data point, 0:13:19.600 --> 0:13:22.360 fed speak to FED speak and anything that Jay Powell does. 0:13:22.360 --> 0:13:24.920 All right, guys, thank you so much, so appreciated, of course. 0:13:25.080 --> 0:13:27.959 Are Michael McKee at the Federal Reserve in Washington, DC, 0:13:28.120 --> 0:13:30.960 is international Economics and Policy correspondent here at Bloomberg News 0:13:30.960 --> 0:13:33.960 and our thanks also to anawong chief US economist at 0:13:33.960 --> 0:13:36.559 Bloomberg Economics. She is there in our DC bureau. 0:13:38.040 --> 0:13:41.560 You're listening to the Bloomberg Business Week podcast. Catch us 0:13:41.600 --> 0:13:44.839 live weekday afternoons from two to five pm Eastern. Listen 0:13:44.880 --> 0:13:47.040 on Apple card Play and then brout Auto with a 0:13:47.040 --> 0:13:51.199 Bloomberg Business app, or watch us live on YouTube. 0:13:52.559 --> 0:13:55.560 Intel back to sterrophiles for an initial public offering today 0:13:55.600 --> 0:13:59.240 on the NASDAC Wall Street Journal, noting that Reddit expected 0:13:59.280 --> 0:14:01.840 to make its IPO filing public this month, then reserve 0:14:01.920 --> 0:14:05.800 shares for seventy five thousand of its users and meantime 0:14:05.840 --> 0:14:08.600 earlier this year are Bailey Lipshealtz noting jump in biotech 0:14:08.679 --> 0:14:13.200 IPO listings. I do feel like Jennifer, that IPO obviously important. 0:14:13.280 --> 0:14:16.120 It's a great indicator of kind of health in the marketer. 0:14:16.280 --> 0:14:19.400 The willingness right to bring new issues, But my attention 0:14:19.480 --> 0:14:20.920 has been a lot more on like M and A. 0:14:20.960 --> 0:14:22.360 We've seen a lot of M and A deals this 0:14:22.440 --> 0:14:24.080 year exactly other good indicator. 0:14:24.200 --> 0:14:26.560 It is a very good indicator, and it's it makes 0:14:26.560 --> 0:14:28.800 a very nice change from last year when that was 0:14:28.880 --> 0:14:31.400 really in the doldrums, and that has ripple effects across 0:14:31.440 --> 0:14:33.080 the whole economy and all the markets. 0:14:33.120 --> 0:14:34.840 All right, So watching M and A. But we did 0:14:34.840 --> 0:14:36.760 also though, want to dig a little bit more into 0:14:36.880 --> 0:14:39.280 what's going on with those new issues. So we've got 0:14:39.280 --> 0:14:41.120 a great voice on that. And back with us is 0:14:41.200 --> 0:14:46.000 Rachel gering Ey, America's IPO leader. She joins us from Nashville, Tennessee. Rachel, 0:14:46.040 --> 0:14:48.000 great to have you here with Jennifer and myself. So 0:14:48.080 --> 0:14:51.520 how would you describe the IPO market today? What are 0:14:51.520 --> 0:14:54.240 you hearing maybe from some of your clients. 0:14:55.120 --> 0:14:58.360 Sure, thank you for having me, you know, sitting here today. 0:14:59.160 --> 0:15:03.440 I look at the ip market in definitely feeling and 0:15:03.480 --> 0:15:07.600 sensing positive signs of a continued, steady recovery in the 0:15:07.640 --> 0:15:10.360 IPO market similar to coming out of twenty twenty three. 0:15:10.480 --> 0:15:14.000 So not a spike in a resurgence by any means, 0:15:14.000 --> 0:15:19.040 but positive signs, steady recovery. Twenty four IPOs so far 0:15:19.840 --> 0:15:24.000 in twenty twenty four. Five of those raising you know, 0:15:24.600 --> 0:15:28.040 well over you know, half over five hundred million in 0:15:28.080 --> 0:15:33.040 proceeds to over a billion, so strong results, cross sector representation, 0:15:33.920 --> 0:15:37.040 larger deals eleven of those twenty four all raising over 0:15:37.080 --> 0:15:40.320 one hundred million in proceeds. So positive to see some 0:15:40.360 --> 0:15:44.200 stronger deals, larger deals coming to market. Those are positive 0:15:44.240 --> 0:15:45.800 signs for twenty twenty four so far. 0:15:46.560 --> 0:15:48.400 You know, Can you talk a little bit more about 0:15:48.440 --> 0:15:50.880 how the FED is affecting the environment, because we've been 0:15:50.880 --> 0:15:53.240 talking an awful lot today about the Fed minutes, and 0:15:53.520 --> 0:15:55.840 you know, we all remember how traders have really been 0:15:55.880 --> 0:15:59.080 wrong footed with the FED with their expectations on how 0:15:59.160 --> 0:16:01.800 quickly the Fed's going to cut rate. So how is 0:16:01.800 --> 0:16:05.040 this recovery of the IPO market sort of interacting with 0:16:05.080 --> 0:16:05.720 that dynamic. 0:16:07.080 --> 0:16:10.040 It's certainly impacting and back to kind of just a 0:16:10.200 --> 0:16:13.720 steady recovery because we are still in that high interest 0:16:13.760 --> 0:16:18.600 rate environment. What's helpful is we're not anticipating or expect 0:16:18.600 --> 0:16:21.920 any rate increases. Rates are going to hold steady, hopefully 0:16:21.920 --> 0:16:24.360 start to come down, whether it's you know, late spring, 0:16:24.480 --> 0:16:27.960 early summer is still the question of when we would 0:16:27.960 --> 0:16:30.200 start to see those rates come down for twenty twenty 0:16:30.240 --> 0:16:34.000 four and into twenty twenty five. But the economic you 0:16:34.040 --> 0:16:37.520 know backdrop is showing signs of improvement, not only with 0:16:37.640 --> 0:16:42.400 interest rates, but with you know, labor markets, supply chain, 0:16:42.680 --> 0:16:46.480 you know, tensions are easing and inflation is easing. So 0:16:46.520 --> 0:16:49.280 those are positive signs that will help fuel the IPO market, 0:16:49.360 --> 0:16:53.960 but we need to see those signals continue in a 0:16:54.000 --> 0:16:54.560 steady state. 0:16:54.680 --> 0:16:56.960 You sound like a FED member, Rachel, to be honest 0:16:57.360 --> 0:17:00.680 with you, because it does feel like you are. Still 0:17:00.800 --> 0:17:03.200 there are a few different scenarios that could certainly play 0:17:03.200 --> 0:17:05.879 out here in twenty twenty four. Are you more cautious 0:17:05.920 --> 0:17:09.040 than not cautious? Maybe compared with the last I don't 0:17:09.080 --> 0:17:10.040 know six months or so. 0:17:11.400 --> 0:17:15.520 I'm optimistic, quite honestly, not to say that there's not challenges. 0:17:15.600 --> 0:17:18.880 Companies are continuing to navigate. You know, cost is one, 0:17:20.840 --> 0:17:24.480 whether it's consumers, the price of goods, price of services, 0:17:24.560 --> 0:17:28.640 costs of capital continue to be high compared to your 0:17:28.640 --> 0:17:32.760 pre pandemic levels. So it's a challenging environment to navigate, 0:17:32.840 --> 0:17:37.600 no doubt, but starting to ease and improve. I'm optimistic 0:17:38.240 --> 0:17:41.239 when it comes to IPOs, that the key is not 0:17:41.320 --> 0:17:45.960 only the economic backdrop and how that will sustain to 0:17:46.240 --> 0:17:50.600 bring companies to market, but the post IPO performance of 0:17:50.640 --> 0:17:55.159 those companies right needs to hit to maintain the momentum. 0:17:55.240 --> 0:17:59.240 That's absolutely critical. So how companies prepare in advance of 0:17:59.280 --> 0:18:03.160 the IPO that that time of preparation is really critical 0:18:03.200 --> 0:18:06.639 because we need them to perform well in strong post IPO. 0:18:06.840 --> 0:18:09.880 You mentioned at the start of it the conversation twenty 0:18:09.880 --> 0:18:13.119 four IPO so far in twenty twenty four cross cross 0:18:13.119 --> 0:18:17.800 section across a much of different sectors. Is that true 0:18:17.880 --> 0:18:19.280 to like talk to us, Like, you know, we talk 0:18:19.320 --> 0:18:21.800 a lot about AI. I'm curious if you're seeing a 0:18:21.800 --> 0:18:23.920 lot of IPO activity with that. The Intel back to 0:18:24.000 --> 0:18:28.600 Stera has an IPO certainly component to it, and they 0:18:29.040 --> 0:18:31.160 talked about an IPO on the Nasdaq that came across 0:18:31.160 --> 0:18:35.080 the Bloomberg today Biotech, Like where are you seeing them 0:18:35.160 --> 0:18:37.560 more momentum than maybe the rest? 0:18:38.440 --> 0:18:43.360 Sure? Yeah, So biotech certainly a sector that's coming out 0:18:43.400 --> 0:18:47.520 strong so far in twenty twenty four ten IPOs two 0:18:47.600 --> 0:18:52.240 billion in proceeds raised, so really strong results, particularly in biotech. 0:18:52.520 --> 0:18:55.400 Then we're seeing kind of onesie twosies across all other sectors, 0:18:55.400 --> 0:18:58.760 you know, consumer, one, tech, IPO. So far that the 0:18:58.800 --> 0:19:02.840 biotech really is being fueled by interest in big pharma 0:19:03.680 --> 0:19:05.840 and the M and A activity that we're starting to 0:19:05.880 --> 0:19:10.040 see that's improving valuations. So that's driving some momentum around 0:19:10.119 --> 0:19:13.399 IPOs and also follow on activity in the biotech sector. 0:19:13.640 --> 0:19:16.920 So that's really encouraging to see anticipate that to continue. 0:19:17.359 --> 0:19:21.639 When I think about AI, huge topic, everyone is talking 0:19:21.640 --> 0:19:24.199 about it, I think about it in two buckets. One 0:19:24.640 --> 0:19:27.480 the peer play AI companies. We're going to see those 0:19:27.520 --> 0:19:30.400 come to market kind of onesie twosies in my opinion, 0:19:31.200 --> 0:19:35.240 over the coming months and so forth, but probably not 0:19:35.320 --> 0:19:39.800 in droves, largely because one the technology is still emerging 0:19:39.880 --> 0:19:43.840 and evolving, and two, in the private sector, there's still 0:19:43.840 --> 0:19:46.760 a lot of interest in investing in that direction, particularly 0:19:46.840 --> 0:19:50.280 from venture capital. So these companies are getting funded to 0:19:50.359 --> 0:19:54.320 continue working through the technology and so forth and remaining private. 0:19:54.960 --> 0:19:59.280 But then alternately, there's alternatively there's all everyone else, our 0:19:59.359 --> 0:20:02.679 companies leveraging AI in their existing business, whether it's you know, 0:20:02.720 --> 0:20:08.840 product services, driving customer satisfaction, driving efficiency and reducing costs. 0:20:09.280 --> 0:20:12.080 Companies are still really looking to how they're going to 0:20:12.160 --> 0:20:15.560 employ AI within their business model. We're seeing that play 0:20:15.560 --> 0:20:20.040 out and equity stories. The tension that's going to be 0:20:20.160 --> 0:20:24.560 there is investors and stakeholders saying, show me proof, right, 0:20:24.680 --> 0:20:27.440 not just talk about it, but show me the results 0:20:27.480 --> 0:20:30.800 of AI and how that's really impacting the business overall. 0:20:30.840 --> 0:20:33.200 So that'll be something companies really have to pay close 0:20:33.200 --> 0:20:35.600 attention to as they come to market with an AI story. 0:20:36.720 --> 0:20:38.919 You know, if you could elaborate a little bit on that, 0:20:39.119 --> 0:20:42.000 I mean, how happy our investors do you think at 0:20:42.000 --> 0:20:45.879 this point with the real cash value of AI for companies? 0:20:45.920 --> 0:20:48.120 You know, are there is there patients about to get 0:20:48.160 --> 0:20:49.919 tested a little bit? And do they have a lot 0:20:49.960 --> 0:20:51.600 of patients right? 0:20:51.680 --> 0:20:53.679 I think I think there's I think we're going to 0:20:53.720 --> 0:20:58.680 start seeing, you know, continued pressure testing around that and 0:20:58.720 --> 0:21:03.160 in healthy skepticism coming from investors and broader stakeholders. It's 0:21:03.200 --> 0:21:07.119 not just about talking about how how companies are leveraging AI, 0:21:07.280 --> 0:21:10.720 but showing me the results of that use and also 0:21:10.760 --> 0:21:14.400 demonstrating a responsible use around AI as well. 0:21:14.880 --> 0:21:17.120 Is there a private equity component to this too? I mean, 0:21:17.119 --> 0:21:19.639 we've we've got a couple of stories about you know, 0:21:19.720 --> 0:21:22.480 private equity funds that maybe have been waiting for a 0:21:22.560 --> 0:21:26.720 much more friendly market to maybe either sell or spin 0:21:26.800 --> 0:21:29.000 out some of their investments. I'm just curious if you 0:21:29.000 --> 0:21:31.800