WEBVTT - Dollar-Yen in Focus 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.120 us live on YouTube. 0:00:27.240 --> 0:00:31.000 We start stronging in this hour, joining us Dominique Constant 0:00:31.080 --> 0:00:35.320 of Missouo Definitive on Wall Street. I got bad news, folks, 0:00:35.479 --> 0:00:39.920 he's got twenty one considerations for twenty twenty. It's come on, 0:00:40.000 --> 0:00:44.080 it's entertainment, doctor Constam. I can't do twenty one things 0:00:44.159 --> 0:00:46.480 and squeeze it in with you, So let me cut 0:00:46.520 --> 0:00:49.519 to the chase. You're gonna see rate cuts as well 0:00:49.960 --> 0:00:53.239 this year? Are you and Rashudo on the same page 0:00:53.479 --> 0:00:57.240 in that the vector is towards short term lower rates? 0:00:57.520 --> 0:01:00.520 The people are pushing against you right now? Yeah? 0:01:00.600 --> 0:01:03.160 No, I mean Steve is more in the camp that 0:01:03.200 --> 0:01:05.520 the FED will probably end up missing the whole year. 0:01:05.640 --> 0:01:08.640 We're in the camp where, yes, power may struggle to 0:01:08.680 --> 0:01:09.880 get some rate cuts. 0:01:09.600 --> 0:01:10.720 But then the new guys shows up. 0:01:10.720 --> 0:01:13.000 Where the new guys show up and basically there are 0:01:13.000 --> 0:01:15.280 a lot of good reasons we think why they will 0:01:15.280 --> 0:01:19.000 bring down rates, even if inflation risks arising in the mix. 0:01:18.920 --> 0:01:22.160 In the three dimensional x y z space of dominant 0:01:22.200 --> 0:01:24.959 constant back to credits, we should work with Irin Jersey 0:01:25.000 --> 0:01:28.400 and just for Global Wall Street. This is a conversation 0:01:28.720 --> 0:01:31.240 of that. They don't tell Matt Miller in Detroit, but 0:01:31.560 --> 0:01:34.000 you know, I look Dominique where we are, and the 0:01:34.120 --> 0:01:37.600 answer is, we have a lot of stimulus going Now 0:01:37.680 --> 0:01:42.160 are we just expecting out the stimulus that President Trump 0:01:42.360 --> 0:01:43.520 and others have given us? 0:01:43.720 --> 0:01:46.000 Well, the stimulus should be seen in the context of 0:01:46.160 --> 0:01:49.280 the tightening if you like, that came from tariffs. So basically, 0:01:49.440 --> 0:01:52.960 consumer spending in nominal terms fell well short of its 0:01:53.000 --> 0:01:56.400 trend during the last year because of when the tariffs hit, 0:01:56.680 --> 0:01:58.560 and now the consumers are kind of getting that back. 0:01:58.640 --> 0:02:00.400 This is if you remember one of the problems with 0:02:00.520 --> 0:02:03.240 sequencing the stimulus before. You know, you kind of wanted 0:02:03.240 --> 0:02:05.720 it up front before the tariffs hit and you didn't 0:02:05.720 --> 0:02:07.640 get it, so now you're getting it. So that kind 0:02:07.640 --> 0:02:10.760 of in our view, avoids any kind of recession or 0:02:10.760 --> 0:02:12.680 anything like that. So the economy's fine, but I wouldn't 0:02:12.680 --> 0:02:15.560 say it's going to meaningfully accelerate in a way that 0:02:15.639 --> 0:02:19.080 will deliver job growth and acceleration in the labor input 0:02:19.120 --> 0:02:19.800 to growth. 0:02:20.400 --> 0:02:22.320 We have and your Jordan Rochester, I don't know if 0:02:22.320 --> 0:02:24.320 you're in speaking terms with him, but he's just a 0:02:24.440 --> 0:02:28.440 killing it with us, with Japan particularly. But when you 0:02:28.520 --> 0:02:31.600 look at this is an equity market in the United States, 0:02:31.680 --> 0:02:35.679 it's acting in a responsible way expecting out or is 0:02:35.720 --> 0:02:37.960 there an anomaly there? Yeah? 0:02:38.000 --> 0:02:40.440 No, I think equities are in a pretty good place. 0:02:40.520 --> 0:02:43.160 If the FED is biased to either not do anything 0:02:43.400 --> 0:02:45.840 or if anything cut, then that's fine. The issue is 0:02:45.840 --> 0:02:48.320 going to come if and when the Fed ever raises rates, 0:02:48.360 --> 0:02:50.680 But with a new FED coming in, we would say 0:02:50.680 --> 0:02:54.000 they would even look through any kind of inflation because 0:02:54.120 --> 0:02:57.720 that inflation rise we actually project in the second half 0:02:57.720 --> 0:02:59.800 of this year is going to be temporary. The AI 0:03:00.160 --> 0:03:02.720 is a really big deal for us, and that will 0:03:02.760 --> 0:03:05.040 mean you'll get disinflation if you like, on the back 0:03:05.080 --> 0:03:06.880 of it in twenty twenty seven. So the FED can 0:03:06.919 --> 0:03:10.119 basically end up kind of not raising rates for quite 0:03:10.160 --> 0:03:13.680 a long time, and that's pretty constructive for riscasses. 0:03:13.240 --> 0:03:16.239 Our Conversation of the Day for Global Wall Street on YouTube. 0:03:16.280 --> 0:03:20.480 Subscribe to Bloomberg podcast Dominic Constant with us at Missou, 0:03:20.639 --> 0:03:23.400 I can't say enough about a decades impact on Wall 0:03:23.400 --> 0:03:28.600 Street in describing the almost the umbrella that we are 0:03:28.680 --> 0:03:31.360 living in here He's got partly it's two schools in 0:03:31.400 --> 0:03:35.960 England Oxford, and there's another school here that they've better crew. 0:03:36.520 --> 0:03:38.720 Alarian was there for a cup of coffee as well. 0:03:38.920 --> 0:03:41.800 Alexis Christophers with dominic constant. 0:03:42.120 --> 0:03:45.400 Let's talk the dollar. I'm curious what your outlook is 0:03:45.480 --> 0:03:47.240 just for four X in general. But we saw a 0:03:47.280 --> 0:03:50.400 week dollar in twenty twenty five. Does it continue in 0:03:50.440 --> 0:03:51.040 twenty six? 0:03:51.360 --> 0:03:51.560 Yeah? 0:03:51.600 --> 0:03:53.480 Well, in a way, the dollar wasn't nearly as weak 0:03:53.480 --> 0:03:55.160 as it could have been in twenty twenty five. That's 0:03:55.160 --> 0:03:57.400 the way I put it, and that was because relatives 0:03:57.360 --> 0:03:59.360 to the rest of the world, the FED was actually 0:03:59.400 --> 0:04:02.480 quite restricted. I mean, ironically, you could say that Trump 0:04:02.520 --> 0:04:05.000 has some justice for sort of complaining about power not 0:04:05.040 --> 0:04:07.400 cutting rates more because the US was one of the 0:04:07.400 --> 0:04:10.440 most restrictive major central banks last year and the dollar 0:04:10.520 --> 0:04:12.280 was weaker, yes, but not as weak as it could 0:04:12.320 --> 0:04:14.840 have been. My guess is that this year, as you 0:04:14.880 --> 0:04:18.080 see a bit more of a divergence across the central banks. 0:04:18.400 --> 0:04:20.960 Obviously some back central banks are priced to hike. They 0:04:21.000 --> 0:04:23.799 probably won't end up doing that, but with the US, 0:04:23.839 --> 0:04:25.800 you know, with the scope to cut, then you probably 0:04:25.839 --> 0:04:28.400 will see a bit more dollar weakness coming through. And 0:04:28.760 --> 0:04:30.679 that's uh, yeah, that's going to be the outlook. 0:04:30.720 --> 0:04:34.560 Yeah, what about inflation you keep talking about is not 0:04:34.640 --> 0:04:35.960 really going to be a problem. It's going to be 0:04:36.000 --> 0:04:37.000 well behaved. 0:04:37.440 --> 0:04:38.160 What makes what. 0:04:38.080 --> 0:04:41.320 Makes you so inflation is fascinating? Well, we have you know, 0:04:41.440 --> 0:04:43.320 needle to say, we have a great model on inflation. 0:04:43.440 --> 0:04:45.920 It's a global model of inflation. And basically the thing 0:04:45.920 --> 0:04:49.039 about inflation is a lot of lags happen that work 0:04:49.120 --> 0:04:51.040 through it. So what's happening sort of a year or 0:04:51.040 --> 0:04:53.080 two ago in terms of money growth and the dollar 0:04:53.200 --> 0:04:55.560 that really matters for inflation now. So it's kind of 0:04:55.560 --> 0:04:58.680 baits in the cake that inflation has been low recently, 0:04:59.080 --> 0:05:00.880 and it's also somewhat bakes in the cake that it 0:05:00.920 --> 0:05:02.960 will tend to rise in the second half this year. 0:05:03.120 --> 0:05:04.039 But after that is. 0:05:04.040 --> 0:05:05.719 A bit of an unknown, and that really depends on 0:05:05.720 --> 0:05:07.840 the AI think. I think structurally we're going to see 0:05:07.880 --> 0:05:10.280 a lot of disinflation next year. 0:05:10.320 --> 0:05:13.200 Basically I'm going to tee up two disinflations. They got 0:05:13.320 --> 0:05:16.839 China where their oddities, including the surplus we saw the 0:05:16.960 --> 0:05:21.000 other day, and you've mentioned AI twice here now Dominique, 0:05:21.520 --> 0:05:25.600 the view from sixty thousand feet. Talk to Corporate America 0:05:25.640 --> 0:05:30.279 listening right now. They're going to actually see tangible margin 0:05:30.480 --> 0:05:34.880 improvement out of AI and out of the Chinese input. 0:05:35.240 --> 0:05:39.560 Well, they have massive margins at the moment. I think 0:05:39.600 --> 0:05:42.280 the idea of AI is it's the roots to cutting 0:05:42.279 --> 0:05:46.520 costs to maintain those margins because in the K shaped economy, okay, 0:05:46.560 --> 0:05:49.040 the final demand from the consumer is going to be 0:05:49.080 --> 0:05:50.640 a bit more challenged going forward. 0:05:50.680 --> 0:05:53.320 And sequencing, which is your hallmark Beck then Neil Samson, 0:05:53.400 --> 0:05:57.760 credit squeeze and sequencing. Are companies going to cut before 0:05:57.880 --> 0:06:01.039 AI benefit? Are they going to invest in AI before 0:06:01.120 --> 0:06:02.800 they cut? Well? Any vision there? 0:06:02.880 --> 0:06:06.520 I mean unit unit labor costs were basically zero negative 0:06:06.880 --> 0:06:09.160 in the second half of last year, so I mean 0:06:09.160 --> 0:06:10.760 they've they picked up it a little bit, but that 0:06:10.880 --> 0:06:13.240 is effectively the cutting in the end, they didn't need 0:06:13.279 --> 0:06:15.440 to really you know, five people lay off rates are 0:06:15.440 --> 0:06:17.719 really low, but they didn't work them so hard in 0:06:17.800 --> 0:06:20.440 terms of the hour side, and they've definitely cut income strategies. 0:06:20.520 --> 0:06:22.240 I mean, I know a stud like you doesn't look 0:06:22.240 --> 0:06:25.000 at this, but weekly claims came in under two hundred thousand. 0:06:25.360 --> 0:06:27.080 When was the last time and you looked at claims? 0:06:27.560 --> 0:06:31.000 Well, we look at it every week. 0:06:29.960 --> 0:06:33.640 Which which is one of my favorites. Okay, stop the shop. 0:06:34.040 --> 0:06:36.720 Could we stop the show? Did I re choosy get 0:06:36.760 --> 0:06:39.600 your World Cup tickets? Not yet? 0:06:39.800 --> 0:06:43.000 Not yet, I'm waiting for We're working at them right now. 0:06:43.040 --> 0:06:46.000 Dominic coustam with us here with Missil. Can't say enough 0:06:46.040 --> 0:06:49.480 about what Missoo's doing with Stephen Rashudo and Jordan Rochester 0:06:49.880 --> 0:06:51.760 and the whole combo. And we're just thrilled to have 0:06:51.839 --> 0:06:54.400 him in here. This morning, you were waiting on Matthew 0:06:54.440 --> 0:06:58.360 Miller in Detroit, an incredible F one interview. I'm fired 0:06:58.400 --> 0:07:01.520 up to talk to Matt Miller about maybe later. Alexis 0:07:01.600 --> 0:07:03.320 christophis here with doctor constem. 0:07:03.680 --> 0:07:06.440 What do you do if you're searching for yield? What 0:07:06.440 --> 0:07:08.960 what are bond investors to do this year? 0:07:09.520 --> 0:07:13.360 Well, I mean it's I mean, basically, the main issue 0:07:13.400 --> 0:07:15.600 is that the yeld curve is going to end up 0:07:15.600 --> 0:07:18.280 getting a lot steeper in real yields, so we expect 0:07:18.360 --> 0:07:20.560 real yels at the front end to be super low 0:07:20.880 --> 0:07:22.160 and real yels at the long. 0:07:22.040 --> 0:07:24.200 End to be high. So you know there is going to. 0:07:24.120 --> 0:07:26.960 Be yield out there, you know, as long as you 0:07:27.000 --> 0:07:29.160 go far enough out in terms of the yeal curve. 0:07:29.360 --> 0:07:31.160 And obviously there are some markets and the US is 0:07:31.160 --> 0:07:33.840 a relatively high yield yielder and the UK is high, 0:07:34.000 --> 0:07:36.240 so you know there's something out there. But yeah, I mean, 0:07:36.240 --> 0:07:39.240 this isn't this isn't the most exciting world in terms 0:07:39.320 --> 0:07:42.920 of yields outright versus you know, the risky assets. And 0:07:43.320 --> 0:07:45.200 but you know you should play the curve basically. 0:07:45.360 --> 0:07:47.480 I mean, you were twelve years old, but you lived 0:07:48.040 --> 0:07:52.360 independence of the Bank of England, diaminic constant and the 0:07:52.520 --> 0:07:55.160 threat to United States central bank independence. 0:07:55.200 --> 0:07:56.680 I'm so glad you asked that question. 0:07:57.160 --> 0:07:59.360 So when we were in England, we were taught, and 0:07:59.400 --> 0:08:01.440 most people taught in Europe at the time that there 0:08:01.480 --> 0:08:04.760 was no such thing as independent monetary policy. You basically, 0:08:04.800 --> 0:08:08.080 fiscal policy kind of dominated and the central bank setters 0:08:08.080 --> 0:08:08.320 sort of. 0:08:08.320 --> 0:08:08.920 Go along with it. 0:08:09.000 --> 0:08:10.680 So in a way, the Federal Reserve Act that gave 0:08:10.720 --> 0:08:13.480 them their independence in practical the terms, you know, it 0:08:13.520 --> 0:08:16.080 only really became relevant after the inflation in the nineteen 0:08:16.120 --> 0:08:18.960 seventies in order to bring down inflational expectations. I think 0:08:18.960 --> 0:08:22.000 it's a luxury that we enjoy right now, the independence, 0:08:22.000 --> 0:08:23.640 and they shouldn't be taken for granted at all. 0:08:23.760 --> 0:08:26.440 Well, our audience is, particularly the global law street that 0:08:26.560 --> 0:08:29.200 hangs on your every word. Should they get used to 0:08:29.400 --> 0:08:33.440 treasury driving central bank monetary policy? Yeah? 0:08:33.480 --> 0:08:35.079 I think, and I think that's what's going to happen. 0:08:35.120 --> 0:08:37.040 And I think the problem is that if you don't 0:08:37.040 --> 0:08:40.240 have say, inflation expectations per se as a real issue, 0:08:40.760 --> 0:08:42.520 then basically what is a real issue. 0:08:42.520 --> 0:08:43.200 It is debt service. 0:08:43.240 --> 0:08:44.880 I mean, you can't have half the budget going and 0:08:44.960 --> 0:08:46.960 debt service type thing at a time of all this 0:08:47.000 --> 0:08:48.080 geopolitical tension. 0:08:48.200 --> 0:08:50.920 I mean, Stephanie Calton, I know you've read every word. 0:08:51.160 --> 0:08:55.640 Is Trump really? Is President Trump actually doing modern monetary theory? 0:08:55.679 --> 0:08:57.040 I mean, is he brought MMT? 0:08:57.400 --> 0:09:00.000 Yeah? Yeah, they're going to end up having to do it. 0:09:00.080 --> 0:09:02.199 K shaped economy with a eye is going to lead 0:09:02.240 --> 0:09:04.440 a lot of people desperate. And if you don't have 0:09:04.480 --> 0:09:07.920 the fiscal latitude to basically bail those people out with 0:09:07.920 --> 0:09:12.280 basic income and munashit policy is very imperfect tools one 0:09:12.320 --> 0:09:14.280 interest rate for everyone then you are going to have 0:09:14.360 --> 0:09:16.360 to sort of think a bit more creatively about how 0:09:16.440 --> 0:09:19.720 you interact fiscal with munashit policy. And that really means 0:09:19.800 --> 0:09:21.800 very low short rates at the front end, and the 0:09:21.840 --> 0:09:23.920 long end can be a bit high and may even 0:09:23.920 --> 0:09:25.720 be controlled at some point if necessary. 0:09:25.800 --> 0:09:28.480 And creative I think has to mean something other than 0:09:29.120 --> 0:09:31.440 handing out free money than helicopter money. 0:09:32.000 --> 0:09:34.280 Yeah, well yeah, it doesn't help in finish, Yeah, helicopter 0:09:34.320 --> 0:09:36.400 not yet exactly. I mean, it's got to be targeted 0:09:36.400 --> 0:09:37.720 at the people you need at most. I mean, it's 0:09:37.760 --> 0:09:39.640 basically I mean, we are effectively going down the road 0:09:39.679 --> 0:09:42.000 of basic income. I mean, and if AI is what 0:09:42.160 --> 0:09:43.920 is supposed to be in five years time, there are 0:09:43.920 --> 0:09:46.040 a lot of people here who will not be working. 0:09:46.240 --> 0:09:49.679 So what is going to be the political response to 0:09:49.720 --> 0:09:53.720 this among elites and frankly among the broad swathe of 0:09:53.760 --> 0:09:57.400 America that is joining us enjoying this prosperity. 0:09:57.840 --> 0:09:59.720 Well, it's going to be a bit like Greenland. Eventually 0:09:59.720 --> 0:10:01.240 that they will talk and. 0:10:01.160 --> 0:10:05.040 Eventually people will sit down and discuss and think more 0:10:05.200 --> 0:10:07.880 more creatively about what you do, because you are blowing 0:10:07.960 --> 0:10:10.920 up so many different things that we have taken for granted. 0:10:10.960 --> 0:10:11.880 And need to be addressed. 0:10:11.880 --> 0:10:14.960 So I think there will be this acceptance if you 0:10:15.120 --> 0:10:18.840 like that fiscal policy has to be taken into consideration 0:10:20.320 --> 0:10:23.600 along with the sort of normal mandates of inflation. 0:10:23.960 --> 0:10:26.640 So okay, wise, how do we work out then how 0:10:26.640 --> 0:10:30.400 do we consider our fiscal mess? The theories you know, 0:10:30.480 --> 0:10:33.600 all wonderful work by Joe Stiglitz is you grow your 0:10:33.640 --> 0:10:36.520 way out of it on a nominal or real basis. 0:10:36.520 --> 0:10:39.560 Do you have a confidence with our technology that we're 0:10:39.600 --> 0:10:40.679 going to grow our way out of that? 0:10:40.920 --> 0:10:44.839 So imagine a world where GDP growth is let's say, 0:10:44.880 --> 0:10:48.120 running at three percent, and four percent comes from productivity 0:10:48.120 --> 0:10:50.240 and negative one comes from labor input. You have pretty 0:10:50.280 --> 0:10:53.160 good growth and you can grow out of it if 0:10:53.160 --> 0:10:55.480 you have, say, you know, two percent inflation. But of 0:10:55.480 --> 0:10:58.160 course that world will probably be giving you disinflation if 0:10:58.160 --> 0:11:00.000 you're not careful, So you kind of need a very 0:11:00.040 --> 0:11:03.400 supportive monetary policy as part and parcel of that. But 0:11:03.440 --> 0:11:05.720 then on and once you get the lattitude on fiscal 0:11:05.760 --> 0:11:08.200 policy because you are growing yourself out of it, then 0:11:08.240 --> 0:11:10.560 you can do your redistribution with your basic heat. 0:11:10.760 --> 0:11:13.240 But Alexis wants to get in here, I'm being rude. 0:11:13.360 --> 0:11:16.320 The elasticities have changed. You've got two thirds. I mean, 0:11:16.400 --> 0:11:19.040 I is Chris Waller, do we have two do we 0:11:19.080 --> 0:11:21.440 have to our starts? We got on our start for 0:11:21.520 --> 0:11:23.920 the haves, Yeah, and we got on our start for 0:11:24.000 --> 0:11:26.160 they have nuts. Do you agree? Yeah? 0:11:26.200 --> 0:11:28.480 In a sense there, yeah, that's true. But that can 0:11:28.520 --> 0:11:31.240 also get reflective or embedded in what will be a 0:11:31.360 --> 0:11:34.200 very steep, you know, real ilk curve, because the real 0:11:34.280 --> 0:11:36.880 ill curve when you have this very low real rates 0:11:36.880 --> 0:11:39.080 at the front end and if the government is funding 0:11:39.280 --> 0:11:40.960 and more at the fund send, that is how you 0:11:41.000 --> 0:11:42.560 probably get that fiscal latitude. 0:11:42.600 --> 0:11:44.599 I mean, Lisa Mattero just love because she's going to 0:11:44.600 --> 0:11:46.600 get the surveillance cork to put it in my mouth. 0:11:46.640 --> 0:11:49.360 I got so many questions as jump in here. 0:11:49.679 --> 0:11:51.800 Well I went speaking of fiscal policy. I'm just you 0:11:51.800 --> 0:11:54.480 got me thinking about fiscal policy in Europe. I mean, 0:11:54.559 --> 0:11:56.800 it's it's kind of a hot mess, right, And so 0:11:56.880 --> 0:12:00.880 if you want to look at opportunities outside the US, 0:12:01.520 --> 0:12:03.120 where are you looking? If you're looking in the EUO, 0:12:03.160 --> 0:12:05.160 I mean it's growing albeit moderately. 0:12:06.360 --> 0:12:09.400 Yeah, well, I mean opportunities and fixed income. I think 0:12:09.480 --> 0:12:12.240 you know, basically it's you know that they have very 0:12:12.360 --> 0:12:14.960 relative low rates. You know, they've they've they cut rates 0:12:15.000 --> 0:12:18.760 much more aggressively relatively speaking. They do have sort of 0:12:18.920 --> 0:12:21.200 you know, some countries like France obviously have huge fiscal 0:12:21.200 --> 0:12:23.040 issues they need to deal with a kind of as bad, 0:12:23.280 --> 0:12:25.439 if not worse than Italy. So yeah, I mean those 0:12:25.480 --> 0:12:27.760 are issues that you know, you could argue that maybe 0:12:27.760 --> 0:12:29.320 we're at a turning point, but I think the poliskal 0:12:29.440 --> 0:12:31.600 uncertainty there makes that much more risky. You've still got 0:12:31.600 --> 0:12:34.440 a lot of polistic uncertainty that needs to be working through. 0:12:34.679 --> 0:12:36.520 So yeah, I'm not sure there's you know, I wouldn't 0:12:36.559 --> 0:12:37.520 rush off to buy Europe. 0:12:38.360 --> 0:12:39.280 Can I get in trouble? 0:12:39.720 --> 0:12:41.559 Yeah, well, you know you do sometimes. 0:12:42.240 --> 0:12:45.880 So I put out a comment and a fan distribution 0:12:46.000 --> 0:12:49.960 of probability. Do many custom folks invented fan distributions are 0:12:50.040 --> 0:12:54.480 now also some market and modern market economics. The certitude 0:12:54.559 --> 0:12:58.080 here of select FED governors and presidents right now I 0:12:58.120 --> 0:13:03.920 find absolutely mind bug. How do you respond to academics, 0:13:04.000 --> 0:13:09.440 schooled quality academics who are just so damn certain ex 0:13:09.559 --> 0:13:10.880 ante of what they think. 0:13:14.320 --> 0:13:16.640 Well, I mean, yes, I mean there's there's been an 0:13:16.679 --> 0:13:20.600 element of backward looking. I would say group think and 0:13:20.640 --> 0:13:25.120 taking everything for granted. And I would say they they 0:13:25.200 --> 0:13:27.319 need to be much more flexible and much more sort 0:13:27.320 --> 0:13:29.800 of strategically thinking. And I think it's fair to say that 0:13:29.840 --> 0:13:32.280 a lot of the criticism leveled at, you know that 0:13:32.400 --> 0:13:34.880 the current FED and and that sort of you know, 0:13:35.040 --> 0:13:38.040 you know, previous FED chairs has been that there's too 0:13:38.160 --> 0:13:41.760 much sort of backward looking playing by with the rule 0:13:41.800 --> 0:13:43.480 books that they thought would never be ripped up, and 0:13:43.559 --> 0:13:46.720 yet those rule books have to be challenged. 0:13:46.920 --> 0:13:49.520 Thank you so much for getting us started in January. 0:13:49.600 --> 0:13:52.760 Dominic constems with Miszoo. Folks. I can't say enough I 0:13:52.760 --> 0:13:54.480 get I'm flooded with people. 0:13:54.720 --> 0:13:54.960 Time. 0:13:55.080 --> 0:13:57.320 Send me his note, Send me his note. Get it 0:13:57.360 --> 0:13:59.840 from a zoo. We protect the copyright of all of 0:13:59.840 --> 0:14:03.200 our guests, even Jordan Rochester, which is tough to Can 0:14:03.240 --> 0:14:07.040 you get out on LinkedIn? Okay? Everybody else is on LinkedIn? Domini? 0:14:07.120 --> 0:14:08.600 Can you can you write on LinkedIn? 0:14:08.840 --> 0:14:10.360 I could try, you could try, Okay? 0:14:10.400 --> 0:14:15.960 Thank you, Dominique constem with Miszoo this morning. Stay with us. 0:14:16.200 --> 0:14:19.440 More from Bloomberg Surveillance coming up after this. 0:14:26.680 --> 0:14:30.240 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:14:30.320 --> 0:14:33.480 weekday afternoons from seven to ten am Eastern Listen on 0:14:33.560 --> 0:14:37.200 Applecarplay and Android Auto with the Bloomberg Business app, or 0:14:37.360 --> 0:14:38.880 watch us live on YouTube. 0:14:39.200 --> 0:14:42.520 We said good morning, patiently waiting Decked and Van Cleef 0:14:42.520 --> 0:14:45.920 and Cardier in London. Sri Coacha Gavidian joins us is 0:14:46.040 --> 0:14:51.240 brilliant at Aberdeen Investments as well. Sri, what is the 0:14:51.480 --> 0:14:55.640 change in your investment strategy over the last sixty days, 0:14:56.280 --> 0:15:00.120 given the cacophony, the the buttress scene that we've I've 0:15:00.120 --> 0:15:04.120 seen out there, of GEOPOLOTEXI in banking as well, have 0:15:04.240 --> 0:15:05.320 you changed a view. 0:15:08.080 --> 0:15:10.560 We've actually taken a very long term view and we've 0:15:10.800 --> 0:15:13.720 at the end of last year we were very aware 0:15:13.840 --> 0:15:16.280 of a lot of the geopolitical risks that were ahead, 0:15:16.400 --> 0:15:19.240 so that would be very much in favor of a 0:15:19.280 --> 0:15:23.280 diversified portfolio. So as we've seen some of the safe havens, 0:15:23.320 --> 0:15:25.360 even though they were quite stretched, like gold and silver, 0:15:25.400 --> 0:15:27.640 they're still doing quite well in this backdrop. So we 0:15:27.680 --> 0:15:32.160 still recommend hedging with those safe havens. But also if 0:15:32.200 --> 0:15:34.000 we think about the broader we were just talking about 0:15:34.000 --> 0:15:38.320 TSMC earlier. If we think about the broader AI story, 0:15:38.360 --> 0:15:42.160 one of the recommendations we're making is that looking beyond 0:15:42.400 --> 0:15:46.200 the big tech names and looking towards broadening out that 0:15:46.320 --> 0:15:50.640 AI theme towards other regions and perhaps towards real assets, 0:15:50.640 --> 0:15:55.400 for example, the AI related infrastructure. So I'd say that 0:15:55.880 --> 0:16:00.000 a lot has happened, but we go with a scenario analysis, 0:16:00.080 --> 0:16:03.720 and so far we've been Okay, Gold. 0:16:03.560 --> 0:16:05.240 And Sex out with earnings. We're going to talk to 0:16:05.280 --> 0:16:08.840 bank unless three, Coach, you're forgetting you. I'm kidding, three, 0:16:08.880 --> 0:16:11.080 but three, you know, as we see Gold and Sex 0:16:11.120 --> 0:16:14.640 come out here with some ginormous numbers equity training. I'm 0:16:14.640 --> 0:16:16.280 not going to bore you with the details, three, because 0:16:16.320 --> 0:16:19.480 I know you can't talk about individual stacks. But do 0:16:19.600 --> 0:16:24.480 you see continent of Europe banking finally as turned a 0:16:24.600 --> 0:16:29.000 quarter and will begin to show American like results. 0:16:31.160 --> 0:16:33.800 Well, I don't have an earnings forecast as such. Yes, 0:16:33.880 --> 0:16:36.800 of course, outlook for Europe, but the outlook for Europe 0:16:36.840 --> 0:16:40.520 is still quite quite strong for this year. I'd say 0:16:40.560 --> 0:16:43.080 that a lot of the if you think about the 0:16:43.440 --> 0:16:48.720 banking backdrop, moving on from banking and broader as well, 0:16:48.840 --> 0:16:52.560 you can see that the economic outlook is quite resilient 0:16:52.560 --> 0:16:55.120 for the rest of the year. I would say that, 0:16:55.160 --> 0:16:57.760 you know, rates have stabilized. You know, we have seen 0:16:57.800 --> 0:17:00.160 the end of the easing cycle from the ECB, so 0:17:00.200 --> 0:17:03.560 there's some stability there and from the rates section. From 0:17:03.560 --> 0:17:06.840 the rate side, in terms of margins for banks, we 0:17:07.359 --> 0:17:10.800 are expecting the ECB to be on hold because inflation 0:17:10.920 --> 0:17:14.960 is at target, growth is quite stable, resilient. 0:17:15.400 --> 0:17:16.400 But at the end of. 0:17:16.520 --> 0:17:18.760 This year, towards the end of this year, I think 0:17:18.760 --> 0:17:20.639 what we'll start to see is a shift in the 0:17:20.680 --> 0:17:24.639 ECB slightly more hawkish tone, perhaps because we're going to 0:17:24.680 --> 0:17:28.800 see the impact of fiscal spending filter through into the 0:17:28.840 --> 0:17:33.120 broader economy, particularly defense in Germany, defense across different countries. 0:17:33.560 --> 0:17:35.560 But I'd say that that is going to have material 0:17:35.600 --> 0:17:39.520 impact on the rates outlook as well. So nothing too dramatic, 0:17:39.640 --> 0:17:42.480 but potentially a hike twenty five basis points at the 0:17:42.480 --> 0:17:43.760 beginning of twenty twenty seven. 0:17:43.880 --> 0:17:44.160 The looks. 0:17:44.240 --> 0:17:48.720 Since we're speaking international, just want to get Japan in here, 0:17:48.760 --> 0:17:50.600 and what we're seeing with the yen now at about 0:17:50.640 --> 0:17:54.440 one fifty eight to fifty one, eighteen month low. There's 0:17:54.440 --> 0:17:57.080 been a lot of concern over Japan's fiscal policy. What 0:17:57.119 --> 0:17:59.000 this is going to mean for the Japanese end. When 0:17:59.040 --> 0:18:03.880 does that because a problem for global markets? 0:18:04.240 --> 0:18:06.840 I would say that for the yen, the global markets 0:18:06.840 --> 0:18:09.359 are really focused on the carry trade and the carry 0:18:09.400 --> 0:18:12.000 on wind. We've seen bouts of this in I think 0:18:12.000 --> 0:18:14.320 it was last year or the year before where we 0:18:14.400 --> 0:18:17.440 had a big unwind in the shift in the yen. 0:18:17.840 --> 0:18:20.359 It's those sharp movements that we need to be concerned about. 0:18:20.400 --> 0:18:22.199 And at the moment, what we're seeing is that the 0:18:22.240 --> 0:18:26.880 yen is oscillating around that one sixty level, just almost 0:18:26.920 --> 0:18:29.640 triggering that level. This is the lowest we've seen since 0:18:29.640 --> 0:18:32.719 twenty twenty four. Back then we saw a series of 0:18:32.760 --> 0:18:36.359 interventions from the Ministry of Finance because it was felt 0:18:36.400 --> 0:18:40.040 that the depreciation of the yen was too excessive. We're 0:18:40.040 --> 0:18:43.000 hearing that talk again from the Ministry of Finance that 0:18:43.160 --> 0:18:46.040 the yen has moved away from fundamentals, also from the 0:18:46.080 --> 0:18:49.960 Bank of Japan. So I would say that it's possible 0:18:50.080 --> 0:18:53.000 that the yen breaches one sixty. Some hedge funds are 0:18:53.040 --> 0:18:56.400 vetting on one sixty five. But I would say we've 0:18:56.440 --> 0:18:59.679 the Ministry of Finance has already started talking. We have 0:18:59.720 --> 0:19:03.720 a election coming up. They need to intervene quite soon 0:19:03.760 --> 0:19:06.080 and I think the election dynamics are going to be 0:19:06.119 --> 0:19:07.399 really interesting in the next few. 0:19:07.320 --> 0:19:11.680 Days, right street, Thank you so much. Stay with us. 0:19:11.920 --> 0:19:15.160 More from Bloomberg Surveillance coming up after this. 0:19:22.400 --> 0:19:26.000 You're listening to the Bloomberg Surveillance podcast. Catch US Live 0:19:26.040 --> 0:19:29.199 weekday afternoons from seven to ten am Eastern Listen on 0:19:29.280 --> 0:19:32.720 Apple Karplay and Android Otto with the Bloomberg Business app, 0:19:32.880 --> 0:19:34.600