WEBVTT - Bloomberg Surveillance TV: January 16th, 2026

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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<v Speaker 2>with Lisa Bromwitz and Amrie Hordernt. Join us each day

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<v Speaker 2>for insight from the best in markets, economics, and geopolitics

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<v Speaker 2>from our global headquarters in New York City. We are

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<v Speaker 2>anywhere else you listen, and as always on the Bloomberg

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<v Speaker 2>Terminal and the Bloomberg Business app.

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<v Speaker 3>Let's turn to the stock market.

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<v Speaker 2>Mana Mahajana Edward Jones writing, we believe US corporate earnings

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<v Speaker 2>are on pace to achieve double digit growth this year.

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<v Speaker 2>We remain overweight equities relative to fixed income. Mona, Welcome

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<v Speaker 2>to the program. This is slightly unfair because those headlines

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<v Speaker 2>only just cross. So you're going to have to do

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<v Speaker 2>this with me in real time. And if you don't

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<v Speaker 2>want to go there, don't go there. But what on

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<v Speaker 2>earth would happen and everyone started to happening there four

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<v Speaker 2>or one case to buy houses, what would happen to

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<v Speaker 2>the stock market?

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<v Speaker 4>Yeah, you know, look, we'll have to wait for details

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<v Speaker 4>from the President next week, but certainly I think the

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<v Speaker 4>motivation here is to make sure that all households, whether

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<v Speaker 4>you're in the upper income bracket, mid income, or lower income,

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<v Speaker 4>have exposure to.

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<v Speaker 5>A diverse set of asset classes.

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<v Speaker 4>And I do think fundamentally that theory and consideration is

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<v Speaker 4>the right one. We want to make sure that all

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<v Speaker 4>households are thinking about investments from an early stage of

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<v Speaker 4>their career, their family development, their homeownership development. So broadly speaking,

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<v Speaker 4>we think if this starts a conversation of how should

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<v Speaker 4>I position my assets, whether it's in equities, fixed income,

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<v Speaker 4>or real estate, it's a good step in the right direction.

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<v Speaker 3>Well, let's start with where this is coming from.

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<v Speaker 2>So there is an affordability problem has been for a

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<v Speaker 2>long time. This administration inherited it. Now they need to

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<v Speaker 2>address it. The remedies to that affordability crisis. How do

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<v Speaker 2>you think that's going to shape market outcomes in the

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<v Speaker 2>year to come.

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<v Speaker 4>Yeah, you know, there's different ways the administration can force

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<v Speaker 4>this or do this. If it's using blunt instruments like

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<v Speaker 4>putting caps on credit card interest rates, that will have

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<v Speaker 4>adverse incomes, outcomes for the broader economy and then certainly

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<v Speaker 4>the players in that sector. Now, if you do this

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<v Speaker 4>in a way, that is, let us do this in

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<v Speaker 4>a gradual way. Let us take an approach that offers you,

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<v Speaker 4>whether it's tax relief, whether it's deferred tax payments, whether

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<v Speaker 4>it's thinking about opportunities at lower rates depending on your

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<v Speaker 4>income level. I think doing it in a graduated fashion

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<v Speaker 4>makes more sense than trying to use the blunt instrument approach.

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<v Speaker 4>But I think overall, the affordability issue needs to be addressed,

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<v Speaker 4>and certainly, as we are approaching a midtrum election year,

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<v Speaker 4>makes sense that we're starting to think about this early on.

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<v Speaker 1>If you want to start thinking about affordability the midtrum

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<v Speaker 1>election year, what do you want to be exposed to

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<v Speaker 1>in the equity market?

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<v Speaker 4>Yeah, you know, and I think your earlier guests alluded

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<v Speaker 4>to this as well. We do think that this is

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<v Speaker 4>a year where diversification does matter. And I think, you know,

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<v Speaker 4>we've come off of three years where AI and technology

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<v Speaker 4>have really dominated leadership in the markets. If you did

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<v Speaker 4>not have exposure to those themes, you really were underperforming.

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<v Speaker 4>Now this year, we think if you have exposure to

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<v Speaker 4>both the AI parts of market, but you have some

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<v Speaker 4>exposure to cyclical parts of market value, parts of market

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<v Speaker 4>international and EM and by the way, have a little

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<v Speaker 4>bit of fixed income exposure. That is the way that

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<v Speaker 4>your portfolio is going to perform. And I think the

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<v Speaker 4>combination of a steady economic growth picture, a FED that

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<v Speaker 4>is likely going to cut on the margin, but also

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<v Speaker 4>earnings growth that is accelerating this year supports that broading theme.

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<v Speaker 1>When you say the FED cutting on the margin, one

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<v Speaker 1>cut is that.

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<v Speaker 3>What we're expecting for in twenty twenty.

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<v Speaker 4>Six, So you know, our base case is one to

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<v Speaker 4>two cuts in twenty twenty six. We think they're probably

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<v Speaker 4>towards the tail end of this rate cutting cycle. But nonetheless,

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<v Speaker 4>we do think the FED is looking to get towards

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<v Speaker 4>a neutral level. And typically, if you look historically, that

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<v Speaker 4>neutral levels usually some somewhere around one hundred basis points

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<v Speaker 4>above inflation. So if you think inflation ends around or

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<v Speaker 4>you know it kind of steadies out around two two

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<v Speaker 4>and a half percent, a FED funds rate around three

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<v Speaker 4>and a half percent to us makes a lot of

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<v Speaker 4>sense as a.

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<v Speaker 3>Base case since we're on the federal reserve.

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<v Speaker 2>This week really kicked off with Sham and Powell coming

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<v Speaker 2>out quite publicly and pushing back against the administration. That

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<v Speaker 2>story's got old very very quickly, Mona. Do you see

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<v Speaker 2>that as noise or news?

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<v Speaker 4>Yeah, you know, I think it was initially quite a

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<v Speaker 4>bit of shocking news to hear that the Federal Reserve

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<v Speaker 4>chair was under criminal investigation. But to your point, since then,

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<v Speaker 4>we've seen not only FED Chair Drone Powell come out strongly,

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<v Speaker 4>but old former FED chairs as well as congressional members

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<v Speaker 4>from both sides of the aisle supporting this idea that

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<v Speaker 4>the FED independence is important. And what we've always said

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<v Speaker 4>is if the market gets a sense that FED independence

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<v Speaker 4>is being questioned or challenged, not only can you see

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<v Speaker 4>mork of volatility, you'll probably see rates rise, especially on

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<v Speaker 4>the long end, as that risk premium gets baked in.

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<v Speaker 4>And that's squarely opposite of what this administration wants, which

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<v Speaker 4>is lower rates. So there's a little bit of a counterintuitive,

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<v Speaker 4>you know, cycle happening there. But I think generally markets

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<v Speaker 4>have made it clear that FED independence is important.

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<v Speaker 2>Stay with US multil Inpex surveillance coming up after this,

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<v Speaker 2>John Labor of the Eurasia Grape joins US. Now, John,

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<v Speaker 2>you heard it there from Tyler Amrie mentioned it as well.

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<v Speaker 2>Gavna Shapiro at the White House, Is this just a

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<v Speaker 2>new political reality that both parties have to confront.

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<v Speaker 6>Yeah, I mean, I think actually President Trump's trying to

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<v Speaker 6>get out ahead of the curve here. We know affordability

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<v Speaker 6>is probably the number one issue on voters' minds for

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<v Speaker 6>twenty twenty six, and this electricity issue was a factor

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<v Speaker 6>in some of the off cycle elections that we saw

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<v Speaker 6>in New Jersey and Virginia last year. So you know,

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<v Speaker 6>the data centers, it's a big deal. It's a big

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<v Speaker 6>part of Trump industrial strategy. They want the US to

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<v Speaker 6>be the world leader in AI, and to be the

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<v Speaker 6>world leader in AI, you need to consume a lot

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<v Speaker 6>of energy and that's going to become an increasing political

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<v Speaker 6>problem for people all over the country. I do think

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<v Speaker 6>to your point, it's notable that Democrats are willing to

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<v Speaker 6>play ball here with the administration. This reflects the power

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<v Speaker 6>that only the White House has, and I think that

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<v Speaker 6>this is going to be an ongoing theme that we

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<v Speaker 6>see throughout the year.

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<v Speaker 1>Not just democratic governors willing to play ball, tech companies, Microsoft,

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<v Speaker 1>Brad Smith. We're going to ask utilities and public commissions

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<v Speaker 1>to set our rates high enough to cover electricity costs

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<v Speaker 1>for our data centers. John, is this just another implementation

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<v Speaker 1>of state capitalism?

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<v Speaker 3>Yeah.

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<v Speaker 6>I think that's exactly one way to think about it.

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<v Speaker 6>I think Microsoft knows that the Trump administration is their

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<v Speaker 6>biggest champion. They really need Trump to get the licenses

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<v Speaker 6>that they need to have access to semiconductors. I mean,

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<v Speaker 6>the administration has been extraordinarily aggressive in shaping how these

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<v Speaker 6>tech companies sell chips by chips have access around the globe,

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<v Speaker 6>and they've been championing them. And I think the Microsoft

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<v Speaker 6>sees the writing on the wall here, which is that

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<v Speaker 6>this is a growing political story that they need to

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<v Speaker 6>get ahead of, exactly the same as how the Trump

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<v Speaker 6>administration's doing this. And I think this again, this is

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<v Speaker 6>going to be a big theme for the year. I

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<v Speaker 6>think that electricity is a vulnerability for the president, and

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<v Speaker 6>by doing this and by getting their partners like Microsoft

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<v Speaker 6>to do this, it's an incredibly savvy way of saying

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<v Speaker 6>he's doing something about the problem.

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<v Speaker 1>Not to get two in the weaves, but there is

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<v Speaker 1>a law from nineteen thirty five, the Federal Power Act,

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<v Speaker 1>which basically separates when it comes to the grid, how

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<v Speaker 1>the states jurisdiction is over the federal government. Are we

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<v Speaker 1>pretty much just resetting new rules of engagement between how

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<v Speaker 1>the states deal with electricity.

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<v Speaker 6>You know, I'm not familiar with the rules of the

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<v Speaker 6>electrical grid and how it works at the state level,

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<v Speaker 6>but I do think federal intervention here is probably appropriate.

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<v Speaker 6>And given that this is multiple states coming together to

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<v Speaker 6>drive this new initiative and put this new electricity on

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<v Speaker 6>the market, and it's affecting all these tech companies that

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<v Speaker 6>are trying to invest everywhere in the United States. This

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<v Speaker 6>sets a tone for the entire country and tells these

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<v Speaker 6>tech companies that they're going to need to be partners

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<v Speaker 6>in solving this problem. And because of that, you're probably

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<v Speaker 6>going to see more efforts to take advantage of a

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<v Speaker 6>diverse source of electricity generation, including probably over time nuclear power,

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<v Speaker 6>which had previously fallen out of favor in the United States,

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<v Speaker 6>and now that the tech companies need it is going

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<v Speaker 6>to be surging back.

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<v Speaker 1>John mentioned all what's going on in terms of the

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<v Speaker 1>presidents laid his sol those on truth, social the defense sector, housing,

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<v Speaker 1>credit card companies. What do you expect him to deliver

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<v Speaker 1>at Davos?

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<v Speaker 6>Yeah, it's only been We're in the third week of

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<v Speaker 6>the year, and it feels like we've lived three years

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<v Speaker 6>so far, given all the stuff that's going on. Yeah,

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<v Speaker 6>I think the Davos speech will probably be a chance

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<v Speaker 6>for Trump as he does to air some grievances in

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<v Speaker 6>front of a crowd that he probably thinks is hostile

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<v Speaker 6>to him, but he still wants to get in front

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<v Speaker 6>of He mentioned housing as one of the things he's

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<v Speaker 6>going to talk about. I think there's going to be

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<v Speaker 6>other affordability things brought up. One of the big things

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<v Speaker 6>on housing is long term rates. They've been attempting to

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<v Speaker 6>use Fanny and Freddy in order to get long term

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<v Speaker 6>mortgage rates down. I think that probably healthcare is going

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<v Speaker 6>to be an issue that is focused in focus in

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<v Speaker 6>this speech on affordability. There's still the live issue of

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<v Speaker 6>these Affordable Care Act subsidies that's happening in Congress right now.

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<v Speaker 6>And then electricity, I think and energy costs are probably

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<v Speaker 6>going to be a big piece of it, not just electricity,

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<v Speaker 6>but also energy prices, I mean oil prices. That's one

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<v Speaker 6>of the primary drivers, or at least it's the primary

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<v Speaker 6>outcome of this Venezuela in addiction is that they're putting

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<v Speaker 6>all these new barrels of oil on the market, and

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<v Speaker 6>I think that keeping energy costs low is going to

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<v Speaker 6>be a big theme.

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<v Speaker 2>John, Is there a home for people who support traditional

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<v Speaker 2>conservative policy.

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<v Speaker 3>In the United States?

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<v Speaker 6>I mean no, You've got the Republican Party is, or

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<v Speaker 6>at least under Trump, massively interventionists. And there are a

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<v Speaker 6>lot of Republicans, many of whom have only been elected

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<v Speaker 6>in the Trump era. I mean over the half of

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<v Speaker 6>the House of Representatives came into office after Trump was

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<v Speaker 6>already here and have helped him totally reshape this party

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<v Speaker 6>into a much more populous, much more aggressive, much more

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<v Speaker 6>interventionist party that seems to have no limits to the

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<v Speaker 6>kind of things that they're going to do to deliver

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<v Speaker 6>benefits for voters. So, I think the ara of small

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<v Speaker 6>government is really over here, and you're going to see

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<v Speaker 6>a government that's on both sides that's now reacting to

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<v Speaker 6>the need for voters to want to see change in

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<v Speaker 6>their life. And so I think both parties now are

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<v Speaker 6>going to be much much more aggressive in how they

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<v Speaker 6>try to do that.

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<v Speaker 2>How much daylight do you think they'll be between the

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<v Speaker 2>two parties on economic policy?

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<v Speaker 3>By the time we get to twenty eight very little.

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<v Speaker 6>Probably tax policy will be the big one. There will

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<v Speaker 6>probably be more lip service paid to the deficit from

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<v Speaker 6>the Republicans. The Democrats will probably support a more larger

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<v Speaker 6>tax increases in order to bring down the deficit. I

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<v Speaker 6>think on trade you're going to see a lot of similarities.

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<v Speaker 6>Labor policies probably another one where you see a big difference,

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<v Speaker 6>but more divergence in the coming years. So you know,

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<v Speaker 6>I think the parties are going to compete on cultural differences.

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<v Speaker 6>Immigration will probably be a big wedge issue in the

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<v Speaker 6>upcoming election. But on economic policy, you know, these parties

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<v Speaker 6>are looking more and more similar to each other.

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<v Speaker 2>Stay with US mult Blomberg surveillance coming up after this,

0:11:35.520 --> 0:11:37.560
<v Speaker 2>and let's keep it on the federal reserve. Stephen Stanley

0:11:37.559 --> 0:11:40.200
<v Speaker 2>of Santantie writing this, I look for the unemployment rate

0:11:40.280 --> 0:11:44.400
<v Speaker 2>to stabilize. Inflation is likely to remain stubbornly high. I

0:11:44.440 --> 0:11:48.040
<v Speaker 2>look for the FMC to remain on hold for all

0:11:48.080 --> 0:11:51.320
<v Speaker 2>of twenty twenty six. Stephen joins the staffer or Stephen

0:11:51.320 --> 0:11:54.640
<v Speaker 2>Goodmonick warning controversial call of the president's watching this morning,

0:11:54.679 --> 0:11:55.840
<v Speaker 2>Good morning, missed the President?

0:11:56.080 --> 0:11:57.560
<v Speaker 3>Why not ray cuts for the year ahead.

0:11:58.000 --> 0:12:00.400
<v Speaker 7>Well, I think what we're seeing now as the FED

0:12:00.400 --> 0:12:02.880
<v Speaker 7>has moved into pause mode and there are at least

0:12:02.880 --> 0:12:04.720
<v Speaker 7>someone in the Committee that would like to move further.

0:12:04.800 --> 0:12:05.200
<v Speaker 5>I think.

0:12:05.320 --> 0:12:07.760
<v Speaker 7>But what you heard from Powin to summer I thought

0:12:07.800 --> 0:12:10.760
<v Speaker 7>was really important, where he's said that the rate is

0:12:10.840 --> 0:12:14.040
<v Speaker 7>now within the plausible range of neutrality, so there's no

0:12:14.160 --> 0:12:17.080
<v Speaker 7>urgency to move. I think that pause turns into a

0:12:17.080 --> 0:12:19.200
<v Speaker 7>full stop because I look for the economy to do

0:12:19.240 --> 0:12:21.600
<v Speaker 7>better in twenty twenty six and most as sooning.

0:12:21.640 --> 0:12:23.360
<v Speaker 2>Okay, so we can sort of tease and unpack some

0:12:23.440 --> 0:12:25.280
<v Speaker 2>of this. So the first half, I've got it. You

0:12:25.320 --> 0:12:28.120
<v Speaker 2>mentioned chairman power, he's gone. Let's get to the second half.

0:12:28.400 --> 0:12:32.320
<v Speaker 2>What you're essentially forecasting is whoever takes over the feder Reserve,

0:12:32.679 --> 0:12:34.480
<v Speaker 2>and we imagine whoever it is is going to vote

0:12:34.520 --> 0:12:36.200
<v Speaker 2>for interest rate cuts, given that this is what the

0:12:36.200 --> 0:12:38.839
<v Speaker 2>President is looking for. They're going to be voted down

0:12:38.840 --> 0:12:41.120
<v Speaker 2>by the Committee for every single meeting for the rest

0:12:41.160 --> 0:12:41.560
<v Speaker 2>of the year.

0:12:42.160 --> 0:12:45.199
<v Speaker 7>Well, look, I'm going to take the optimistic teck on this, Okay.

0:12:45.960 --> 0:12:49.560
<v Speaker 7>I've always assumed that whoever is the nominee for chair

0:12:50.160 --> 0:12:53.400
<v Speaker 7>will operate more or less as the FED has always

0:12:53.400 --> 0:12:56.280
<v Speaker 7>operated based on the data. So if look, if it's

0:12:56.320 --> 0:12:59.360
<v Speaker 7>a close call, I'm sure that a very dubbsh new

0:12:59.400 --> 0:13:02.040
<v Speaker 7>FED chair is going to kind of push in that direction.

0:13:03.320 --> 0:13:05.800
<v Speaker 7>But they have to convince the entire committee, and if

0:13:05.840 --> 0:13:08.560
<v Speaker 7>the data are relatively clear, I think that would be difficult.

0:13:08.720 --> 0:13:11.120
<v Speaker 7>I would also point out we're not talking about a

0:13:11.120 --> 0:13:15.080
<v Speaker 7>big break here because Chairman Powell has been a dubvish

0:13:15.160 --> 0:13:18.000
<v Speaker 7>FED chair and I think the December move was the

0:13:18.080 --> 0:13:21.200
<v Speaker 7>latest side of that. I mean, he very much personally

0:13:21.280 --> 0:13:24.600
<v Speaker 7>pushed that through right. That committee was very divided. The

0:13:24.640 --> 0:13:26.760
<v Speaker 7>decision could have gone either way, and the fact that

0:13:26.800 --> 0:13:29.280
<v Speaker 7>they moved in December, I think is clear evidence that

0:13:29.320 --> 0:13:30.640
<v Speaker 7>Powell was pushing in that direction.

0:13:30.840 --> 0:13:33.160
<v Speaker 1>If that's your case, does this set up the new

0:13:33.240 --> 0:13:39.760
<v Speaker 1>FED at very more of a frictious market relationship with

0:13:39.840 --> 0:13:40.839
<v Speaker 1>this White House.

0:13:42.200 --> 0:13:44.719
<v Speaker 5>Friction between the FED and the Yeah, And if it is.

0:13:44.640 --> 0:13:46.360
<v Speaker 1>Someone like Kevin Hassett and you think they're going to

0:13:46.360 --> 0:13:48.040
<v Speaker 1>operate independently.

0:13:48.280 --> 0:13:51.560
<v Speaker 5>Well, I mean, look, I think it remains to be seen.

0:13:51.600 --> 0:13:54.480
<v Speaker 7>I would say that if the economy is doing better,

0:13:55.040 --> 0:13:58.319
<v Speaker 7>that is likely to reduce the level of ogita in

0:13:58.360 --> 0:14:01.000
<v Speaker 7>the White House. Right, even if the FED is not

0:14:01.080 --> 0:14:06.160
<v Speaker 7>cutting as the President has suggested he would like, if

0:14:06.520 --> 0:14:09.720
<v Speaker 7>people are feeling better about the economy and the president,

0:14:09.720 --> 0:14:13.079
<v Speaker 7>it's maybe feeling better at the margin about election prospects.

0:14:13.080 --> 0:14:16.520
<v Speaker 7>In November, I suspect the heat will tamp down a

0:14:16.559 --> 0:14:17.240
<v Speaker 7>little bit on the wa.

0:14:17.160 --> 0:14:19.920
<v Speaker 1>You're basically saying it all is predicated on polling numbers

0:14:21.280 --> 0:14:24.280
<v Speaker 1>from the White House perspective. Yeah, I mean, no, man,

0:14:24.320 --> 0:14:26.280
<v Speaker 1>how much they want to maybe jow bone the Federal Reserve,

0:14:26.280 --> 0:14:29.160
<v Speaker 1>even if it is someone that the President has decided

0:14:29.160 --> 0:14:30.760
<v Speaker 1>you wanted to put in because he thinks they're going

0:14:30.760 --> 0:14:31.640
<v Speaker 1>to be a part of.

0:14:31.600 --> 0:14:33.080
<v Speaker 5>This lowering interest rate.

0:14:33.440 --> 0:14:36.080
<v Speaker 7>Well, we're you know, we've kind of we've moved into

0:14:36.240 --> 0:14:38.720
<v Speaker 7>territory where I'm far from an expert. I'm not much

0:14:38.720 --> 0:14:43.160
<v Speaker 7>of a political analyst. But look, the administration wants to

0:14:43.160 --> 0:14:45.760
<v Speaker 7>do well in the mid term elections, and I think

0:14:45.800 --> 0:14:49.520
<v Speaker 7>it's very clear from what we saw last November and

0:14:49.960 --> 0:14:54.280
<v Speaker 7>kind of the just the general conversation around politics at

0:14:54.320 --> 0:14:57.520
<v Speaker 7>the moment that economic issues are going to be very

0:14:57.520 --> 0:15:01.320
<v Speaker 7>important to voters. Right, so our vote oters feeling good

0:15:01.320 --> 0:15:03.920
<v Speaker 7>about things? Do they feel more confident in their job?

0:15:04.440 --> 0:15:08.720
<v Speaker 7>Are they feeling like inflation is less of a concern.

0:15:09.200 --> 0:15:13.880
<v Speaker 7>Those are things that are obviously going to If things

0:15:13.920 --> 0:15:16.920
<v Speaker 7>are moving in a good direction on that front, that's

0:15:16.960 --> 0:15:19.760
<v Speaker 7>probably good for the President and for the Republican Party

0:15:19.800 --> 0:15:20.840
<v Speaker 7>and vice versa.

0:15:21.040 --> 0:15:22.280
<v Speaker 5>So that's kind.

0:15:22.200 --> 0:15:25.520
<v Speaker 7>Of what I'm thinking there is that, you know, the

0:15:25.560 --> 0:15:27.480
<v Speaker 7>reason I have the FED on hold is because I

0:15:27.480 --> 0:15:29.880
<v Speaker 7>think the economy does better. Well, if the economy does better,

0:15:30.320 --> 0:15:34.320
<v Speaker 7>then you know, maybe the sentiment around the economy also improved.

0:15:34.360 --> 0:15:35.880
<v Speaker 2>Let's say on that then the core if youel cool

0:15:35.960 --> 0:15:38.200
<v Speaker 2>a better economy, what's driving it? What are the town

0:15:38.240 --> 0:15:39.480
<v Speaker 2>wins that you go confiden scent?

0:15:39.920 --> 0:15:42.960
<v Speaker 7>Yeah, I think the biggest one is that, in my view,

0:15:43.000 --> 0:15:45.240
<v Speaker 7>a big thing that held us back in twenty twenty

0:15:45.280 --> 0:15:47.000
<v Speaker 7>five was uncertainty around policy.

0:15:47.080 --> 0:15:49.520
<v Speaker 5>I mean, Terris being one of the key pieces of that.

0:15:50.120 --> 0:15:52.440
<v Speaker 7>And you know, I've felt for a long time that

0:15:53.560 --> 0:15:56.600
<v Speaker 7>businesses would re engage in twenty twenty six, not that

0:15:56.720 --> 0:15:59.640
<v Speaker 7>the policy, not that policy and certainly goes away entirely.

0:15:59.720 --> 0:16:01.920
<v Speaker 7>I mean that clearly is not going to happen, and

0:16:02.160 --> 0:16:04.560
<v Speaker 7>there's always some level of uncertainty. But you're hearing a

0:16:04.600 --> 0:16:08.440
<v Speaker 7>lot more FED officials who are communicating that their contacts

0:16:08.440 --> 0:16:10.880
<v Speaker 7>are telling them that businesses are kind of getting ready

0:16:10.960 --> 0:16:12.080
<v Speaker 7>to re engage.

0:16:11.640 --> 0:16:12.120
<v Speaker 5>A little bit.

0:16:12.200 --> 0:16:16.680
<v Speaker 7>So in twenty twenty five, investment spending was really just

0:16:16.760 --> 0:16:19.000
<v Speaker 7>about AI, and if you were to strip out the

0:16:19.040 --> 0:16:22.560
<v Speaker 7>AI pieces, business investment was probably negative in real terms

0:16:22.560 --> 0:16:25.280
<v Speaker 7>to the first three quarters. I think you'll see a

0:16:25.320 --> 0:16:28.640
<v Speaker 7>broadening out in twenty twenty six, reflecting the tax cuts

0:16:28.640 --> 0:16:31.120
<v Speaker 7>that were put into place, the deregulatory push, and some

0:16:31.160 --> 0:16:34.560
<v Speaker 7>of the other things, assuming that the administration kind of

0:16:34.600 --> 0:16:36.320
<v Speaker 7>ties up some of the loose ends around terras.

0:16:36.320 --> 0:16:38.280
<v Speaker 2>Will that be accompanied with better payroll growth?

0:16:39.040 --> 0:16:42.440
<v Speaker 7>Yes, because I think the same dynamic that has businesses

0:16:42.520 --> 0:16:45.560
<v Speaker 7>hitting the pause button on investment is also applicable to

0:16:45.600 --> 0:16:46.280
<v Speaker 7>the labor market.

0:16:46.320 --> 0:16:48.400
<v Speaker 5>I think they're businesses who maybe.

0:16:48.120 --> 0:16:52.160
<v Speaker 7>Would otherwise have hired, who are holding off because of

0:16:52.160 --> 0:16:57.120
<v Speaker 7>that uncertainty. The complication around that, I think is that

0:16:57.200 --> 0:17:00.080
<v Speaker 7>now what we're hearing again, what we're hearing FED officials

0:17:01.080 --> 0:17:03.920
<v Speaker 7>saying that they're being told by their contacts in their districts,

0:17:04.480 --> 0:17:08.440
<v Speaker 7>is that there's also now a second feature, which is AI.

0:17:08.960 --> 0:17:11.000
<v Speaker 7>And do I maybe want to hold off on hiring

0:17:11.240 --> 0:17:13.640
<v Speaker 7>because I'm not sure if I'm going to need those

0:17:13.720 --> 0:17:17.680
<v Speaker 7>workers A year, two years, three years down the line.

0:17:17.840 --> 0:17:20.480
<v Speaker 5>But I mean, you know, if the economy.

0:17:20.119 --> 0:17:23.560
<v Speaker 7>Is growing as it has, ultimately you have to grow

0:17:23.600 --> 0:17:28.080
<v Speaker 7>your workforce to measure up to that. So I do

0:17:28.119 --> 0:17:31.520
<v Speaker 7>think we'll see an improvement, not a drastic improvement, but

0:17:31.560 --> 0:17:34.080
<v Speaker 7>some improvement in the pace of hiring enough that we

0:17:34.119 --> 0:17:35.920
<v Speaker 7>should be able to get the unplantent rate down a

0:17:35.960 --> 0:17:37.440
<v Speaker 7>little bit as we move into the latter part of

0:17:37.440 --> 0:17:37.760
<v Speaker 7>the year.

0:17:37.920 --> 0:17:40.639
<v Speaker 1>Will that growth lift all both say the bottom part.

0:17:40.720 --> 0:17:43.560
<v Speaker 1>If you do believe we're in a CA shaped economy.

0:17:44.440 --> 0:17:46.040
<v Speaker 5>That is a very real phenomenon.

0:17:46.080 --> 0:17:48.280
<v Speaker 7>There's no question that the folks at the lower end

0:17:48.359 --> 0:17:51.680
<v Speaker 7>of the income scale are struggling more than the folks

0:17:51.680 --> 0:17:55.680
<v Speaker 7>at the higher end. It remains to be seen whether

0:17:55.720 --> 0:18:00.760
<v Speaker 7>that dynamic changes. I think that they're in some ways.

0:18:00.840 --> 0:18:03.439
<v Speaker 7>What we're seeing over the last year or two is

0:18:03.480 --> 0:18:07.359
<v Speaker 7>really just a normalization. I think the people at the

0:18:07.359 --> 0:18:12.480
<v Speaker 7>lower end of the income scale benefited greatly. They got

0:18:12.480 --> 0:18:17.280
<v Speaker 7>most of the federal government money during the pandemic. We

0:18:17.320 --> 0:18:22.000
<v Speaker 7>had mortgage foreclosure moratorium, student loan payments weren't due for

0:18:22.040 --> 0:18:26.840
<v Speaker 7>four years, and the labor market was very tight and

0:18:26.920 --> 0:18:29.240
<v Speaker 7>skewed toward lower paying jobs. Right because it was the

0:18:29.320 --> 0:18:32.800
<v Speaker 7>retail and the restaurant, the high contact jobs during the

0:18:32.800 --> 0:18:35.840
<v Speaker 7>pandemic where we were seeing the highest pay raises. What

0:18:35.920 --> 0:18:37.440
<v Speaker 7>we've seen over the last few years is kind of

0:18:37.440 --> 0:18:40.119
<v Speaker 7>getting back to normal, which is that the folks at

0:18:40.160 --> 0:18:43.040
<v Speaker 7>the lower end of the income scale are seeing slower

0:18:43.080 --> 0:18:46.520
<v Speaker 7>wage gains than the folks at the top, and as always,

0:18:46.560 --> 0:18:50.400
<v Speaker 7>they're not benefiting as much from higher asset prices.

0:18:50.520 --> 0:18:52.480
<v Speaker 3>Just quickly, where have you got Inflation at the end

0:18:52.520 --> 0:18:53.120
<v Speaker 3>of the year.

0:18:53.920 --> 0:18:56.960
<v Speaker 7>Still in the high twos. I think it probably accelerates

0:18:57.000 --> 0:18:59.560
<v Speaker 7>early in the year as more of the terrif related

0:18:59.760 --> 0:19:02.840
<v Speaker 7>pressures get pushed through, and then maybe comes off a

0:19:02.840 --> 0:19:04.760
<v Speaker 7>little bit as we move toward the end of the year.

0:19:04.800 --> 0:19:06.760
<v Speaker 7>I think by the end of the year the run

0:19:06.840 --> 0:19:09.920
<v Speaker 7>rate will be two and a half, maybe even a

0:19:09.960 --> 0:19:12.439
<v Speaker 7>slight bit lower than that, but still above target.

0:19:13.320 --> 0:19:16.880
<v Speaker 2>This is the Bloomberg Surveillance podcast, bringing you the best

0:19:16.920 --> 0:19:20.240
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0:19:20.280 --> 0:19:23.240
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