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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Scrid thing is serious stuff. Are you rebuilding America Front Center?

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Speaker 2: And it's It's a story that's not going to go away.

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Speaker 2: Wayley mentions that with a great chart on materials, We're

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Speaker 2: thrilled that she could join us this morning for an

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Speaker 2: extended conversation chief investment strategists for the world for mister

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Speaker 2: Fink and Blackrock this morning. Wyley, you're out on LinkedIn.

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Speaker 2: Dan Roth emailed me at LinkedIn, He says, Tom pitch LinkedIn. Okay,

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Speaker 2: you want to join LinkedIn, folks for no other reason

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Speaker 2: to watch way Lee of black Rock and Urine timor

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Speaker 2: Fidelity and I'll mentioned Marcains as well at Pangaea in Washington. Wayley,

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Speaker 2: this chart is spectacular on the emotion evaluation, energy up

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Speaker 2: versus earnings, where technology continues to win. Whatever the word

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Speaker 2: outcome is on July fourth, technology is going to continue

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Speaker 2: to win, right.

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Speaker 3: Well, This is a sentiment emotional market, it's not a

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Speaker 3: fundamental market. The chart that you refer to Tom shows the

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Speaker 3: energy sector is the best performing, not surprisingly so far

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Speaker 3: this year, but in terms of earnings is the worst

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Speaker 3: in terms of earnings delivery. But it doesn't matter when

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Speaker 3: market is a repricing risk premier, and by the way,

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Speaker 3: it's repricing risk premium in an extremely extremely tropy ways

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Speaker 3: so far this week. It's just the latest evidence that

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Speaker 3: we cannot predict the blow by blow in terms of announcements,

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Speaker 3: which is white directionally with flattening exposure to equities.

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Speaker 4: Flattening exposure to equities.

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Speaker 5: Is that suggesting way that maybe these markets are maybe

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Speaker 5: too sanguine about the risk opposed by perhaps higher energy

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Speaker 5: prices for longer.

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Speaker 6: I would say two things.

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Speaker 3: First is this, Yes, there is a disconnect between energy

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Speaker 3: market that is pricing in doable disruption and.

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Speaker 6: Broader risk assets.

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Speaker 3: You look at US equities that's just down I think

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Speaker 3: four percent from the beginning of the conflict, So there

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Speaker 3: is definitely a disconnect. And the second thing I would

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Speaker 3: say is that I've spoken to a lot of investors

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Speaker 3: the last three weeks, and lots of clients globally as well.

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Speaker 3: There are really just two ways to invest in and

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Speaker 3: navigate this market. The first one is directionally, second one

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Speaker 3: is thematically. So what flattening exposure directionally because in the

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Speaker 3: near term it's just so trophy reacting to headlines.

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Speaker 6: But thematically, as a.

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Speaker 3: Result of events in the Middle East is to every

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Speaker 3: single company, every single government globally, they are going to

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Speaker 3: think even harder about supply chain resilience, even harder about

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Speaker 3: energy independence, and those are the things that we want

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Speaker 3: to lean into.

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Speaker 5: So waylia, are there certain sectors here that even though

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Speaker 5: you're kind of taking down your risk appetite that thematically

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Speaker 5: is it defense?

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Speaker 4: Is it infrastructure?

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Speaker 5: Is that a place to hide or maybe try to

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Speaker 5: take advantage of this uncertainty?

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Speaker 3: Absolutely, So the adjustment that we have made is to

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Speaker 3: brain broad US acrodies from modest overweight to neutral, recognizing

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Speaker 3: that there is a disconnect between the energy market pricing

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Speaker 3: and where risk assets are. And then we're also leaning

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Speaker 3: into you know, like we up the European government bond

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Speaker 3: front to end from neutral to models overweight and recognizing

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Speaker 3: government bonds broadly the front end they have gone through

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Speaker 3: significant reprising, really notable, So there is a big pash

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Speaker 3: buffer to be to be built. But you talked about infrastructure,

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Speaker 3: defense and energy. Visit the themes that we want to

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Speaker 3: lean into Waily with us.

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Speaker 2: And we continue with our sheu's with black Rock as

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Speaker 2: Global Chief Investment Strategies. Paul helped me here because I'm

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Speaker 2: sick of Duke and we'll talk about that in a moment.

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Speaker 2: Is the University of Cambridge in March madness?

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Speaker 4: No, I don't think they are.

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Speaker 2: They're not in there. Okay, Wayley over at Duke, which

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Speaker 2: is going to win the tournament. According to Paul Sweeney,

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Speaker 2: there's a professor Cameron Harvey, Cam Harvey, and he is

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Speaker 2: definitive on the idea that bonds lead stocks, that the

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Speaker 2: price dynamics of bonds are out front of what equities

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Speaker 2: will do. Do you buy that within your mathematical work, Cambridge?

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Speaker 3: I think it depends on lead by how much? Really,

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Speaker 3: it's not unusual that the bond markets price in one

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Speaker 3: version of the world and accadey market is pricing another

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Speaker 3: version of the world. This is why we say that

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Speaker 3: bond investors are a bit more bearish as in personality

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Speaker 3: than accudy investors. But the jokes aside I would say

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Speaker 3: that we have seen meaningful, meaningful repricing in bond market,

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Speaker 3: both on the front end and also to some extent

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Speaker 3: on the on the back end. You look at concerns

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Speaker 3: around inflation, concerns around fiscal and they have yet to

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Speaker 3: be reflexed in equities.

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Speaker 6: And this is the dissonance that we are aware.

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Speaker 3: We're trying to take advantage of and lean into with

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Speaker 3: the adjustments that we have made.

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Speaker 2: You've got a radar like no one out there way

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Speaker 2: leading your visits with black red clients. Not what are

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Speaker 2: they thinking, what their emotion is, but what are they

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Speaker 2: doing in a reallocation a mid.

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Speaker 3: War Well, the first observation I would make is that

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Speaker 3: actually there has been some continued momentum into US assets.

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Speaker 3: So Regreader was just sharing this. So rec Raader was

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Speaker 3: just can hear me? Sorry, there is are t give me.

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Speaker 6: Somebody is calling me. Chean Balvan is calling me.

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Speaker 3: So reg Raader was just sharing me this flow chart

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Speaker 3: that shows that inflows into US assets across Appleism bonds

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Speaker 3: have been quite strong. And this is despite the fact

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Speaker 3: that steflationary momentum has been building, right, and I think

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Speaker 3: that has really been the reason behind why these markets

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Speaker 3: have been holding up reasonably while even in the face

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Speaker 3: of the broad supply disruption. So that's one observation I

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Speaker 3: would make around flow. The second observation is that investors

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Speaker 3: are not meaningfully, meaning fully kind of position for extreme

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Speaker 3: scenarios yet because it takes it takes time, and also

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Speaker 3: it takes a huge kind of conviction to position for

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Speaker 3: a totally different automative scenario. So there's a lot of

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Speaker 3: discussions around kind of Plan B, Plan.

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Speaker 6: C, but meaningful overhaul or for.

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Speaker 3: The scenarios I have yet to see coming through in

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Speaker 3: my conversation with clients.

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Speaker 2: We continue with the way we leave with Blackrock here

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Speaker 2: as well. Markets deteriorate futures in negative forty seven right now,

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Speaker 2: the Vicks twenty seven point five four in oil moving,

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Speaker 2: we're gonna get a one oh four one oh three

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Speaker 2: point four to four on branch crewed up a solid

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Speaker 2: three and a half percent. Paul Sweeney with Way Lee

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Speaker 2: of Blackrock.

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Speaker 5: Welly twenty twenty five was a really good year for

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Speaker 5: global equity markets. The US did quite well, but many

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Speaker 5: non US markets did even better. And maybe I don't know,

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Speaker 5: not not sure if that was to sell America trade

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Speaker 5: or just because a dollar was weak in twenty twenty five.

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Speaker 5: How's your allocation geographically these days US versus rest of

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Speaker 5: the world.

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Speaker 3: We think that over the longer term there is steel

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Speaker 3: space for US to continue to play a leading role

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Speaker 3: if you just look at kind of the relative earnings momentum.

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Speaker 3: But as I also said at the beginning of this interview,

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Speaker 3: we have flattened over the very near term in terms

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Speaker 3: of the exposure to actuality directionally, and that means us

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Speaker 3: we are flat. Were neutral, Europe were neutral, Japan were neutral,

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Speaker 3: and broader emergent markets were neutral. And that is really

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Speaker 3: recognizing that so far we haven't seen arrangeable avenues of

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Speaker 3: actions that point to sustained polls to this broader supply disruption.

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Speaker 3: But having said it, over the slightly longer term, we

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Speaker 3: still expect the feedback mechanism from higher oil price to bind.

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Speaker 3: Is just that this bread told that binds maybe more

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Speaker 3: painful than he looked initially.

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Speaker 2: But you mentioned Wayy, the modern disease. You say you're

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Speaker 2: neutral here, neutral there, neutral everywhere. I think of Gina

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Speaker 2: Martin Adams on this Wayley, the modern American financial media

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Speaker 2: says neutral is go to cash. What is the trap

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Speaker 2: of going to cash here? If Black Rock says have

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Speaker 2: courage and be neutral.

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Speaker 3: Well, I would say that it's very important to be invested.

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Speaker 6: Our CEO and chairman Larry it.

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Speaker 3: Is published his letter let me just pull up this

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Speaker 3: key stet so over time, staying investors is mattered far

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Speaker 3: more than getting the timing right. Over the last two decades,

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Speaker 3: every dollar invested in S and P five hundred grew

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Speaker 3: more than eightfold. Missed just ten best days, you would

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Speaker 3: have earned less than half of that right. So I

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Speaker 3: think staying investors, even in the face of droopolitical ANSWERSNTY,

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Speaker 3: is important. But neutral is our way to tighten risk exposure.

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Speaker 3: But we're also very dynamic in looking to lean into

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Speaker 3: thematic opportunities and looking to potentially.

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Speaker 6: Up if we see signs of tangible action.

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Speaker 2: Paul, this is just so great you and I. It's

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Speaker 2: mister Fink, It's Lawrence Film for Wayly, It's like share.

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Speaker 4: It's just well exactly and we knew exactly who she

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Speaker 4: was referring to.

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Speaker 5: Wall Again, before the Iran War started, the theme for

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Speaker 5: most investors in most markets was AI.

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Speaker 4: How are you playing AI these days?

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Speaker 5: Because it's gone from being just we're going to buy

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Speaker 5: whoever spending the most money to now we really need

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Speaker 5: to think about can generate a return on all this investment.

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Speaker 3: That's absolutely right, and I think the infrastructure to build

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Speaker 3: out layer is still very much well positioned at this

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Speaker 3: point of AI transformation because it may take longer for

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Speaker 3: the winners of the adoption phase to emerge, and right now,

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Speaker 3: so far the narrative this year at least has focused

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Speaker 3: a lot on the losers of the adoption pace. So

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Speaker 3: the big picture is that here today we have seen

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Speaker 3: focus shifting from AI winners to AI losers. If you

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Speaker 3: think about kind of software and the reasons for that,

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Speaker 3: it's not entirely left field.

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Speaker 6: Right.

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Speaker 3: Like we've been flagging that it takes time for kapex

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Speaker 3: spent to then lead to.

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Speaker 6: New revenue generation.

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Speaker 3: Markets can be in patient, and markets are periodically going

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Speaker 3: to just question the return on investment of this investors

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Speaker 3: or of the capex spent. But the conviction in AI

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Speaker 3: transformation has increased, not decreased. And if you look at

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Speaker 3: multiples after the derating that we have seen so far

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Speaker 3: this year Max seven in media, they aretting at close

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Speaker 3: to the same levels that they were at the beginning

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Speaker 3: of tragedy the launch. So there are good value opportunities

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Speaker 3: right now given the derating and we continue.

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Speaker 6: Do you like it as a thing degrading is.

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Speaker 2: Priced down in University of Cambridge Shock Paul. Forward to

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Speaker 2: the summer of this year, Microsoft PE twenty two point seven.

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Speaker 4: Yeah, I did not know that. Now, that's amazing.

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Speaker 5: So whainly as you think about some of the software

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Speaker 5: names that got sold off, I mean, how do you

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Speaker 5: try to differentiate a winner and a loser on the

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Speaker 5: software side, because it seemed like for a while there

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Speaker 5: investors were just kind of selling everything.

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Speaker 3: Yeah, it has been a bit of a discrimin, indiscriminated

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Speaker 3: to sell off, throwing the baby's out of the bath water,

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Speaker 3: But there is huge room for dispersion and then being selective.

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Speaker 3: So retail software providers with little mode could be more vulnerable,

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Speaker 3: whereas enterprise software providers with deep vertical integration that can

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Speaker 3: actually benefit from AI integration and productivity boost they are

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Speaker 3: better positions. So I think this is really an environment

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Speaker 3: for active stock selection and being very dynamic.

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Speaker 2: Generous time Waye, thank you, thank you so much for

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Speaker 2: the perspective today, and again I can't say enough folks

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Speaker 2: about her commitment to informing the public. Out on LinkedIn

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Speaker 2: way Lee with Blackrock, their global chief investment strategists. Stay

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Speaker 2: with us. More from Bloomberg Surveillance coming up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on

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Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or

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Speaker 1: watch us live on YouTube.

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Speaker 2: Joining us right now. Mark Howard's senior multa as a

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Speaker 2: specialist at BMP Perry Bah under the category many talk

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Speaker 2: but others do. Mark Howard driving for a Band of Parents.

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Speaker 4: This is a.

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Speaker 2: Charity you do every year in ice hockey, discuss pediatic

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Speaker 2: cancer and what you're doing.

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Speaker 7: You know, when you see kids suffer and their families suffer,

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Speaker 7: it is just incredibly heart wrenching. And so band of

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Speaker 7: Parents does this thing at Madison Square Garden where old

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Speaker 7: guys like I get to go out and whip around

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Speaker 7: the ice and play a game behind it rather.

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Speaker 2: Than the Rangers last night with nine shots.

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Speaker 7: It wasn't pretty. It wasn't pretty, but it's it's a

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Speaker 7: tremendous cause. It brings people from across the country. They

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Speaker 7: actually come to play from Chicago and from other.

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Speaker 2: And at Madison Square. Yeah, so it's a it's a.

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Speaker 7: Wonderful charity and and uh and and the outcomes the

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Speaker 7: research that it supports at MSK and at other institutions

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Speaker 7: actually leads to positive outcomes with kids with these rare cancers.

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Speaker 2: Explain the uniqueness of memorials slung Cottering in.

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Speaker 7: Cancer just world class and very deep pockets and very creative.

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Speaker 7: I've also been an active participant in Cycle for Survival,

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Speaker 7: which you're probably familiar with. A lot of organizations in

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Speaker 7: New York do that as well, which again provides for

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Speaker 7: MSK to do groundbreaking work, long tail work that requires

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Speaker 7: consistent funding but leads to really positive outcomes.

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Speaker 2: Mark hard being prepared by their on cancer in pediatric cancer.

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Speaker 2: We have a war. I guess the optimism is someday

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Speaker 2: it will be over. Do you prepare now for the

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Speaker 2: good news of an end of the war.

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Speaker 7: I think you have to prepare for multiple outcomes. Tom

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Speaker 7: clients I talked to and our trading desks are gaming

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Speaker 7: out using real game theory to anticipate various outcomes, because

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Speaker 7: as we saw yesterday with an incredible whipsaw and we

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Speaker 7: could see that tomorrow the next day. You have to

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Speaker 7: be prepared for multiple scenarios because this is not like tariffs,

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Speaker 7: where a simple strike of the pen can reverse and

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Speaker 7: you go back to close to where we started. The

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Speaker 7: damage to infrastructure is going to take years to replace,

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Speaker 7: The damage to trust, and the implications on global inflation

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Speaker 7: are going to be here for a while. So I

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Speaker 7: think you have to be prepared for better but not

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Speaker 7: normal outcomes. But you also have to be prepared for

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Speaker 7: weaker outcomes. Haven't we haven't seen the knock on to

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Speaker 7: corporate profit expectations. I think we will see that in

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Speaker 7: the months to come, So you have to prepare for both.

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Speaker 5: So how are you positioning these days? At BNP Pirie

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Speaker 5: bought multi asset specialists. What asset are you guys focusing

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Speaker 5: on these days or how are you positioning amongst the assets?

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Speaker 7: That's a great question. I wish there was one silver bullet,

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Speaker 7: one great asset, but there is no one. I think

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Speaker 7: diversification is how you prepare and deal with this adversity.

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Speaker 7: There are also some asset classes that you might have

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Speaker 7: ignored because they seemed a little sleepy, or perhaps less

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Speaker 7: compelling but stand out now like mortgagees. You know, the

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Speaker 7: number two fixed income asset class category doesn't get a

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Speaker 7: whole lot of commentary from time to time, but it

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Speaker 7: actually is a is a really you know, compelling opportunity.

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Speaker 2: How much bigger is the yield on a mortgage piece

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Speaker 2: than a full faith.

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Speaker 7: And credit Well, it depends, you know, it varies, but

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Speaker 7: it could be anywhere from thirty to fifty basis points.

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Speaker 7: It's not a tremendous amount, but in terms of a

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Speaker 7: store of value, a place of safety where you get

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Speaker 7: some extra spread is quite compelling, particularly at a time

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Speaker 7: when treasuries have been, you know, kind of backing up aggressively.

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Speaker 4: Until yesterday, Tom's been making the point that we're not

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Speaker 4: for a rin. One of the bigger.

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Speaker 5: Issues for Global Wall streeting these markets to deal with

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Speaker 5: is private credit and really how much of a risk

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Speaker 5: that represents for investors. We know it's a two trillion

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Speaker 5: dollar market. Gary Gensler a couple of days ago said, yeah,

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Speaker 5: it's two trillion dollars, but the global capital markets are

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Speaker 5: one hundred and twenty trillion, So put it into context,

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Speaker 5: how do you guys think about that?

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Speaker 7: Yeah, it's a great concern amongst investors right now. My

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Speaker 7: colleague Calvin C who you know, was recently in Asia

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Speaker 7: and in particularly in Japan, and it was the number

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Speaker 7: one question Calvin received from every client he visited in Japan.

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Speaker 7: So it's not just a domestic concern. A lot of

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Speaker 7: money has flown into the asset class ball and so

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Speaker 7: I think the question is not so much the systemic impact,

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Speaker 7: because I think most people who have really thought it

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Speaker 7: through don't see a systemic knock on, but rather they

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Speaker 7: see a rotational effect. They see people halting their investments

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Speaker 7: into what was a hot new category and now we're

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Speaker 7: seeing actually reversals, people trying to put the money out.

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Speaker 2: It's Paul's important question, folks. I don't think there's any

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Speaker 2: other question more important right now for Global Wall Street

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Speaker 2: other than this war. Brent crude right now one oh

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Speaker 2: one seventy three up a dollars seventy nine and private

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Speaker 2: credit in this the people in the game saying this

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Speaker 2: is not a big deal. That's the summary. Everybody's radars up.

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Speaker 2: I'm sorry it's on the cover of Bloomberg cover the

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Speaker 2: Ft and that BOYD does it feel like two thousand

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Speaker 2: and six? Does it feel like two thousand and six.

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Speaker 7: We're getting tom where Yeah, I think six is more

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Speaker 7: accurate than perhaps eight. And but the on ramp is there,

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Speaker 7: and if certain dominoes don't go the right way, absolutely,

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Speaker 7: that's gonna be a real problem.

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Speaker 2: Story. Can I do a story? You won't walk out

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Speaker 2: of the studio?

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Speaker 3: Yeah.

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Speaker 2: I'm in the Saint Regis in Beijing, dumpy old hotel

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Speaker 2: before the fancy Saint Regis, sitting in a chair six

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Speaker 2: Laido five. Two bankers are giggling about whatever they're giggling about.

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Speaker 2: I got the ft open in Gillian tet Is lecturing

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Speaker 2: me on cdo squares. It was frozen in time that

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Speaker 2: moment as I listened to the synthetic unsynthetic derivatives. Why

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Speaker 2: is this, Paul, Why is this any different? You tell me?

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Speaker 4: I hope it is so?

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Speaker 5: Mark? What do you where's the risk in this market here?

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Speaker 5: Aside from the geopolitical risk here? What do you guys

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Speaker 5: maybe staying away from maybe hedging.

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Speaker 7: What are those conversations like, well, I think inflation is

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Speaker 7: a risk. And you know you had a great speaker

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Speaker 7: on last week. I belie I believe it was Loop

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Speaker 7: and Ramen great boiler, and she frames some of the

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Speaker 7: important not so obvious factors around the sovereign debt markets

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Speaker 7: in the developed markets, not just in emerging markets. And

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Speaker 7: I think people take for granted. You know, there's a

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Speaker 7: view that a Trump put exists. There's also a view

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Speaker 7: that the you know, the fedkins come to the rescue,

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Speaker 7: that fiscal policy can come to the rescue, and and

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Speaker 7: others are saying that's not the case. You can't assume

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Speaker 7: that there's going to be fiscal largessit. There's going to

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Speaker 7: be monetary backstops the way there have been in the past,

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Speaker 7: because the degrees of freedom, the flexibility to starn't there.

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Speaker 2: Alexis what was the shopping show years ago on the

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Speaker 2: channel QVC QVC QVC Folks, it's loop in Ramen's new book,

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Speaker 2: The Sovereign Debt Investors, she's TEMPCO, I AMF. She was

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Speaker 2: in the other day. This is the best two hundred

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Speaker 2: page non math walkthrough of Mark Howard's World. We thank

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Speaker 2: you and a QVC it's yours for sixteen.

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Speaker 5: There you go, mar we heard from the FED recently.

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Speaker 5: What do you think the Fed's thinking about these days?

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Speaker 5: Because it looks like if you look at the WRP function.

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Speaker 5: It seems like the market has no idea cut rates,

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Speaker 5: raise rates, kind of. It looks like the markets right

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Speaker 5: now is just pricing in nothing.

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Speaker 7: Yeah, it's a really difficult time to be a central banker,

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Speaker 7: and not just here but around the world, particularly in

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Speaker 7: places where inflation is the primary or only mandate. At

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Speaker 7: least here, we've got both growth and inflation as a mandate,

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Speaker 7: So they're looking at everything, and as you know, with

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Speaker 7: a supply shock, the first order is usually on inflation,

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Speaker 7: the second order is on growth. So they're trying to

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Speaker 7: calibrate the severity and the duration of both the shock

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Speaker 7: and then the now gone to growth. And it's a

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Speaker 7: very imprecise thing because you have other vectors such as

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Speaker 7: deficit spending, such as trade, etc. So it's a very

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Speaker 7: complex calculus.

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Speaker 2: Markhart, thank you so much. BMP Perry bout stay with us.

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Speaker 2: More from Bloomberg's Surveillance coming up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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00:22:07,320 --> 00:22:10,480
Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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00:22:10,560 --> 00:22:14,000
Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: One of the great joys of Bloomberg is the absolute

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Speaker 2: depth of the academics backing up the news and analysis

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Speaker 2: that we do. Jennifer Welch has chief you Economics analysts

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Speaker 2: for Bloomberg Economics out of the Bucknell East Asian Studies

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Speaker 2: combined with Eric Lofkran. Jennifer, I want to start there,

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Speaker 2: where is China in this war debate? You've done a

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Speaker 2: lot of work on that, including work in Beijing. Where

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Speaker 2: do you see China fitting in to the uncertainties we

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Speaker 2: face with President Trump, with mister net Yahoo, and with Iran.

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Speaker 8: I think China is playing a balancing actor right now.

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Speaker 8: It's also playing the long game. It is being careful

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Speaker 8: to maintain it's rhetorical support for Iran, which has a

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Speaker 8: strategic partnership with Beijing packed a formal pack signed in

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Speaker 8: twenty twenty one, but it is not going so far

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Speaker 8: as to provide around material support in this war, at

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Speaker 8: least as far as we can tell, in part because

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Speaker 8: China is worried about balancing its ties to other goal

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Speaker 8: states who it also sees important partners in the region.

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Speaker 8: So I think what we're likely to see from Beijing

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Speaker 8: is this continued calibrated approach of right backing Iran, but

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Speaker 8: only so far.

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Speaker 2: What is a distinction of that versus mister putin Moscow

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Speaker 2: and Russia.

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Speaker 8: Moscow is going in a little bit further tilts with Iran.

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Speaker 8: We're seeing reports that Russia is, for example, providing targeting

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Speaker 8: intelligence and other intelligence sharing with Iran to support its

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Speaker 8: actual military activity against the US and Israel. That is

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Speaker 8: certainly further than where China has been willing to go

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Speaker 8: to a date. But I think even for Russia, we're

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Speaker 8: unlikely to see Russia get directly involved in this pray.

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Speaker 8: It remains very much focused on the war in Ukraine,

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Speaker 8: and it is also a little bit leery of doing

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Speaker 8: anything that would draw Washington's iire maybe pushed the United

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Speaker 8: States to either support Ukraine more deeply or to heightened

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Speaker 8: distinctions on Russia.

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Speaker 5: Jennifer, The market's very uncertain as to the status of

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Speaker 5: what's going on in Aron, particular as it relates to negotiations. Yesterday,

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Speaker 5: President Trump issued via social media that talks were in

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Speaker 5: fact taking place, and he was so enthusia that he

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Speaker 5: was going to pause some military options. Yet we've not

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Speaker 5: really heard anything confirming that from the other side, Do

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Speaker 5: you have any insight as to what's actually going on.

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Speaker 8: Yeah, we're actually hearing directly contradictory things from Iran, which

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Speaker 8: is flat out denying that talks are happening, including denying

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Speaker 8: this Axios report regarding specific talks that were happening between

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Speaker 8: Steve Whitkoff, Jared Kushner, and Ron's parliament speaker, with the

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Speaker 8: Irani and parliament speaker coming out on x and saying

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Speaker 8: he is not involved in those negotiations. I think to

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Speaker 8: be clear, we should recognize that both sides have an

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Speaker 8: interest in putting out different language on this, that the

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Speaker 8: US wants to reassure markets, and Iranian officials probably don't

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Speaker 8: want to to negotiating with the United States while still

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Speaker 8: under attack. That being said, the United States does seem

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Speaker 8: to be pursuing negotiations. Talks might be happening through back

438
00:25:09,880 --> 00:25:13,600
Speaker 8: channels or indirectly through mediators. There does seem to be

439
00:25:13,640 --> 00:25:16,040
Speaker 8: some sort of communication occurring. But I think the larger

440
00:25:16,119 --> 00:25:18,840
Speaker 8: question is does that mean we're any closer to a ceasefire?

441
00:25:19,160 --> 00:25:21,440
Speaker 8: And at this stage we would say no. Both sides

442
00:25:21,480 --> 00:25:23,520
Speaker 8: seem to be very far apart on what the terms

443
00:25:23,520 --> 00:25:26,480
Speaker 8: of that would be, and so we see the odds

444
00:25:26,520 --> 00:25:28,479
Speaker 8: of a full resolution of this conflict in the near

445
00:25:28,640 --> 00:25:31,960
Speaker 8: term is rather unlikely. Instead, what we might see is

446
00:25:32,000 --> 00:25:35,040
Speaker 8: either further escalation, as the United States is considering deploying

447
00:25:35,040 --> 00:25:38,240
Speaker 8: additional forces to the region, or a dip into a

448
00:25:38,359 --> 00:25:41,600
Speaker 8: lower intensity conflict that could still pose major risks of

449
00:25:41,600 --> 00:25:42,720
Speaker 8: the global energy market.

450
00:25:43,320 --> 00:25:47,040
Speaker 5: Jenniferser, from your sources, is there a sense that there's

451
00:25:47,080 --> 00:25:50,480
Speaker 5: a possibility or probability or a likelihood that President Trump

452
00:25:50,680 --> 00:25:53,200
Speaker 5: may just wake up some day and say I'm kind

453
00:25:53,200 --> 00:25:56,119
Speaker 5: of bored of all this and say we've achieved our

454
00:25:56,160 --> 00:25:57,919
Speaker 5: objectives and just kind of walk away.

455
00:25:58,000 --> 00:25:59,919
Speaker 4: Is that in the cards at all.

456
00:26:00,520 --> 00:26:02,360
Speaker 8: It does seem, and it has seemed for at least

457
00:26:02,400 --> 00:26:04,600
Speaker 8: two weeks now, that President Trump is looking for an

458
00:26:04,600 --> 00:26:07,800
Speaker 8: exit ramp. He's referred to the war as having already

459
00:26:07,800 --> 00:26:10,800
Speaker 8: achieved many of his objectives, as being very complete, and

460
00:26:11,480 --> 00:26:13,760
Speaker 8: he did an end to it would come very soon.

461
00:26:14,280 --> 00:26:16,080
Speaker 8: I think that being said, the fact that we're still

462
00:26:16,080 --> 00:26:19,320
Speaker 8: continuing to see US strike Center on suggests it hasn't

463
00:26:19,480 --> 00:26:21,800
Speaker 8: achieved or he doesn't feel he has the leverage of

464
00:26:21,840 --> 00:26:23,200
Speaker 8: the terms that he's looking.

465
00:26:22,960 --> 00:26:24,080
Speaker 9: For to end this war.

466
00:26:24,359 --> 00:26:26,399
Speaker 8: And I think in particular, what he's concerned about is

467
00:26:26,440 --> 00:26:29,359
Speaker 8: reopening her moves before he can fully back away.

468
00:26:30,000 --> 00:26:33,360
Speaker 2: Jennifer, one final question. It's outside your remit, but you're

469
00:26:33,400 --> 00:26:37,040
Speaker 2: more than qualified to handle this. I'm looking at yields

470
00:26:37,240 --> 00:26:41,040
Speaker 2: higher in many different flavors, including the inflation had just

471
00:26:41,320 --> 00:26:44,680
Speaker 2: yield the cost of capital, if you will, Does Jennifer

472
00:26:44,720 --> 00:26:49,280
Speaker 2: Welch believe in markets telling politics what to do? Do

473
00:26:49,359 --> 00:26:52,639
Speaker 2: you believe in ed Yard Denny's bond vigilantes?

474
00:26:54,000 --> 00:26:54,879
Speaker 6: Well, I would say this.

475
00:26:54,960 --> 00:26:58,000
Speaker 8: I think President Trump is uniquely quite sensitive to markets,

476
00:26:58,000 --> 00:27:00,399
Speaker 8: and that's part of what we've seen in terms of

477
00:27:00,440 --> 00:27:04,240
Speaker 8: his rhetoric shifting over the last week or two. In particular,

478
00:27:04,320 --> 00:27:06,920
Speaker 8: his message yesterday morning when markets are about to open

479
00:27:07,240 --> 00:27:09,280
Speaker 8: that he was seeking talks at the run, kind of

480
00:27:09,440 --> 00:27:12,439
Speaker 8: backing away from his prior threat to strike running and

481
00:27:12,520 --> 00:27:16,199
Speaker 8: energy facilities. That seemed very much directed at shaping markets

482
00:27:16,240 --> 00:27:17,800
Speaker 8: as they were opening in the United States.

483
00:27:18,000 --> 00:27:20,600
Speaker 2: It's great brief, Jennifer. Well, it's hugely valuable. Thank you

484
00:27:20,640 --> 00:27:24,439
Speaker 2: so much, Chief to you economics analysts for Bloomberg Economics.

485
00:27:26,080 --> 00:27:30,240
Speaker 2: Stay with us. More from Bloomberg Surveillance coming up after this.

486
00:27:37,520 --> 00:27:41,080
Speaker 1: You're listening to the Bloomberg Surveillance Podcast. Catch US live

487
00:27:41,160 --> 00:27:44,320
Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on

488
00:27:44,400 --> 00:27:48,080
Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or

489
00:27:48,240 --> 00:27:49,960
Speaker 1: watch US live on YouTube.

490
00:27:50,200 --> 00:27:52,840
Speaker 2: Aaron Kevin joins us in studio right now, co founder's

491
00:27:52,880 --> 00:27:57,920
Speaker 2: CEO Clear Harbor Asset Management. On the moment at hand,

492
00:27:58,440 --> 00:28:02,920
Speaker 2: I understand this is now uncertain key and not measurable risk.

493
00:28:03,440 --> 00:28:09,320
Speaker 2: If I stand aside, what do I stand aside into cash?

494
00:28:09,840 --> 00:28:11,440
Speaker 4: Well, it's been challenging Tom.

495
00:28:12,520 --> 00:28:16,199
Speaker 9: This all began the weekend of February twenty eighth, and

496
00:28:16,240 --> 00:28:19,160
Speaker 9: there's been no place to hide. Gold is off one

497
00:28:19,160 --> 00:28:23,520
Speaker 9: thousand dollars an ounce, bonds are higher and yield lower

498
00:28:23,520 --> 00:28:27,119
Speaker 9: in price by what thirty to fifty basis points, and

499
00:28:27,560 --> 00:28:30,920
Speaker 9: equities are off somewhat measurably. So there's been a very

500
00:28:31,280 --> 00:28:32,919
Speaker 9: I guess unless you were just sort of long the

501
00:28:33,000 --> 00:28:35,760
Speaker 9: dollar and maybe your triple levered cash, there's very very

502
00:28:35,800 --> 00:28:37,800
Speaker 9: difficult place to be right now.

503
00:28:37,840 --> 00:28:40,320
Speaker 2: What do you do with duration in the fixed income space?

504
00:28:40,360 --> 00:28:43,200
Speaker 2: And all your work at City Group over the years

505
00:28:43,200 --> 00:28:47,840
Speaker 2: in RBC, I mean duration's a tool, right, Explain that

506
00:28:47,920 --> 00:28:50,400
Speaker 2: to people that don't get convexity.

507
00:28:50,400 --> 00:28:52,680
Speaker 9: Right, I mean clearly if you're of the view and

508
00:28:52,720 --> 00:28:57,760
Speaker 9: your long duration your for every basis point moving the

509
00:28:57,760 --> 00:29:00,120
Speaker 9: bond market, as you move out the duration curve of

510
00:29:00,200 --> 00:29:05,680
Speaker 9: your as rates move lower, you're capturing oftentimes multiples of

511
00:29:05,720 --> 00:29:08,360
Speaker 9: the upside relative to when rates move lower in the

512
00:29:08,360 --> 00:29:11,040
Speaker 9: front end of the curve, by about four or five

513
00:29:11,080 --> 00:29:13,800
Speaker 9: times and tens relative to twos, and about ten times

514
00:29:13,800 --> 00:29:15,040
Speaker 9: and thirties relative to two.

515
00:29:15,200 --> 00:29:16,400
Speaker 4: So it can work in your favor.

516
00:29:16,480 --> 00:29:18,480
Speaker 9: But in an environment like the one we've been in

517
00:29:18,560 --> 00:29:20,600
Speaker 9: over the last month where rates have gone up, if

518
00:29:20,640 --> 00:29:23,320
Speaker 9: you've been just long the long bond, you would have

519
00:29:23,360 --> 00:29:26,680
Speaker 9: clearly underperformed relative to just being long let's say the

520
00:29:26,720 --> 00:29:29,840
Speaker 9: two year or the ten year. My view on duration

521
00:29:29,960 --> 00:29:32,560
Speaker 9: at this point is really a question of where are

522
00:29:32,560 --> 00:29:35,200
Speaker 9: we on inflation in the long run. If you look

523
00:29:35,240 --> 00:29:37,680
Speaker 9: at ten year break evens, there are about two thirty

524
00:29:37,720 --> 00:29:40,000
Speaker 9: five this morning. The ten year is about four to

525
00:29:40,120 --> 00:29:44,160
Speaker 9: thirty five, so you know we have a month ago

526
00:29:44,360 --> 00:29:47,400
Speaker 9: the break evens were about five basis points lower, so

527
00:29:47,480 --> 00:29:52,240
Speaker 9: really unchanged in terms of long term inflation expectations.

528
00:29:52,680 --> 00:29:58,560
Speaker 5: Stocks, bonds, commodities, alternatives. What's your asset allocation look today

529
00:29:58,680 --> 00:30:01,480
Speaker 5: versus maybe or five weeks ago, anything.

530
00:30:01,240 --> 00:30:03,080
Speaker 4: Changed, not significantly.

531
00:30:03,080 --> 00:30:06,240
Speaker 9: I would just highlight that we own all major asset

532
00:30:06,280 --> 00:30:10,200
Speaker 9: classes across many of our client portfolios. Even you mentioned

533
00:30:10,240 --> 00:30:14,080
Speaker 9: alternatives alternas. We try to own the areas within the

534
00:30:14,120 --> 00:30:19,360
Speaker 9: alternative segment that are less correlated, negatively correlated, or non

535
00:30:19,400 --> 00:30:22,280
Speaker 9: correlated to long only equities and long only fixed income.

536
00:30:22,560 --> 00:30:26,440
Speaker 9: And I think that's really held in there quite well

537
00:30:26,480 --> 00:30:29,360
Speaker 9: for us. We're not owning just you know, sort of

538
00:30:29,360 --> 00:30:32,840
Speaker 9: long only private equity, long only private credit that's highly

539
00:30:32,880 --> 00:30:36,600
Speaker 9: correlated to both equities and high yield in the public markets.

540
00:30:36,800 --> 00:30:39,200
Speaker 9: That doesn't provide the diversification that we're looking for in

541
00:30:39,240 --> 00:30:43,200
Speaker 9: alternatives within equities. Clearly, the value trade has been on

542
00:30:43,280 --> 00:30:46,000
Speaker 9: its heels month to date, but if you look over

543
00:30:46,200 --> 00:30:48,560
Speaker 9: the course of just year to date or even last year,

544
00:30:49,160 --> 00:30:53,120
Speaker 9: still the value orientation has generally worked both home and abroad.

545
00:30:53,200 --> 00:30:55,320
Speaker 9: You know, the Russell's still up fractionally on the year,

546
00:30:55,680 --> 00:30:57,600
Speaker 9: equally to S and P's up fractionally on the year.

547
00:30:57,640 --> 00:30:59,200
Speaker 9: The rest of the market in the US is down

548
00:30:59,200 --> 00:31:01,239
Speaker 9: on the year, Japan up on the ear, EM's up

549
00:31:01,240 --> 00:31:04,560
Speaker 9: on the ear and that's a very value oriented sector

550
00:31:04,640 --> 00:31:05,640
Speaker 9: or allocation there.

551
00:31:06,320 --> 00:31:08,800
Speaker 5: We saw in twenty twenty five as well as the

552
00:31:08,880 --> 00:31:11,320
Speaker 5: US markets did, a lot of markets outside of the

553
00:31:11,400 --> 00:31:14,120
Speaker 5: US did even better, in part, maybe in large part,

554
00:31:14,200 --> 00:31:14,520
Speaker 5: due to.

555
00:31:14,440 --> 00:31:16,040
Speaker 4: The weakening dollar in twenty twenty five.

556
00:31:16,560 --> 00:31:18,160
Speaker 5: How do you think about US versus the rest of

557
00:31:18,160 --> 00:31:19,560
Speaker 5: the world in twenty twenty six.

558
00:31:19,760 --> 00:31:22,040
Speaker 9: It's tricky, and I think the real question is narration

559
00:31:22,200 --> 00:31:25,080
Speaker 9: of this war and Iran and the degree to which

560
00:31:25,120 --> 00:31:28,960
Speaker 9: that's going to potentially keep the dollar sort of buoyant

561
00:31:29,000 --> 00:31:32,120
Speaker 9: relative to possible weakening if there's an off ramp or

562
00:31:32,160 --> 00:31:34,680
Speaker 9: if there's a secession of things there.

563
00:31:34,760 --> 00:31:36,640
Speaker 2: How do you look at shocks? I just had an

564
00:31:36,680 --> 00:31:38,680
Speaker 2: email come in thank you so much folks for all

565
00:31:38,680 --> 00:31:42,640
Speaker 2: the information from listeners, and it's amazing what you can

566
00:31:42,680 --> 00:31:45,840
Speaker 2: do with is AI. You can convert a leader per

567
00:31:45,960 --> 00:31:51,520
Speaker 2: pound or pence into a US gallon by just typing

568
00:31:51,560 --> 00:31:52,560
Speaker 2: in a couple of words.

569
00:31:52,720 --> 00:31:52,960
Speaker 5: Wow.

570
00:31:53,400 --> 00:31:57,160
Speaker 2: I spent a fullesser slide rule to figure that out

571
00:31:57,440 --> 00:32:01,840
Speaker 2: not too long ago in London eight seventy eight cents

572
00:32:02,000 --> 00:32:05,360
Speaker 2: per gallant. Thank you. In Hong Kong with Laura Davison

573
00:32:05,920 --> 00:32:10,040
Speaker 2: thirteen fourteen, fifteen dollars per gallant. These shocks at some

574
00:32:10,200 --> 00:32:13,400
Speaker 2: point have to affect all the bond lift we saw

575
00:32:13,600 --> 00:32:17,000
Speaker 2: Friday and into Monday two. I'm gonna call it a

576
00:32:17,000 --> 00:32:23,120
Speaker 2: forty eight hour structural price down, yield up and presidential reaction.

577
00:32:23,680 --> 00:32:26,120
Speaker 2: Is that what moved the president to make those statements?

578
00:32:26,480 --> 00:32:28,520
Speaker 9: What we'll have to see, I mean, is this a

579
00:32:29,080 --> 00:32:32,400
Speaker 9: head fake for strategic reasons? Are they bringing troops in

580
00:32:32,520 --> 00:32:38,040
Speaker 9: from Asia to initiate more of a ground operation, or

581
00:32:38,640 --> 00:32:41,000
Speaker 9: was yesterday's overture at about seven to ten in the

582
00:32:41,040 --> 00:32:44,960
Speaker 9: morning a real off ramp that indicates the beginning of

583
00:32:45,000 --> 00:32:46,840
Speaker 9: the end of things. And of course we do not know.

584
00:32:46,880 --> 00:32:49,600
Speaker 9: The public probably knows about twenty percent of what's happening.

585
00:32:49,680 --> 00:32:52,880
Speaker 2: Right, But in all your years, the bond vigilantes, I mean,

586
00:32:53,400 --> 00:32:54,960
Speaker 2: you know Doney's right, they're for real.

587
00:32:55,280 --> 00:32:55,840
Speaker 4: Yeah.

588
00:32:55,880 --> 00:32:57,800
Speaker 9: But if you look at the bond market too, Tom,

589
00:32:57,840 --> 00:33:01,480
Speaker 9: credit spreads have widened. What some grade five year CDs

590
00:33:01,560 --> 00:33:04,560
Speaker 9: is about fifteen twenty basis points wider month today. If

591
00:33:04,600 --> 00:33:07,080
Speaker 9: you look at high yield five year high yield CDs

592
00:33:07,200 --> 00:33:10,600
Speaker 9: is probably about forty to fifty basis points wider.

593
00:33:10,640 --> 00:33:11,760
Speaker 4: Haven't seen a major.

594
00:33:11,520 --> 00:33:14,280
Speaker 2: Move the two of you here. I got a four

595
00:33:14,360 --> 00:33:17,080
Speaker 2: ninety five thirty year yep, And I'm watching the ten

596
00:33:17,160 --> 00:33:20,200
Speaker 2: year real yield is two point zero two percent. That

597
00:33:20,320 --> 00:33:23,320
Speaker 2: was one eighty one ninety. Everything is Paul Sweeney and

598
00:33:23,360 --> 00:33:24,400
Speaker 2: everything's creeping.

599
00:33:24,160 --> 00:33:27,120
Speaker 5: Up right, absolutely, I mean that's the look if you

600
00:33:27,160 --> 00:33:29,400
Speaker 5: look at the warp function, the market's kind of pulled

601
00:33:29,400 --> 00:33:30,560
Speaker 5: back on any rate cut here.

602
00:33:30,800 --> 00:33:32,920
Speaker 4: What did you hear from the Fed last week?

603
00:33:32,960 --> 00:33:35,520
Speaker 5: And do you think that's being to what extent is

604
00:33:35,520 --> 00:33:37,120
Speaker 5: of being impacted by what's going on? And Ran?

605
00:33:37,520 --> 00:33:38,320
Speaker 4: I think it's interesting.

606
00:33:38,320 --> 00:33:41,720
Speaker 9: I mean, clearly the Fed is in sort of a

607
00:33:41,760 --> 00:33:44,160
Speaker 9: period of where there's a real predicament, right. They don't

608
00:33:44,200 --> 00:33:46,800
Speaker 9: want to be accused of what they were accused of

609
00:33:46,880 --> 00:33:49,360
Speaker 9: in twenty twenty one into twenty two, which is they

610
00:33:49,440 --> 00:33:52,480
Speaker 9: relate to the game. Inflation was rising, headline went to

611
00:33:52,560 --> 00:33:55,520
Speaker 9: nine point one percent, they reacted late. There's a lot

612
00:33:55,560 --> 00:33:59,120
Speaker 9: of criticism there, but I think when you look at

613
00:33:58,040 --> 00:34:02,400
Speaker 9: the source of this inflation pressure in the duration of it,

614
00:34:02,440 --> 00:34:05,440
Speaker 9: which is energy and supply, I think the FED is

615
00:34:05,880 --> 00:34:08,920
Speaker 9: being prudent remaining on hold here. And in fact, I

616
00:34:08,920 --> 00:34:11,560
Speaker 9: would argue that if the duration of this is shorter,

617
00:34:11,960 --> 00:34:14,759
Speaker 9: and perhaps even if it's longer, if growth is impacted

618
00:34:14,840 --> 00:34:17,960
Speaker 9: negatively the Fed's going to be more willing to cut

619
00:34:18,040 --> 00:34:19,400
Speaker 9: than the raise rates going forward.

620
00:34:19,440 --> 00:34:22,840
Speaker 2: Aaron Kennon with us, we continue with clear harbor asset

621
00:34:22,880 --> 00:34:26,160
Speaker 2: management this morning on fixed income, I'm going to suggest

622
00:34:26,200 --> 00:34:29,400
Speaker 2: for equity participants, right now is a good time to

623
00:34:29,440 --> 00:34:33,440
Speaker 2: watch all the movements within the bond market. Let me,

624
00:34:33,520 --> 00:34:35,319
Speaker 2: I rarely do this. It's just, you know, it's like

625
00:34:35,400 --> 00:34:38,520
Speaker 2: a bunch of numbers, but right now it matters. Three

626
00:34:38,560 --> 00:34:41,400
Speaker 2: point eight eight percent in the two year Paul Sweeney

627
00:34:41,440 --> 00:34:44,160
Speaker 2: noted four percent even on the two year a cup

628
00:34:44,200 --> 00:34:47,080
Speaker 2: of coffee were creeping up by three basis points a

629
00:34:47,080 --> 00:34:49,760
Speaker 2: four thirty seven on the ten year and the thirty

630
00:34:49,840 --> 00:34:54,840
Speaker 2: year bond, I'm sorry, four point ninety five percent, close

631
00:34:55,160 --> 00:34:58,680
Speaker 2: to five percent yield four point ninety five percent as well,

632
00:34:58,719 --> 00:35:00,000
Speaker 2: Paul Sweeney with Aaron.

633
00:35:00,600 --> 00:35:02,640
Speaker 5: You know, we kind of lose fact as some of

634
00:35:02,680 --> 00:35:05,560
Speaker 5: these other news items in the marketplace. One of them

635
00:35:06,080 --> 00:35:10,600
Speaker 5: is it's an election year, and historically that introduces a

636
00:35:10,600 --> 00:35:13,080
Speaker 5: whole level of volatility to the markets outside of some

637
00:35:13,120 --> 00:35:15,160
Speaker 5: core fundamentals like earnings and interest rates and so on

638
00:35:15,200 --> 00:35:15,800
Speaker 5: and so forth.

639
00:35:16,040 --> 00:35:18,719
Speaker 4: How do you guys position for that kind of volatility

640
00:35:18,760 --> 00:35:20,759
Speaker 4: or you try to look past it. We do try

641
00:35:20,800 --> 00:35:21,520
Speaker 4: to look beyond it.

642
00:35:21,600 --> 00:35:24,759
Speaker 9: We do ask ourselves, how about the fiscal sort of

643
00:35:24,880 --> 00:35:28,000
Speaker 9: momentum coming into an election year with a big, beautiful bill.

644
00:35:28,160 --> 00:35:31,200
Speaker 9: Prior to this war, we were sort of constructive, right.

645
00:35:31,239 --> 00:35:37,680
Speaker 9: You had the impetus for consumers to consume more with

646
00:35:37,800 --> 00:35:41,520
Speaker 9: potential for paychecks coming in. You had no tax on tips,

647
00:35:41,520 --> 00:35:45,120
Speaker 9: no tax on overtime. You had the ability to deduct

648
00:35:45,160 --> 00:35:48,000
Speaker 9: your expenditures at the corporate level by one hundred percent

649
00:35:48,200 --> 00:35:50,440
Speaker 9: year one. That was going to accelerate a lot of

650
00:35:50,480 --> 00:35:53,960
Speaker 9: economic activity. That is accelerating a lot of economic activity.

651
00:35:54,280 --> 00:35:56,680
Speaker 9: We are very constructive on that theme. But it's being

652
00:35:56,719 --> 00:36:00,600
Speaker 9: obviously that the crosswind of this moment is problematic.

653
00:36:01,640 --> 00:36:05,799
Speaker 2: I look at the makeup here of equity listening to

654
00:36:05,880 --> 00:36:10,440
Speaker 2: the buying market. You say spreads have backed up. What

655
00:36:10,560 --> 00:36:15,839
Speaker 2: will well, if this continues, this fragility continues, I'm going

656
00:36:15,880 --> 00:36:17,960
Speaker 2: to be up three dollars on Brent Cruz here in

657
00:36:18,000 --> 00:36:22,120
Speaker 2: a moment. I mean, how does what's the history here

658
00:36:22,600 --> 00:36:26,480
Speaker 2: of what happens to equity markets when spreads widen? Well?

659
00:36:26,880 --> 00:36:27,320
Speaker 2: I would?

660
00:36:27,719 --> 00:36:30,120
Speaker 9: I mean, clearly there's a correlation. If we see how

661
00:36:30,200 --> 00:36:35,040
Speaker 9: yield spreads, you know, move in a pronounced way upward,

662
00:36:35,080 --> 00:36:38,040
Speaker 9: where that probably means that volatility index has spiked and

663
00:36:38,080 --> 00:36:42,000
Speaker 9: equities are lower. And when VALL spikes, we know what

664
00:36:42,239 --> 00:36:46,000
Speaker 9: investors and hedge fund managers and some institutions do. They

665
00:36:46,040 --> 00:36:50,240
Speaker 9: reduce their risk, they reduce their exposure. And so that

666
00:36:50,239 --> 00:36:53,080
Speaker 9: that's what we would anticipate. If this is a longer

667
00:36:53,160 --> 00:36:56,799
Speaker 9: duration occurrence in Iran and not you know, something that's

668
00:36:56,840 --> 00:36:59,000
Speaker 9: just going to settle down over the next let's call

669
00:36:59,040 --> 00:37:01,560
Speaker 9: it two to four weeks, we would anticipate the VIX

670
00:37:01,600 --> 00:37:04,320
Speaker 9: to probably shoot up well above thirty and then you

671
00:37:04,360 --> 00:37:06,200
Speaker 9: would have risk take and come off. We haven't seen

672
00:37:06,200 --> 00:37:09,480
Speaker 9: the VIX above thirty months to date, which is sort

673
00:37:09,480 --> 00:37:11,800
Speaker 9: of interesting, almost but not quite.

674
00:37:12,040 --> 00:37:14,400
Speaker 2: Aaron, thank you so much for the generous time this morning.

675
00:37:14,440 --> 00:37:18,680
Speaker 2: Aaron Kennon with us here on fixed income course as

676
00:37:18,719 --> 00:37:20,600
Speaker 2: a measurement of the rest of the market with clear

677
00:37:20,640 --> 00:37:22,560
Speaker 2: harbor asset management.

678
00:37:22,760 --> 00:37:27,560
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679
00:37:27,680 --> 00:37:31,479
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680
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681
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