1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amerie Hordern join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,000 Speaker 2: Terminal and the Bloomberg Business app. We begin this hour 10 00:00:37,040 --> 00:00:39,680 Speaker 2: with stocks rising ahead of CPI data and better than 11 00:00:39,760 --> 00:00:42,600 Speaker 2: expected results from both JP Morgan and from Wales Farco. 12 00:00:42,880 --> 00:00:46,000 Speaker 2: Joining us now to discuss is Ken Leon of cfra Ken. 13 00:00:46,000 --> 00:00:48,320 Speaker 2: You've had about fifteen minutes to pour over those numbers. 14 00:00:48,320 --> 00:00:49,360 Speaker 2: What do you make of them? 15 00:00:49,720 --> 00:00:50,400 Speaker 3: Well, it's great. 16 00:00:50,440 --> 00:00:53,360 Speaker 4: So we had outsize games for these stocks last year, 17 00:00:53,960 --> 00:00:58,520 Speaker 4: and what the results speak to is the ability. 18 00:00:58,080 --> 00:00:59,800 Speaker 3: To earn into your evaluation. 19 00:01:00,040 --> 00:01:02,640 Speaker 4: I would expect the street is going to have upward 20 00:01:02,680 --> 00:01:05,920 Speaker 4: earnings revisions for twenty twenty five. Take a look at 21 00:01:05,920 --> 00:01:10,319 Speaker 4: twenty twenty six, as noted here, what's the delta for 22 00:01:10,440 --> 00:01:13,480 Speaker 4: driving that earnings and that's about really for JP Morgan. 23 00:01:13,560 --> 00:01:17,320 Speaker 4: First would really be net interest income, so it's not 24 00:01:17,440 --> 00:01:20,680 Speaker 4: just rates as noted here, but it's also volume what 25 00:01:20,840 --> 00:01:23,600 Speaker 4: speaks to the US economy growing about two and a 26 00:01:23,680 --> 00:01:28,399 Speaker 4: half percent. Those two flywheels drives net interest income, which 27 00:01:28,480 --> 00:01:30,600 Speaker 4: is significant for JP. 28 00:01:30,480 --> 00:01:31,680 Speaker 3: Morgan and other banks. 29 00:01:31,959 --> 00:01:35,760 Speaker 4: The other delta that we haven't spoken about is investment banking, 30 00:01:35,800 --> 00:01:38,520 Speaker 4: and it might start slow, but the ability of a 31 00:01:38,640 --> 00:01:42,640 Speaker 4: risk on environment for mergers and acquisitions and also equity 32 00:01:42,720 --> 00:01:46,080 Speaker 4: underwriting means that we're going to be moving further up 33 00:01:46,080 --> 00:01:49,360 Speaker 4: from the trough of the market or the cycle about 34 00:01:49,400 --> 00:01:53,640 Speaker 4: eighteen months ago. Additionally, when you look at again net 35 00:01:53,640 --> 00:01:59,000 Speaker 4: interest income, but JP Morgan is a diversified bank, so 36 00:01:59,040 --> 00:02:02,080 Speaker 4: it's getting that from many different types of services. 37 00:02:02,360 --> 00:02:04,080 Speaker 3: The only negative. 38 00:02:03,680 --> 00:02:08,000 Speaker 4: Here in the print was really community banks a little 39 00:02:08,000 --> 00:02:12,160 Speaker 4: bit slower in terms of their net revenue. But mostly 40 00:02:12,200 --> 00:02:16,919 Speaker 4: this is a monolithic global bank, well placed trading at 41 00:02:16,960 --> 00:02:21,359 Speaker 4: an expensive valuation. Our takeaway is stay the course and 42 00:02:21,400 --> 00:02:24,560 Speaker 4: they're going to grow into their earnings and valuation. 43 00:02:25,040 --> 00:02:27,880 Speaker 5: Ken another figure, fourth quarter provisions for credit losses came 44 00:02:27,880 --> 00:02:30,240 Speaker 5: in at two point six billion. The estimate was higher 45 00:02:30,480 --> 00:02:33,320 Speaker 5: at just over three billion. Similar story for Wells, a 46 00:02:33,400 --> 00:02:36,120 Speaker 5: lower number than expected to What does that say to 47 00:02:36,160 --> 00:02:38,760 Speaker 5: you about credit quality? Are we in a period or 48 00:02:38,800 --> 00:02:41,000 Speaker 5: at least getting very close to normalization? 49 00:02:41,680 --> 00:02:41,880 Speaker 3: Yeah? 50 00:02:41,919 --> 00:02:44,520 Speaker 4: For JP Murray, then the industry, so bank analysts are 51 00:02:44,520 --> 00:02:47,040 Speaker 4: a nervous lot, and the concern is always on credit 52 00:02:47,160 --> 00:02:51,280 Speaker 4: risk and major write offs. And so far the economy 53 00:02:51,320 --> 00:02:55,000 Speaker 4: is resilient. We're nowhere near an amber or red alert 54 00:02:55,120 --> 00:02:58,960 Speaker 4: in terms of significant need for build up of credit reserves. 55 00:02:59,200 --> 00:03:00,720 Speaker 3: Looks like we're going to have a pretty good year 56 00:03:00,760 --> 00:03:01,560 Speaker 3: for the economy. 57 00:03:01,840 --> 00:03:05,520 Speaker 4: And when you look at the consumer, certainly, as you 58 00:03:05,680 --> 00:03:10,000 Speaker 4: do see increases in allowance for bad debt, it's mostly 59 00:03:10,040 --> 00:03:12,440 Speaker 4: because the volumes are much higher today. 60 00:03:12,240 --> 00:03:14,120 Speaker 3: Than they were two or three years ago. 61 00:03:14,919 --> 00:03:19,040 Speaker 4: Ultimately, and we didn't speak about this, which is whether 62 00:03:19,080 --> 00:03:23,200 Speaker 4: it's on credit risk or on trading. Is that black 63 00:03:23,320 --> 00:03:28,160 Speaker 4: Swan event? So Jamie Diamond mentions geopolitical arrests. The third 64 00:03:28,240 --> 00:03:31,920 Speaker 4: I would ask, is some liquidity squeeze in a complex 65 00:03:32,280 --> 00:03:36,200 Speaker 4: trading product that upsets the market and maybe the bank stocks. 66 00:03:36,440 --> 00:03:38,480 Speaker 4: We haven't seen it here, you know, if you go 67 00:03:38,600 --> 00:03:41,000 Speaker 4: back in twenty twenty three, that was credit. 68 00:03:40,720 --> 00:03:43,880 Speaker 2: Swiss Ken thirty minutes ago, I asked you what's your 69 00:03:43,880 --> 00:03:45,440 Speaker 2: favorite what kind of business do you want to warn? 70 00:03:45,480 --> 00:03:47,080 Speaker 2: And you were loving Goldman Sex. Do you love them 71 00:03:47,080 --> 00:03:49,120 Speaker 2: a little bit more after those numbers? 72 00:03:49,680 --> 00:03:54,120 Speaker 4: We do, and I think there's a more dynamic story 73 00:03:54,160 --> 00:03:57,440 Speaker 4: here for Goldman. They'll under promise and over deliver. I 74 00:03:57,480 --> 00:04:01,480 Speaker 4: think through most of twenty twenty five, traditional businesses are 75 00:04:01,480 --> 00:04:05,320 Speaker 4: going to get the benefits of positive trend M and A. 76 00:04:05,400 --> 00:04:09,320 Speaker 4: Of course, with one trillion of private equity investments that 77 00:04:09,440 --> 00:04:12,240 Speaker 4: have to be monetized in the next twenty four months, 78 00:04:12,280 --> 00:04:17,440 Speaker 4: CEO confidences coming up, we're also seeing what higher equity 79 00:04:17,520 --> 00:04:21,240 Speaker 4: marketing values great trading. But John, the story is, and 80 00:04:21,279 --> 00:04:24,480 Speaker 4: if I was Goldman Management, I'd be talking about their 81 00:04:25,000 --> 00:04:30,719 Speaker 4: really pivot to having durable, recurring fee revenue businesses across 82 00:04:31,200 --> 00:04:33,200 Speaker 4: that would be an asset in wealth management. 83 00:04:33,440 --> 00:04:34,719 Speaker 3: They're large businesses. 84 00:04:35,040 --> 00:04:38,120 Speaker 4: And then also as we see the easing of regulation 85 00:04:38,200 --> 00:04:40,919 Speaker 4: in Washington, you're going to see Goldman be more of 86 00:04:40,960 --> 00:04:44,960 Speaker 4: a principal actor besides just an agent for transactions, and 87 00:04:45,040 --> 00:04:47,039 Speaker 4: what that means is getting to be more of a 88 00:04:47,080 --> 00:04:51,640 Speaker 4: participant in direct private equity and private credit. We saw 89 00:04:51,720 --> 00:04:53,880 Speaker 4: that as part of their announcement earlier in the week 90 00:04:54,040 --> 00:04:57,160 Speaker 4: of blending some of these businesses so that they can 91 00:04:57,560 --> 00:05:01,600 Speaker 4: partner or compete with Apollo and others. 92 00:05:01,880 --> 00:05:03,960 Speaker 5: It is a different model can because for most of 93 00:05:04,000 --> 00:05:06,120 Speaker 5: the big banks, the way that they've been approaching private 94 00:05:06,160 --> 00:05:10,320 Speaker 5: credit is partnerships. Goldman with that announcement, to your point, 95 00:05:10,360 --> 00:05:13,080 Speaker 5: shows that they can compete with some of the big 96 00:05:13,160 --> 00:05:15,520 Speaker 5: names which are the model for the banking sector. Do 97 00:05:15,560 --> 00:05:16,920 Speaker 5: you think we'll ultimately win out? 98 00:05:17,920 --> 00:05:20,000 Speaker 4: That's who you are, But I think Goldman can play 99 00:05:20,040 --> 00:05:22,800 Speaker 4: often so they can certainly, as I said, be principal 100 00:05:23,040 --> 00:05:26,000 Speaker 4: and compete, but also for asset back loans, they can 101 00:05:26,040 --> 00:05:30,520 Speaker 4: also be there to also provide funding for the private 102 00:05:30,560 --> 00:05:34,160 Speaker 4: equity firms. The traditional banks have a different game, particularly 103 00:05:34,360 --> 00:05:38,120 Speaker 4: regionals or mid size you know, which is really loans 104 00:05:38,240 --> 00:05:42,520 Speaker 4: or syndicate loans, competing against a corporate who wants to 105 00:05:42,600 --> 00:05:46,640 Speaker 4: just get immediate attention with a direct borrowing from a 106 00:05:46,680 --> 00:05:50,760 Speaker 4: private equity firm. And it's a sea change because it's 107 00:05:50,800 --> 00:05:54,440 Speaker 4: moving up in size of the deals from small mid 108 00:05:55,080 --> 00:05:58,400 Speaker 4: mid sized companies to much larger deals over a billion 109 00:05:59,760 --> 00:06:03,720 Speaker 4: a year trend. I think Goldman again, you have to 110 00:06:03,760 --> 00:06:07,080 Speaker 4: go back over ten years. Gold you know, Goldman couldn't 111 00:06:07,120 --> 00:06:11,760 Speaker 4: be competing with Blackstone and KKR because of regulation, and 112 00:06:11,800 --> 00:06:14,120 Speaker 4: we're going to see a little easing of regulation, but 113 00:06:14,160 --> 00:06:16,280 Speaker 4: they're going to be smart because they want to have 114 00:06:16,320 --> 00:06:18,240 Speaker 4: the right strategy and execute. 115 00:06:18,360 --> 00:06:20,120 Speaker 6: Ken, I want to go back to John's earlier point 116 00:06:20,160 --> 00:06:23,120 Speaker 6: to Shanali, do you see any weakness in any of 117 00:06:23,120 --> 00:06:23,800 Speaker 6: these earnings. 118 00:06:25,760 --> 00:06:30,920 Speaker 4: The weakness is, you know, really related to any sharp 119 00:06:31,800 --> 00:06:36,479 Speaker 4: change or shock in the markets that affects volume but 120 00:06:36,680 --> 00:06:41,080 Speaker 4: also affects in their books exposure. And I mentioned that 121 00:06:41,279 --> 00:06:44,520 Speaker 4: at the hour before, which is really the black Swan event. 122 00:06:44,920 --> 00:06:48,240 Speaker 4: You know, some complex derivative product that has a ripple 123 00:06:48,279 --> 00:06:51,200 Speaker 4: effect whether it happens in Asia or Europe, but it 124 00:06:51,279 --> 00:06:55,640 Speaker 4: impacts Goldman generally. The other one, which Jamie Diamond speaks to, 125 00:06:55,760 --> 00:06:58,880 Speaker 4: is a geopolitical event that has usually been if there's 126 00:06:58,920 --> 00:07:02,480 Speaker 4: any sell off of buyer opportunity. But what we're seeing 127 00:07:02,600 --> 00:07:06,680 Speaker 4: so far is confirmation that twenty twenty five stayed the course, 128 00:07:07,000 --> 00:07:09,840 Speaker 4: and we're going to see I think the consensus or 129 00:07:09,880 --> 00:07:12,520 Speaker 4: street analysts raise their estimates as we go. 130 00:07:12,480 --> 00:07:12,960 Speaker 3: Through the year. 131 00:07:13,200 --> 00:07:15,960 Speaker 2: Ken, we spoke to you about thirty minutes ago. I'm 132 00:07:15,960 --> 00:07:18,040 Speaker 2: going to say this for you. You gave Goldman Saxon 133 00:07:18,080 --> 00:07:21,160 Speaker 2: a plus. What does City get this morning, Well, we'll 134 00:07:21,160 --> 00:07:21,880 Speaker 2: give them a bee. 135 00:07:22,080 --> 00:07:24,320 Speaker 4: I haven't seen the details, but picking up from what 136 00:07:24,400 --> 00:07:29,720 Speaker 4: Chinali said, the return on equity narrowing the range. You know, 137 00:07:29,800 --> 00:07:32,760 Speaker 4: they took a one billion dollar restructuring charge in twenty 138 00:07:32,800 --> 00:07:37,240 Speaker 4: four so the ability possibly to reduce costs or more 139 00:07:37,320 --> 00:07:39,880 Speaker 4: than the street thinks might be able to help them 140 00:07:39,880 --> 00:07:44,560 Speaker 4: on Roe. City is also an event driven stock. Of 141 00:07:44,600 --> 00:07:48,320 Speaker 4: the large banks, they are finally this year, we hope 142 00:07:48,520 --> 00:07:54,280 Speaker 4: moving to monetizing selling in Mexico Banamex, which was by 143 00:07:54,320 --> 00:08:00,160 Speaker 4: far the largest consumer bank they had outside the US. 144 00:07:59,840 --> 00:08:01,880 Speaker 3: That significant. It's event driven. 145 00:08:02,560 --> 00:08:07,640 Speaker 4: They also have stable businesses with more transparency. That's called services. 146 00:08:07,680 --> 00:08:11,520 Speaker 4: It's treasury and trade solutions, a dominant position in the 147 00:08:11,560 --> 00:08:16,200 Speaker 4: corporate treasury market, and certainly they're more on the fixed 148 00:08:16,600 --> 00:08:20,160 Speaker 4: income side versus equity across banking and trading. 149 00:08:20,360 --> 00:08:23,600 Speaker 3: So you know, I think City is going to be fine. 150 00:08:24,480 --> 00:08:28,920 Speaker 4: And they're still trading below net tangible book value, although 151 00:08:28,960 --> 00:08:32,720 Speaker 4: the gap has narrowed a bit, so we need to 152 00:08:32,720 --> 00:08:37,000 Speaker 4: see results improve through twenty twenty five. But I think 153 00:08:37,080 --> 00:08:41,040 Speaker 4: myself and most analysts with buys think that they can execute. 154 00:08:41,160 --> 00:08:43,160 Speaker 3: Jane Fraser is still on course. 155 00:08:43,679 --> 00:08:46,160 Speaker 5: She's still on course. That gap maybe even narrowing more 156 00:08:46,200 --> 00:08:48,800 Speaker 5: this morning with the rally still ongoing. Pre market, Ken 157 00:08:48,840 --> 00:08:51,040 Speaker 5: another headline that came out is that they see their 158 00:08:51,040 --> 00:08:54,520 Speaker 5: expenses for twenty twenty five slightly lower than fifty three 159 00:08:54,600 --> 00:08:57,360 Speaker 5: point eight billion dollars. That is the high end of 160 00:08:57,400 --> 00:08:59,880 Speaker 5: their range that they had already given to this market. 161 00:09:00,320 --> 00:09:03,080 Speaker 5: Does it concern you that they aren't bringing in expenses 162 00:09:03,160 --> 00:09:07,040 Speaker 5: quicker in the midst of this restructuring, Well, it ties. 163 00:09:06,840 --> 00:09:09,960 Speaker 4: In with my earlier point one billion dollar restructuring. But 164 00:09:10,400 --> 00:09:15,440 Speaker 4: what they're doing is reducing management layers and also realigning 165 00:09:15,760 --> 00:09:20,960 Speaker 4: businesses that weren't really responsive to the markets or customers. 166 00:09:21,360 --> 00:09:23,120 Speaker 3: So I think it's a. 167 00:09:23,080 --> 00:09:28,200 Speaker 4: Timing issue and one where you'll see accelerated improvement perhaps 168 00:09:28,280 --> 00:09:31,280 Speaker 4: in the second half of the year, but you'll see improvement, 169 00:09:31,400 --> 00:09:33,920 Speaker 4: but it just doesn't happen in one or two quarters. 170 00:09:34,160 --> 00:09:36,120 Speaker 2: I Ken, appreciate you time. Thanks for this morning, Ken 171 00:09:36,200 --> 00:09:49,600 Speaker 2: Lee on that of CFI on City pH Seth appearing 172 00:09:49,600 --> 00:09:53,240 Speaker 2: on course to win confirmation dismissing acusations of past misconduct 173 00:09:53,520 --> 00:09:56,840 Speaker 2: in his Senate hearing. Secretary of State nominee Marco Rubio 174 00:09:56,960 --> 00:09:59,319 Speaker 2: among those speaking on Capital Hill Lights alone this morning, 175 00:09:59,400 --> 00:10:03,320 Speaker 2: then recent country nomination Scale Besson appearing on Thursday, joining 176 00:10:03,360 --> 00:10:06,640 Speaker 2: us not to discuss Jennifer Flitzer of INVESTCA, Jennifer, welcome 177 00:10:06,679 --> 00:10:08,920 Speaker 2: back any reason to believe that some of these nominations 178 00:10:09,000 --> 00:10:11,959 Speaker 2: might be in trouble, any trouble at so well. 179 00:10:12,000 --> 00:10:14,520 Speaker 1: I think what we saw yesterday is that a lot 180 00:10:14,640 --> 00:10:20,160 Speaker 1: depends on these hearings, and objectively, you know, Pete Hegseth 181 00:10:20,800 --> 00:10:23,160 Speaker 1: did a pretty good job and it is now. 182 00:10:23,160 --> 00:10:26,480 Speaker 7: Taking him on the path to confirmation. I think he'll skate. 183 00:10:26,320 --> 00:10:31,440 Speaker 1: Through the committee approval and he'll be on the floor 184 00:10:31,559 --> 00:10:38,360 Speaker 1: probably sometime next week. The other more controversial of folks 185 00:10:38,480 --> 00:10:39,559 Speaker 1: like Tulci. 186 00:10:39,320 --> 00:10:41,640 Speaker 7: Gabbard or Robert F. Kennedy Junior. 187 00:10:43,040 --> 00:10:45,640 Speaker 1: I think these hearings are really going to matter, and 188 00:10:45,720 --> 00:10:48,640 Speaker 1: if they have some of the same showing as Pete 189 00:10:48,600 --> 00:10:50,840 Speaker 1: Heggseth did, then I think they're well. 190 00:10:50,640 --> 00:10:52,319 Speaker 7: On their way to confirmation, Jennifer. 191 00:10:52,360 --> 00:10:54,640 Speaker 6: If they're going up for the hearing, though, the Trump 192 00:10:54,720 --> 00:10:57,559 Speaker 6: campaign must think that they have the votes for these 193 00:10:57,559 --> 00:11:00,080 Speaker 6: individuals like Tulci Gabbard and our. 194 00:11:01,520 --> 00:11:01,679 Speaker 8: Well. 195 00:11:01,720 --> 00:11:04,920 Speaker 7: I think they have faith in their strength right. 196 00:11:04,960 --> 00:11:07,120 Speaker 1: And one thing that is sort of a through line 197 00:11:07,200 --> 00:11:11,640 Speaker 1: with all of these nominees is their strong ability to communicate, 198 00:11:11,760 --> 00:11:14,320 Speaker 1: their ability to message and stay on message. 199 00:11:14,760 --> 00:11:18,360 Speaker 7: And I think you're going to see that with Chelsea 200 00:11:18,480 --> 00:11:20,679 Speaker 7: Gabbard and with Robert F. 201 00:11:20,760 --> 00:11:27,600 Speaker 1: Kennedy Junior, with patl for the FBI director. If they 202 00:11:27,640 --> 00:11:30,080 Speaker 1: have strong showings that they're hearings and I think the 203 00:11:30,080 --> 00:11:33,080 Speaker 1: faith there is with them from the transition. 204 00:11:33,480 --> 00:11:35,839 Speaker 7: Then I think they're well on their way to confirmation. 205 00:11:36,120 --> 00:11:38,840 Speaker 1: And what we're hearing behind the scenes with the meetings 206 00:11:38,840 --> 00:11:42,319 Speaker 1: that are happening with the senators is that they're gaining 207 00:11:42,440 --> 00:11:44,880 Speaker 1: a lot of support as they move along. 208 00:11:45,080 --> 00:11:46,840 Speaker 6: It's a good point you make, because that's what sources 209 00:11:46,920 --> 00:11:49,720 Speaker 6: close to Trump tell me that being able to communicate 210 00:11:49,720 --> 00:11:52,679 Speaker 6: his agenda is just as important as being able to 211 00:11:52,760 --> 00:11:55,320 Speaker 6: do the job that he's putting some of these nominees 212 00:11:55,360 --> 00:11:57,480 Speaker 6: in place. Can you give us a sense is what's 213 00:11:57,520 --> 00:12:01,280 Speaker 6: so different from Trump one point zero and how they 214 00:12:01,480 --> 00:12:03,920 Speaker 6: worked with nominees and some under secretaries. So what we're 215 00:12:03,920 --> 00:12:05,480 Speaker 6: seeing now are they moving faster? 216 00:12:05,640 --> 00:12:08,200 Speaker 7: Now? They're definitely moving faster. 217 00:12:08,400 --> 00:12:10,440 Speaker 1: I mean I think the vetting was a little slow 218 00:12:10,600 --> 00:12:13,240 Speaker 1: because of how they decided to do it, and when 219 00:12:13,280 --> 00:12:16,520 Speaker 1: they brought in the FBI vetting, and when they started 220 00:12:16,520 --> 00:12:18,880 Speaker 1: filing with the Senate. But I think they're well with 221 00:12:19,040 --> 00:12:23,280 Speaker 1: on within their way, well on the path to getting 222 00:12:23,280 --> 00:12:27,439 Speaker 1: folks in immediately as soon as the president is inaugurated 223 00:12:27,480 --> 00:12:32,600 Speaker 1: on day one. I do see a much sort of 224 00:12:33,040 --> 00:12:37,400 Speaker 1: stronger bench in the sense of the ability of Trump 225 00:12:37,520 --> 00:12:40,839 Speaker 1: and the Trump transition team and really Susie Wiles at 226 00:12:40,840 --> 00:12:43,240 Speaker 1: the top there as in the chief of Staff to 227 00:12:43,320 --> 00:12:47,720 Speaker 1: get folks in who are really speaking the message of 228 00:12:47,800 --> 00:12:50,320 Speaker 1: Trump and Trump two point zero. I think in one 229 00:12:50,360 --> 00:12:54,320 Speaker 1: point oh, you saw sort of, you know, the mechanism 230 00:12:54,520 --> 00:12:55,880 Speaker 1: in Washington. 231 00:12:56,600 --> 00:12:59,000 Speaker 7: Really working to influence Trump. 232 00:12:59,240 --> 00:13:04,240 Speaker 1: Now, Trump has a very strong position and has a 233 00:13:04,440 --> 00:13:08,520 Speaker 1: whole team of folks who are there to push that position, 234 00:13:08,600 --> 00:13:10,280 Speaker 1: to push that agenda. 235 00:13:10,440 --> 00:13:13,959 Speaker 5: Beyond just the ability to get these various cabinet members 236 00:13:14,000 --> 00:13:17,559 Speaker 5: confirm Jennifer. Does it also speak to a cohesion within 237 00:13:17,600 --> 00:13:20,600 Speaker 5: the Republican Party that will benefit Trump as he tries 238 00:13:20,640 --> 00:13:23,320 Speaker 5: to do things like past one big beautiful bill in 239 00:13:23,400 --> 00:13:26,080 Speaker 5: a very slim majority. Does it help that these are 240 00:13:26,080 --> 00:13:28,080 Speaker 5: getting through? Does it speak to that ability? 241 00:13:28,840 --> 00:13:29,120 Speaker 8: Yeah? 242 00:13:29,120 --> 00:13:32,000 Speaker 1: Absolutely, And I think we've seen it just in this 243 00:13:32,040 --> 00:13:33,160 Speaker 1: transition period. 244 00:13:34,040 --> 00:13:35,800 Speaker 7: Mar A Lago is a very. 245 00:13:35,600 --> 00:13:39,080 Speaker 1: Busy place right now, and not just with CEOs from 246 00:13:39,080 --> 00:13:39,960 Speaker 1: the tech industry. 247 00:13:40,360 --> 00:13:44,360 Speaker 7: You see Washington basically flying down to mar A Lago. 248 00:13:45,080 --> 00:13:49,880 Speaker 1: He has been entertaining members of Congress, senators and Tiger 249 00:13:49,960 --> 00:13:54,680 Speaker 1: caucuses and factions of the House representatives. I think going forward, 250 00:13:54,840 --> 00:13:57,600 Speaker 1: especially within this first six months, you're going to see 251 00:13:57,600 --> 00:14:02,200 Speaker 1: a very hands on White House working their agenda and 252 00:14:02,480 --> 00:14:05,840 Speaker 1: working with the members within the House who might be 253 00:14:06,040 --> 00:14:07,800 Speaker 1: the most difficult to get on board. 254 00:14:08,080 --> 00:14:21,600 Speaker 2: Jennifer, appreciate your time. Jennifer Flitten of Investco. David Kelly's 255 00:14:21,640 --> 00:14:23,480 Speaker 2: with us around of TYPEO with David Kelly of JP 256 00:14:23,640 --> 00:14:26,440 Speaker 2: markin Asset Management, David Mornick get to see you morning. 257 00:14:26,640 --> 00:14:29,280 Speaker 2: You expected to see more of this softer inflation prints 258 00:14:29,280 --> 00:14:30,640 Speaker 2: in a monthst ahead, Yes, I do. 259 00:14:30,880 --> 00:14:33,640 Speaker 9: I think the I think it's important to recognize that 260 00:14:33,920 --> 00:14:35,680 Speaker 9: the year of year, which is kind of high right 261 00:14:35,720 --> 00:14:37,800 Speaker 9: now at two point nine, that's going to look a 262 00:14:37,840 --> 00:14:40,640 Speaker 9: lot better by April because the first four months of 263 00:14:40,760 --> 00:14:45,480 Speaker 9: last year we saw pretty strong inflation, so that that 264 00:14:45,680 --> 00:14:47,920 Speaker 9: makes it very easy to get down to a low 265 00:14:48,000 --> 00:14:51,320 Speaker 9: twos by April. And overall, this is not an inflation 266 00:14:51,400 --> 00:14:54,000 Speaker 9: prone economy. I mean, the economy left to itself is 267 00:14:54,040 --> 00:14:57,560 Speaker 9: just chugging along, steady growth at over two percent growth, 268 00:14:57,720 --> 00:15:00,840 Speaker 9: unemployment very steady, and inflation grad coming down. 269 00:15:00,920 --> 00:15:03,360 Speaker 8: So the economy itself looks pretty good right now. 270 00:15:03,360 --> 00:15:06,160 Speaker 9: It's got a lot coming up on the plate. 271 00:15:05,920 --> 00:15:08,400 Speaker 8: Here, but overall feel pretty good about. 272 00:15:08,440 --> 00:15:09,720 Speaker 2: We'll talk about what's coming up on a play, and 273 00:15:09,720 --> 00:15:12,680 Speaker 2: I've seen you're talking about incoming policy changes. Potentially you've 274 00:15:12,680 --> 00:15:16,400 Speaker 2: written about this sources of inflation, labor, energy, goods, and services. 275 00:15:16,480 --> 00:15:17,680 Speaker 2: Where'd you have the most confidence? 276 00:15:17,720 --> 00:15:17,920 Speaker 8: Now? 277 00:15:18,960 --> 00:15:21,160 Speaker 9: I think the most important is the labor market, and 278 00:15:22,000 --> 00:15:24,800 Speaker 9: I think what we've seen is American workers just won't 279 00:15:24,840 --> 00:15:28,600 Speaker 9: ask for race. It's remarkable. I mean, we saw production 280 00:15:28,680 --> 00:15:31,600 Speaker 9: on supervisory workers, wages up three point eight percent year 281 00:15:31,640 --> 00:15:32,040 Speaker 9: over year. 282 00:15:32,120 --> 00:15:33,800 Speaker 8: We've got eight million job openings. 283 00:15:33,840 --> 00:15:36,240 Speaker 9: Everybody knows it's hard to find a good employee, but 284 00:15:36,320 --> 00:15:37,760 Speaker 9: yet quits rates are below. 285 00:15:37,560 --> 00:15:38,960 Speaker 8: Where they were before the pandemic. 286 00:15:39,240 --> 00:15:42,080 Speaker 9: And either American business is great at saying why they're 287 00:15:42,080 --> 00:15:44,000 Speaker 9: not going to give people a raise, or American workers 288 00:15:44,040 --> 00:15:45,440 Speaker 9: are just won't be about asking for one. 289 00:15:45,440 --> 00:15:47,520 Speaker 8: But whatever way it works, we're just. 290 00:15:47,520 --> 00:15:50,240 Speaker 9: Not getting inflation coming out of the labor market, and 291 00:15:50,280 --> 00:15:52,560 Speaker 9: without that you cannot get sustained inflation. 292 00:15:53,840 --> 00:15:55,800 Speaker 5: Just to that point on the labor market, as we're 293 00:15:55,840 --> 00:15:59,120 Speaker 5: digesting CPI, you have had these individual announcements from companies, 294 00:15:59,200 --> 00:16:02,640 Speaker 5: be it from Meta, Microsoft, Southwest City, when it comes 295 00:16:02,640 --> 00:16:06,680 Speaker 5: to benefits about reducing hiring, not hiring, or even letting 296 00:16:06,720 --> 00:16:08,960 Speaker 5: people go do some of that softness. Do you look 297 00:16:09,000 --> 00:16:11,680 Speaker 5: at that and say these are idiosyncratic company events or 298 00:16:11,720 --> 00:16:14,400 Speaker 5: does it suggest that something has indeed shifted in the 299 00:16:14,480 --> 00:16:16,840 Speaker 5: labor market in terms of who has the power and 300 00:16:16,920 --> 00:16:18,920 Speaker 5: overall represents some form of softness. 301 00:16:19,560 --> 00:16:21,760 Speaker 9: I think it's good messaging for these companies. There's nothing 302 00:16:21,880 --> 00:16:24,880 Speaker 9: there's nothing like announcing perspective layoffs to quieten down the 303 00:16:24,920 --> 00:16:27,840 Speaker 9: labor force. So I think it's a way of really 304 00:16:28,120 --> 00:16:32,000 Speaker 9: suppressing wage gains. There's no evidence in GDP. I mean, 305 00:16:32,480 --> 00:16:34,760 Speaker 9: you know, if you want to figure out where employment's going, 306 00:16:34,960 --> 00:16:38,240 Speaker 9: look at where GDP has been. Because the last four quarters, 307 00:16:38,240 --> 00:16:40,480 Speaker 9: the current quarter, in the previous three quarters are a 308 00:16:40,600 --> 00:16:41,120 Speaker 9: very good. 309 00:16:41,040 --> 00:16:42,320 Speaker 8: Driver payroll employment. 310 00:16:42,520 --> 00:16:44,240 Speaker 9: So I know that the rate of growth of this 311 00:16:44,320 --> 00:16:47,520 Speaker 9: economy is capable of generating on hundred and fifty one 312 00:16:47,560 --> 00:16:49,840 Speaker 9: hundred and seventy five thousand jobs per month as an 313 00:16:49,880 --> 00:16:52,600 Speaker 9: average through this year, and that forecast is good for 314 00:16:52,600 --> 00:16:55,200 Speaker 9: at least the next three to six months anyway. So 315 00:16:55,440 --> 00:16:59,600 Speaker 9: there really isn't any softness in terms of the overall economy. 316 00:16:59,640 --> 00:17:02,240 Speaker 9: But business, you know, they focus on margins, they focus 317 00:17:02,240 --> 00:17:03,080 Speaker 9: on efficiencies. 318 00:17:03,240 --> 00:17:04,680 Speaker 8: You know, how can we be more productive? 319 00:17:04,680 --> 00:17:06,720 Speaker 9: And yes, if that means announcing well, I'm going to 320 00:17:06,720 --> 00:17:09,680 Speaker 9: have to lay off a few people, then that that. 321 00:17:09,640 --> 00:17:11,800 Speaker 8: Actually works in terms of maintaining cost control. 322 00:17:12,000 --> 00:17:15,320 Speaker 6: David John mentioned energy and that was a big part 323 00:17:15,320 --> 00:17:17,760 Speaker 6: of this inflation story for this print forty percent. I 324 00:17:17,760 --> 00:17:21,240 Speaker 6: believe IA Overnight was saying, actually they see a smaller 325 00:17:21,320 --> 00:17:25,240 Speaker 6: glut next year. How concerned you that fighting energy prices, 326 00:17:25,320 --> 00:17:27,399 Speaker 6: higher oil prices, higher grass lean price is going to 327 00:17:27,400 --> 00:17:28,600 Speaker 6: be a concern for twenty twenty five? 328 00:17:29,119 --> 00:17:29,600 Speaker 8: Not too much. 329 00:17:29,600 --> 00:17:32,840 Speaker 9: I mean, if you look at the global composite PMI index, 330 00:17:33,440 --> 00:17:36,960 Speaker 9: you've got a global economy that is kind of muddling forward. 331 00:17:37,080 --> 00:17:40,720 Speaker 9: The US is doing very well in places like India 332 00:17:41,160 --> 00:17:44,120 Speaker 9: and Italy are doing well, but a lot of Europe 333 00:17:44,200 --> 00:17:47,320 Speaker 9: and particularly China are pretty soft here that's not going 334 00:17:47,359 --> 00:17:50,240 Speaker 9: to generate a lot of demand. Meanwhile, I think with 335 00:17:50,320 --> 00:17:52,600 Speaker 9: the change in administration, you could get two things. One, 336 00:17:52,920 --> 00:17:55,840 Speaker 9: you may get a peace settlement in the Middle East, 337 00:17:56,320 --> 00:17:59,359 Speaker 9: which could you know, DAP and down tensions a little 338 00:17:59,359 --> 00:18:02,639 Speaker 9: bit and con turns. And then secondly you're going to 339 00:18:02,640 --> 00:18:07,200 Speaker 9: have a very pro drilling policy which could increase US production, 340 00:18:07,640 --> 00:18:09,240 Speaker 9: and some deregulation. 341 00:18:08,640 --> 00:18:09,960 Speaker 8: Which could help the energy sector. 342 00:18:10,000 --> 00:18:13,760 Speaker 9: So overall, I don't think energy prices for fossil fuels 343 00:18:13,800 --> 00:18:16,680 Speaker 9: are likely to go up significantly over the next few years. 344 00:18:16,720 --> 00:18:18,560 Speaker 2: If you are just joining us, welcome to the program. 345 00:18:18,640 --> 00:18:21,480 Speaker 2: Seven minutes ago, inflation data drops and came in a 346 00:18:21,520 --> 00:18:24,800 Speaker 2: little bit better than expected on core CPI excluding food 347 00:18:24,800 --> 00:18:26,920 Speaker 2: and energy month over month, coming in at zero point 348 00:18:26,960 --> 00:18:29,560 Speaker 2: two percent the median estimate in our survey with zero 349 00:18:29,600 --> 00:18:32,840 Speaker 2: point three on headline inline at zero point four percent 350 00:18:32,880 --> 00:18:35,760 Speaker 2: the estimate with zero point four. Of course, we're trading 351 00:18:35,760 --> 00:18:38,400 Speaker 2: off the back of that downside surprise on core CPI, 352 00:18:38,640 --> 00:18:41,240 Speaker 2: and it's unlocking much lower bond yards across the curve. 353 00:18:41,440 --> 00:18:43,760 Speaker 2: The ten year is now lower by ten basis points, 354 00:18:43,760 --> 00:18:46,360 Speaker 2: the two year down by nine. That unlocks some dollar 355 00:18:46,400 --> 00:18:48,920 Speaker 2: weakness and euro strength. Euro dollar at one oh three forty, 356 00:18:49,040 --> 00:18:51,760 Speaker 2: and equities a really big lift of stocks on the 357 00:18:51,840 --> 00:18:55,080 Speaker 2: s and p up by one point four percent. Likewise, 358 00:18:55,080 --> 00:18:57,359 Speaker 2: on the Nasdaq and on the Russle, the small caps 359 00:18:57,359 --> 00:19:01,320 Speaker 2: are absolutely flying this morning. On Russell, we are rallying 360 00:19:01,359 --> 00:19:03,720 Speaker 2: pretty hard going into the up and about up by 361 00:19:03,840 --> 00:19:07,280 Speaker 2: two point nine percent. David, you talked about the incoming administration. 362 00:19:07,800 --> 00:19:10,440 Speaker 2: Danny talked about this earlier, the cost of not making 363 00:19:10,440 --> 00:19:13,199 Speaker 2: your plans clear. You think it's high yields, it's that 364 00:19:13,200 --> 00:19:15,240 Speaker 2: what's playing out in the bond market, not this morning, 365 00:19:15,320 --> 00:19:16,440 Speaker 2: but leading up to this move. 366 00:19:16,520 --> 00:19:19,680 Speaker 9: Oh yeah, yes, absolutely, because we don't know how far 367 00:19:19,840 --> 00:19:22,960 Speaker 9: we can push the global bond market. And on Friday 368 00:19:23,000 --> 00:19:24,680 Speaker 9: we're going to get some new numbers from the Congression 369 00:19:24,680 --> 00:19:26,720 Speaker 9: Budget Office looking at you know, if we don't do 370 00:19:26,840 --> 00:19:28,720 Speaker 9: any tax cuts from here, if we don't even extend 371 00:19:28,720 --> 00:19:31,040 Speaker 9: the tax cuts we've got still, I think they'll still 372 00:19:31,080 --> 00:19:34,600 Speaker 9: show the debt to GDP ratio rising to about one 373 00:19:34,680 --> 00:19:36,840 Speaker 9: hundred and twenty two hundred and twenty five percent of 374 00:19:36,920 --> 00:19:41,240 Speaker 9: GDP by by twenty thirty five. It looks like that 375 00:19:41,400 --> 00:19:43,399 Speaker 9: the budget deficit for this year could come in as 376 00:19:43,400 --> 00:19:46,280 Speaker 9: over two trillion dollars, and half of that is interest, 377 00:19:46,480 --> 00:19:48,480 Speaker 9: and these higher interest costs that we're seeing it's a 378 00:19:48,520 --> 00:19:50,560 Speaker 9: negative feedback loop because it's actually pushing. 379 00:19:50,359 --> 00:19:50,960 Speaker 8: Up the deficit. 380 00:19:51,080 --> 00:19:53,680 Speaker 9: And the question is, well, how much can the government 381 00:19:53,760 --> 00:19:57,600 Speaker 9: borrow from global capital markets at very cheap rates. 382 00:19:57,760 --> 00:19:59,920 Speaker 6: You said in your note the most dangerous three were 383 00:20:00,119 --> 00:20:02,600 Speaker 6: and economics are quote wait and see. What do you 384 00:20:02,640 --> 00:20:06,440 Speaker 6: do that in this environment where Trump wants to be unpredictable. 385 00:20:06,520 --> 00:20:09,480 Speaker 8: That's part of the policy. Yeah, and it doesn't it works. 386 00:20:09,640 --> 00:20:12,240 Speaker 9: You know, it works well in football, it works well 387 00:20:12,280 --> 00:20:13,360 Speaker 9: in military maneuvers. 388 00:20:13,359 --> 00:20:14,400 Speaker 8: It does not work. 389 00:20:14,200 --> 00:20:15,760 Speaker 9: Work well in macroeconomic management. 390 00:20:15,840 --> 00:20:16,919 Speaker 8: You actually have to let people know. 391 00:20:16,960 --> 00:20:18,520 Speaker 9: I mean, that's why the fence spends so much time 392 00:20:18,560 --> 00:20:21,200 Speaker 9: saying we're looking for two percent inflation and just tries 393 00:20:21,240 --> 00:20:24,359 Speaker 9: to telegraph their punches all the time. And that's really 394 00:20:24,400 --> 00:20:27,560 Speaker 9: what what you should do in macroeconomic management. So yes, 395 00:20:27,600 --> 00:20:30,560 Speaker 9: I think there is an uncertainty tax, absolutely, because the 396 00:20:30,640 --> 00:20:32,639 Speaker 9: problem is that if you don't know what the administration 397 00:20:32,720 --> 00:20:34,920 Speaker 9: is going to do in terms of taxation or deficits, 398 00:20:34,960 --> 00:20:36,480 Speaker 9: you don't know where interest rates are going to be. 399 00:20:36,920 --> 00:20:38,760 Speaker 9: What's the easiest thing for business to say, well, let's 400 00:20:38,760 --> 00:20:41,040 Speaker 9: wait and see. And you know, whenever decides to wait 401 00:20:41,080 --> 00:20:42,600 Speaker 9: and see, what they eventually see is not good, So 402 00:20:42,640 --> 00:20:45,359 Speaker 9: it actually drags in the economy, slows down economic growth. 403 00:20:45,480 --> 00:20:47,960 Speaker 9: So I am not concerned about the economy accelerating a 404 00:20:47,960 --> 00:20:48,360 Speaker 9: lot this. 405 00:20:48,400 --> 00:20:49,320 Speaker 8: Year at all. 406 00:20:49,840 --> 00:20:52,320 Speaker 9: I'd be more worried about it decelerating if we have 407 00:20:52,359 --> 00:20:53,480 Speaker 9: some shock or make some mistake. 408 00:20:53,520 --> 00:20:57,280 Speaker 2: Sammary's point, though, this president, the incoming president, values a 409 00:20:57,359 --> 00:20:59,600 Speaker 2: lack of predictability. Are you saying that's going to be 410 00:20:59,600 --> 00:21:02,080 Speaker 2: a permanent feature of this bond market through this administration, 411 00:21:02,160 --> 00:21:04,760 Speaker 2: a yield premium because we just won't have a clear plan. 412 00:21:05,040 --> 00:21:07,920 Speaker 9: It could be, but also because we're going into uncharted 413 00:21:08,000 --> 00:21:10,200 Speaker 9: territory in terms of how much we're trying to borrow 414 00:21:10,240 --> 00:21:11,720 Speaker 9: from the you know, the biggest borrow in the world 415 00:21:11,840 --> 00:21:13,920 Speaker 9: is going to be borrowing more than they've ever borrowed before. 416 00:21:14,119 --> 00:21:17,240 Speaker 9: And it's and you know, we're at a delicate point 417 00:21:17,240 --> 00:21:18,040 Speaker 9: here because. 418 00:21:17,800 --> 00:21:20,120 Speaker 8: We really need to not only do we have to. 419 00:21:20,040 --> 00:21:24,640 Speaker 9: Have a sensible plan in terms of revenues and spending, 420 00:21:24,680 --> 00:21:27,159 Speaker 9: but we need a certain amount of predictability. If you 421 00:21:27,640 --> 00:21:30,680 Speaker 9: if we sort of push through a budget plan which 422 00:21:30,720 --> 00:21:33,440 Speaker 9: suddenly pushes us to a four trillion dollar deficit and 423 00:21:33,440 --> 00:21:35,160 Speaker 9: everybody said, well, it's okay, We're going to grow away 424 00:21:35,160 --> 00:21:36,480 Speaker 9: out of it. We're not going to grow our way 425 00:21:36,480 --> 00:21:38,040 Speaker 9: out of it. I mean, we have to do some 426 00:21:38,080 --> 00:21:40,359 Speaker 9: sensible budgeting here. And yes, I do think that could 427 00:21:40,359 --> 00:21:42,359 Speaker 9: push up long term interst rates. And as I say, 428 00:21:42,480 --> 00:21:45,040 Speaker 9: it's a feedback loop because that pushes the deficit to 429 00:21:45,040 --> 00:21:47,719 Speaker 9: GDP ratio up to you know, seven percent, eight percent. 430 00:21:47,960 --> 00:21:50,400 Speaker 9: Those numbers make it very hard to finance this debt. 431 00:21:50,440 --> 00:21:52,520 Speaker 2: It's pretty a negative psycho David, it's going to say, 432 00:21:52,640 --> 00:21:55,600 Speaker 2: as always, appreciated time joint to guess Nats continue the conversation. 433 00:21:55,680 --> 00:21:59,119 Speaker 2: ADITYA Bve of Bank of America Global Research. Adita, you 434 00:21:59,160 --> 00:22:00,640 Speaker 2: made a code in the last week off the back 435 00:22:00,640 --> 00:22:03,720 Speaker 2: of pay rolls, no more rate cuts in twenty twenty five. 436 00:22:03,880 --> 00:22:05,919 Speaker 2: Does this data point this morning change things on the 437 00:22:05,920 --> 00:22:07,760 Speaker 2: margin at all for you in the team? 438 00:22:08,480 --> 00:22:11,080 Speaker 10: No, I don't think it changes our mind. Really, it's 439 00:22:11,160 --> 00:22:15,240 Speaker 10: a good number. Zero point two percent on the core PC. 440 00:22:15,440 --> 00:22:18,399 Speaker 10: We were below consensus at about twenty six basis points. 441 00:22:18,400 --> 00:22:21,440 Speaker 10: This was even softer than that. But what's different this 442 00:22:21,520 --> 00:22:24,439 Speaker 10: month relative to previous months is that we already have 443 00:22:24,520 --> 00:22:28,639 Speaker 10: the PPI data, so we can very quickly go from 444 00:22:28,960 --> 00:22:32,280 Speaker 10: reacting to CPI to then doing the read through to PCE, 445 00:22:32,760 --> 00:22:35,280 Speaker 10: which is what really matters at the end of the day. 446 00:22:35,320 --> 00:22:37,280 Speaker 10: And if you look over the last three four months, 447 00:22:37,359 --> 00:22:39,679 Speaker 10: we're basically running it around two and a half percent, 448 00:22:40,000 --> 00:22:42,080 Speaker 10: which is where the FED things will be at the 449 00:22:42,240 --> 00:22:44,680 Speaker 10: end of this year for the core PC, So by 450 00:22:44,680 --> 00:22:47,480 Speaker 10: the FED Zone admission, inflation is stuck around. 451 00:22:47,280 --> 00:22:48,240 Speaker 8: Two and a half percent. 452 00:22:48,640 --> 00:22:51,840 Speaker 10: And then also on top of that, the labor market 453 00:22:51,840 --> 00:22:54,159 Speaker 10: seems to have stabilize and that was the primary reason 454 00:22:54,200 --> 00:22:56,359 Speaker 10: they were cutting, so we don't see any reason for 455 00:22:56,400 --> 00:22:57,960 Speaker 10: them to keep cutting now going forward. 456 00:22:58,000 --> 00:23:00,280 Speaker 5: Adachin that same call you made, you also say that 457 00:23:00,320 --> 00:23:03,919 Speaker 5: should core PCE come in somewhere above three percent, then 458 00:23:03,960 --> 00:23:07,119 Speaker 5: we'd start talking about hikes. With this data in hand, 459 00:23:07,359 --> 00:23:09,280 Speaker 5: even if it doesn't change your call when it comes 460 00:23:09,280 --> 00:23:11,399 Speaker 5: to no cuts, does it at least move us further 461 00:23:11,440 --> 00:23:13,479 Speaker 5: away for having to talk about hikes. 462 00:23:15,240 --> 00:23:16,040 Speaker 8: I think that's fair. 463 00:23:16,480 --> 00:23:19,280 Speaker 10: We were pretty upfront about the fact that the bar 464 00:23:19,400 --> 00:23:21,639 Speaker 10: for hikes is still quite high, so getting to three 465 00:23:21,680 --> 00:23:24,400 Speaker 10: percent is not a trivial thing, right, even setting aside 466 00:23:24,640 --> 00:23:28,119 Speaker 10: this latest data print, As your previous guest mentioned, we 467 00:23:28,160 --> 00:23:29,760 Speaker 10: are going to go down on the year of a 468 00:23:29,800 --> 00:23:32,520 Speaker 10: year eight over the next three months most likely, because 469 00:23:32,560 --> 00:23:34,639 Speaker 10: the base effects are very favorable, so I won't be 470 00:23:34,720 --> 00:23:37,480 Speaker 10: surprised if we're around two and a half percent once 471 00:23:37,520 --> 00:23:39,800 Speaker 10: we have the data through March. So to go from 472 00:23:39,800 --> 00:23:42,520 Speaker 10: there to three percent is going to be very challenging, 473 00:23:42,640 --> 00:23:45,680 Speaker 10: and it'll probably take some sort of exogenous shock which 474 00:23:45,960 --> 00:23:49,120 Speaker 10: could get hikes really into the equation. But equally, our 475 00:23:49,160 --> 00:23:51,840 Speaker 10: point for now is getting from there to two percent 476 00:23:51,960 --> 00:23:54,320 Speaker 10: looks quite challenging, which is why we don't see a 477 00:23:54,359 --> 00:23:55,760 Speaker 10: rationale for continued cuts. 478 00:23:55,920 --> 00:23:57,840 Speaker 5: Is there some degree which we should look at these 479 00:23:57,920 --> 00:24:00,919 Speaker 5: data points as a jumping off point point, that is 480 00:24:00,960 --> 00:24:03,200 Speaker 5: to say that we are going to see inflation's true 481 00:24:03,320 --> 00:24:06,679 Speaker 5: path coming forward once we pass the inauguration, once we 482 00:24:06,680 --> 00:24:09,639 Speaker 5: hear different policy for Donald Trump. Is this only the 483 00:24:09,680 --> 00:24:13,600 Speaker 5: beginning of something that again could be an inflationary path. 484 00:24:16,119 --> 00:24:17,960 Speaker 8: It's possible. We'll really have to see. 485 00:24:18,000 --> 00:24:20,719 Speaker 10: I mean, you talked a lot about policy uncertainty as 486 00:24:20,760 --> 00:24:22,560 Speaker 10: well in the previous segment, and I think there is 487 00:24:22,600 --> 00:24:24,879 Speaker 10: a lot of uncertainty, so we'll see how things play out. 488 00:24:25,200 --> 00:24:27,240 Speaker 10: We have made it clear that we think the risks 489 00:24:27,280 --> 00:24:32,160 Speaker 10: are skewed towards more inflationary policies, but nobody really knows 490 00:24:31,880 --> 00:24:34,000 Speaker 10: what's actually going to happen, right, So we'll have to 491 00:24:34,040 --> 00:24:35,760 Speaker 10: see how things play out. I think it is worth 492 00:24:35,800 --> 00:24:37,760 Speaker 10: noting that last time around, there were a lot of 493 00:24:37,800 --> 00:24:41,639 Speaker 10: expectations that tariffs would be super inflationary, but the dollar 494 00:24:41,720 --> 00:24:43,840 Speaker 10: ended up absorbing a lot of the shock. There were 495 00:24:43,880 --> 00:24:46,360 Speaker 10: a lot of exclusions and so on, so the tariffs 496 00:24:46,400 --> 00:24:49,240 Speaker 10: didn't actually end up being that inflationary. 497 00:24:49,680 --> 00:24:50,600 Speaker 8: Well, then, going to. 498 00:24:50,640 --> 00:24:53,439 Speaker 6: David Kelly's point talking about this policy uncertainty and this 499 00:24:53,520 --> 00:24:56,520 Speaker 6: wait and see, does this basically mean paralysis as you 500 00:24:56,600 --> 00:24:59,720 Speaker 6: wait for this unpredictability because the income administration wants a 501 00:24:59,760 --> 00:25:01,959 Speaker 6: lot of optionality when it comes to how are they 502 00:25:02,000 --> 00:25:04,520 Speaker 6: going to enact some of these things like immigration policy 503 00:25:04,560 --> 00:25:05,160 Speaker 6: and tariffs? 504 00:25:08,680 --> 00:25:10,520 Speaker 8: Right, Sorry I lost you for a bit. I'm not 505 00:25:10,560 --> 00:25:11,520 Speaker 8: sure what the question was. 506 00:25:11,600 --> 00:25:15,000 Speaker 6: Well, are we going to have basically just economic paralysis 507 00:25:15,000 --> 00:25:17,160 Speaker 6: this weight and see? And can that in itself hurt 508 00:25:17,200 --> 00:25:19,320 Speaker 6: the economy? 509 00:25:20,160 --> 00:25:20,360 Speaker 8: Right? 510 00:25:20,400 --> 00:25:23,400 Speaker 10: So we're pretty optimistic on the trajectory of the economy. 511 00:25:23,440 --> 00:25:27,080 Speaker 10: To be honest, economic paralysis isn't really our outlook. We 512 00:25:27,119 --> 00:25:30,879 Speaker 10: think we're going in with significant momentum. We are above 513 00:25:30,920 --> 00:25:36,360 Speaker 10: consensus on growth for this year, primarily because of structural growth, right, 514 00:25:36,400 --> 00:25:39,960 Speaker 10: So we see productivity as a big driver of growth 515 00:25:39,960 --> 00:25:41,880 Speaker 10: over the last couple of years. We think that can 516 00:25:42,080 --> 00:25:44,159 Speaker 10: continue going forward. So we think we can grow at 517 00:25:44,160 --> 00:25:49,399 Speaker 10: two point three percent this year with tariffs maybe putting 518 00:25:49,400 --> 00:25:52,280 Speaker 10: some downside on growth, but then equally if we do 519 00:25:52,400 --> 00:25:56,200 Speaker 10: get some fiscal stimulus, that could be the growth environment. 520 00:25:56,400 --> 00:25:58,760 Speaker 2: I did you appreciate your time, sir as always did 521 00:25:58,800 --> 00:26:00,919 Speaker 2: you pother there Bank for America level research off the 522 00:26:00,920 --> 00:26:04,119 Speaker 2: back of this inflation print at each This is the 523 00:26:04,160 --> 00:26:08,399 Speaker 2: Bloomberg Surveillance podcast, bringing you the best in markets, economics, 524 00:26:08,440 --> 00:26:11,400 Speaker 2: and geopolitics. 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