1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,520 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:21,720 Speaker 1: at Bloomberg dot com slash podcast. This is a treat. 7 00:00:21,840 --> 00:00:25,000 Speaker 1: Jennifer Lee, Senior economist and Managing director BEMO Capital Markets 8 00:00:25,079 --> 00:00:27,600 Speaker 1: joins is via the phone, and Daniel D. Martino, Boots, 9 00:00:27,640 --> 00:00:30,680 Speaker 1: CEO and chief Strategists at Quick Intelligence Joints, is here 10 00:00:30,680 --> 00:00:33,479 Speaker 1: in on our Bloomberg Interactive Broker Studio, and Jennifer, I'm 11 00:00:33,520 --> 00:00:37,520 Speaker 1: gonna start with you. We had Christine Legard today, FED 12 00:00:37,560 --> 00:00:41,600 Speaker 1: Chairman j Pal yesterday. Let's talk central banks. What's going 13 00:00:41,640 --> 00:00:45,559 Speaker 1: on at there with their central bankers globally? You tell me, 14 00:00:45,600 --> 00:00:48,200 Speaker 1: we'll both be the You know, I think I think 15 00:00:48,200 --> 00:00:50,760 Speaker 1: everyone it was funny with just Jimmy in on the 16 00:00:50,760 --> 00:00:52,040 Speaker 1: FED for a second. You know, I thought there was 17 00:00:52,040 --> 00:00:54,760 Speaker 1: a little bit of something for everyone in that press conference, 18 00:00:54,800 --> 00:00:57,160 Speaker 1: but I was leading towards the view that he was 19 00:00:57,200 --> 00:01:00,920 Speaker 1: more hawkish than I think. What the market was initially thinking, um, 20 00:01:01,080 --> 00:01:02,960 Speaker 1: the big of England. I have no idea it was. 21 00:01:03,680 --> 00:01:06,640 Speaker 1: It was um. It was a bit mixed, but it 22 00:01:06,640 --> 00:01:08,600 Speaker 1: sounds like they're towards the end of the red hikes 23 00:01:08,800 --> 00:01:10,960 Speaker 1: and the c D was all in the hawki ish, 24 00:01:10,959 --> 00:01:13,199 Speaker 1: so I was calling it was interesting how the entire 25 00:01:13,240 --> 00:01:15,920 Speaker 1: governing Council seems to be on board this, this s 26 00:01:16,120 --> 00:01:18,600 Speaker 1: S hawk Is ship. It has led by Christie Legard 27 00:01:18,640 --> 00:01:20,800 Speaker 1: to Captain Legard um and I think you have to 28 00:01:20,800 --> 00:01:25,240 Speaker 1: call her. There's an unwritten rule you don't call anybody 29 00:01:25,240 --> 00:01:27,480 Speaker 1: else Mr or missus anything, but in her case it 30 00:01:27,480 --> 00:01:30,160 Speaker 1: has to be Madam. Okay, I don't like, but yeah, 31 00:01:30,280 --> 00:01:32,240 Speaker 1: I can see another ray high coming up after March. 32 00:01:32,319 --> 00:01:33,760 Speaker 1: But you guy, it's all good. Be data dependent. I 33 00:01:33,800 --> 00:01:35,360 Speaker 1: don't know about you know, the ECB and the b 34 00:01:35,480 --> 00:01:37,240 Speaker 1: o E. But in terms of the FED. You know, 35 00:01:37,280 --> 00:01:39,920 Speaker 1: my wife always says, I don't care what you say. 36 00:01:40,440 --> 00:01:43,080 Speaker 1: Your actions speak much louder than your words, and they 37 00:01:43,120 --> 00:01:47,480 Speaker 1: only easily good for nothing. Twenty five basis points not 38 00:01:47,520 --> 00:01:51,600 Speaker 1: to mention the fact that um, they see disinflation. He 39 00:01:51,640 --> 00:01:55,240 Speaker 1: admitted he waffled on the question Powell about whether or 40 00:01:55,320 --> 00:01:58,480 Speaker 1: not anyone talked about a pause last time. He just said, no, 41 00:01:58,760 --> 00:02:03,240 Speaker 1: point blank, end their data dependent. So what is the 42 00:02:03,360 --> 00:02:06,160 Speaker 1: point of telling me what you plan to do maybe 43 00:02:06,200 --> 00:02:08,440 Speaker 1: if the data goes your way, and then saying your 44 00:02:08,520 --> 00:02:13,000 Speaker 1: data dependent, Danielle. So look, I think it's all very nuanced. 45 00:02:13,120 --> 00:02:16,040 Speaker 1: We forget that the way the CPI is constructed is 46 00:02:16,120 --> 00:02:19,600 Speaker 1: changing before our very eyes. Used car prizes which are 47 00:02:19,600 --> 00:02:22,639 Speaker 1: coming down hard, that weight's going to be reduced. New 48 00:02:22,720 --> 00:02:26,359 Speaker 1: York rents which spiked after the entire rest of the country. 49 00:02:26,400 --> 00:02:29,560 Speaker 1: That's eleven percent of shelter in the in in inflation 50 00:02:29,800 --> 00:02:31,760 Speaker 1: that's going to feed through with a lag. There are 51 00:02:31,760 --> 00:02:33,920 Speaker 1: many cases to be made for inflation being higher in 52 00:02:33,919 --> 00:02:35,560 Speaker 1: the second half of the year than what the market 53 00:02:35,600 --> 00:02:39,680 Speaker 1: is currently anticipating. What I think was the most devish 54 00:02:39,840 --> 00:02:43,360 Speaker 1: what I think turn markets around yesterday. The hardest was 55 00:02:43,440 --> 00:02:46,080 Speaker 1: when he was specifically asked about the Jolts data, which 56 00:02:46,120 --> 00:02:48,040 Speaker 1: was obviously stronger than what was That was that was 57 00:02:48,040 --> 00:02:49,919 Speaker 1: why markets freaked out going into the FED yesterday, was 58 00:02:50,000 --> 00:02:52,919 Speaker 1: Jolts was so strong north of eleven million openings again 59 00:02:52,960 --> 00:02:55,800 Speaker 1: one point nine two per every for um for every 60 00:02:56,040 --> 00:02:58,440 Speaker 1: opening um. Anyways, he did site that, but then he 61 00:02:58,440 --> 00:03:01,640 Speaker 1: faded it. He's like, you know, when he faded, jolts 62 00:03:01,720 --> 00:03:05,399 Speaker 1: markets turntail and went straight to the moon. Did I mean, 63 00:03:05,639 --> 00:03:08,880 Speaker 1: did I misunderstand, did I maybe miss here? Or did 64 00:03:08,880 --> 00:03:12,600 Speaker 1: he say financial conditions were tightening? He said? And then 65 00:03:12,600 --> 00:03:16,440 Speaker 1: I have to ask in what universe does exactly, because 66 00:03:16,480 --> 00:03:19,359 Speaker 1: because financial conditions have given back everything all the way 67 00:03:19,440 --> 00:03:22,560 Speaker 1: until February two, it's as if the Fed has not 68 00:03:22,639 --> 00:03:25,919 Speaker 1: hiked up one basis point forget twenty five or unusually 69 00:03:26,000 --> 00:03:29,600 Speaker 1: large seventy five times four plus fifty plus twenty five. 70 00:03:29,760 --> 00:03:33,800 Speaker 1: But but he did say that he anticipated that in time, 71 00:03:34,000 --> 00:03:40,720 Speaker 1: ultimately financial conditions would reflect his restrictive stance of monetary policy. Again, 72 00:03:41,280 --> 00:03:44,800 Speaker 1: yesterday was just wishy washy. Yeah, Jennifer, I want to 73 00:03:44,840 --> 00:03:48,840 Speaker 1: get your opinion here. I mean, the markets have been saying, well, 74 00:03:49,000 --> 00:03:51,240 Speaker 1: the FED officials and central bankers around the world have 75 00:03:51,240 --> 00:03:53,680 Speaker 1: been saying, they've been talking tough, We're gonna keep rates higher, 76 00:03:53,920 --> 00:03:56,120 Speaker 1: We're not going to turn tail. But the markets are 77 00:03:56,120 --> 00:03:58,160 Speaker 1: saying not so fast. I mean, the market of pricing 78 00:03:58,160 --> 00:04:00,760 Speaker 1: in rate decreases it the end of the year. How 79 00:04:00,760 --> 00:04:05,640 Speaker 1: do you think about that dichotomy? Uh, you know, in 80 00:04:05,680 --> 00:04:07,720 Speaker 1: many ways this is all, you know, the communications, and 81 00:04:07,760 --> 00:04:10,920 Speaker 1: it sounds like it's being muddled again. UM, just given it, 82 00:04:11,040 --> 00:04:12,520 Speaker 1: you know, just everyone here on this of his call 83 00:04:12,640 --> 00:04:15,080 Speaker 1: to UM. But you know, we have been always of 84 00:04:15,120 --> 00:04:17,040 Speaker 1: the view that you know, the rate cuts would not 85 00:04:17,080 --> 00:04:20,320 Speaker 1: be uh seen this year. UM. But I guess the 86 00:04:20,480 --> 00:04:22,440 Speaker 1: scary part is that you know that you know, as 87 00:04:22,440 --> 00:04:24,080 Speaker 1: they I was saying, we were talking about the old 88 00:04:24,200 --> 00:04:26,160 Speaker 1: data of the employment data. You know, he was saying 89 00:04:26,160 --> 00:04:28,120 Speaker 1: that it's still you know that the job market is 90 00:04:28,160 --> 00:04:31,200 Speaker 1: way too strong, and uh, it almost frightens me to think, 91 00:04:31,200 --> 00:04:33,240 Speaker 1: you know, what are they willing to do to to 92 00:04:33,400 --> 00:04:36,240 Speaker 1: cause the labor market to almost buckle? It seems, in 93 00:04:36,320 --> 00:04:38,919 Speaker 1: order to bring inflation back down to two percent, and 94 00:04:38,960 --> 00:04:41,040 Speaker 1: it sounds like they're going to keep it, you know, higher, 95 00:04:41,080 --> 00:04:45,040 Speaker 1: for longer. Alright, I have a listener who's written in Okay, 96 00:04:45,040 --> 00:04:48,760 Speaker 1: he sent me a chart of different countries inflation data. 97 00:04:49,080 --> 00:04:50,880 Speaker 1: I just showed it to Danielle because I don't really 98 00:04:50,920 --> 00:04:54,080 Speaker 1: know what to do with it. But UM, he's saying 99 00:04:55,120 --> 00:04:57,760 Speaker 1: and asking a question, what happens to Marcus if we 100 00:04:57,880 --> 00:05:01,200 Speaker 1: become like in the nineteen se and d's we pause 101 00:05:01,320 --> 00:05:03,480 Speaker 1: and then have to hike again and this I thought 102 00:05:03,640 --> 00:05:06,919 Speaker 1: was a concern, but I guess their data dependence, so 103 00:05:06,920 --> 00:05:10,080 Speaker 1: they're willing to change the way they're going every single meeting. No, 104 00:05:11,760 --> 00:05:13,760 Speaker 1: uh no, no, no, no, I'm going to push back 105 00:05:13,800 --> 00:05:18,000 Speaker 1: on this because he was asked that question specifically yesterday 106 00:05:18,040 --> 00:05:22,280 Speaker 1: and he said, I don't mind if we overtighten, because 107 00:05:22,400 --> 00:05:25,760 Speaker 1: we cannot pull the genie back into the bottle if 108 00:05:25,800 --> 00:05:29,760 Speaker 1: inflation gets re released. He's like, if we tighten too much, 109 00:05:29,800 --> 00:05:32,679 Speaker 1: we've got tools to bring it back down. But he said, 110 00:05:32,720 --> 00:05:36,200 Speaker 1: I will not stop until I'm convinced that we don't 111 00:05:36,240 --> 00:05:39,279 Speaker 1: have to go back in. So he again, there was 112 00:05:39,360 --> 00:05:42,280 Speaker 1: so much that he said yesterday that was flat out ignored, 113 00:05:42,760 --> 00:05:45,760 Speaker 1: and he was very articulate and emphatic in saying, I 114 00:05:45,800 --> 00:05:49,159 Speaker 1: don't care if we go too far. Well, Jennifer, the 115 00:05:49,200 --> 00:05:53,679 Speaker 1: market still clearly doesn't believe that the FED is going 116 00:05:53,720 --> 00:05:57,440 Speaker 1: to raise rates past you know, five percent um at 117 00:05:57,520 --> 00:05:59,760 Speaker 1: least that's not the pricing on w I RP GO 118 00:06:00,000 --> 00:06:02,359 Speaker 1: shows me that the market doesn't buy that, and the 119 00:06:02,440 --> 00:06:08,320 Speaker 1: market still is pricing in cuts this year in fact too. 120 00:06:08,640 --> 00:06:12,880 Speaker 1: So what does that mean to you at demo UM, 121 00:06:12,960 --> 00:06:15,760 Speaker 1: that that that that that this FED doesn't have credibility 122 00:06:15,880 --> 00:06:18,440 Speaker 1: or that the market thinks Pale is going to change 123 00:06:18,440 --> 00:06:23,560 Speaker 1: his course. Why, Jennifer, I don't know if they're going 124 00:06:23,680 --> 00:06:25,919 Speaker 1: to change their quarters. The market is thinking that. It 125 00:06:25,920 --> 00:06:28,960 Speaker 1: sounds like they're almost ignoring everything he's saying. But you know, 126 00:06:29,000 --> 00:06:30,560 Speaker 1: again for the way, what dinner I was just saying, 127 00:06:30,560 --> 00:06:33,280 Speaker 1: I mean, he did see yesterday about history cautioning against 128 00:06:33,279 --> 00:06:36,279 Speaker 1: prematurely loosening policy, and and he said that before. Was 129 00:06:36,320 --> 00:06:38,760 Speaker 1: it Jackson hole when you know when he first made 130 00:06:38,800 --> 00:06:41,080 Speaker 1: that comment, and he's still standing by that. And I 131 00:06:41,120 --> 00:06:43,559 Speaker 1: think it's it's it's better too, as they have said before, 132 00:06:43,920 --> 00:06:46,720 Speaker 1: to tighten too much than and then they're not tightened enough. 133 00:06:46,839 --> 00:06:49,360 Speaker 1: And again they have you know, they have the tools 134 00:06:49,400 --> 00:06:52,200 Speaker 1: to back down on that. Even um regard this morning, 135 00:06:52,279 --> 00:06:54,919 Speaker 1: she was saying, do not students that are in faulved 136 00:06:55,240 --> 00:06:57,520 Speaker 1: to bring in flash back down to target. And I 137 00:06:57,600 --> 00:06:59,359 Speaker 1: think that's what again the same thing she's trying to 138 00:06:59,360 --> 00:07:03,160 Speaker 1: make sure that they're indibility is intact um and it 139 00:07:03,400 --> 00:07:05,039 Speaker 1: just just continue to talk. But of course, you know, 140 00:07:05,080 --> 00:07:07,680 Speaker 1: the markets look seems like it's looking at the other way. 141 00:07:08,040 --> 00:07:09,760 Speaker 1: All right, we are breaking this down. We have a 142 00:07:09,800 --> 00:07:12,120 Speaker 1: FED round table here Jennifer Lee Sing your economists and 143 00:07:12,120 --> 00:07:15,360 Speaker 1: managing director at Demo Capital Markets, and Daniel D. Martino Booth, 144 00:07:15,440 --> 00:07:20,000 Speaker 1: CEO of quill uh Intelligence. Uh, Danielle, I'm looking at 145 00:07:20,000 --> 00:07:21,680 Speaker 1: my ECO screen. I got a lot of ECO data 146 00:07:21,760 --> 00:07:23,760 Speaker 1: this morning, and I see a lot of some negative numbers. Here. 147 00:07:23,760 --> 00:07:29,200 Speaker 1: I mean factory orders X transportation minus one. The consensus 148 00:07:29,280 --> 00:07:33,760 Speaker 1: was positive zero point two percent, durable goods X transportation 149 00:07:34,040 --> 00:07:37,280 Speaker 1: negative zero point two percent? Consensus was negative point one? 150 00:07:38,120 --> 00:07:41,000 Speaker 1: Am I seeing a recession in my economy? Here? What 151 00:07:41,240 --> 00:07:43,160 Speaker 1: am I seeing with these negative numbers? You look, the 152 00:07:43,240 --> 00:07:47,280 Speaker 1: National Beer of Economic Research follows um real disposable income ex. 153 00:07:47,360 --> 00:07:50,840 Speaker 1: Government transfers. That's that's in the tank in dustphere Industrial 154 00:07:50,840 --> 00:07:53,800 Speaker 1: production yuck. What we just got out feeds g d P. 155 00:07:54,080 --> 00:07:57,520 Speaker 1: The data that you specifically sided the disappointed to the downside, 156 00:07:57,600 --> 00:08:00,240 Speaker 1: especially on the on the shipments that feeds into g EP. 157 00:08:00,880 --> 00:08:03,320 Speaker 1: Ben hers On is my favorite. Uh. He was at 158 00:08:03,360 --> 00:08:06,160 Speaker 1: mcgar Advisors and I S Market bought them out then 159 00:08:06,280 --> 00:08:09,360 Speaker 1: s in P level. Anyways, he basically created the GDP 160 00:08:09,520 --> 00:08:12,000 Speaker 1: model and right now he's at negative one point five 161 00:08:12,040 --> 00:08:14,320 Speaker 1: pc after the day we just got out this morning. 162 00:08:14,440 --> 00:08:16,400 Speaker 1: He's going to be taking that Q one number down 163 00:08:16,760 --> 00:08:22,239 Speaker 1: below negative one. The answer, yes, we are in recession. Okay, Jennifer, 164 00:08:22,280 --> 00:08:26,040 Speaker 1: what do you think, Um, we still have you know, 165 00:08:26,080 --> 00:08:28,720 Speaker 1: we've always been penciled and we've always had that uh 166 00:08:28,760 --> 00:08:33,800 Speaker 1: two negative quarters by definition penciled into our into this year. Um. 167 00:08:33,840 --> 00:08:35,839 Speaker 1: But you know, we continue to see you know, some 168 00:08:35,920 --> 00:08:38,200 Speaker 1: sort of a bounce back or a little bit of 169 00:08:38,240 --> 00:08:41,120 Speaker 1: recovery in the second half, but you know, averaging out 170 00:08:41,120 --> 00:08:44,440 Speaker 1: to you know, still about almost like a lot years. 171 00:08:44,440 --> 00:08:45,679 Speaker 1: So I think this year is almost going to be 172 00:08:45,679 --> 00:08:48,440 Speaker 1: a write off still. Um. Of course, what happens next 173 00:08:48,520 --> 00:08:51,319 Speaker 1: year is another story. But um, right now, I mean 174 00:08:51,360 --> 00:08:53,200 Speaker 1: it's like, here's another thing. I mean, we were talking 175 00:08:53,200 --> 00:08:55,360 Speaker 1: about the data this morning, and we know how extremely 176 00:08:55,440 --> 00:08:57,760 Speaker 1: volatile the factor order's data are. But you know, we 177 00:08:57,800 --> 00:09:00,320 Speaker 1: at least we got that bounced back yesterday and auto sales. 178 00:09:00,360 --> 00:09:02,440 Speaker 1: I mean, of course it was a big drop in December, 179 00:09:02,480 --> 00:09:04,280 Speaker 1: so it's almost like a wash for the two tho 180 00:09:04,480 --> 00:09:08,079 Speaker 1: for the two months. So I wouldn't completely discount um, um, 181 00:09:08,120 --> 00:09:10,120 Speaker 1: you know, for example, the US consumer just yet. But 182 00:09:10,160 --> 00:09:13,439 Speaker 1: obviously all these rate hypes are finally finally trying starting 183 00:09:13,480 --> 00:09:16,959 Speaker 1: to make make their mark on the economy Daniel. Let's 184 00:09:16,960 --> 00:09:19,240 Speaker 1: talk about the labor market here again. We had an 185 00:09:19,240 --> 00:09:22,200 Speaker 1: initial jobles claims print dight three thousand that was lower 186 00:09:22,200 --> 00:09:24,599 Speaker 1: than expected. Another print below two hundred thousand, which you 187 00:09:24,679 --> 00:09:27,760 Speaker 1: kind of tell me is is kind of important jobless 188 00:09:27,880 --> 00:09:31,640 Speaker 1: non farm payrolls. Tomorrow we get that data. That consensus 189 00:09:31,679 --> 00:09:35,280 Speaker 1: is a hundred ninety thousand added. Boy, this is a 190 00:09:35,280 --> 00:09:38,319 Speaker 1: strong labor market. Is there anything that breaks this labor market? 191 00:09:38,600 --> 00:09:40,440 Speaker 1: It sure looks like it's a strong labor market on 192 00:09:40,480 --> 00:09:43,280 Speaker 1: the surface, doesn't it. Yes, because this morning Challenger Gray 193 00:09:43,280 --> 00:09:45,680 Speaker 1: and Christmas came out and said laoffs in January for 194 00:09:45,720 --> 00:09:47,800 Speaker 1: the month of January that was the weakest January since 195 00:09:47,840 --> 00:09:51,920 Speaker 1: two thousand and nine. They said that hiring announcements were 196 00:09:51,960 --> 00:09:56,800 Speaker 1: cut in by between December and January. And by the way, 197 00:09:56,960 --> 00:09:59,200 Speaker 1: the Department of Labor, the Beuer of Labor Statistics, they've 198 00:09:59,280 --> 00:10:02,559 Speaker 1: already pretty clear that they're having trouble with seasonal adjustments 199 00:10:02,720 --> 00:10:06,920 Speaker 1: post pandemic. I've been tracking closely Google trends file for 200 00:10:07,000 --> 00:10:10,480 Speaker 1: unemployment people searching for file for unemployment. It's tracking right 201 00:10:10,520 --> 00:10:14,960 Speaker 1: alongside not seasonally adjusted continuing claims, which popped up again 202 00:10:15,320 --> 00:10:18,520 Speaker 1: to one point nine million this week. They're up off 203 00:10:18,559 --> 00:10:22,600 Speaker 1: their lows, not seasonally adjusted. Continuing under the surfaces. Under 204 00:10:22,640 --> 00:10:25,240 Speaker 1: the surface, it's much weaker than it appears on the headline. 205 00:10:25,400 --> 00:10:27,480 Speaker 1: But if we're talking about the Fed, J. Powell doesn't 206 00:10:27,480 --> 00:10:29,600 Speaker 1: appear to care. He's going to follow the headlines that 207 00:10:29,640 --> 00:10:32,440 Speaker 1: suit him. I can tell you all the Sweeney offspring 208 00:10:32,640 --> 00:10:36,600 Speaker 1: are employed. That's good gradulations. Well they should be, right 209 00:10:36,640 --> 00:10:39,079 Speaker 1: if there are two jobs out there for every single person. 210 00:10:40,120 --> 00:10:44,280 Speaker 1: I mean, there's eleven million job openings. I thought. Again, 211 00:10:44,440 --> 00:10:47,920 Speaker 1: the Boweing interview that guy Johnson did the other day 212 00:10:48,080 --> 00:10:50,720 Speaker 1: was amazing, and the CEO Bowing said, look every time, 213 00:10:50,880 --> 00:10:55,240 Speaker 1: basically said, I'm paraphrising every time Microsoft or Amazon lays 214 00:10:55,280 --> 00:10:57,320 Speaker 1: off a smart engineer, we're gonna go scoop him up. 215 00:10:58,480 --> 00:11:00,679 Speaker 1: So you do see some pink slips out there on 216 00:11:00,720 --> 00:11:03,120 Speaker 1: the West coast, But that doesn't mean those people aren't 217 00:11:03,120 --> 00:11:05,960 Speaker 1: getting jobs right away. Again, Yeah, I don't know. Bowe 218 00:11:06,040 --> 00:11:07,720 Speaker 1: never should have left Seattle. By the way, that's my 219 00:11:07,920 --> 00:11:11,040 Speaker 1: number one call, um, Jennifer. When when you take a 220 00:11:11,040 --> 00:11:15,320 Speaker 1: look at this economy here, what's your real call here 221 00:11:15,480 --> 00:11:19,520 Speaker 1: for twenty three four? I mean, is this recession if 222 00:11:19,559 --> 00:11:23,560 Speaker 1: so is it a shallow one? How what what level 223 00:11:23,600 --> 00:11:26,800 Speaker 1: does the economy in North America bounce back if, in 224 00:11:26,800 --> 00:11:28,679 Speaker 1: fact we do go into a recession. How do you 225 00:11:28,679 --> 00:11:32,120 Speaker 1: guys think about that? A female? Well, right now, everything's 226 00:11:32,120 --> 00:11:34,560 Speaker 1: obviously fluid um as Again, as I said, you know, 227 00:11:34,600 --> 00:11:37,679 Speaker 1: we're looking for a flat ish um um year for 228 00:11:38,480 --> 00:11:42,000 Speaker 1: three decline the first half, better second half, and then 229 00:11:42,040 --> 00:11:43,760 Speaker 1: you know, some sort of a recovery as as rate 230 00:11:43,800 --> 00:11:45,880 Speaker 1: cuts start to take hold or start to kick in 231 00:11:45,920 --> 00:11:50,360 Speaker 1: probably uh. You know again, this is all goes back 232 00:11:50,400 --> 00:11:53,720 Speaker 1: to how it's how intentional the the set is going 233 00:11:53,800 --> 00:11:56,600 Speaker 1: to be in keeping rates up at these restrictive levels 234 00:11:57,080 --> 00:11:59,800 Speaker 1: um for how long as well? And what I guess 235 00:11:59,800 --> 00:12:02,080 Speaker 1: what is a little bit is puzzling to I think 236 00:12:02,080 --> 00:12:04,160 Speaker 1: everyone is going to be like again the job market 237 00:12:04,200 --> 00:12:06,800 Speaker 1: and the fact that we still have for ten million 238 00:12:06,880 --> 00:12:09,360 Speaker 1: job openings out there. You know, at some point those 239 00:12:09,400 --> 00:12:11,679 Speaker 1: ones are gonna be wants to be cut first. Um. 240 00:12:11,760 --> 00:12:13,640 Speaker 1: It's almost like a lot of fat before you get 241 00:12:13,679 --> 00:12:16,320 Speaker 1: to the bone. Um. But we still expect, you know, 242 00:12:16,360 --> 00:12:19,880 Speaker 1: unemployment to start rising the longer that the rates still 243 00:12:20,160 --> 00:12:23,880 Speaker 1: you know, the fed stas um um um height with 244 00:12:23,920 --> 00:12:26,120 Speaker 1: their with your conditions you know, and keep rates higher 245 00:12:26,160 --> 00:12:29,040 Speaker 1: for longer. So if I could just jump in here 246 00:12:29,040 --> 00:12:30,400 Speaker 1: on jolts, I think one of the reasons that the 247 00:12:30,400 --> 00:12:33,440 Speaker 1: FED chair faded it yesterday's because joint research between the St. 248 00:12:33,440 --> 00:12:36,240 Speaker 1: Louis FED and the Dallas FED showed that about of 249 00:12:36,280 --> 00:12:38,679 Speaker 1: all job openings for the purpose of coaching your closest 250 00:12:38,679 --> 00:12:41,520 Speaker 1: competitors worker. That's what I was wondering about. Why is 251 00:12:41,520 --> 00:12:44,000 Speaker 1: the JOLTS number so strong when a DP isn't, Because 252 00:12:44,080 --> 00:12:45,880 Speaker 1: because you're you're trying to get your competitors worker and 253 00:12:45,960 --> 00:12:47,800 Speaker 1: not have to pay to train them. Just like going said, 254 00:12:47,960 --> 00:12:51,120 Speaker 1: all right, good stuff, good stuff FED round table, like 255 00:12:51,160 --> 00:12:54,040 Speaker 1: only Bloomberg Radio can do. Jennifer Lee, Senior commiss and 256 00:12:54,080 --> 00:12:56,880 Speaker 1: Managing Director with BMO Capital Markets, joining us on the 257 00:12:56,920 --> 00:13:00,000 Speaker 1: phone at Daniel D. Martino, Booth, CEO and Chief straps 258 00:13:00,040 --> 00:13:02,599 Speaker 1: it just at Quill Intelligence, joining us live here in 259 00:13:02,640 --> 00:13:06,160 Speaker 1: a Bloomberg Interactive Broker studio, breaking down the FED speak 260 00:13:06,200 --> 00:13:08,520 Speaker 1: we've heard over the last twenty four hours. ECO data 261 00:13:08,960 --> 00:13:13,760 Speaker 1: lots going on a lot across winds for investors. I 262 00:13:13,800 --> 00:13:16,600 Speaker 1: want to bring in right now Hugh Roberts at quant 263 00:13:16,640 --> 00:13:20,040 Speaker 1: Insight to talk to us about what we saw yesterday, um, 264 00:13:20,040 --> 00:13:21,959 Speaker 1: with the FED and what we're seeing today with the 265 00:13:22,040 --> 00:13:23,920 Speaker 1: b o E and the e c B. Basically, all 266 00:13:23,920 --> 00:13:29,560 Speaker 1: this big central bank action is moving markets pretty substantially. So, Hugh, uh, 267 00:13:29,800 --> 00:13:32,000 Speaker 1: you were with us on television yesterday, and I'm glad 268 00:13:32,000 --> 00:13:33,640 Speaker 1: you could join us on radio today we get a 269 00:13:33,679 --> 00:13:36,079 Speaker 1: little bit more time. UM, let me first get your 270 00:13:36,080 --> 00:13:39,000 Speaker 1: reaction to what we saw yesterday. Was it more devish 271 00:13:39,040 --> 00:13:43,360 Speaker 1: than you would have expected? Um? Well, I think the 272 00:13:43,760 --> 00:13:47,640 Speaker 1: biggest takeaway is that Chair Powell and the broader Fed 273 00:13:47,840 --> 00:13:51,240 Speaker 1: clearly think about financial conditions, um, in a different way 274 00:13:51,320 --> 00:13:54,439 Speaker 1: to most of the mainstream market. Was that just a 275 00:13:54,520 --> 00:13:56,960 Speaker 1: slip up or two? I mean, so Powell was asked 276 00:13:56,960 --> 00:14:01,400 Speaker 1: about financial conditions loosening and their looser by Bloomberg's measure, 277 00:14:01,440 --> 00:14:04,280 Speaker 1: by Goldman Sachs measure, by Wall Street measures than they 278 00:14:04,280 --> 00:14:07,680 Speaker 1: have your own, uh, your own measures, and they have 279 00:14:07,760 --> 00:14:09,840 Speaker 1: been in like a year, right, So was it just 280 00:14:09,880 --> 00:14:13,160 Speaker 1: a mistake that he made? Yeah? I mean I've seen 281 00:14:13,200 --> 00:14:15,720 Speaker 1: some conspiracy theories. I have to confess I've missed that 282 00:14:15,800 --> 00:14:18,400 Speaker 1: he actually suffered from about the COVID, And I saw 283 00:14:18,440 --> 00:14:20,880 Speaker 1: one conspiracy theory saying, you know, was it just a 284 00:14:20,920 --> 00:14:24,920 Speaker 1: subpar performance because he's still suffering a little bit on 285 00:14:24,960 --> 00:14:27,280 Speaker 1: the health front. I don't know about that. I mean, 286 00:14:27,320 --> 00:14:30,120 Speaker 1: I think taking a step back, there's always a danger 287 00:14:30,400 --> 00:14:34,360 Speaker 1: that we all start to over analyze and overthink certain things. 288 00:14:34,440 --> 00:14:36,400 Speaker 1: You know, we have had the most interesting bit of 289 00:14:36,400 --> 00:14:38,440 Speaker 1: pushback in the last twenty four hours that I've seen 290 00:14:39,160 --> 00:14:42,560 Speaker 1: is to fed unofficial press boatsman operating in a divorce. 291 00:14:42,560 --> 00:14:45,640 Speaker 1: Street journal has today pointed us in the direction of 292 00:14:45,800 --> 00:14:49,520 Speaker 1: a brain Ard speech from two weeks ago and which 293 00:14:49,960 --> 00:14:54,120 Speaker 1: opens with a comment about overall financial conditions. And two 294 00:14:54,160 --> 00:14:56,880 Speaker 1: things come out from that speech. One is just the 295 00:14:56,960 --> 00:15:00,160 Speaker 1: timeframe that they're looking almost a year on year. They're 296 00:15:00,200 --> 00:15:02,920 Speaker 1: looking at a much longer history compared to the likes 297 00:15:02,960 --> 00:15:06,080 Speaker 1: of ourselves, who say, well, look at the unwinding of 298 00:15:06,360 --> 00:15:08,680 Speaker 1: the financial conditions we've seen in the last six months 299 00:15:08,800 --> 00:15:12,440 Speaker 1: or so. And then secondly, if you look at the 300 00:15:12,640 --> 00:15:16,800 Speaker 1: specific references in that speech, there is no eputy market 301 00:15:16,840 --> 00:15:19,880 Speaker 1: com opponent and so no wealth effect component. It's sites 302 00:15:19,920 --> 00:15:24,840 Speaker 1: will yield in particular, that's probably the most overweighted um variable. 303 00:15:24,880 --> 00:15:27,800 Speaker 1: But hang on you so um so. Brainerd also said 304 00:15:27,840 --> 00:15:32,520 Speaker 1: financial conditions are tightening, and this is interesting because I 305 00:15:32,560 --> 00:15:35,840 Speaker 1: was talking with you about this yesterday. If you take 306 00:15:35,880 --> 00:15:43,160 Speaker 1: out the stock market effects, aren't financial conditions still pretty loose? Yeah, 307 00:15:43,200 --> 00:15:45,080 Speaker 1: So that's that would be the time scale point that 308 00:15:45,280 --> 00:15:48,080 Speaker 1: we're looking at on our measure, and like your measure, 309 00:15:48,480 --> 00:15:51,080 Speaker 1: I think the unwind of the easing has come in 310 00:15:51,080 --> 00:15:53,240 Speaker 1: the last six months or so and the brain our 311 00:15:53,320 --> 00:15:55,080 Speaker 1: speech and I think maybe there, whether it was a 312 00:15:55,080 --> 00:15:57,360 Speaker 1: slip of the tongue or just whatever it was from 313 00:15:57,400 --> 00:16:00,880 Speaker 1: Powell yesterday, was actually a much longer horizon. They were 314 00:16:00,880 --> 00:16:03,920 Speaker 1: saying over the duration of their tightening cycle from where 315 00:16:03,920 --> 00:16:06,840 Speaker 1: we were a year ago, conditions are still tighter. So 316 00:16:07,000 --> 00:16:10,200 Speaker 1: it's to a degree, it's where you stop the clock, 317 00:16:10,240 --> 00:16:13,440 Speaker 1: if you see what I mean, Hugh. So there is 318 00:16:13,480 --> 00:16:16,320 Speaker 1: a disconnected obviously, between what we're hearing from the central bankers, 319 00:16:16,360 --> 00:16:20,920 Speaker 1: including Madame Leguard today, in terms of you know, talking 320 00:16:20,960 --> 00:16:23,440 Speaker 1: the talk and a tough fight. We're gonna keep rates 321 00:16:23,480 --> 00:16:26,000 Speaker 1: higher for for longer, and the market is just not 322 00:16:26,120 --> 00:16:30,880 Speaker 1: buying it. How unusual is that dichotomy in the marketplace. 323 00:16:31,800 --> 00:16:34,440 Speaker 1: It's one of the more aggressive examples, I agreed, hopefully, 324 00:16:34,480 --> 00:16:38,640 Speaker 1: I mean to see such a coordinated response. And there 325 00:16:38,680 --> 00:16:41,040 Speaker 1: were the events we had this week between the third 326 00:16:41,200 --> 00:16:44,560 Speaker 1: yesterday d CD in the Bank of England, and in 327 00:16:44,680 --> 00:16:47,680 Speaker 1: each instance for the bond market to react the way 328 00:16:47,800 --> 00:16:49,960 Speaker 1: there is the repricing we've seen at the front end. 329 00:16:51,240 --> 00:16:53,280 Speaker 1: I'm struggling off the top of my head to think 330 00:16:53,280 --> 00:16:56,960 Speaker 1: of many examples where the market has so aggressively and 331 00:16:57,120 --> 00:17:01,920 Speaker 1: so uniformly flown in the opposite action to the manta 332 00:17:02,080 --> 00:17:05,240 Speaker 1: from central banks. I agree where we're in fairly unpaceded 333 00:17:05,240 --> 00:17:08,480 Speaker 1: tempories and it does make you think that that we're 334 00:17:08,480 --> 00:17:13,240 Speaker 1: coming to a rather severe pitch point at some stage. 335 00:17:13,440 --> 00:17:17,440 Speaker 1: Either the markets pricing has to be vindicated um or 336 00:17:17,560 --> 00:17:19,040 Speaker 1: we're just going to make this worse. And I guess 337 00:17:19,040 --> 00:17:21,640 Speaker 1: that's part of the reasons, I guess to justify our actions. 338 00:17:21,680 --> 00:17:24,280 Speaker 1: In terms of us all trying to analyze the FED 339 00:17:24,320 --> 00:17:26,639 Speaker 1: going into last night's meeting, I think one of the 340 00:17:26,720 --> 00:17:29,720 Speaker 1: motivations everyone had in the back of their mind was that, 341 00:17:29,760 --> 00:17:31,800 Speaker 1: you know, is the whole kind of stitching time type 342 00:17:32,359 --> 00:17:35,800 Speaker 1: approach that you need to get in front of this. Otherwise, 343 00:17:36,080 --> 00:17:39,280 Speaker 1: if you allow this kind of almost a rational exuberance, 344 00:17:39,320 --> 00:17:41,639 Speaker 1: you could classify it as to get too far carried 345 00:17:41,680 --> 00:17:43,640 Speaker 1: away that when the day of reckoning comes and if 346 00:17:43,640 --> 00:17:47,160 Speaker 1: the FED and the ECB version of events is proved right, 347 00:17:47,600 --> 00:17:50,919 Speaker 1: then the repricing then become that much more severe. And 348 00:17:51,000 --> 00:17:52,960 Speaker 1: the problem with that, it's not just from a financial 349 00:17:52,960 --> 00:17:55,720 Speaker 1: market perspective, but the transmission through to the real economy. 350 00:17:55,880 --> 00:17:58,040 Speaker 1: Does it then start to really really make what could 351 00:17:58,080 --> 00:18:00,560 Speaker 1: have been a soft landing, that could they such defeat 352 00:18:00,560 --> 00:18:03,320 Speaker 1: from the jaws of victory the soft landing, but the 353 00:18:03,359 --> 00:18:06,040 Speaker 1: repricing makes it a heart on me. So that's because 354 00:18:06,480 --> 00:18:08,840 Speaker 1: the market is pricing in a couple of cuts this year, 355 00:18:08,880 --> 00:18:12,320 Speaker 1: and you're saying that the FED just holds high, you know, 356 00:18:12,400 --> 00:18:15,280 Speaker 1: after another rate rise or two at five and a 357 00:18:15,359 --> 00:18:19,240 Speaker 1: quarter percent, and doesn't cut by the end of this year, 358 00:18:19,320 --> 00:18:22,960 Speaker 1: even if the data shows they should. That's snatching defeat 359 00:18:22,960 --> 00:18:26,720 Speaker 1: from the jaws of victory. Yeah. That that and also, 360 00:18:26,840 --> 00:18:29,240 Speaker 1: as I say, just the fact that if you have 361 00:18:29,359 --> 00:18:32,240 Speaker 1: a too big a disconnect between what the central bank 362 00:18:32,359 --> 00:18:34,880 Speaker 1: is trying to do and what financial markets are pricing, 363 00:18:35,280 --> 00:18:37,440 Speaker 1: then at some point something has to give. That elastic 364 00:18:37,440 --> 00:18:39,679 Speaker 1: can only go so far, I would argue, And then 365 00:18:39,680 --> 00:18:43,119 Speaker 1: there comes a point where if the FED version of 366 00:18:43,119 --> 00:18:46,480 Speaker 1: events proves true and the higher for longer scenario wins out. 367 00:18:46,920 --> 00:18:49,280 Speaker 1: The implication for that is quite an aggressive sell off 368 00:18:49,280 --> 00:18:52,640 Speaker 1: and risky assets, and that hurts the real economy through 369 00:18:52,960 --> 00:18:56,959 Speaker 1: the wealth effect for equities, corporate America's ability to finance itself, 370 00:18:56,960 --> 00:19:01,080 Speaker 1: through why the credit spreads stronger. Dollar took sense. So 371 00:19:01,359 --> 00:19:03,520 Speaker 1: h when you look at the market over the past 372 00:19:03,560 --> 00:19:07,000 Speaker 1: two days, I mean yesterday a strong move, today, very 373 00:19:07,040 --> 00:19:09,280 Speaker 1: strong move. We got the SMP up one point four percent, 374 00:19:09,359 --> 00:19:14,000 Speaker 1: the NASDAK up, but two point nine just really significant moves. 375 00:19:14,760 --> 00:19:17,439 Speaker 1: Does that seem like an overreaction to you from this 376 00:19:17,520 --> 00:19:20,639 Speaker 1: market or just more of the same. This is a 377 00:19:20,640 --> 00:19:24,040 Speaker 1: market that's really much more optimistic or bullish than maybe 378 00:19:24,200 --> 00:19:28,359 Speaker 1: central bankers are. Yeah, I mean we were inclined, um. 379 00:19:28,480 --> 00:19:30,480 Speaker 1: I think up until the last twenty four hours, were 380 00:19:30,480 --> 00:19:32,720 Speaker 1: inclined to think that there was a bit of positioning 381 00:19:32,760 --> 00:19:36,240 Speaker 1: and sentiment dynamics at work. And I think sentiment and 382 00:19:36,280 --> 00:19:39,199 Speaker 1: equity market has been poor, but positioning probably wasn't as 383 00:19:39,280 --> 00:19:42,560 Speaker 1: bearish as everyone thought. I think there was an element 384 00:19:42,600 --> 00:19:46,400 Speaker 1: of a straight rotation. Winners have become twenty twenties lag 385 00:19:46,480 --> 00:19:51,480 Speaker 1: ards and vice versa, um and on our modeling, although 386 00:19:51,840 --> 00:19:56,440 Speaker 1: that proven like NASDAK or XLK or anything vaguely tech related, 387 00:19:56,920 --> 00:20:01,880 Speaker 1: was modestly rich, it wasn't crazy extended. It's now starting 388 00:20:01,880 --> 00:20:03,919 Speaker 1: to look a little bit more stretched, and there's lots 389 00:20:03,960 --> 00:20:06,600 Speaker 1: sun to look like the move is moving further away 390 00:20:06,600 --> 00:20:10,920 Speaker 1: from macro fundamentals. So um, I think up until now 391 00:20:10,960 --> 00:20:13,119 Speaker 1: we would have said it's been a relatively orderly moved, 392 00:20:13,119 --> 00:20:15,919 Speaker 1: but this is beginning to raise eyebrows. All right, Hugh 393 00:20:16,240 --> 00:20:18,760 Speaker 1: Key question your officers are based at right there in 394 00:20:18,800 --> 00:20:21,359 Speaker 1: Liverpool Street, right in the city of London. How is 395 00:20:21,400 --> 00:20:25,040 Speaker 1: the city of London today? Today's Thursday crowded? How's the 396 00:20:25,080 --> 00:20:26,879 Speaker 1: two are people back in your office? What's gone on 397 00:20:26,920 --> 00:20:29,960 Speaker 1: in the city. Yeah, it feels like I mean buying 398 00:20:30,080 --> 00:20:32,440 Speaker 1: large things about to normal. I mean that the kind 399 00:20:32,480 --> 00:20:35,960 Speaker 1: of PrePost COVID dynamics I think has largely worked through. 400 00:20:36,000 --> 00:20:38,080 Speaker 1: There's a lot of hybrid working models. But on the 401 00:20:38,119 --> 00:20:41,879 Speaker 1: whole foot traffic is normal obviously, where the UK is 402 00:20:41,880 --> 00:20:44,840 Speaker 1: a slant slight outliers of all the industrial actions which 403 00:20:44,840 --> 00:20:47,000 Speaker 1: has just made things much worse. So you know, on 404 00:20:47,040 --> 00:20:49,119 Speaker 1: any given day there's a tube or a trained strike, 405 00:20:49,320 --> 00:20:51,919 Speaker 1: or if trape teachers are striking, then some people have 406 00:20:52,000 --> 00:20:53,679 Speaker 1: to stay the home and do you know kind of 407 00:20:53,720 --> 00:20:57,720 Speaker 1: our home schooling and childcare, so we haven't had an 408 00:20:57,760 --> 00:21:01,399 Speaker 1: uninterrupted period of normal what the normal might be. To 409 00:21:01,480 --> 00:21:04,119 Speaker 1: give you a goods on the fight, alright, good stuff, 410 00:21:04,240 --> 00:21:07,080 Speaker 1: Hugh Roberts. The offices are Liverpool Street, really close to 411 00:21:07,119 --> 00:21:11,080 Speaker 1: Bloomberg's London headquarters at Queen Victoria Street, just as films 412 00:21:11,080 --> 00:21:14,000 Speaker 1: throw there in the City of London by bank yep, 413 00:21:14,119 --> 00:21:16,000 Speaker 1: right by bank, but they're there. Asses are right on 414 00:21:16,040 --> 00:21:18,840 Speaker 1: the Liverpool Street station, which is an awesome train station, 415 00:21:19,240 --> 00:21:22,320 Speaker 1: great tube stop. Kind of get pretty much everywhere from there. 416 00:21:22,600 --> 00:21:24,879 Speaker 1: Some good stuff. Hugh Roberts. He's head of analytics at 417 00:21:24,920 --> 00:21:28,119 Speaker 1: quant Insights, based in the UK, giving us some thoughts 418 00:21:28,200 --> 00:21:34,720 Speaker 1: on these markets. Let's do something insane right now. We'll 419 00:21:34,800 --> 00:21:37,639 Speaker 1: rip up the script. I've never had a five person 420 00:21:37,760 --> 00:21:41,760 Speaker 1: round table. Let's bring Carl Rickadonna without Jess Matten. You're 421 00:21:41,760 --> 00:21:45,920 Speaker 1: gonna stay here. Bloomberg Equities reporters Katie Greifeld, Cross Asset, 422 00:21:46,160 --> 00:21:50,719 Speaker 1: Maven and Carl Rickadonna joins us right now from BNP. 423 00:21:50,840 --> 00:21:54,160 Speaker 1: Perry Boy he's chief US economist. UM, anyone feel free 424 00:21:54,200 --> 00:21:56,160 Speaker 1: to jump in. But Carl, let's throw this to you. 425 00:21:56,240 --> 00:21:59,280 Speaker 1: What do you make of Jerome Powell, the Chair of 426 00:21:59,320 --> 00:22:03,280 Speaker 1: the FED, who arguably has um easy access to the 427 00:22:03,320 --> 00:22:08,119 Speaker 1: Bloomberg Terminal to everybody else's f con um index. Yesterday 428 00:22:08,160 --> 00:22:12,399 Speaker 1: he said financial conditions are tighter. What on earth was 429 00:22:12,400 --> 00:22:16,320 Speaker 1: he talking about? Well, Matt, I was as perplexed as 430 00:22:16,320 --> 00:22:18,960 Speaker 1: everyone else sitting around the table. Good morning to you all. 431 00:22:19,720 --> 00:22:23,320 Speaker 1: But I also then quickly said, well, if if they're 432 00:22:23,359 --> 00:22:26,120 Speaker 1: not looking at f CON on the Bloomberg Terminal, which 433 00:22:26,160 --> 00:22:29,040 Speaker 1: I think is a great index, which I've worked with 434 00:22:29,240 --> 00:22:32,080 Speaker 1: a lot in the past, they're probably looking at one 435 00:22:32,119 --> 00:22:34,440 Speaker 1: of their own indices. And so I pulled up that 436 00:22:34,600 --> 00:22:38,040 Speaker 1: Chicago Fed index and sure enough, it's a little bit 437 00:22:38,160 --> 00:22:40,800 Speaker 1: less of a dramatic story than what f CON is showing. 438 00:22:41,240 --> 00:22:43,520 Speaker 1: But if we look at that Bloomberg index, it's telling 439 00:22:43,600 --> 00:22:48,080 Speaker 1: us financial conditions are easier now than they were at 440 00:22:48,119 --> 00:22:51,720 Speaker 1: the start of the FEDS tightening campaign last year. So, 441 00:22:51,880 --> 00:22:55,400 Speaker 1: regardless of whatever Powell said during the press conference, UH, 442 00:22:55,520 --> 00:22:59,480 Speaker 1: Bloomberg financial conditions, which has a high correlation with GDP. 443 00:22:59,560 --> 00:23:03,600 Speaker 1: It's been cited in FED research papers because of its 444 00:23:03,640 --> 00:23:08,560 Speaker 1: prowess as a predictive tool for a GDP growth economic activity. UH, 445 00:23:08,680 --> 00:23:11,600 Speaker 1: it is easy and it's telling you. Unless they fixed 446 00:23:11,680 --> 00:23:15,280 Speaker 1: the narrative and financial markets to get the message, we 447 00:23:15,320 --> 00:23:18,159 Speaker 1: could be looking at a re acceleration in the economy, 448 00:23:18,200 --> 00:23:22,000 Speaker 1: which in turn would undermine all of their efforts to 449 00:23:22,040 --> 00:23:25,480 Speaker 1: get the inflation genie back in the bottle. And we 450 00:23:25,520 --> 00:23:28,800 Speaker 1: could be looking at, you know, a very difficult inflation 451 00:23:28,880 --> 00:23:31,280 Speaker 1: landscape going forward, which is not what the Fed wants 452 00:23:31,280 --> 00:23:34,520 Speaker 1: to be confronted. So, Carl, this is Katie Greyfeld. It 453 00:23:34,600 --> 00:23:36,199 Speaker 1: is thrilling to talk to you. I will say, my 454 00:23:36,280 --> 00:23:39,480 Speaker 1: heart rate is sixty right now, pretty high for me. 455 00:23:40,000 --> 00:23:42,000 Speaker 1: I'm really happy to hear that you also went to 456 00:23:42,040 --> 00:23:44,960 Speaker 1: the Chicago Fed measure. Uh, and it does. I mean 457 00:23:45,000 --> 00:23:47,159 Speaker 1: the absolute levels are a little bit different from the 458 00:23:47,200 --> 00:23:51,160 Speaker 1: Bloomberg measure. By the Chicago Feds absolute level, they are 459 00:23:51,520 --> 00:23:53,720 Speaker 1: tighter than they were at the start of the hiking cycle, 460 00:23:53,760 --> 00:23:56,400 Speaker 1: but still they've been lostening. I want to talk about 461 00:23:56,760 --> 00:23:59,400 Speaker 1: why it matters. I mean, you mentioned that this could 462 00:23:59,480 --> 00:24:03,600 Speaker 1: under mind the FEDS you know, inflation fighting campaign, but 463 00:24:04,000 --> 00:24:07,600 Speaker 1: walk us through how that actually works. Because I feel 464 00:24:07,600 --> 00:24:10,200 Speaker 1: like we talk about financial conditions all the time without 465 00:24:10,240 --> 00:24:14,639 Speaker 1: actually defining them. Yes, so financial conditions, whether it's a 466 00:24:14,640 --> 00:24:17,840 Speaker 1: Bloomberg metric or the Chicago Fans metric. The Bloomberg metric 467 00:24:18,040 --> 00:24:22,480 Speaker 1: very efficient because it has just a narrow um a 468 00:24:22,520 --> 00:24:25,880 Speaker 1: small number of inputs. I think it's probably about ten inputs. 469 00:24:26,200 --> 00:24:29,159 Speaker 1: Chicago FED has something like one dred inputs. But they 470 00:24:29,240 --> 00:24:32,480 Speaker 1: both tell the same story. So even though the Chicago 471 00:24:32,560 --> 00:24:36,399 Speaker 1: Fed index has been a little less dramatic in the 472 00:24:36,440 --> 00:24:40,720 Speaker 1: signal at sending UH, these things matter because either index 473 00:24:41,160 --> 00:24:44,480 Speaker 1: correlates well with GDP growth, and we know the Fed 474 00:24:44,560 --> 00:24:47,680 Speaker 1: has to slow the economy down from that twelve and 475 00:24:47,720 --> 00:24:50,600 Speaker 1: a half percent growth rate that we were registering in 476 00:24:50,640 --> 00:24:53,639 Speaker 1: the middle of one and it has to hold the 477 00:24:53,720 --> 00:24:57,600 Speaker 1: economy at a below trend growth rate. Now, some folks 478 00:24:57,720 --> 00:25:00,240 Speaker 1: like myself will say that means they have to cause 479 00:25:00,320 --> 00:25:03,560 Speaker 1: a recession to create some dislocation in the labor market. 480 00:25:04,280 --> 00:25:06,960 Speaker 1: Other folks, including Jerome Powell and a lot of SET 481 00:25:07,040 --> 00:25:11,439 Speaker 1: officials including that I think Governor Waller as well, are saying, no, no, no, 482 00:25:11,560 --> 00:25:13,520 Speaker 1: we we don't need to cause recession. We can just 483 00:25:13,840 --> 00:25:16,600 Speaker 1: push growth below its trend rate and hold it there 484 00:25:16,600 --> 00:25:19,679 Speaker 1: for an extended period of time. That will create slack 485 00:25:19,720 --> 00:25:23,960 Speaker 1: in the economy, ease labor pressures, and easy inflation. Pressures 486 00:25:24,000 --> 00:25:27,119 Speaker 1: as well. Um, that's something that they've actually never done 487 00:25:27,240 --> 00:25:29,760 Speaker 1: in the past. So that's why we're a bit skeptical 488 00:25:29,760 --> 00:25:32,159 Speaker 1: that it won't ultimately tilt us into recession. If you 489 00:25:32,440 --> 00:25:35,199 Speaker 1: push the economy to a slow enough growth rate, it 490 00:25:35,280 --> 00:25:39,240 Speaker 1: becomes very sensitive to exogen the shocks and and resilience 491 00:25:39,280 --> 00:25:41,720 Speaker 1: won't be the story. Fragility will be the story, and 492 00:25:41,760 --> 00:25:44,960 Speaker 1: then you get a recession anyways. But nonetheless, if you're 493 00:25:45,000 --> 00:25:48,240 Speaker 1: not keeping the brake pedal on, and financial conditions tell 494 00:25:48,320 --> 00:25:50,240 Speaker 1: us how well the FET is keeping their put on 495 00:25:50,240 --> 00:25:53,400 Speaker 1: the brake pedal, then you're not going through that low 496 00:25:53,520 --> 00:25:57,200 Speaker 1: growth regime that accomplishes your inflation goals. I think that's 497 00:25:57,200 --> 00:25:59,600 Speaker 1: a real risk. That's where the tension is in the markets, 498 00:25:59,640 --> 00:26:02,560 Speaker 1: which are still saying the FED will stop sooner and 499 00:26:02,600 --> 00:26:05,400 Speaker 1: start easing sooner than what the Fed is saying. So 500 00:26:06,320 --> 00:26:09,200 Speaker 1: just to put a full circle around it, I think 501 00:26:09,240 --> 00:26:13,800 Speaker 1: we've seen this drama play out before. It was last summer. 502 00:26:14,400 --> 00:26:17,440 Speaker 1: In July, the Fed teas the idea that they may 503 00:26:17,600 --> 00:26:20,359 Speaker 1: need that there would be some point where they would 504 00:26:20,359 --> 00:26:23,440 Speaker 1: be willing to downshift the pace of tightening. The markets 505 00:26:23,440 --> 00:26:27,639 Speaker 1: went haywire, went too far with that narrative. And then 506 00:26:27,680 --> 00:26:29,879 Speaker 1: we go from the July A poem C meeting to 507 00:26:30,040 --> 00:26:33,679 Speaker 1: the Jackson Hole Fed Policy Conference in late August uh, 508 00:26:33,760 --> 00:26:36,960 Speaker 1: and Jerome pal comes in, rips up the script uh 509 00:26:37,000 --> 00:26:41,520 Speaker 1: and delivers a very hawkish direct message saying, Okay, markets 510 00:26:41,520 --> 00:26:44,680 Speaker 1: are not listening, let's all get on the same page here. Uh. 511 00:26:44,720 --> 00:26:47,880 Speaker 1: And he largely accomplished that goal. But then what kind 512 00:26:47,880 --> 00:26:50,560 Speaker 1: of right right back to square one where they need 513 00:26:50,640 --> 00:26:53,640 Speaker 1: to have a reprise, if you will, or a rerun 514 00:26:54,000 --> 00:26:57,879 Speaker 1: of that Jackson Hole messaging campaign. Carl, this is jas. 515 00:26:57,880 --> 00:27:00,240 Speaker 1: It's good to talk to you again. Something that I'm 516 00:27:00,280 --> 00:27:02,840 Speaker 1: looking ahead too. We will get another update on cp 517 00:27:02,880 --> 00:27:04,879 Speaker 1: I on Valentine's Day, and so this will be for 518 00:27:04,920 --> 00:27:07,760 Speaker 1: the month of January. And I am aware that the 519 00:27:07,800 --> 00:27:09,840 Speaker 1: CPI there is going to be a rewaiting, and this 520 00:27:09,880 --> 00:27:12,560 Speaker 1: does happen at times. But I have talked to certain 521 00:27:12,600 --> 00:27:16,359 Speaker 1: economists who have argued that potentially this could push down 522 00:27:16,720 --> 00:27:20,240 Speaker 1: cp I faster just given what's happening. If you're looking 523 00:27:20,280 --> 00:27:23,159 Speaker 1: at the rewaiting, potentially there could be larger weights and 524 00:27:23,280 --> 00:27:26,600 Speaker 1: autos maybe notably rents potentially could fall. But then I've 525 00:27:26,600 --> 00:27:28,920 Speaker 1: had other economists argue that you might actually see more 526 00:27:28,920 --> 00:27:31,800 Speaker 1: of a boost in the first quarter towards core c 527 00:27:32,000 --> 00:27:33,719 Speaker 1: p I, and so it's kind of been split when 528 00:27:33,720 --> 00:27:35,920 Speaker 1: I've talked to economists, and so I was curious if 529 00:27:35,920 --> 00:27:38,880 Speaker 1: that's something that you have been focusing on just yet 530 00:27:38,920 --> 00:27:41,800 Speaker 1: and what your expectations are, if there is could be 531 00:27:41,840 --> 00:27:43,960 Speaker 1: any sort of changes there as far as what that 532 00:27:44,040 --> 00:27:46,639 Speaker 1: could mean when we are still looking very closely at 533 00:27:46,680 --> 00:27:50,560 Speaker 1: those inflation numbers. Yes, So to kind of summarize the 534 00:27:50,640 --> 00:27:54,560 Speaker 1: landscape for the listeners, UH, they rewait the components in 535 00:27:54,640 --> 00:27:58,399 Speaker 1: the CPI so that the waiting factors we give to 536 00:27:58,400 --> 00:28:01,399 Speaker 1: the various components, UH, to the extent that in recent 537 00:28:01,520 --> 00:28:04,320 Speaker 1: years has been more spending on goods, which was the 538 00:28:04,359 --> 00:28:06,800 Speaker 1: story during the pandemic. We couldn't go to restaurants, we 539 00:28:06,800 --> 00:28:10,119 Speaker 1: couldn't go on vacation, we bought lots of things on 540 00:28:10,119 --> 00:28:13,480 Speaker 1: online and whatnot. We see it in the income and 541 00:28:13,520 --> 00:28:16,840 Speaker 1: spending numbers, and it will be reflected in the CPI 542 00:28:16,920 --> 00:28:19,880 Speaker 1: numbers as well as those weighting factors change. So if 543 00:28:19,920 --> 00:28:22,879 Speaker 1: goods inflation is running cooler and we're giving them a 544 00:28:22,960 --> 00:28:26,240 Speaker 1: higher weighting factor, that could reset the c p I 545 00:28:26,840 --> 00:28:32,560 Speaker 1: UH marginally or incrementally lower. It doesn't change the narrative though, 546 00:28:32,600 --> 00:28:36,160 Speaker 1: So this is a little bit of dithering over the details. Uh, 547 00:28:36,240 --> 00:28:39,960 Speaker 1: it won't happen in the CORE PC deflator or the 548 00:28:39,960 --> 00:28:44,080 Speaker 1: FEDS PC deflator, the metric they like to track. Um. 549 00:28:44,160 --> 00:28:46,200 Speaker 1: So so it's a it's a nuanced story, but it 550 00:28:46,240 --> 00:28:49,440 Speaker 1: doesn't change the inflation landscape. Is the cp I now 551 00:28:49,600 --> 00:28:52,080 Speaker 1: different from what we had in the seventies? And by 552 00:28:52,120 --> 00:28:54,240 Speaker 1: the way, Matt Miller here, Uh, I have a beard. 553 00:28:54,840 --> 00:28:58,080 Speaker 1: Um do you do you think the comparisons to the 554 00:28:58,120 --> 00:29:00,360 Speaker 1: seventies are fair because a lot of people are asked today, 555 00:29:00,400 --> 00:29:02,640 Speaker 1: what if you know this devish fed has to turn 556 00:29:02,680 --> 00:29:08,000 Speaker 1: hawk comes back. I remember elements of the seventies, Paul. 557 00:29:08,280 --> 00:29:11,400 Speaker 1: And there was there was some great television programming in great, 558 00:29:11,800 --> 00:29:15,200 Speaker 1: great hunt, great music back then, Paul. Uh. But to 559 00:29:15,280 --> 00:29:18,280 Speaker 1: Matt's point, so that the CPI does evolve over time. 560 00:29:18,320 --> 00:29:21,320 Speaker 1: So of course the waiting factors are different than where 561 00:29:21,320 --> 00:29:23,280 Speaker 1: we were in the seventies. So how much we spend 562 00:29:23,320 --> 00:29:26,640 Speaker 1: on rent and housing versus goods or food or energy, 563 00:29:27,080 --> 00:29:30,480 Speaker 1: that has evolved over time. Also, there have been methodological 564 00:29:30,640 --> 00:29:33,560 Speaker 1: changes to the CPI, so the way they count housing 565 00:29:33,640 --> 00:29:37,080 Speaker 1: costs and rents and shelter has changed a lot. So 566 00:29:37,160 --> 00:29:40,240 Speaker 1: it's not your father's, or we'll say it's not Paul 567 00:29:40,280 --> 00:29:44,360 Speaker 1: Sweeney's c P i UM. But nonetheless it gives you 568 00:29:44,400 --> 00:29:47,000 Speaker 1: a sense of the direction of price pressure in the economy. 569 00:29:47,280 --> 00:29:50,240 Speaker 1: The other key difference I'll draw to the nineteen seventies, 570 00:29:50,240 --> 00:29:52,760 Speaker 1: so we can say, sure, inflations running as hot as 571 00:29:52,760 --> 00:29:56,160 Speaker 1: it was in the early nineteen eighties, it's a very 572 00:29:56,480 --> 00:30:00,920 Speaker 1: different landscape. So the inflation that Paul Vulker had to 573 00:30:00,960 --> 00:30:04,640 Speaker 1: confront in the early nineteen eighties was really fifteen years 574 00:30:04,720 --> 00:30:08,560 Speaker 1: in the making, right, It started in Lyndon Johnson's Great Society, 575 00:30:09,040 --> 00:30:12,480 Speaker 1: and the spending on the Vietnam War, two oil crises 576 00:30:12,560 --> 00:30:16,480 Speaker 1: that changed to foreign exchange policy globally, a lot of 577 00:30:16,480 --> 00:30:20,320 Speaker 1: shocks that had eroded the psychology. Uh, the problem that 578 00:30:20,400 --> 00:30:23,000 Speaker 1: Jerome Palace confronting was really fifteen months in the making, 579 00:30:23,200 --> 00:30:26,440 Speaker 1: So much more surgical solution, all right, Carl great stuff 580 00:30:26,480 --> 00:30:29,640 Speaker 1: as always called ricka Donna chief US economists from BNP, 581 00:30:30,280 --> 00:30:33,640 Speaker 1: Parry ba phoning it in. I will note, but Jess 582 00:30:33,640 --> 00:30:36,120 Speaker 1: metten he was here in the office yesterday, was he? Yeah? Okay, 583 00:30:36,160 --> 00:30:37,480 Speaker 1: so we'll give him some credit there, Jess Met and 584 00:30:37,560 --> 00:30:39,479 Speaker 1: Katie Gray felt there from Bloomberg News there in our 585 00:30:39,480 --> 00:30:44,000 Speaker 1: Bloomberg Interactive Broker studio, they get the gold stars today. 586 00:30:44,520 --> 00:30:47,920 Speaker 1: All right, kids, we all know the adage don't fight 587 00:30:48,040 --> 00:30:50,600 Speaker 1: the Fed, but the market seems to be fighting the 588 00:30:50,640 --> 00:30:52,640 Speaker 1: Fed to fetch talking tough of the markets just not 589 00:30:52,760 --> 00:30:55,080 Speaker 1: buying it. Let's break down what's going on out there 590 00:30:55,080 --> 00:30:57,200 Speaker 1: in the market. We get the equity markets ripping again today, 591 00:30:57,240 --> 00:31:00,080 Speaker 1: You've got yields coming down pretty substantially. Let's check in 592 00:31:00,160 --> 00:31:02,360 Speaker 1: with Ben Emmets. He's a senior portfolio management had a 593 00:31:02,360 --> 00:31:04,800 Speaker 1: fixed income at New Edge Wealth. He joins us here 594 00:31:04,800 --> 00:31:07,720 Speaker 1: in our Bloomberg in our actor broker studios. So, Ben, 595 00:31:07,760 --> 00:31:10,479 Speaker 1: we had the FED yesterday, the Bank of England, uh, 596 00:31:10,600 --> 00:31:13,560 Speaker 1: the ECB today, a lot of people talking tough as 597 00:31:13,560 --> 00:31:15,240 Speaker 1: it relates to holding the line on rates, but the 598 00:31:15,280 --> 00:31:18,360 Speaker 1: markets saying not so much. What do you make of it? Yeah, 599 00:31:18,600 --> 00:31:21,000 Speaker 1: the tougher they sound and the more hawkish they sound, 600 00:31:21,240 --> 00:31:24,880 Speaker 1: again not a reason for markets to rally. And I 601 00:31:24,920 --> 00:31:27,280 Speaker 1: think it was really triggered by that where disinflation that 602 00:31:27,360 --> 00:31:30,600 Speaker 1: Powell said yesterday. So the market is discounting and even 603 00:31:30,680 --> 00:31:34,800 Speaker 1: faster disinflation for cpis was listening. That means CPI goes 604 00:31:34,800 --> 00:31:38,040 Speaker 1: down even quicker faster than but the feeders forecasting, and 605 00:31:38,080 --> 00:31:40,960 Speaker 1: it's the Fed because he used to talk tough. Then 606 00:31:41,080 --> 00:31:43,120 Speaker 1: the market says, okay, you're not only going to reach 607 00:31:43,160 --> 00:31:46,080 Speaker 1: two percent for sure, you're going to reach it much faster. 608 00:31:46,280 --> 00:31:49,480 Speaker 1: And it triggers this major valley because at the end, 609 00:31:49,560 --> 00:31:52,680 Speaker 1: if you if you do get faster to percent inflation one, 610 00:31:52,760 --> 00:31:55,000 Speaker 1: you don't have to hike anymore too. At some point, 611 00:31:55,000 --> 00:31:57,240 Speaker 1: the Fed also may have to consider the couprights and 612 00:31:57,760 --> 00:32:00,920 Speaker 1: playing into the market expectations. So I think especially their 613 00:32:01,000 --> 00:32:06,160 Speaker 1: data dependent ben I mean, why uh, why try even 614 00:32:06,200 --> 00:32:09,760 Speaker 1: to talk tough in terms of your forward guidance. If 615 00:32:10,440 --> 00:32:13,280 Speaker 1: you say in the same breath that your data dependent, 616 00:32:13,360 --> 00:32:15,920 Speaker 1: you know, it's like I'm never gonna cut rates. I 617 00:32:15,960 --> 00:32:18,040 Speaker 1: will cut rates of the data tells me too. Yeah, 618 00:32:18,760 --> 00:32:20,880 Speaker 1: I totally agree. In fact, you know probably even yes. 619 00:32:20,920 --> 00:32:23,440 Speaker 1: They said like so yeah, if the markets are right, 620 00:32:23,880 --> 00:32:27,200 Speaker 1: then yeah, we should factor it into our policy. Why 621 00:32:27,200 --> 00:32:29,480 Speaker 1: would you then say that you're going to high grade 622 00:32:29,560 --> 00:32:33,440 Speaker 1: So what's interesting math is that you know you could 623 00:32:33,480 --> 00:32:35,840 Speaker 1: maybe next weeks he speakers come out if they started 624 00:32:36,320 --> 00:32:38,440 Speaker 1: more and more leaning towards that idea. Yeah, and the 625 00:32:38,440 --> 00:32:41,840 Speaker 1: market maybe right, that sounds more dovish, right, that market 626 00:32:41,880 --> 00:32:44,520 Speaker 1: is getting a different sense. Okay, But as inflation story 627 00:32:44,560 --> 00:32:46,200 Speaker 1: is not over at you getting them at some point 628 00:32:46,640 --> 00:32:49,120 Speaker 1: two dovish speakers out there. That's the other side of that. 629 00:32:49,280 --> 00:32:51,640 Speaker 1: At this moment, it's about too hawkish and there for 630 00:32:51,880 --> 00:32:55,000 Speaker 1: the market valley. So um, how far can this continue? 631 00:32:55,080 --> 00:32:57,280 Speaker 1: It does look much like a source source squeeze to me. 632 00:32:57,440 --> 00:33:00,640 Speaker 1: You know, the nastac popping really higher this way, that's 633 00:33:00,640 --> 00:33:03,160 Speaker 1: where the biggest short positions are. So that's I think 634 00:33:03,280 --> 00:33:05,920 Speaker 1: part of the reason why we have markets higher. Well, 635 00:33:05,920 --> 00:33:08,320 Speaker 1: we had fed. I mean, I'm sorry ECB president of 636 00:33:08,760 --> 00:33:11,600 Speaker 1: Madame Legard this morning. I don't know, she sounded pretty 637 00:33:11,640 --> 00:33:14,440 Speaker 1: hawkish to me. Fifty basis points and there's more to come. 638 00:33:15,320 --> 00:33:19,680 Speaker 1: But you know, I'm looking at the German tenure. You know, 639 00:33:19,720 --> 00:33:22,120 Speaker 1: it's it's down to two point zero seven percent of 640 00:33:22,200 --> 00:33:25,760 Speaker 1: twenty one basis points today. So again that rhetor did 641 00:33:25,760 --> 00:33:28,800 Speaker 1: not work. No, especially when she said we intend to 642 00:33:28,920 --> 00:33:32,840 Speaker 1: hike intend Like you guys really touched that language and 643 00:33:33,080 --> 00:33:35,440 Speaker 1: you intend to do something that means that you may 644 00:33:35,680 --> 00:33:38,320 Speaker 1: or may not. And you know, I think that the 645 00:33:38,640 --> 00:33:41,880 Speaker 1: German bude market, the entire periphery by the way, really 646 00:33:41,920 --> 00:33:44,520 Speaker 1: collapsing in yields. So they probaced out the access of 647 00:33:44,600 --> 00:33:47,040 Speaker 1: hikes that were maybe through in the back back part 648 00:33:47,040 --> 00:33:51,720 Speaker 1: of the three. And not forget that the ECB put 649 00:33:51,760 --> 00:33:56,240 Speaker 1: in place a program to ensure that spreads stay relatively 650 00:33:56,280 --> 00:33:58,840 Speaker 1: stable while they were hiking rates. So that too, I 651 00:33:58,880 --> 00:34:02,600 Speaker 1: think is supporting market now. But that's their job keeping 652 00:34:02,640 --> 00:34:06,200 Speaker 1: spread stable. He's learned. He learned from not saying we're 653 00:34:06,240 --> 00:34:08,000 Speaker 1: not in the business to collapse preads yet you are. 654 00:34:09,080 --> 00:34:11,399 Speaker 1: What what do you think about? You know the four 655 00:34:11,520 --> 00:34:15,160 Speaker 1: twenty or four five that we saw on the tenure um, 656 00:34:15,520 --> 00:34:18,200 Speaker 1: was that the peak and rates? Yeah, you could say 657 00:34:18,200 --> 00:34:20,279 Speaker 1: that now, yeah, because it's it's not going to be 658 00:34:20,320 --> 00:34:24,160 Speaker 1: so easy to go back to that level unless this 659 00:34:24,440 --> 00:34:27,640 Speaker 1: China reopening, which we've talked about previously. That was October 660 00:34:28,239 --> 00:34:31,600 Speaker 1: also right around the time we saw low inequities, low 661 00:34:31,640 --> 00:34:34,040 Speaker 1: in equities, and right around the time that the first 662 00:34:34,040 --> 00:34:37,040 Speaker 1: news out of China came came out that they were 663 00:34:37,080 --> 00:34:39,799 Speaker 1: looking at zero COVID in a in a potentially different way. 664 00:34:40,320 --> 00:34:44,160 Speaker 1: So that was probably the moment of at least the bottom. 665 00:34:44,680 --> 00:34:48,919 Speaker 1: China plays big into um, you know, the markets moves here. 666 00:34:48,920 --> 00:34:55,080 Speaker 1: I mean, is China is the reopening? Are people optimistic 667 00:34:55,120 --> 00:34:57,760 Speaker 1: about that because for a while we couldn't tell which 668 00:34:58,000 --> 00:35:00,640 Speaker 1: they were reopening, but they were getting you millions of 669 00:35:00,680 --> 00:35:04,200 Speaker 1: COVID cases every day, um. And also it's a different 670 00:35:04,280 --> 00:35:07,239 Speaker 1: China than it was before they went into lockdown. Yeah. 671 00:35:07,360 --> 00:35:09,960 Speaker 1: I do think it plays a big role because the 672 00:35:10,000 --> 00:35:13,960 Speaker 1: impact has already seen through one money coming into China 673 00:35:13,960 --> 00:35:15,840 Speaker 1: assets which by the way, for example, our e t 674 00:35:16,000 --> 00:35:18,799 Speaker 1: F here listed on exchange and people buying them here 675 00:35:18,840 --> 00:35:20,760 Speaker 1: because the money has been put to work. That obviously 676 00:35:20,800 --> 00:35:25,120 Speaker 1: spills over into Banaszak, into other markets. But it's really 677 00:35:25,320 --> 00:35:27,000 Speaker 1: you know, you could tell from the p MY data 678 00:35:27,320 --> 00:35:29,560 Speaker 1: this week just alone out of the lunar year. Immediately, 679 00:35:29,560 --> 00:35:33,360 Speaker 1: the PM data recovered above fifty as one simple example, 680 00:35:34,120 --> 00:35:36,960 Speaker 1: So this is reopening is real. They lost about two 681 00:35:37,000 --> 00:35:39,560 Speaker 1: percent of output during the COVID lockdown, so they want 682 00:35:39,560 --> 00:35:42,719 Speaker 1: to get back to five. That's a big change. Lots 683 00:35:42,760 --> 00:35:45,719 Speaker 1: of different estimates had to impact global GDP, but that 684 00:35:45,760 --> 00:35:48,719 Speaker 1: could be up to a percent globally, and that's that's 685 00:35:48,800 --> 00:35:52,200 Speaker 1: I think significant. The changes the outcomes on the recession 686 00:35:52,280 --> 00:35:55,720 Speaker 1: that people were fearing. My view owner this that China 687 00:35:55,840 --> 00:35:59,040 Speaker 1: reopening actually means the recession this year may not really happen, 688 00:35:59,280 --> 00:36:03,759 Speaker 1: and it's that significant, and the commodity prices is very significant. Yeah, 689 00:36:03,760 --> 00:36:07,960 Speaker 1: that's very significant. And the Solar Guards interestingly did address 690 00:36:08,080 --> 00:36:11,120 Speaker 1: China today and like Powell, he did not really and 691 00:36:11,200 --> 00:36:13,239 Speaker 1: she did say you have to really take a close 692 00:36:13,320 --> 00:36:16,440 Speaker 1: look at this and monitor because they understand just like 693 00:36:16,480 --> 00:36:20,120 Speaker 1: anyone really has a I know they have a pronounced 694 00:36:20,520 --> 00:36:22,960 Speaker 1: trade relationship with China. Think that's some of these big 695 00:36:23,000 --> 00:36:26,319 Speaker 1: German industrial companies and you know, sending turbines over there, 696 00:36:26,360 --> 00:36:28,080 Speaker 1: that's a big deal for them. The belt in roads 697 00:36:28,200 --> 00:36:31,440 Speaker 1: and they went straight up through Italy right exactly, so 698 00:36:31,560 --> 00:36:33,520 Speaker 1: into the heart of Europe. So the collapse in these 699 00:36:33,520 --> 00:36:36,200 Speaker 1: boondhields and and the Italian heels today, I've really about 700 00:36:36,200 --> 00:36:39,320 Speaker 1: the ECB and maybe not hiking anymore after March. But 701 00:36:39,440 --> 00:36:41,520 Speaker 1: if you think about the impact that China could have 702 00:36:41,560 --> 00:36:44,560 Speaker 1: on those economies and thereby inflation, it's still really high 703 00:36:44,640 --> 00:36:47,640 Speaker 1: in both of these economies. That's where the Guard was 704 00:36:47,760 --> 00:36:49,200 Speaker 1: was hinting at, and the market is not listening to 705 00:36:49,280 --> 00:36:51,480 Speaker 1: that now. But that's something that will come back. I 706 00:36:51,560 --> 00:36:54,920 Speaker 1: think at some points now nuance is not my strength. Um, 707 00:36:55,480 --> 00:36:59,600 Speaker 1: you know, but to me, uh so this is optimistic. Right, 708 00:36:59,719 --> 00:37:04,680 Speaker 1: China reopens, Um, maybe we don't get a recession in Europe. Um, 709 00:37:04,800 --> 00:37:08,080 Speaker 1: these central banks are sounding devish because inflation is coming 710 00:37:08,160 --> 00:37:12,719 Speaker 1: down pretty rapidly. Um, why isn't Why aren't we off 711 00:37:12,719 --> 00:37:14,600 Speaker 1: to the races When it comes to commodities. You know, 712 00:37:14,719 --> 00:37:17,319 Speaker 1: oil is still trading eighty dollars a barrel. Um, if 713 00:37:17,400 --> 00:37:20,120 Speaker 1: if all that good news was it priced in? Is 714 00:37:20,239 --> 00:37:22,719 Speaker 1: this the good news eighty two dollars a barrel? Or 715 00:37:23,160 --> 00:37:25,040 Speaker 1: do we still have to look forward to a hundred 716 00:37:25,040 --> 00:37:28,000 Speaker 1: dollars for brand? So that that those are expectations out 717 00:37:28,040 --> 00:37:30,000 Speaker 1: there that I think if we're gonna go back to 718 00:37:30,120 --> 00:37:32,680 Speaker 1: huntred dollars a barrel, and that there has been I 719 00:37:32,760 --> 00:37:35,640 Speaker 1: think in the oil price liquidation that took plicity end 720 00:37:35,680 --> 00:37:39,640 Speaker 1: of lash year, big positioning arch styles. And in addition 721 00:37:39,719 --> 00:37:42,440 Speaker 1: to that, there was I think expectations in that market 722 00:37:42,520 --> 00:37:45,560 Speaker 1: that as the OPAC doesn't really change output as much, 723 00:37:45,840 --> 00:37:49,960 Speaker 1: caught it more, say, then the recession fears do hit 724 00:37:50,080 --> 00:37:52,160 Speaker 1: that that part of the commodity market a bit harder 725 00:37:52,200 --> 00:37:55,080 Speaker 1: because China's pent up de ment is really through the 726 00:37:55,120 --> 00:37:57,320 Speaker 1: metals market and that part of the commodity markets we 727 00:37:57,480 --> 00:38:01,279 Speaker 1: outperformed energy and out of parts. In addition that wheat, 728 00:38:01,440 --> 00:38:04,040 Speaker 1: for example, that has been also depressed because the Ukraine 729 00:38:04,080 --> 00:38:08,920 Speaker 1: situation is slowly resolving the supply shortage even though the 730 00:38:09,080 --> 00:38:12,160 Speaker 1: ongoing war. So I think it's the metal sector that's 731 00:38:12,200 --> 00:38:14,560 Speaker 1: where it's called quick priced in and where it showed 732 00:38:14,640 --> 00:38:17,839 Speaker 1: up first. The next stage will be that energy does 733 00:38:18,000 --> 00:38:20,839 Speaker 1: pick up. And you know, but some estimates we will 734 00:38:20,920 --> 00:38:24,920 Speaker 1: have again really low gasoline stock this summer as we 735 00:38:25,000 --> 00:38:28,160 Speaker 1: get into driving season. And my this is on this 736 00:38:28,360 --> 00:38:31,800 Speaker 1: is is that the China effect is really the tourism issue. 737 00:38:32,480 --> 00:38:35,279 Speaker 1: So recently the Japan's CPI numbers showed a big jump 738 00:38:35,480 --> 00:38:39,160 Speaker 1: because of recreation. There's the first impact from China tourism 739 00:38:39,239 --> 00:38:42,359 Speaker 1: that's coming on shortward hair. It's happening in Assolia too, 740 00:38:42,680 --> 00:38:45,480 Speaker 1: will happen here. My say, not more out of things 741 00:38:45,480 --> 00:38:46,840 Speaker 1: on this. We can just take a walk through a 742 00:38:46,960 --> 00:38:48,840 Speaker 1: time score. That's that's my thing. When I walked the 743 00:38:48,880 --> 00:38:51,040 Speaker 1: Penn station. Now I'll give you a man on the 744 00:38:51,560 --> 00:38:54,560 Speaker 1: on the ground view of what's happening and that Europeans 745 00:38:54,600 --> 00:38:56,919 Speaker 1: are back big time. I have, but I haven't seen 746 00:38:57,320 --> 00:39:00,040 Speaker 1: Chinese per se exactly. So that's that's just coming. We 747 00:39:00,080 --> 00:39:02,719 Speaker 1: can imagine that the payroll I'm gonna get tomorrow, it 748 00:39:02,840 --> 00:39:04,480 Speaker 1: may may go down a bit of the next few 749 00:39:04,560 --> 00:39:06,800 Speaker 1: months because of all the layoffs but the shortages, but 750 00:39:06,920 --> 00:39:08,960 Speaker 1: it really is in the leisure sector, and the leisure 751 00:39:09,000 --> 00:39:11,759 Speaker 1: sector has been the huge contributor to payroll growth. So 752 00:39:12,400 --> 00:39:15,279 Speaker 1: if this wave of tourism is coming, I mean, the 753 00:39:15,320 --> 00:39:18,160 Speaker 1: payroll numbers could actually start rising again at least driven 754 00:39:18,200 --> 00:39:21,640 Speaker 1: by leisure bench just real quick, thirty seconds and I 755 00:39:21,719 --> 00:39:23,920 Speaker 1: got the ten year treasury three thirty five here, just 756 00:39:23,960 --> 00:39:25,799 Speaker 1: amazing off six basis points today. What are you telling 757 00:39:25,800 --> 00:39:29,560 Speaker 1: your clients about the fixed income markets? Yeah, continue to 758 00:39:29,640 --> 00:39:31,960 Speaker 1: have an emphasis on that batty yields are on the 759 00:39:32,040 --> 00:39:33,960 Speaker 1: short end of the Yel curve, then on the long 760 00:39:34,080 --> 00:39:37,640 Speaker 1: end of the Yel curve. Really because the price sensitivity 761 00:39:37,719 --> 00:39:40,640 Speaker 1: of those securities is still really high. It's called duration. 762 00:39:40,840 --> 00:39:45,640 Speaker 1: And so no question So therefore sorry, that was that 763 00:39:45,800 --> 00:39:48,719 Speaker 1: was our producer, Rich Truman in your ears. He was 764 00:39:48,760 --> 00:39:52,560 Speaker 1: telling us, no more questions for you. He's a micro manager, 765 00:39:52,960 --> 00:39:56,000 Speaker 1: he's like a helicopter mom because we need it. Basically, Yeah, 766 00:39:56,480 --> 00:39:59,560 Speaker 1: that's not that's not unfair. So at the finish it, 767 00:40:00,320 --> 00:40:03,759 Speaker 1: you know, short maturity securities remain interesting. I mean, if 768 00:40:03,800 --> 00:40:06,239 Speaker 1: the FETE stoles out with this radition, does look at 769 00:40:06,239 --> 00:40:09,279 Speaker 1: this the case, then there's where you you pick up 770 00:40:09,320 --> 00:40:12,920 Speaker 1: continues to be that ultimate. Those hiels will decline um 771 00:40:13,280 --> 00:40:15,960 Speaker 1: as the FETE does move to a neutral stance. Alright, 772 00:40:16,000 --> 00:40:18,840 Speaker 1: good stuff as always. Ben em And senior portfolio manager 773 00:40:19,120 --> 00:40:20,719 Speaker 1: and he's head of the fixed income over there at 774 00:40:20,800 --> 00:40:23,520 Speaker 1: New Edge Wealth. Joining us here in our Bloomberg Interactive 775 00:40:23,560 --> 00:40:27,080 Speaker 1: Broker Studio. Thanks for listening to the Bloomberg Markets podcast. 776 00:40:27,520 --> 00:40:30,680 Speaker 1: You can subscribe and listen to interviews with Apple Podcasts 777 00:40:30,880 --> 00:40:34,759 Speaker 1: or whatever podcast platform you prefer. I'm Matt Miller. I'm 778 00:40:34,800 --> 00:40:38,480 Speaker 1: on Twitter at Matt Miller V three, pt on Ball 779 00:40:38,480 --> 00:40:41,320 Speaker 1: Sweeney I'm on Twitter at pt Sweeney. Before the podcast, 780 00:40:41,440 --> 00:40:43,919 Speaker 1: you can always catch us worldwide at Bloomberg Radio