WEBVTT - FOMC, Inflation, and the Economy 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.520 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.720 at Bloomberg dot com slash podcast. This is a treat. 0:00:21.840 --> 0:00:25.000 Jennifer Lee, Senior economist and Managing director BEMO Capital Markets 0:00:25.079 --> 0:00:27.600 joins is via the phone, and Daniel D. Martino, Boots, 0:00:27.640 --> 0:00:30.680 CEO and chief Strategists at Quick Intelligence Joints, is here 0:00:30.680 --> 0:00:33.479 in on our Bloomberg Interactive Broker Studio, and Jennifer, I'm 0:00:33.520 --> 0:00:37.520 gonna start with you. We had Christine Legard today, FED 0:00:37.560 --> 0:00:41.600 Chairman j Pal yesterday. Let's talk central banks. What's going 0:00:41.640 --> 0:00:45.559 on at there with their central bankers globally? You tell me, 0:00:45.600 --> 0:00:48.200 we'll both be the You know, I think I think 0:00:48.200 --> 0:00:50.760 everyone it was funny with just Jimmy in on the 0:00:50.760 --> 0:00:52.040 FED for a second. You know, I thought there was 0:00:52.040 --> 0:00:54.760 a little bit of something for everyone in that press conference, 0:00:54.800 --> 0:00:57.160 but I was leading towards the view that he was 0:00:57.200 --> 0:01:00.920 more hawkish than I think. What the market was initially thinking, um, 0:01:01.080 --> 0:01:02.960 the big of England. I have no idea it was. 0:01:03.680 --> 0:01:06.640 It was um. It was a bit mixed, but it 0:01:06.640 --> 0:01:08.600 sounds like they're towards the end of the red hikes 0:01:08.800 --> 0:01:10.960 and the c D was all in the hawki ish, 0:01:10.959 --> 0:01:13.199 so I was calling it was interesting how the entire 0:01:13.240 --> 0:01:15.920 governing Council seems to be on board this, this s 0:01:16.120 --> 0:01:18.600 S hawk Is ship. It has led by Christie Legard 0:01:18.640 --> 0:01:20.800 to Captain Legard um and I think you have to 0:01:20.800 --> 0:01:25.240 call her. There's an unwritten rule you don't call anybody 0:01:25.240 --> 0:01:27.480 else Mr or missus anything, but in her case it 0:01:27.480 --> 0:01:30.160 has to be Madam. Okay, I don't like, but yeah, 0:01:30.280 --> 0:01:32.240 I can see another ray high coming up after March. 0:01:32.319 --> 0:01:33.760 But you guy, it's all good. Be data dependent. I 0:01:33.800 --> 0:01:35.360 don't know about you know, the ECB and the b 0:01:35.480 --> 0:01:37.240 o E. But in terms of the FED. You know, 0:01:37.280 --> 0:01:39.920 my wife always says, I don't care what you say. 0:01:40.440 --> 0:01:43.080 Your actions speak much louder than your words, and they 0:01:43.120 --> 0:01:47.480 only easily good for nothing. Twenty five basis points not 0:01:47.520 --> 0:01:51.600 to mention the fact that um, they see disinflation. He 0:01:51.640 --> 0:01:55.240 admitted he waffled on the question Powell about whether or 0:01:55.320 --> 0:01:58.480 not anyone talked about a pause last time. He just said, no, 0:01:58.760 --> 0:02:03.240 point blank, end their data dependent. So what is the 0:02:03.360 --> 0:02:06.160 point of telling me what you plan to do maybe 0:02:06.200 --> 0:02:08.440 if the data goes your way, and then saying your 0:02:08.520 --> 0:02:13.000 data dependent, Danielle. So look, I think it's all very nuanced. 0:02:13.120 --> 0:02:16.040 We forget that the way the CPI is constructed is 0:02:16.120 --> 0:02:19.600 changing before our very eyes. Used car prizes which are 0:02:19.600 --> 0:02:22.639 coming down hard, that weight's going to be reduced. New 0:02:22.720 --> 0:02:26.359 York rents which spiked after the entire rest of the country. 0:02:26.400 --> 0:02:29.560 That's eleven percent of shelter in the in in inflation 0:02:29.800 --> 0:02:31.760 that's going to feed through with a lag. There are 0:02:31.760 --> 0:02:33.920 many cases to be made for inflation being higher in 0:02:33.919 --> 0:02:35.560 the second half of the year than what the market 0:02:35.600 --> 0:02:39.680 is currently anticipating. What I think was the most devish 0:02:39.840 --> 0:02:43.360 what I think turn markets around yesterday. The hardest was 0:02:43.440 --> 0:02:46.080 when he was specifically asked about the Jolts data, which 0:02:46.120 --> 0:02:48.040 was obviously stronger than what was That was that was 0:02:48.040 --> 0:02:49.919 why markets freaked out going into the FED yesterday, was 0:02:50.000 --> 0:02:52.919 Jolts was so strong north of eleven million openings again 0:02:52.960 --> 0:02:55.800 one point nine two per every for um for every 0:02:56.040 --> 0:02:58.440 opening um. Anyways, he did site that, but then he 0:02:58.440 --> 0:03:01.640 faded it. He's like, you know, when he faded, jolts 0:03:01.720 --> 0:03:05.399 markets turntail and went straight to the moon. Did I mean, 0:03:05.639 --> 0:03:08.880 did I misunderstand, did I maybe miss here? Or did 0:03:08.880 --> 0:03:12.600 he say financial conditions were tightening? He said? And then 0:03:12.600 --> 0:03:16.440 I have to ask in what universe does exactly, because 0:03:16.480 --> 0:03:19.359 because financial conditions have given back everything all the way 0:03:19.440 --> 0:03:22.560 until February two, it's as if the Fed has not 0:03:22.639 --> 0:03:25.919 hiked up one basis point forget twenty five or unusually 0:03:26.000 --> 0:03:29.600 large seventy five times four plus fifty plus twenty five. 0:03:29.760 --> 0:03:33.800 But but he did say that he anticipated that in time, 0:03:34.000 --> 0:03:40.720 ultimately financial conditions would reflect his restrictive stance of monetary policy. Again, 0:03:41.280 --> 0:03:44.800 yesterday was just wishy washy. Yeah, Jennifer, I want to 0:03:44.840 --> 0:03:48.840 get your opinion here. I mean, the markets have been saying, well, 0:03:49.000 --> 0:03:51.240 the FED officials and central bankers around the world have 0:03:51.240 --> 0:03:53.680 been saying, they've been talking tough, We're gonna keep rates higher, 0:03:53.920 --> 0:03:56.120 We're not going to turn tail. But the markets are 0:03:56.120 --> 0:03:58.160 saying not so fast. I mean, the market of pricing 0:03:58.160 --> 0:04:00.760 in rate decreases it the end of the year. How 0:04:00.760 --> 0:04:05.640 do you think about that dichotomy? Uh, you know, in 0:04:05.680 --> 0:04:07.720 many ways this is all, you know, the communications, and 0:04:07.760 --> 0:04:10.920 it sounds like it's being muddled again. UM, just given it, 0:04:11.040 --> 0:04:12.520 you know, just everyone here on this of his call 0:04:12.640 --> 0:04:15.080 to UM. But you know, we have been always of 0:04:15.120 --> 0:04:17.040 the view that you know, the rate cuts would not 0:04:17.080 --> 0:04:20.320 be uh seen this year. UM. But I guess the 0:04:20.480 --> 0:04:22.440 scary part is that you know that you know, as 0:04:22.440 --> 0:04:24.080 they I was saying, we were talking about the old 0:04:24.200 --> 0:04:26.160 data of the employment data. You know, he was saying 0:04:26.160 --> 0:04:28.120 that it's still you know that the job market is 0:04:28.160 --> 0:04:31.200 way too strong, and uh, it almost frightens me to think, 0:04:31.200 --> 0:04:33.240 you know, what are they willing to do to to 0:04:33.400 --> 0:04:36.240 cause the labor market to almost buckle? It seems, in 0:04:36.320 --> 0:04:38.919 order to bring inflation back down to two percent, and 0:04:38.960 --> 0:04:41.040 it sounds like they're going to keep it, you know, higher, 0:04:41.080 --> 0:04:45.040 for longer. Alright, I have a listener who's written in Okay, 0:04:45.040 --> 0:04:48.760 he sent me a chart of different countries inflation data. 0:04:49.080 --> 0:04:50.880 I just showed it to Danielle because I don't really 0:04:50.920 --> 0:04:54.080 know what to do with it. But UM, he's saying 0:04:55.120 --> 0:04:57.760 and asking a question, what happens to Marcus if we 0:04:57.880 --> 0:05:01.200 become like in the nineteen se and d's we pause 0:05:01.320 --> 0:05:03.480 and then have to hike again and this I thought 0:05:03.640 --> 0:05:06.919 was a concern, but I guess their data dependence, so 0:05:06.920 --> 0:05:10.080 they're willing to change the way they're going every single meeting. No, 0:05:11.760 --> 0:05:13.760 uh no, no, no, no, I'm going to push back 0:05:13.800 --> 0:05:18.000 on this because he was asked that question specifically yesterday 0:05:18.040 --> 0:05:22.280 and he said, I don't mind if we overtighten, because 0:05:22.400 --> 0:05:25.760 we cannot pull the genie back into the bottle if 0:05:25.800 --> 0:05:29.760 inflation gets re released. He's like, if we tighten too much, 0:05:29.800 --> 0:05:32.679 we've got tools to bring it back down. But he said, 0:05:32.720 --> 0:05:36.200 I will not stop until I'm convinced that we don't 0:05:36.240 --> 0:05:39.279 have to go back in. So he again, there was 0:05:39.360 --> 0:05:42.280 so much that he said yesterday that was flat out ignored, 0:05:42.760 --> 0:05:45.760 and he was very articulate and emphatic in saying, I 0:05:45.800 --> 0:05:49.159 don't care if we go too far. Well, Jennifer, the 0:05:49.200 --> 0:05:53.679 market still clearly doesn't believe that the FED is going 0:05:53.720 --> 0:05:57.440 to raise rates past you know, five percent um at 0:05:57.520 --> 0:05:59.760 least that's not the pricing on w I RP GO 0:06:00.000 --> 0:06:02.359 shows me that the market doesn't buy that, and the 0:06:02.440 --> 0:06:08.320 market still is pricing in cuts this year in fact too. 0:06:08.640 --> 0:06:12.880 So what does that mean to you at demo UM, 0:06:12.960 --> 0:06:15.760 that that that that that this FED doesn't have credibility 0:06:15.880 --> 0:06:18.440 or that the market thinks Pale is going to change 0:06:18.440 --> 0:06:23.560 his course. Why, Jennifer, I don't know if they're going 0:06:23.680 --> 0:06:25.919 to change their quarters. The market is thinking that. It 0:06:25.920 --> 0:06:28.960 sounds like they're almost ignoring everything he's saying. But you know, 0:06:29.000 --> 0:06:30.560 again for the way, what dinner I was just saying, 0:06:30.560 --> 0:06:33.280 I mean, he did see yesterday about history cautioning against 0:06:33.279 --> 0:06:36.279 prematurely loosening policy, and and he said that before. Was 0:06:36.320 --> 0:06:38.760 it Jackson hole when you know when he first made 0:06:38.800 --> 0:06:41.080 that comment, and he's still standing by that. And I 0:06:41.120 --> 0:06:43.559 think it's it's it's better too, as they have said before, 0:06:43.920 --> 0:06:46.720 to tighten too much than and then they're not tightened enough. 0:06:46.839 --> 0:06:49.360 And again they have you know, they have the tools 0:06:49.400 --> 0:06:52.200 to back down on that. Even um regard this morning, 0:06:52.279 --> 0:06:54.919 she was saying, do not students that are in faulved 0:06:55.240 --> 0:06:57.520 to bring in flash back down to target. And I 0:06:57.600 --> 0:06:59.359 think that's what again the same thing she's trying to 0:06:59.360 --> 0:07:03.160 make sure that they're indibility is intact um and it 0:07:03.400 --> 0:07:05.039 just just continue to talk. But of course, you know, 0:07:05.080 --> 0:07:07.680 the markets look seems like it's looking at the other way. 0:07:08.040 --> 0:07:09.760 All right, we are breaking this down. We have a 0:07:09.800 --> 0:07:12.120 FED round table here Jennifer Lee Sing your economists and 0:07:12.120 --> 0:07:15.360 managing director at Demo Capital Markets, and Daniel D. Martino Booth, 0:07:15.440 --> 0:07:20.000 CEO of quill uh Intelligence. Uh, Danielle, I'm looking at 0:07:20.000 --> 0:07:21.680 my ECO screen. I got a lot of ECO data 0:07:21.760 --> 0:07:23.760 this morning, and I see a lot of some negative numbers. Here. 0:07:23.760 --> 0:07:29.200 I mean factory orders X transportation minus one. The consensus 0:07:29.280 --> 0:07:33.760 was positive zero point two percent, durable goods X transportation 0:07:34.040 --> 0:07:37.280 negative zero point two percent? Consensus was negative point one? 0:07:38.120 --> 0:07:41.000 Am I seeing a recession in my economy? Here? What 0:07:41.240 --> 0:07:43.160 am I seeing with these negative numbers? You look, the 0:07:43.240 --> 0:07:47.280 National Beer of Economic Research follows um real disposable income ex. 0:07:47.360 --> 0:07:50.840 Government transfers. That's that's in the tank in dustphere Industrial 0:07:50.840 --> 0:07:53.800 production yuck. What we just got out feeds g d P. 0:07:54.080 --> 0:07:57.520 The data that you specifically sided the disappointed to the downside, 0:07:57.600 --> 0:08:00.240 especially on the on the shipments that feeds into g EP. 0:08:00.880 --> 0:08:03.320 Ben hers On is my favorite. Uh. He was at 0:08:03.360 --> 0:08:06.160 mcgar Advisors and I S Market bought them out then 0:08:06.280 --> 0:08:09.360 s in P level. Anyways, he basically created the GDP 0:08:09.520 --> 0:08:12.000 model and right now he's at negative one point five 0:08:12.040 --> 0:08:14.320 pc after the day we just got out this morning. 0:08:14.440 --> 0:08:16.400 He's going to be taking that Q one number down 0:08:16.760 --> 0:08:22.239 below negative one. The answer, yes, we are in recession. Okay, Jennifer, 0:08:22.280 --> 0:08:26.040 what do you think, Um, we still have you know, 0:08:26.080 --> 0:08:28.720 we've always been penciled and we've always had that uh 0:08:28.760 --> 0:08:33.800 two negative quarters by definition penciled into our into this year. Um. 0:08:33.840 --> 0:08:35.839 But you know, we continue to see you know, some 0:08:35.920 --> 0:08:38.200 sort of a bounce back or a little bit of 0:08:38.240 --> 0:08:41.120 recovery in the second half, but you know, averaging out 0:08:41.120 --> 0:08:44.440 to you know, still about almost like a lot years. 0:08:44.440 --> 0:08:45.679 So I think this year is almost going to be 0:08:45.679 --> 0:08:48.440 a write off still. Um. Of course, what happens next 0:08:48.520 --> 0:08:51.319 year is another story. But um, right now, I mean 0:08:51.360 --> 0:08:53.200 it's like, here's another thing. I mean, we were talking 0:08:53.200 --> 0:08:55.360 about the data this morning, and we know how extremely 0:08:55.440 --> 0:08:57.760 volatile the factor order's data are. But you know, we 0:08:57.800 --> 0:09:00.320 at least we got that bounced back yesterday and auto sales. 0:09:00.360 --> 0:09:02.440 I mean, of course it was a big drop in December, 0:09:02.480 --> 0:09:04.280 so it's almost like a wash for the two tho 0:09:04.480 --> 0:09:08.079 for the two months. So I wouldn't completely discount um, um, 0:09:08.120 --> 0:09:10.120 you know, for example, the US consumer just yet. But 0:09:10.160 --> 0:09:13.439 obviously all these rate hypes are finally finally trying starting 0:09:13.480 --> 0:09:16.959 to make make their mark on the economy Daniel. Let's 0:09:16.960 --> 0:09:19.240 talk about the labor market here again. We had an 0:09:19.240 --> 0:09:22.200 initial jobles claims print dight three thousand that was lower 0:09:22.200 --> 0:09:24.599 than expected. Another print below two hundred thousand, which you 0:09:24.679 --> 0:09:27.760 kind of tell me is is kind of important jobless 0:09:27.880 --> 0:09:31.640 non farm payrolls. Tomorrow we get that data. That consensus 0:09:31.679 --> 0:09:35.280 is a hundred ninety thousand added. Boy, this is a 0:09:35.280 --> 0:09:38.319 strong labor market. Is there anything that breaks this labor market? 0:09:38.600 --> 0:09:40.440 It sure looks like it's a strong labor market on 0:09:40.480 --> 0:09:43.280 the surface, doesn't it. Yes, because this morning Challenger Gray 0:09:43.280 --> 0:09:45.680 and Christmas came out and said laoffs in January for 0:09:45.720 --> 0:09:47.800 the month of January that was the weakest January since 0:09:47.840 --> 0:09:51.920 two thousand and nine. They said that hiring announcements were 0:09:51.960 --> 0:09:56.800 cut in by between December and January. And by the way, 0:09:56.960 --> 0:09:59.200 the Department of Labor, the Beuer of Labor Statistics, they've 0:09:59.280 --> 0:10:02.559 already pretty clear that they're having trouble with seasonal adjustments 0:10:02.720 --> 0:10:06.920 post pandemic. I've been tracking closely Google trends file for 0:10:07.000 --> 0:10:10.480 unemployment people searching for file for unemployment. It's tracking right 0:10:10.520 --> 0:10:14.960 alongside not seasonally adjusted continuing claims, which popped up again 0:10:15.320 --> 0:10:18.520 to one point nine million this week. They're up off 0:10:18.559 --> 0:10:22.600 their lows, not seasonally adjusted. Continuing under the surfaces. Under 0:10:22.640 --> 0:10:25.240 the surface, it's much weaker than it appears on the headline. 0:10:25.400 --> 0:10:27.480 But if we're talking about the Fed, J. Powell doesn't 0:10:27.480 --> 0:10:29.600 appear to care. He's going to follow the headlines that 0:10:29.640 --> 0:10:32.440 suit him. I can tell you all the Sweeney offspring 0:10:32.640 --> 0:10:36.600 are employed. That's good gradulations. Well they should be, right 0:10:36.640 --> 0:10:39.079 if there are two jobs out there for every single person. 0:10:40.120 --> 0:10:44.280 I mean, there's eleven million job openings. I thought. Again, 0:10:44.440 --> 0:10:47.920 the Boweing interview that guy Johnson did the other day 0:10:48.080 --> 0:10:50.720 was amazing, and the CEO Bowing said, look every time, 0:10:50.880 --> 0:10:55.240 basically said, I'm paraphrising every time Microsoft or Amazon lays 0:10:55.280 --> 0:10:57.320 off a smart engineer, we're gonna go scoop him up. 0:10:58.480 --> 0:11:00.679 So you do see some pink slips out there on 0:11:00.720 --> 0:11:03.120 the West coast, But that doesn't mean those people aren't 0:11:03.120 --> 0:11:05.960 getting jobs right away. Again, Yeah, I don't know. Bowe 0:11:06.040 --> 0:11:07.720 never should have left Seattle. By the way, that's my 0:11:07.920 --> 0:11:11.040 number one call, um, Jennifer. When when you take a 0:11:11.040 --> 0:11:15.320 look at this economy here, what's your real call here 0:11:15.480 --> 0:11:19.520 for twenty three four? I mean, is this recession if 0:11:19.559 --> 0:11:23.560 so is it a shallow one? How what what level 0:11:23.600 --> 0:11:26.800 does the economy in North America bounce back if, in 0:11:26.800 --> 0:11:28.679 fact we do go into a recession. How do you 0:11:28.679 --> 0:11:32.120 guys think about that? A female? Well, right now, everything's 0:11:32.120 --> 0:11:34.560 obviously fluid um as Again, as I said, you know, 0:11:34.600 --> 0:11:37.679 we're looking for a flat ish um um year for 0:11:38.480 --> 0:11:42.000 three decline the first half, better second half, and then 0:11:42.040 --> 0:11:43.760 you know, some sort of a recovery as as rate 0:11:43.800 --> 0:11:45.880 cuts start to take hold or start to kick in 0:11:45.920 --> 0:11:50.360 probably uh. You know again, this is all goes back 0:11:50.400 --> 0:11:53.720 to how it's how intentional the the set is going 0:11:53.800 --> 0:11:56.600 to be in keeping rates up at these restrictive levels 0:11:57.080 --> 0:11:59.800 um for how long as well? And what I guess 0:11:59.800 --> 0:12:02.080 what is a little bit is puzzling to I think 0:12:02.080 --> 0:12:04.160 everyone is going to be like again the job market 0:12:04.200 --> 0:12:06.800 and the fact that we still have for ten million 0:12:06.880 --> 0:12:09.360 job openings out there. You know, at some point those 0:12:09.400 --> 0:12:11.679 ones are gonna be wants to be cut first. Um. 0:12:11.760 --> 0:12:13.640 It's almost like a lot of fat before you get 0:12:13.679 --> 0:12:16.320 to the bone. Um. But we still expect, you know, 0:12:16.360 --> 0:12:19.880 unemployment to start rising the longer that the rates still 0:12:20.160 --> 0:12:23.880 you know, the fed stas um um um height with 0:12:23.920 --> 0:12:26.120 their with your conditions you know, and keep rates higher 0:12:26.160 --> 0:12:29.040 for longer. So if I could just jump in here 0:12:29.040 --> 0:12:30.400 on jolts, I think one of the reasons that the 0:12:30.400 --> 0:12:33.440 FED chair faded it yesterday's because joint research between the St. 0:12:33.440 --> 0:12:36.240 Louis FED and the Dallas FED showed that about of 0:12:36.280 --> 0:12:38.679 all job openings for the purpose of coaching your closest 0:12:38.679 --> 0:12:41.520 competitors worker. That's what I was wondering about. Why is 0:12:41.520 --> 0:12:44.000 the JOLTS number so strong when a DP isn't, Because 0:12:44.080 --> 0:12:45.880 because you're you're trying to get your competitors worker and 0:12:45.960 --> 0:12:47.800 not have to pay to train them. Just like going said, 0:12:47.960 --> 0:12:51.120 all right, good stuff, good stuff FED round table, like 0:12:51.160 --> 0:12:54.040 only Bloomberg Radio can do. Jennifer Lee, Senior commiss and 0:12:54.080 --> 0:12:56.880 Managing Director with BMO Capital Markets, joining us on the 0:12:56.920 --> 0:13:00.000 phone at Daniel D. Martino, Booth, CEO and Chief straps 0:13:00.040 --> 0:13:02.599 it just at Quill Intelligence, joining us live here in 0:13:02.640 --> 0:13:06.160 a Bloomberg Interactive Broker studio, breaking down the FED speak 0:13:06.200 --> 0:13:08.520 we've heard over the last twenty four hours. ECO data 0:13:08.960 --> 0:13:13.760 lots going on a lot across winds for investors. I 0:13:13.800 --> 0:13:16.600 want to bring in right now Hugh Roberts at quant 0:13:16.640 --> 0:13:20.040 Insight to talk to us about what we saw yesterday, um, 0:13:20.040 --> 0:13:21.959 with the FED and what we're seeing today with the 0:13:22.040 --> 0:13:23.920 b o E and the e c B. Basically, all 0:13:23.920 --> 0:13:29.560 this big central bank action is moving markets pretty substantially. So, Hugh, uh, 0:13:29.800 --> 0:13:32.000 you were with us on television yesterday, and I'm glad 0:13:32.000 --> 0:13:33.640 you could join us on radio today we get a 0:13:33.679 --> 0:13:36.079 little bit more time. UM, let me first get your 0:13:36.080 --> 0:13:39.000 reaction to what we saw yesterday. Was it more devish 0:13:39.040 --> 0:13:43.360 than you would have expected? Um? Well, I think the 0:13:43.760 --> 0:13:47.640 biggest takeaway is that Chair Powell and the broader Fed 0:13:47.840 --> 0:13:51.240 clearly think about financial conditions, um, in a different way 0:13:51.320 --> 0:13:54.439 to most of the mainstream market. Was that just a 0:13:54.520 --> 0:13:56.960 slip up or two? I mean, so Powell was asked 0:13:56.960 --> 0:14:01.400 about financial conditions loosening and their looser by Bloomberg's measure, 0:14:01.440 --> 0:14:04.280 by Goldman Sachs measure, by Wall Street measures than they 0:14:04.280 --> 0:14:07.680 have your own, uh, your own measures, and they have 0:14:07.760 --> 0:14:09.840 been in like a year, right, So was it just 0:14:09.880 --> 0:14:13.160 a mistake that he made? Yeah? I mean I've seen 0:14:13.200 --> 0:14:15.720 some conspiracy theories. I have to confess I've missed that 0:14:15.800 --> 0:14:18.400 he actually suffered from about the COVID, And I saw 0:14:18.440 --> 0:14:20.880 one conspiracy theory saying, you know, was it just a 0:14:20.920 --> 0:14:24.920 subpar performance because he's still suffering a little bit on 0:14:24.960 --> 0:14:27.280 the health front. I don't know about that. I mean, 0:14:27.320 --> 0:14:30.120 I think taking a step back, there's always a danger 0:14:30.400 --> 0:14:34.360 that we all start to over analyze and overthink certain things. 0:14:34.440 --> 0:14:36.400 You know, we have had the most interesting bit of 0:14:36.400 --> 0:14:38.440 pushback in the last twenty four hours that I've seen 0:14:39.160 --> 0:14:42.560 is to fed unofficial press boatsman operating in a divorce. 0:14:42.560 --> 0:14:45.640 Street journal has today pointed us in the direction of 0:14:45.800 --> 0:14:49.520 a brain Ard speech from two weeks ago and which 0:14:49.960 --> 0:14:54.120 opens with a comment about overall financial conditions. And two 0:14:54.160 --> 0:14:56.880 things come out from that speech. One is just the 0:14:56.960 --> 0:15:00.160 timeframe that they're looking almost a year on year. They're 0:15:00.200 --> 0:15:02.920 looking at a much longer history compared to the likes 0:15:02.960 --> 0:15:06.080 of ourselves, who say, well, look at the unwinding of 0:15:06.360 --> 0:15:08.680 the financial conditions we've seen in the last six months 0:15:08.800 --> 0:15:12.440 or so. And then secondly, if you look at the 0:15:12.640 --> 0:15:16.800 specific references in that speech, there is no eputy market 0:15:16.840 --> 0:15:19.880 com opponent and so no wealth effect component. It's sites 0:15:19.920 --> 0:15:24.840 will yield in particular, that's probably the most overweighted um variable. 0:15:24.880 --> 0:15:27.800 But hang on you so um so. Brainerd also said 0:15:27.840 --> 0:15:32.520 financial conditions are tightening, and this is interesting because I 0:15:32.560 --> 0:15:35.840 was talking with you about this yesterday. If you take 0:15:35.880 --> 0:15:43.160 out the stock market effects, aren't financial conditions still pretty loose? Yeah, 0:15:43.200 --> 0:15:45.080 So that's that would be the time scale point that 0:15:45.280 --> 0:15:48.080 we're looking at on our measure, and like your measure, 0:15:48.480 --> 0:15:51.080 I think the unwind of the easing has come in 0:15:51.080 --> 0:15:53.240 the last six months or so and the brain our 0:15:53.320 --> 0:15:55.080 speech and I think maybe there, whether it was a 0:15:55.080 --> 0:15:57.360 slip of the tongue or just whatever it was from 0:15:57.400 --> 0:16:00.880 Powell yesterday, was actually a much longer horizon. They were 0:16:00.880 --> 0:16:03.920 saying over the duration of their tightening cycle from where 0:16:03.920 --> 0:16:06.840 we were a year ago, conditions are still tighter. So 0:16:07.000 --> 0:16:10.200 it's to a degree, it's where you stop the clock, 0:16:10.240 --> 0:16:13.440 if you see what I mean, Hugh. So there is 0:16:13.480 --> 0:16:16.320 a disconnected obviously, between what we're hearing from the central bankers, 0:16:16.360 --> 0:16:20.920 including Madame Leguard today, in terms of you know, talking 0:16:20.960 --> 0:16:23.440 the talk and a tough fight. We're gonna keep rates 0:16:23.480 --> 0:16:26.000 higher for for longer, and the market is just not 0:16:26.120 --> 0:16:30.880 buying it. How unusual is that dichotomy in the marketplace. 0:16:31.800 --> 0:16:34.440 It's one of the more aggressive examples, I agreed, hopefully, 0:16:34.480 --> 0:16:38.640 I mean to see such a coordinated response. And there 0:16:38.680 --> 0:16:41.040 were the events we had this week between the third 0:16:41.200 --> 0:16:44.560 yesterday d CD in the Bank of England, and in 0:16:44.680 --> 0:16:47.680 each instance for the bond market to react the way 0:16:47.800 --> 0:16:49.960 there is the repricing we've seen at the front end. 0:16:51.240 --> 0:16:53.280 I'm struggling off the top of my head to think 0:16:53.280 --> 0:16:56.960 of many examples where the market has so aggressively and 0:16:57.120 --> 0:17:01.920 so uniformly flown in the opposite action to the manta 0:17:02.080 --> 0:17:05.240 from central banks. I agree where we're in fairly unpaceded 0:17:05.240 --> 0:17:08.480 tempories and it does make you think that that we're 0:17:08.480 --> 0:17:13.240 coming to a rather severe pitch point at some stage. 0:17:13.440 --> 0:17:17.440 Either the markets pricing has to be vindicated um or 0:17:17.560 --> 0:17:19.040 we're just going to make this worse. And I guess 0:17:19.040 --> 0:17:21.640 that's part of the reasons, I guess to justify our actions. 0:17:21.680 --> 0:17:24.280 In terms of us all trying to analyze the FED 0:17:24.320 --> 0:17:26.639 going into last night's meeting, I think one of the 0:17:26.720 --> 0:17:29.720 motivations everyone had in the back of their mind was that, 0:17:29.760 --> 0:17:31.800 you know, is the whole kind of stitching time type 0:17:32.359 --> 0:17:35.800 approach that you need to get in front of this. Otherwise, 0:17:36.080 --> 0:17:39.280 if you allow this kind of almost a rational exuberance, 0:17:39.320 --> 0:17:41.639 you could classify it as to get too far carried 0:17:41.680 --> 0:17:43.640 away that when the day of reckoning comes and if 0:17:43.640 --> 0:17:47.160 the FED and the ECB version of events is proved right, 0:17:47.600 --> 0:17:50.919 then the repricing then become that much more severe. And 0:17:51.000 --> 0:17:52.960 the problem with that, it's not just from a financial 0:17:52.960 --> 0:17:55.720 market perspective, but the transmission through to the real economy. 0:17:55.880 --> 0:17:58.040 Does it then start to really really make what could 0:17:58.080 --> 0:18:00.560 have been a soft landing, that could they such defeat 0:18:00.560 --> 0:18:03.320 from the jaws of victory the soft landing, but the 0:18:03.359 --> 0:18:06.040 repricing makes it a heart on me. So that's because 0:18:06.480 --> 0:18:08.840 the market is pricing in a couple of cuts this year, 0:18:08.880 --> 0:18:12.320 and you're saying that the FED just holds high, you know, 0:18:12.400 --> 0:18:15.280 after another rate rise or two at five and a 0:18:15.359 --> 0:18:19.240 quarter percent, and doesn't cut by the end of this year, 0:18:19.320 --> 0:18:22.960 even if the data shows they should. That's snatching defeat 0:18:22.960 --> 0:18:26.720 from the jaws of victory. Yeah. That that and also, 0:18:26.840 --> 0:18:29.240 as I say, just the fact that if you have 0:18:29.359 --> 0:18:32.240 a too big a disconnect between what the central bank 0:18:32.359 --> 0:18:34.880 is trying to do and what financial markets are pricing, 0:18:35.280 --> 0:18:37.440 then at some point something has to give. That elastic 0:18:37.440 --> 0:18:39.679 can only go so far, I would argue, And then 0:18:39.680 --> 0:18:43.119 there comes a point where if the FED version of 0:18:43.119 --> 0:18:46.480 events proves true and the higher for longer scenario wins out. 0:18:46.920 --> 0:18:49.280 The implication for that is quite an aggressive sell off 0:18:49.280 --> 0:18:52.640 and risky assets, and that hurts the real economy through 0:18:52.960 --> 0:18:56.959 the wealth effect for equities, corporate America's ability to finance itself, 0:18:56.960 --> 0:19:01.080 through why the credit spreads stronger. Dollar took sense. So 0:19:01.359 --> 0:19:03.520 h when you look at the market over the past 0:19:03.560 --> 0:19:07.000 two days, I mean yesterday a strong move, today, very 0:19:07.040 --> 0:19:09.280 strong move. We got the SMP up one point four percent, 0:19:09.359 --> 0:19:14.000 the NASDAK up, but two point nine just really significant moves. 0:19:14.760 --> 0:19:17.439 Does that seem like an overreaction to you from this 0:19:17.520 --> 0:19:20.639 market or just more of the same. This is a 0:19:20.640 --> 0:19:24.040 market that's really much more optimistic or bullish than maybe 0:19:24.200 --> 0:19:28.359 central bankers are. Yeah, I mean we were inclined, um. 0:19:28.480 --> 0:19:30.480 I think up until the last twenty four hours, were 0:19:30.480 --> 0:19:32.720 inclined to think that there was a bit of positioning 0:19:32.760 --> 0:19:36.240 and sentiment dynamics at work. And I think sentiment and 0:19:36.280 --> 0:19:39.199 equity market has been poor, but positioning probably wasn't as 0:19:39.280 --> 0:19:42.560 bearish as everyone thought. I think there was an element 0:19:42.600 --> 0:19:46.400 of a straight rotation. Winners have become twenty twenties lag 0:19:46.480 --> 0:19:51.480 ards and vice versa, um and on our modeling, although 0:19:51.840 --> 0:19:56.440 that proven like NASDAK or XLK or anything vaguely tech related, 0:19:56.920 --> 0:20:01.880 was modestly rich, it wasn't crazy extended. It's now starting 0:20:01.880 --> 0:20:03.919 to look a little bit more stretched, and there's lots 0:20:03.960 --> 0:20:06.600 sun to look like the move is moving further away 0:20:06.600 --> 0:20:10.920 from macro fundamentals. So um, I think up until now 0:20:10.960 --> 0:20:13.119 we would have said it's been a relatively orderly moved, 0:20:13.119 --> 0:20:15.919 but this is beginning to raise eyebrows. All right, Hugh 0:20:16.240 --> 0:20:18.760 Key question your officers are based at right there in 0:20:18.800 --> 0:20:21.359 Liverpool Street, right in the city of London. How is 0:20:21.400 --> 0:20:25.040 the city of London today? Today's Thursday crowded? How's the 0:20:25.080 --> 0:20:26.879 two are people back in your office? What's gone on 0:20:26.920 --> 0:20:29.960 in the city. Yeah, it feels like I mean buying 0:20:30.080 --> 0:20:32.440 large things about to normal. I mean that the kind 0:20:32.480 --> 0:20:35.960 of PrePost COVID dynamics I think has largely worked through. 0:20:36.000 --> 0:20:38.080 There's a lot of hybrid working models. But on the 0:20:38.119 --> 0:20:41.879