1 00:00:05,800 --> 00:00:08,360 Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim 2 00:00:08,400 --> 00:00:11,440 Speaker 1: Fox along with my co host Lisa Bramowitz. Each day 3 00:00:11,480 --> 00:00:15,000 Speaker 1: we bring you the most important, noteworthy, and useful interviews 4 00:00:15,040 --> 00:00:17,520 Speaker 1: for you and your money, whether you're at the grocery 5 00:00:17,560 --> 00:00:20,560 Speaker 1: store or the trading floor. Find the Bloomberg p m 6 00:00:20,680 --> 00:00:33,080 Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. 7 00:00:33,080 --> 00:00:35,120 Speaker 1: We have a big meeting coming up or at least 8 00:00:35,120 --> 00:00:39,519 Speaker 1: announcement tomorrow. Today the Fed begins it's two day monthly 9 00:00:39,600 --> 00:00:42,960 Speaker 1: meeting or I guess not monthly ten times a year UM. 10 00:00:43,000 --> 00:00:44,960 Speaker 1: I want to bring in Ira Jersey. He's chief US 11 00:00:45,040 --> 00:00:48,800 Speaker 1: interest rate strategist for Bloomberg in chaligence, and before we 12 00:00:48,840 --> 00:00:52,120 Speaker 1: look ahead to what we're expecting from the Federal Reserve tomorrow, 13 00:00:52,159 --> 00:00:54,080 Speaker 1: I want to talk about this inflation data that we 14 00:00:54,160 --> 00:00:57,400 Speaker 1: got out this morning. UH inflation accelerating to its highest 15 00:00:57,560 --> 00:01:03,160 Speaker 1: in six years, and yet not a wholesale cheer necessarily 16 00:01:03,480 --> 00:01:07,080 Speaker 1: from markets. Why Yeah, high A couple of things, Lisa. 17 00:01:07,120 --> 00:01:10,880 Speaker 1: I think one is that the UH UM the market 18 00:01:10,920 --> 00:01:13,119 Speaker 1: was expecting the numbers that we received. And I think 19 00:01:13,120 --> 00:01:16,399 Speaker 1: one of the reasons why you have UM, certainly interest 20 00:01:16,440 --> 00:01:18,640 Speaker 1: rates near where they are you know, tenure yield right 21 00:01:18,640 --> 00:01:21,360 Speaker 1: close to three percent, yet again after the big risk 22 00:01:21,440 --> 00:01:24,000 Speaker 1: off we had two weeks ago. Is because we are 23 00:01:24,120 --> 00:01:27,600 Speaker 1: expecting inflation to kind of hover with co inflation at 24 00:01:27,959 --> 00:01:30,880 Speaker 1: just over two percent. So um, you know, you have 25 00:01:31,000 --> 00:01:33,440 Speaker 1: that plus a risk premium on top of that, and 26 00:01:33,640 --> 00:01:35,680 Speaker 1: that gets you too close to three percent and that's 27 00:01:35,720 --> 00:01:38,240 Speaker 1: where um, we're we're likely to hover for for a 28 00:01:38,280 --> 00:01:40,760 Speaker 1: little while. Um. It does have big implications for the 29 00:01:40,760 --> 00:01:43,679 Speaker 1: economy though, because when one of the things that that 30 00:01:43,760 --> 00:01:46,440 Speaker 1: we calculate based on this inflation data is what are 31 00:01:46,440 --> 00:01:49,640 Speaker 1: real wages? So what are wages minus inflation? And those 32 00:01:49,640 --> 00:01:53,080 Speaker 1: have been coming down from from a from a high 33 00:01:53,240 --> 00:01:55,480 Speaker 1: last month. So um, so that's something we have to 34 00:01:55,560 --> 00:01:57,880 Speaker 1: keep track of. Is is you know, will spending be 35 00:01:57,920 --> 00:02:00,360 Speaker 1: able to be kept up if inflation can and used 36 00:02:00,360 --> 00:02:03,280 Speaker 1: to rise? So how will the FED view this? Yeah, 37 00:02:03,360 --> 00:02:05,000 Speaker 1: so I think the FED is going to say, Okay, 38 00:02:05,000 --> 00:02:07,760 Speaker 1: this is evidence that what we're doing is the right 39 00:02:07,880 --> 00:02:12,200 Speaker 1: policy path because we've been hiking you know, irregularly, but 40 00:02:12,280 --> 00:02:16,280 Speaker 1: certainly consistently, and as such, we you know, we were 41 00:02:16,280 --> 00:02:19,040 Speaker 1: trying to get inflation under control. We don't want inflation 42 00:02:19,120 --> 00:02:23,359 Speaker 1: to be significantly above where it is today. UM. But 43 00:02:23,760 --> 00:02:26,480 Speaker 1: you know, it says that their gradual path hasn't really 44 00:02:26,639 --> 00:02:30,000 Speaker 1: disrupted the economy, but it also hasn't yet brought inflation 45 00:02:30,040 --> 00:02:33,360 Speaker 1: and inflation expectations down very much. So until it does that, 46 00:02:33,400 --> 00:02:37,120 Speaker 1: I think that they're going to continue to be reasonably hawkish. 47 00:02:37,480 --> 00:02:40,280 Speaker 1: So right now I'm looking at the expectations that are 48 00:02:40,280 --> 00:02:43,480 Speaker 1: being priced into the futures market for a FED rate 49 00:02:43,600 --> 00:02:47,560 Speaker 1: hike tomorrow. It is pretty much chance of a rate 50 00:02:47,639 --> 00:02:51,359 Speaker 1: hike tomorrow. UM. I think the more interesting thing that 51 00:02:51,440 --> 00:02:55,040 Speaker 1: we can hear from the Fed is guidance for the 52 00:02:55,080 --> 00:02:57,680 Speaker 1: rest of the year for next year, and there's been 53 00:02:57,720 --> 00:03:01,440 Speaker 1: some speculation that the Fed might hint that it would 54 00:03:01,440 --> 00:03:06,160 Speaker 1: be willing to slow or cretail it's balance sheet normalization 55 00:03:07,040 --> 00:03:10,919 Speaker 1: if the economy didn't accelerate more. Have you heard about that? 56 00:03:10,960 --> 00:03:13,680 Speaker 1: What do you make of that? Yeah? So, so certainly 57 00:03:13,720 --> 00:03:16,520 Speaker 1: one or two UM, what one or two economists have 58 00:03:16,720 --> 00:03:20,320 Speaker 1: suggested that maybe the UM the FED might consider slowing 59 00:03:20,360 --> 00:03:22,880 Speaker 1: the pace of adjustment. I think part of the reason 60 00:03:22,919 --> 00:03:25,560 Speaker 1: for that is that you've seen the FED funds market 61 00:03:25,720 --> 00:03:28,760 Speaker 1: start to creep up toward the interest that the FED 62 00:03:28,840 --> 00:03:32,400 Speaker 1: pays on access reserves and because of that, they're thinking, oh, well, 63 00:03:32,480 --> 00:03:34,760 Speaker 1: that means that money markets are very tight, and because 64 00:03:34,800 --> 00:03:37,760 Speaker 1: money markets are tight, we should maybe not reduce the 65 00:03:37,800 --> 00:03:40,320 Speaker 1: balance sheet as much. I'm not convinced that it's really 66 00:03:40,600 --> 00:03:42,920 Speaker 1: it's port folio runoff that's doing this. There's a lot 67 00:03:43,000 --> 00:03:45,840 Speaker 1: of other factors that are involved in the pricing of 68 00:03:45,880 --> 00:03:48,960 Speaker 1: Fed funds and and other short end um short end 69 00:03:49,040 --> 00:03:51,520 Speaker 1: rate So, for example, right now, there's a lot of 70 00:03:51,520 --> 00:03:54,560 Speaker 1: treasury bills in the market because of the fiscal stimulus. 71 00:03:54,600 --> 00:03:57,040 Speaker 1: The Treasury departments issued a lot of them, so that's 72 00:03:57,080 --> 00:04:00,360 Speaker 1: caused almost every single front end interest rate to move 73 00:04:00,400 --> 00:04:03,080 Speaker 1: a bit higher than it had been prior to this year. 74 00:04:03,560 --> 00:04:05,880 Speaker 1: So it's not that the Fed can really do much 75 00:04:05,880 --> 00:04:09,640 Speaker 1: about it except maybe lower um and not hike interests 76 00:04:09,640 --> 00:04:12,920 Speaker 1: that paid on reserves by as much as they do 77 00:04:13,000 --> 00:04:15,400 Speaker 1: their UH, their range of where they want to keep 78 00:04:15,440 --> 00:04:17,200 Speaker 1: the Fed funds right. You know, I'm glad that you 79 00:04:17,279 --> 00:04:21,280 Speaker 1: mentioned bills. We've been talking a lot about the treasury 80 00:04:21,279 --> 00:04:25,320 Speaker 1: auctions this week. They're nearly two hundred billion dollars of 81 00:04:25,880 --> 00:04:28,599 Speaker 1: debt auctions. Most of them are bills. UH. The ten 82 00:04:28,680 --> 00:04:32,200 Speaker 1: year auction of a coupon debt yesterday went really well. 83 00:04:32,440 --> 00:04:35,080 Speaker 1: Today we have more bill sales. How are the bill 84 00:04:35,120 --> 00:04:38,640 Speaker 1: sales going? And who is buying? Yeah? So the so 85 00:04:38,680 --> 00:04:42,000 Speaker 1: the bill sales have really been, uh been up and down, 86 00:04:42,080 --> 00:04:44,720 Speaker 1: and in particular, what's been really good is actually six 87 00:04:44,760 --> 00:04:47,440 Speaker 1: months bills, which which a little bit surprises me because 88 00:04:47,480 --> 00:04:49,240 Speaker 1: when we don't know if the Federal Reserve is going 89 00:04:49,279 --> 00:04:52,000 Speaker 1: to hike perhaps two times over the next couple of 90 00:04:52,000 --> 00:04:54,119 Speaker 1: months or one time over the next couple of months, 91 00:04:54,279 --> 00:04:56,159 Speaker 1: you know, why lock in for six months when you 92 00:04:56,200 --> 00:04:58,520 Speaker 1: can just do a four week bill or three months 93 00:04:58,520 --> 00:05:01,479 Speaker 1: bill and be able to capture and additional FED hike 94 00:05:01,560 --> 00:05:04,160 Speaker 1: if if the Fed happens the hike in both June 95 00:05:04,160 --> 00:05:08,240 Speaker 1: and September. Um so so demands good. Who's buying it's 96 00:05:08,279 --> 00:05:11,520 Speaker 1: it's mostly it's mostly end users. So when you look 97 00:05:11,560 --> 00:05:15,320 Speaker 1: at at who's purchasing those longer term securities, it's UM, 98 00:05:15,360 --> 00:05:18,920 Speaker 1: it's UH investment funds and the like. The front end 99 00:05:18,920 --> 00:05:21,080 Speaker 1: bills of four week bills tend to go to dealers, 100 00:05:21,080 --> 00:05:23,520 Speaker 1: and then the dealers then UM then sell them on 101 00:05:23,640 --> 00:05:26,720 Speaker 1: to other other investors such as money market funds and 102 00:05:26,720 --> 00:05:30,279 Speaker 1: and UH and just cash equivalent investors. Um I do 103 00:05:30,320 --> 00:05:33,000 Speaker 1: want to just bring you some headlines just crossing. The 104 00:05:33,040 --> 00:05:36,760 Speaker 1: Senate panel voted twenty four and five against rich Clorida 105 00:05:36,960 --> 00:05:41,159 Speaker 1: for his nomination is FED vice chair? Excuse me. The 106 00:05:41,160 --> 00:05:44,560 Speaker 1: Senate panel also voted eighteen four seven against for Bowman 107 00:05:44,680 --> 00:05:47,560 Speaker 1: for his FED nomination. And do you think that any 108 00:05:47,600 --> 00:05:50,159 Speaker 1: of these sort of changes to the composition of the 109 00:05:50,160 --> 00:05:53,960 Speaker 1: Federals or of will affect sort of the direction of policy? 110 00:05:54,400 --> 00:05:57,080 Speaker 1: I don't think so. I think Richard Clarenda, in particular 111 00:05:57,279 --> 00:06:01,560 Speaker 1: is is a pretty mainstream, um mainstream economists. I think 112 00:06:01,560 --> 00:06:04,159 Speaker 1: that he'll look at the economy where it's going, and 113 00:06:04,240 --> 00:06:09,200 Speaker 1: how policy might might impact both markets and importantly the economy, 114 00:06:09,560 --> 00:06:12,400 Speaker 1: and as such he'll you know, he's not going to 115 00:06:12,480 --> 00:06:15,200 Speaker 1: really rock the boat as much as some other people 116 00:06:15,240 --> 00:06:17,839 Speaker 1: that we may be thought, um that that President Trump 117 00:06:17,920 --> 00:06:20,520 Speaker 1: might might actually pick um. You know, he's not a 118 00:06:20,520 --> 00:06:23,960 Speaker 1: particularly hawkish or dovist person. Um. You know, when you 119 00:06:24,000 --> 00:06:26,320 Speaker 1: know you've spoken to him, I've spoken to him. He's 120 00:06:26,360 --> 00:06:29,480 Speaker 1: really a reasonable, a reasonable person when it comes in 121 00:06:29,600 --> 00:06:32,479 Speaker 1: and a real monetary policy expert. So I think when 122 00:06:32,520 --> 00:06:35,760 Speaker 1: when it comes to things like changes in the Balancie composition, 123 00:06:35,839 --> 00:06:38,600 Speaker 1: he'll be one person that they'll definitely lean on for 124 00:06:38,680 --> 00:06:41,080 Speaker 1: his opinion as to you know, what size the balance 125 00:06:41,200 --> 00:06:43,679 Speaker 1: should be or the pace of reduction there I Jersey, 126 00:06:43,720 --> 00:06:45,560 Speaker 1: thank you so much for being with us our Jersey 127 00:06:45,640 --> 00:06:50,040 Speaker 1: chief US interest rate strategist for Bloomberg Intelligence. Great insight 128 00:06:50,080 --> 00:06:53,120 Speaker 1: ahead of the announcement to borrow from the Federal Reserve 129 00:06:53,360 --> 00:06:55,360 Speaker 1: as well as all of the Treasury auctions the first 130 00:06:55,360 --> 00:07:12,760 Speaker 1: two days of this week. This is a confusing US economy. 131 00:07:12,760 --> 00:07:16,440 Speaker 1: While it is very strong now, certainly a growing number 132 00:07:16,480 --> 00:07:18,840 Speaker 1: of traders are saying, perhaps this is as good as 133 00:07:18,840 --> 00:07:21,880 Speaker 1: it gets, and how do you maneuver given the fact 134 00:07:21,960 --> 00:07:26,520 Speaker 1: that the hangover from the really incredible expansion that we've 135 00:07:26,520 --> 00:07:29,680 Speaker 1: seen could be potentially dramatic. Joining us now, Ben Hunt, 136 00:07:29,920 --> 00:07:33,360 Speaker 1: He has chief investment strategist at Salient, which manages about 137 00:07:33,360 --> 00:07:37,360 Speaker 1: thirteen billion dollars and is focused on real assets. Ben 138 00:07:37,440 --> 00:07:42,240 Speaker 1: Hunt is also the author of Epsilon Theory dot com 139 00:07:42,360 --> 00:07:46,920 Speaker 1: um and it has a hundred thousand professional investors as 140 00:07:47,000 --> 00:07:50,000 Speaker 1: regular readers. Ben, thank you so much for joining me. Um. 141 00:07:50,000 --> 00:07:52,560 Speaker 1: I want to start with how you're viewing the economy 142 00:07:52,680 --> 00:07:55,640 Speaker 1: right now, because on one hand, you're seeing US inflation 143 00:07:55,680 --> 00:07:59,360 Speaker 1: at six years six year highs. You're seeing wages that 144 00:07:59,400 --> 00:08:02,240 Speaker 1: are not being up to the degree that people would 145 00:08:02,280 --> 00:08:06,200 Speaker 1: like to see, a federal reserve that's hiking. Where where 146 00:08:06,200 --> 00:08:08,200 Speaker 1: are you thinking as far as the sort of risk 147 00:08:08,200 --> 00:08:10,680 Speaker 1: appetite that you're willing to make. Well, it's great to 148 00:08:10,680 --> 00:08:12,880 Speaker 1: be on again, Lisa, Thank thanks for having me. And 149 00:08:13,040 --> 00:08:15,520 Speaker 1: I think you put your finger on what is the 150 00:08:15,600 --> 00:08:18,680 Speaker 1: real I'll use a ten dollar word dichotomy. You know, 151 00:08:18,760 --> 00:08:22,480 Speaker 1: it's this, it's this real uh fracture that we're seeing 152 00:08:22,560 --> 00:08:26,960 Speaker 1: between the real economy and what i'll call the market economy. 153 00:08:27,000 --> 00:08:28,840 Speaker 1: You know, what's happening in the in the in the 154 00:08:28,840 --> 00:08:32,680 Speaker 1: stock market. And look, you know, for the last nine years, 155 00:08:33,280 --> 00:08:36,920 Speaker 1: we've had a stock market that is really rocked uh 156 00:08:36,920 --> 00:08:40,120 Speaker 1: and A and a real economy, particularly here in the US, 157 00:08:40,200 --> 00:08:43,800 Speaker 1: it's been mich right. And and what what I think 158 00:08:43,800 --> 00:08:47,680 Speaker 1: you're seeing today is that that's really been turned on 159 00:08:47,800 --> 00:08:50,440 Speaker 1: his head, right, that you've got a real economy that 160 00:08:50,559 --> 00:08:53,280 Speaker 1: is starting to to really pick up here. And we 161 00:08:53,320 --> 00:08:56,040 Speaker 1: can talk about signs off of that and what's driving that. 162 00:08:56,720 --> 00:08:59,319 Speaker 1: But at the same time, you're you're seeing the markets 163 00:08:59,800 --> 00:09:03,040 Speaker 1: you here kind of looking mech right, and and what 164 00:09:03,080 --> 00:09:05,600 Speaker 1: I'm trying to say, is that's not an accident. Right. 165 00:09:05,640 --> 00:09:09,240 Speaker 1: We've had this split in this this this dichotomy between 166 00:09:09,280 --> 00:09:11,839 Speaker 1: the real world, the real economy and markets for about 167 00:09:11,920 --> 00:09:15,760 Speaker 1: nine years now, and now it's truly flipping on his head. Well, 168 00:09:16,000 --> 00:09:17,760 Speaker 1: you know, I want to just push back a little 169 00:09:17,800 --> 00:09:20,320 Speaker 1: bit because I think that when you talk about the 170 00:09:20,320 --> 00:09:23,240 Speaker 1: real economy, what are you looking at? Because you know, 171 00:09:23,240 --> 00:09:25,520 Speaker 1: there are signs that you know, there still is a 172 00:09:25,600 --> 00:09:28,200 Speaker 1: large swath of people that have been left behind in 173 00:09:28,240 --> 00:09:31,480 Speaker 1: the recovery because there has been so much focus on 174 00:09:31,640 --> 00:09:34,880 Speaker 1: the stock market and you know, assets that only the 175 00:09:34,880 --> 00:09:38,640 Speaker 1: wealthiest people are really heavily invested in. And so I'm 176 00:09:38,640 --> 00:09:41,199 Speaker 1: just wondering, you know, what's where are you getting the 177 00:09:41,240 --> 00:09:43,560 Speaker 1: sense it's going to accelerate? Yeah? Yeah, No, what I 178 00:09:43,600 --> 00:09:47,319 Speaker 1: mean by the real economy, I'm really focusing on small 179 00:09:47,360 --> 00:09:50,880 Speaker 1: and medium businesses here in the United States. You know, 180 00:09:50,920 --> 00:09:53,760 Speaker 1: we got some some some new data out today. You know, 181 00:09:53,800 --> 00:09:57,240 Speaker 1: the I'll call it the confidence, the intention to grow, 182 00:09:57,760 --> 00:10:02,600 Speaker 1: the intention to spend, the intention to higher from small businesses, 183 00:10:02,960 --> 00:10:07,520 Speaker 1: which still are the economic backbone of this country, of 184 00:10:07,600 --> 00:10:11,360 Speaker 1: our real economy. You know, that confidence at least for 185 00:10:11,400 --> 00:10:14,720 Speaker 1: intention to grow, it's never been higher since they've been 186 00:10:14,720 --> 00:10:16,440 Speaker 1: taking this survey, and they've been taking it for a 187 00:10:16,480 --> 00:10:18,960 Speaker 1: long time. Now. Look, I totally agree with you that 188 00:10:19,000 --> 00:10:22,400 Speaker 1: there are so many people that have been left behind 189 00:10:22,920 --> 00:10:25,760 Speaker 1: in what i'll call the inflation we have had over 190 00:10:25,800 --> 00:10:29,800 Speaker 1: the last nine years, which is an inflation in asset prices. 191 00:10:29,840 --> 00:10:35,160 Speaker 1: So we're seeing wealth inequality return to levels we haven't 192 00:10:35,160 --> 00:10:39,720 Speaker 1: seen since the nineteen thirties, and that has enormous consequences, 193 00:10:39,760 --> 00:10:42,520 Speaker 1: particularly in politics. But what I'm talking about with the 194 00:10:42,520 --> 00:10:45,800 Speaker 1: real economy, I'm talking about small the medium businesses year 195 00:10:45,800 --> 00:10:51,320 Speaker 1: in the United States and their perception, their intention has 196 00:10:51,480 --> 00:10:57,160 Speaker 1: never been more growth oriented. Uh, new hiring, new expansion, 197 00:10:57,280 --> 00:10:59,080 Speaker 1: all of that. That's what I'm talking about with the 198 00:10:59,080 --> 00:11:01,840 Speaker 1: real economy. How are you capitalizing on that? How are 199 00:11:01,840 --> 00:11:05,600 Speaker 1: you investing around that? Well, look, it's it's it. It 200 00:11:05,760 --> 00:11:09,920 Speaker 1: really means, you know, thinking about how to invest your 201 00:11:09,960 --> 00:11:14,440 Speaker 1: money away from the public markets that have been the 202 00:11:14,440 --> 00:11:18,840 Speaker 1: beneficiary of what I'll call is the monetary stimulus, you know, 203 00:11:18,880 --> 00:11:22,240 Speaker 1: central banks buying everything inside for the last nine years. 204 00:11:22,559 --> 00:11:25,280 Speaker 1: And now how do you think about, well, what if 205 00:11:25,320 --> 00:11:28,400 Speaker 1: that gets turned on his head with the SAD now 206 00:11:28,600 --> 00:11:31,880 Speaker 1: shrinking its balance sheet, with the tide going out on 207 00:11:31,920 --> 00:11:35,120 Speaker 1: the monetary stimulus. But at the same same time, you've 208 00:11:35,120 --> 00:11:38,400 Speaker 1: got fiscal stimulus in the form of tax cuts. You've 209 00:11:38,440 --> 00:11:41,080 Speaker 1: got and I know this sounds weird, but as the 210 00:11:41,120 --> 00:11:44,760 Speaker 1: Fed normalizes interest rates from this very low base, I 211 00:11:44,760 --> 00:11:49,520 Speaker 1: think that's actually stimulative again to these small and medium businesses. 212 00:11:50,000 --> 00:11:53,000 Speaker 1: And third, I don't think you can overestimate I really don't. 213 00:11:53,720 --> 00:11:57,560 Speaker 1: What I'll call is the Donald Trump narrative that you know, 214 00:11:57,600 --> 00:12:00,960 Speaker 1: whatever the reality is, there is a reception that there's 215 00:12:01,080 --> 00:12:05,840 Speaker 1: enormous change of foot particularly informs of deregulation, all of 216 00:12:05,880 --> 00:12:11,120 Speaker 1: those things benefiting the mindset, let's call it the expectations 217 00:12:11,160 --> 00:12:13,360 Speaker 1: of small to medium businesses. So what do you do 218 00:12:13,440 --> 00:12:16,920 Speaker 1: for that for investing? Well, look, you can certainly look 219 00:12:16,960 --> 00:12:20,200 Speaker 1: at private markets as opposed to public markets, but you 220 00:12:20,240 --> 00:12:24,120 Speaker 1: can also look at value of compared to growth. And 221 00:12:24,160 --> 00:12:26,559 Speaker 1: you can look at you know, the Russell two thousand, 222 00:12:26,760 --> 00:12:31,240 Speaker 1: which tends to doesn't tend it's comprised of those smaller 223 00:12:31,320 --> 00:12:36,160 Speaker 1: cap stocks which tend to match or mimic those smaller 224 00:12:36,200 --> 00:12:39,480 Speaker 1: to medium businesses in the real economy. But one thing 225 00:12:39,520 --> 00:12:41,480 Speaker 1: that I'm struck by is that the Russell two thousand 226 00:12:41,559 --> 00:12:45,720 Speaker 1: is actually outperformed dramatically this year. I mean, it's almost 227 00:12:46,080 --> 00:12:47,920 Speaker 1: what I'm talking about. Yeah, I mean, I'm just wondering 228 00:12:47,920 --> 00:12:54,520 Speaker 1: how much is left. Look, I think there's a lot left, frankly, 229 00:12:54,760 --> 00:12:57,400 Speaker 1: right because I I think there's been such a tent 230 00:12:57,679 --> 00:13:01,640 Speaker 1: up I'll call it demand, but it's it's there's there's 231 00:13:01,679 --> 00:13:04,720 Speaker 1: such a tent up energy in the small and medium 232 00:13:04,760 --> 00:13:08,280 Speaker 1: businesses in this country that I think this can go 233 00:13:08,320 --> 00:13:12,840 Speaker 1: on for quite a long time. Now. Look, ultimately, mistakes 234 00:13:12,880 --> 00:13:15,720 Speaker 1: will be made, right, the said will hike rates too 235 00:13:16,120 --> 00:13:19,479 Speaker 1: you know, an an interest rate hike too far. Ultimately 236 00:13:19,559 --> 00:13:23,480 Speaker 1: we will get really inflation starting to kick in, which 237 00:13:23,559 --> 00:13:27,199 Speaker 1: hits the margins not just of you know, big companies, 238 00:13:27,200 --> 00:13:29,760 Speaker 1: but also small and medium companies. That that that's all 239 00:13:29,800 --> 00:13:33,000 Speaker 1: going to happen. But right now we're at this phase 240 00:13:33,080 --> 00:13:36,319 Speaker 1: where these small and medium businesses are really picking their 241 00:13:36,320 --> 00:13:40,640 Speaker 1: heads up and are intending to spend expand and that 242 00:13:40,679 --> 00:13:43,880 Speaker 1: can do well for stocks to represent that. Then, what 243 00:13:43,960 --> 00:13:46,960 Speaker 1: do you think is the biggest thing that investors are 244 00:13:46,960 --> 00:13:51,440 Speaker 1: getting wrong right now? You know, the biggest thing they're 245 00:13:51,440 --> 00:13:54,240 Speaker 1: getting wrong had in my view, is that we are 246 00:13:54,280 --> 00:13:57,960 Speaker 1: still trapped in this perception that we live in a 247 00:13:58,040 --> 00:14:02,600 Speaker 1: deflationary world forever and ever. I'm in just as far 248 00:14:02,640 --> 00:14:05,320 Speaker 1: as the eye can see. And you know, frankly, this 249 00:14:05,360 --> 00:14:08,360 Speaker 1: has been the right bet for forty years, right that 250 00:14:08,360 --> 00:14:11,840 Speaker 1: that we have been in this deflationary rates are always 251 00:14:11,880 --> 00:14:15,040 Speaker 1: going down type of world. What I'm trying to suggest 252 00:14:15,200 --> 00:14:19,240 Speaker 1: is is that when these big picture items like are 253 00:14:19,280 --> 00:14:22,600 Speaker 1: we in an inflationary world or deflationary world? When these 254 00:14:22,680 --> 00:14:26,680 Speaker 1: ideas change is at moments just like this, because it's 255 00:14:26,720 --> 00:14:30,600 Speaker 1: driven by change in politics, is driven by a change 256 00:14:30,600 --> 00:14:35,320 Speaker 1: in the mindset, the expectations, particularly of small to medium businesses. 257 00:14:35,840 --> 00:14:38,000 Speaker 1: So I think there's a you know, I'll use another 258 00:14:38,040 --> 00:14:41,440 Speaker 1: ten dollar phrase, a non trivial chance that where at 259 00:14:41,440 --> 00:14:46,960 Speaker 1: the cusp of a big shift here in the investment environment, 260 00:14:47,080 --> 00:14:50,280 Speaker 1: our business environment, and that's moving from a world where 261 00:14:50,280 --> 00:14:53,720 Speaker 1: it's deflation all the time to where we really have 262 00:14:53,840 --> 00:14:56,880 Speaker 1: to start flexing those How do you invest in an 263 00:14:56,920 --> 00:15:00,800 Speaker 1: inflationary market all over again? And Hunt, thank you so 264 00:15:00,840 --> 00:15:03,560 Speaker 1: much for joining me, really really interesting. Ben Hunt, chief 265 00:15:03,600 --> 00:15:08,120 Speaker 1: investment strategist at Salient. Salient Managers about thirteen billion dollars. 266 00:15:08,120 --> 00:15:11,320 Speaker 1: It's focused on real assets. Been also is the author 267 00:15:11,400 --> 00:15:31,040 Speaker 1: of a blog epsilon theory. Dot com markets have been 268 00:15:31,280 --> 00:15:35,200 Speaker 1: struggling to figure out the real world impact from the 269 00:15:35,400 --> 00:15:40,200 Speaker 1: increasing trade tensions between the US and other major economies. 270 00:15:40,360 --> 00:15:43,320 Speaker 1: One place so where perhaps we'll be able to see 271 00:15:43,320 --> 00:15:47,640 Speaker 1: that is with tourism. And the question is has tourism 272 00:15:47,720 --> 00:15:51,520 Speaker 1: to the United States declined? Joining US now Chris Thompson, President, 273 00:15:51,600 --> 00:15:55,280 Speaker 1: chief executive officer of Brand USA. It is a federal 274 00:15:55,400 --> 00:16:01,200 Speaker 1: agency that focuses on trying to attract international dull travelers 275 00:16:01,280 --> 00:16:03,360 Speaker 1: to the U as Chris, thank you so much for 276 00:16:03,440 --> 00:16:06,760 Speaker 1: being with me, so good morning, my pleasure. So I'd 277 00:16:06,800 --> 00:16:10,120 Speaker 1: love to get your sense of exactly this, whether or 278 00:16:10,160 --> 00:16:13,600 Speaker 1: not fewer tourists are coming to the US as a 279 00:16:13,680 --> 00:16:18,120 Speaker 1: response of to the growing tension that has frankly erupted 280 00:16:18,320 --> 00:16:22,440 Speaker 1: during President Trump and some of these longstanding allies. You know, 281 00:16:22,480 --> 00:16:25,760 Speaker 1: we have seen some softness in international visitation to the 282 00:16:25,840 --> 00:16:30,320 Speaker 1: United States. That was after record visitation for six or 283 00:16:30,360 --> 00:16:33,800 Speaker 1: eight years, But the majority of that actually happened prior 284 00:16:33,840 --> 00:16:35,960 Speaker 1: to the elect of the majority of the reasons for 285 00:16:36,000 --> 00:16:38,600 Speaker 1: that happened prior to the election and have really been 286 00:16:38,640 --> 00:16:41,760 Speaker 1: influencing since then, the main thing being the strength of 287 00:16:41,800 --> 00:16:44,720 Speaker 1: the dollar. You know, you look at market flag Canada, 288 00:16:44,800 --> 00:16:48,160 Speaker 1: Mexico and others. You know, when the dollars strong and 289 00:16:48,200 --> 00:16:51,520 Speaker 1: obviously makes it a little more challenging for folks looking 290 00:16:51,520 --> 00:16:54,520 Speaker 1: to travel to the United States. So that has been 291 00:16:55,080 --> 00:16:58,800 Speaker 1: the case for uh an extended period of time at 292 00:16:58,840 --> 00:17:02,400 Speaker 1: at levels that have been higher than normal. So I 293 00:17:02,440 --> 00:17:07,240 Speaker 1: think that's contributed significantly some of our uh you know, 294 00:17:07,280 --> 00:17:10,840 Speaker 1: some of the things that affect people's intent to travel 295 00:17:10,880 --> 00:17:13,360 Speaker 1: and their willingness to travel or what's affecting them back home. 296 00:17:13,440 --> 00:17:17,400 Speaker 1: So a lot of economic, political, social tensions back home 297 00:17:17,640 --> 00:17:20,439 Speaker 1: also influence intent to travel. So I'm not sure you 298 00:17:20,440 --> 00:17:23,320 Speaker 1: can really pay it on, uh, the things that are 299 00:17:23,320 --> 00:17:26,320 Speaker 1: happening at the moment um. You know, the beautiful thing 300 00:17:26,359 --> 00:17:29,959 Speaker 1: about travel is it really has the ability to transcend politics. 301 00:17:30,040 --> 00:17:34,159 Speaker 1: It's you know about destinations, experiences and US as Americans. 302 00:17:34,240 --> 00:17:36,480 Speaker 1: And you know, we know once people travel to the 303 00:17:36,560 --> 00:17:39,680 Speaker 1: United States and they can immerse themselves and our destinations 304 00:17:39,720 --> 00:17:43,560 Speaker 1: and and they get to feel from US as Americans, uh, 305 00:17:43,600 --> 00:17:45,560 Speaker 1: as far as as being some of the most welcoming 306 00:17:45,600 --> 00:17:48,040 Speaker 1: people in the world, that that has ability to kind 307 00:17:48,080 --> 00:17:50,159 Speaker 1: of rise above all that. Did you notice an uptick 308 00:17:50,440 --> 00:17:54,440 Speaker 1: in visitors international visitors to the US earlier this year 309 00:17:54,560 --> 00:17:57,600 Speaker 1: when the dollar weakened. Yeah, you know, there was some 310 00:17:58,600 --> 00:18:02,400 Speaker 1: some moderation in the dollar, so it was hard to tell. 311 00:18:02,800 --> 00:18:05,800 Speaker 1: The numbers that we get are lagging numbers from the 312 00:18:05,800 --> 00:18:07,639 Speaker 1: Department of Commerce, so I'm not sure we'll really know 313 00:18:07,680 --> 00:18:10,639 Speaker 1: the true impact on what our final numbers as a 314 00:18:10,680 --> 00:18:14,040 Speaker 1: result of that. But we did see some some increases 315 00:18:14,080 --> 00:18:17,879 Speaker 1: in numbers going into seen which was encouraging. And a 316 00:18:17,880 --> 00:18:20,119 Speaker 1: lot of that, as you pointed out, had to do 317 00:18:20,160 --> 00:18:22,080 Speaker 1: with the fact that the dollar was weakening a bit. 318 00:18:22,119 --> 00:18:24,879 Speaker 1: But I think now it's maybe heading back in the 319 00:18:24,920 --> 00:18:28,120 Speaker 1: other direction, and and so it just depends on where 320 00:18:28,119 --> 00:18:30,639 Speaker 1: that all ends. Can you give us some perspective on 321 00:18:30,760 --> 00:18:35,119 Speaker 1: how important tourism is to the U. S economy? So 322 00:18:35,119 --> 00:18:37,600 Speaker 1: most people don't realize that travel is actually an export. 323 00:18:37,640 --> 00:18:41,080 Speaker 1: The product is the experienced people have, the memories they 324 00:18:41,080 --> 00:18:44,399 Speaker 1: take home. As an export, it's a service export. So 325 00:18:45,640 --> 00:18:48,520 Speaker 1: of everything the United States exports that's a service is 326 00:18:48,560 --> 00:18:52,040 Speaker 1: tried to tie to people coming here, having the experiences 327 00:18:52,080 --> 00:18:55,280 Speaker 1: and leaving their money. Eleven percent of everything the largest 328 00:18:55,320 --> 00:18:57,960 Speaker 1: economy in the world exports is tied to people traveling 329 00:18:57,960 --> 00:19:01,000 Speaker 1: to the United States enjoying them els and leaving their 330 00:19:01,000 --> 00:19:04,399 Speaker 1: money behind. You know, you look at balance of trade. 331 00:19:04,440 --> 00:19:07,480 Speaker 1: Trade is obviously a big topic right now. In the 332 00:19:07,560 --> 00:19:10,880 Speaker 1: last time we had annual numbers, we had seventy six 333 00:19:10,960 --> 00:19:15,120 Speaker 1: million people spend two billion dollars and that was an 334 00:19:15,160 --> 00:19:18,600 Speaker 1: eighty four billion dollar positive contribution to the balance of trade. 335 00:19:18,680 --> 00:19:21,399 Speaker 1: So when you look at it as an economic engine, 336 00:19:21,440 --> 00:19:24,120 Speaker 1: it's certainly a huge contributor. And then on the soft 337 00:19:24,119 --> 00:19:26,520 Speaker 1: diplomacy side, we know that, as I said earlier, once 338 00:19:26,520 --> 00:19:29,240 Speaker 1: people have a chance to come and experience the United States, 339 00:19:29,280 --> 00:19:33,000 Speaker 1: they always walk away with a more positive opinion of it, 340 00:19:33,040 --> 00:19:36,480 Speaker 1: whatever their opinion was coming in Chris. Last year, there 341 00:19:36,480 --> 00:19:39,360 Speaker 1: were a number of stories that came out saying that 342 00:19:39,760 --> 00:19:44,680 Speaker 1: President Trump's budget eliminated funding for Brand USA and would 343 00:19:44,720 --> 00:19:49,040 Speaker 1: effectively kill the organization. Have you heard more about that? 344 00:19:49,200 --> 00:19:52,840 Speaker 1: What was your response? You know, anytime a president comes 345 00:19:52,880 --> 00:19:55,560 Speaker 1: in the way for them to make a statement of 346 00:19:55,560 --> 00:19:58,480 Speaker 1: priorities through budget. Uh And so obviously there were a 347 00:19:58,520 --> 00:20:00,960 Speaker 1: lot of priorities. There's never enough money in Washington to 348 00:20:01,040 --> 00:20:03,879 Speaker 1: do everything that everybody wants to do. Uh. So the 349 00:20:03,880 --> 00:20:06,159 Speaker 1: good news is that the people that actually appropriate or 350 00:20:06,160 --> 00:20:11,840 Speaker 1: Congress Congress we have a tremendous bipartisan, strong majority relationship. 351 00:20:12,200 --> 00:20:15,320 Speaker 1: As far as support in Congress, UH, when Congress actually 352 00:20:15,400 --> 00:20:19,400 Speaker 1: got to the business of appropriations are funding state impact 353 00:20:19,760 --> 00:20:23,080 Speaker 1: as as budgets were moved forward. So UH, though we 354 00:20:23,119 --> 00:20:25,280 Speaker 1: would have liked it, liked it to have been a 355 00:20:25,280 --> 00:20:28,440 Speaker 1: different situation. As far as the President's budget, we understand 356 00:20:28,840 --> 00:20:30,520 Speaker 1: that it is a statement of priorities and it's a 357 00:20:31,000 --> 00:20:34,080 Speaker 1: way to navigate a situation where there's really never enough funding. 358 00:20:34,640 --> 00:20:37,280 Speaker 1: Just a real quick what is how exactly do you 359 00:20:37,400 --> 00:20:42,040 Speaker 1: market the US to international investors? So our job is 360 00:20:42,080 --> 00:20:45,439 Speaker 1: to reach out to all the markets around the world. 361 00:20:45,760 --> 00:20:48,920 Speaker 1: We're we're headquartered here at Washington, d C. We're actually 362 00:20:48,920 --> 00:20:51,000 Speaker 1: a private company that had that's in partnership with the 363 00:20:51,000 --> 00:20:53,679 Speaker 1: federal government. We have fifteen offices around the world. We 364 00:20:53,760 --> 00:20:58,880 Speaker 1: take UH messages direct to consumers, and in this year, 365 00:21:00,000 --> 00:21:04,080 Speaker 1: our theme is music. Before there were destination marketing organizations 366 00:21:04,119 --> 00:21:06,879 Speaker 1: like Brand USA, the way people found out about US 367 00:21:06,920 --> 00:21:10,080 Speaker 1: was through movies and music. And we just released a 368 00:21:10,200 --> 00:21:15,240 Speaker 1: Imax film called America's Musical Journey, which documents the heritage 369 00:21:15,240 --> 00:21:18,120 Speaker 1: of American music and the cities that it was founded 370 00:21:18,119 --> 00:21:22,560 Speaker 1: in and tells a story about how UH that is 371 00:21:23,280 --> 00:21:25,440 Speaker 1: is a great way to talk about the United States, 372 00:21:25,440 --> 00:21:27,840 Speaker 1: America and what there is to see and do through music. 373 00:21:27,920 --> 00:21:30,879 Speaker 1: So our job is to be storytellers, to inspire travel 374 00:21:31,119 --> 00:21:33,680 Speaker 1: uh from our friends and visitors from around the world, 375 00:21:33,760 --> 00:21:36,360 Speaker 1: and in the end to really remind them why they 376 00:21:36,359 --> 00:21:38,119 Speaker 1: want to come to the United States, why it is 377 00:21:38,160 --> 00:21:40,959 Speaker 1: the most aspirational destination in the world. Chris Thompson, thank 378 00:21:41,000 --> 00:21:42,920 Speaker 1: you so much for being with me, President and Chief 379 00:21:42,960 --> 00:21:47,280 Speaker 1: executive Officer of Brand USA, coming to us from Washington, 380 00:21:47,440 --> 00:22:06,320 Speaker 1: d C. One notable thing about this week, which some 381 00:22:06,400 --> 00:22:09,639 Speaker 1: have dubbed the most important week of the year, is 382 00:22:09,720 --> 00:22:14,000 Speaker 1: that markets just don't care. They have not cared about 383 00:22:14,040 --> 00:22:18,640 Speaker 1: the Trump Kim Jung summit. UH. They haven't necessarily cared 384 00:22:18,680 --> 00:22:21,360 Speaker 1: about the inflammatory rhetoric out of the G seven meetings. 385 00:22:21,720 --> 00:22:24,399 Speaker 1: Here we had inflation data that came out pretty much 386 00:22:24,440 --> 00:22:27,159 Speaker 1: in line with expectations. No one cared. The Fed's going 387 00:22:27,200 --> 00:22:30,600 Speaker 1: to raise rates tomorrow, and then the ECB meets. Evan 388 00:22:30,640 --> 00:22:33,520 Speaker 1: Brown joins us now to see what'll make him care 389 00:22:33,680 --> 00:22:37,280 Speaker 1: and change potentially his views on the market. Right now, 390 00:22:37,320 --> 00:22:40,320 Speaker 1: Evan Brown is Director of Asset Allocation as part of 391 00:22:40,320 --> 00:22:43,960 Speaker 1: the Investment Solutions team for UBS Asset Management and he 392 00:22:44,040 --> 00:22:47,119 Speaker 1: joins us here in our eleven three oh studios. So, Evan, 393 00:22:48,680 --> 00:22:51,760 Speaker 1: what will make people care sort of change their strategies 394 00:22:52,440 --> 00:22:55,800 Speaker 1: that that's coming out potentially this week? Yes, So I think, 395 00:22:56,080 --> 00:22:58,560 Speaker 1: I mean, if anything is gonna gonna make us care, 396 00:22:58,640 --> 00:23:02,080 Speaker 1: it's it should be the tomb important central banks, arguably 397 00:23:02,119 --> 00:23:04,480 Speaker 1: at least in the development in developed markets to fend 398 00:23:04,480 --> 00:23:07,520 Speaker 1: the e CB this week. So um, I think for 399 00:23:07,560 --> 00:23:11,359 Speaker 1: the FED, we are going to get hike. We're finally 400 00:23:11,400 --> 00:23:15,520 Speaker 1: going to get to a priced in at its priced in. 401 00:23:15,680 --> 00:23:17,760 Speaker 1: But of course right after that you'll get the summary 402 00:23:17,760 --> 00:23:20,680 Speaker 1: of economic projections. Everyone will be wanting to looking at 403 00:23:20,880 --> 00:23:24,080 Speaker 1: at the forecast. What the people still care about the dots? 404 00:23:24,119 --> 00:23:28,200 Speaker 1: People still care about the dots? Uh, And people will say, oh, 405 00:23:28,359 --> 00:23:31,879 Speaker 1: the FED is moving to four hikes or or in 406 00:23:31,920 --> 00:23:34,760 Speaker 1: two thousand eighteen, maybe they're moving their their forecast for 407 00:23:34,800 --> 00:23:38,159 Speaker 1: two thousand nineteen as well, and share Powell is going 408 00:23:38,200 --> 00:23:40,800 Speaker 1: to do everything he can to de emphasize those dots. 409 00:23:40,880 --> 00:23:43,360 Speaker 1: That's something that he wants to do is is move 410 00:23:43,440 --> 00:23:47,600 Speaker 1: the FED away from forward guidance and more towards data dependence, 411 00:23:47,600 --> 00:23:50,080 Speaker 1: which I think is is healthy. It gets us focused 412 00:23:50,080 --> 00:23:52,520 Speaker 1: on the economy and and look, I think one of 413 00:23:52,520 --> 00:23:55,720 Speaker 1: the reasons why the markets haven't been so focused on 414 00:23:55,800 --> 00:23:58,240 Speaker 1: some of the other geopolitical risk right now is that 415 00:23:58,760 --> 00:24:02,080 Speaker 1: the economic news is is is pretty good. So let's 416 00:24:02,119 --> 00:24:04,480 Speaker 1: focus on that. The FED will want to focus on 417 00:24:04,520 --> 00:24:08,280 Speaker 1: that and uh, and and that really is what should 418 00:24:08,320 --> 00:24:12,320 Speaker 1: be guiding markets broadly. You know, there has been some 419 00:24:12,400 --> 00:24:15,440 Speaker 1: speculation as people try to spice up this week's meetings 420 00:24:15,480 --> 00:24:17,399 Speaker 1: that perhaps the FED and signal that they're willing to 421 00:24:17,440 --> 00:24:21,159 Speaker 1: curtail their balance sheet normalization. Uh, if they got a 422 00:24:21,200 --> 00:24:25,639 Speaker 1: little bit concerned about lack of acceleration economic data. Is 423 00:24:25,680 --> 00:24:27,080 Speaker 1: that pie in the sky or do you think that 424 00:24:27,080 --> 00:24:30,680 Speaker 1: that's a real discussion. I don't think that's a real discussion. 425 00:24:30,680 --> 00:24:32,960 Speaker 1: That set is all right, that the FED is on autopie. 426 00:24:32,960 --> 00:24:35,199 Speaker 1: I know that the Reserve Bank of India governor was 427 00:24:35,280 --> 00:24:37,920 Speaker 1: was calling on FED to to slow down its pace 428 00:24:37,960 --> 00:24:42,600 Speaker 1: of normalization, but there is a very very high bar 429 00:24:42,880 --> 00:24:45,840 Speaker 1: for doing that. The FED is on autopilot with the 430 00:24:45,880 --> 00:24:48,880 Speaker 1: balance sheet. They'll use rates as there as their main 431 00:24:48,920 --> 00:24:52,240 Speaker 1: policy lever. All right, So how are you positioning right now? 432 00:24:52,320 --> 00:24:56,199 Speaker 1: And when was the last time you changed your positioning. Yeah. So, um, 433 00:24:56,240 --> 00:24:59,600 Speaker 1: so look, we're we're broughty broadly constructive on on risk appetite, 434 00:24:59,800 --> 00:25:03,080 Speaker 1: on on risk asset. So we we uh, you know, 435 00:25:03,119 --> 00:25:06,119 Speaker 1: like global equities. I think, you know, more recently we 436 00:25:06,240 --> 00:25:08,800 Speaker 1: pivoted a little bit more towards the US and away 437 00:25:08,880 --> 00:25:13,359 Speaker 1: from Europe and Japan. Uh. Clearly we had the Italian 438 00:25:13,480 --> 00:25:16,680 Speaker 1: risks rise over the over the last few weeks, and 439 00:25:16,680 --> 00:25:19,000 Speaker 1: and those are non neglig non negligible. I know that 440 00:25:19,160 --> 00:25:21,320 Speaker 1: they've kind of disappeared a little bit from the headlines. 441 00:25:21,720 --> 00:25:24,920 Speaker 1: But um, you know, I think in September, you're gonna 442 00:25:24,960 --> 00:25:28,680 Speaker 1: get this Italian the budget from from the new Italian government, 443 00:25:29,119 --> 00:25:32,480 Speaker 1: and if that is in any way in line with 444 00:25:32,720 --> 00:25:36,320 Speaker 1: what the new government has promised in terms of fiscal 445 00:25:36,359 --> 00:25:39,600 Speaker 1: stimulus rising by five to seven percent of GDP, that's 446 00:25:39,600 --> 00:25:42,040 Speaker 1: gonna put them on a real collision course with with 447 00:25:42,119 --> 00:25:45,359 Speaker 1: the EU. So I know we all say that, look, 448 00:25:45,480 --> 00:25:48,840 Speaker 1: Italy ultimately will stay in the EU. Um, there will 449 00:25:48,880 --> 00:25:54,240 Speaker 1: be market pressure growing in September as this collision course, uh, 450 00:25:54,280 --> 00:25:57,400 Speaker 1: you know, it starts to starts to build. Here, You're 451 00:25:57,400 --> 00:26:00,960 Speaker 1: not alone in favoring the US over Japan and Europe. 452 00:26:01,000 --> 00:26:03,159 Speaker 1: In fact, Bank of American Mary Lynch put out a 453 00:26:03,200 --> 00:26:06,720 Speaker 1: fund manager survey today that showed that sixty four of 454 00:26:06,720 --> 00:26:09,040 Speaker 1: people who responded to the survey I think the US 455 00:26:09,080 --> 00:26:11,720 Speaker 1: has the most favorable outlook for profits. That is a 456 00:26:11,840 --> 00:26:17,280 Speaker 1: seventeen year high. So does that Does that give you 457 00:26:17,320 --> 00:26:18,800 Speaker 1: a little bit of banks the fact that this has 458 00:26:18,840 --> 00:26:22,879 Speaker 1: become a consensus trade at a time, especially with the 459 00:26:23,200 --> 00:26:28,080 Speaker 1: UH fanmag FAM, the big tech stocks in the US 460 00:26:28,119 --> 00:26:30,440 Speaker 1: being at such high high levels right now. Yeah, No, 461 00:26:30,560 --> 00:26:32,280 Speaker 1: I mean we always, we always want to be focused 462 00:26:32,320 --> 00:26:35,800 Speaker 1: on what's consensus, and uh that obviously raises questions. You 463 00:26:35,800 --> 00:26:37,640 Speaker 1: don't you don't want to be positioned the same way 464 00:26:37,680 --> 00:26:39,520 Speaker 1: that that everyone else is, and you have to be 465 00:26:39,880 --> 00:26:43,000 Speaker 1: hyper focused on the risks or catalyst that could lead 466 00:26:43,000 --> 00:26:45,640 Speaker 1: to an unwind of that UM. At the same time, 467 00:26:45,680 --> 00:26:49,879 Speaker 1: you cannot ignore what is an extraordinarily strong economy, what 468 00:26:50,000 --> 00:26:55,520 Speaker 1: are extraordinarily strong earnings. Uh So, yeah, it's hard and ultimately, 469 00:26:55,680 --> 00:26:58,640 Speaker 1: if we do get a downturn in the end, uh, 470 00:26:58,680 --> 00:27:00,760 Speaker 1: it's going to be those those foreign markets that that 471 00:27:00,880 --> 00:27:05,040 Speaker 1: get hit hardest. Europe and Japan. Emerging markets a higher 472 00:27:05,080 --> 00:27:07,639 Speaker 1: beta than the US. The US is a relative safe haven. 473 00:27:07,800 --> 00:27:09,760 Speaker 1: Do you think that some of the distress that we've 474 00:27:09,800 --> 00:27:13,400 Speaker 1: seen in emerging markets is just the beginning. I don't. 475 00:27:13,440 --> 00:27:15,760 Speaker 1: I think I think we're we're coming to the end. 476 00:27:15,800 --> 00:27:20,040 Speaker 1: You will have uh, specific countries, specific spots kind of 477 00:27:20,080 --> 00:27:24,600 Speaker 1: blow up at any given moment um, But broadly in 478 00:27:24,640 --> 00:27:28,119 Speaker 1: emerging markets, I think what you're seeing is, uh, some 479 00:27:28,240 --> 00:27:32,359 Speaker 1: of these central bankers in these economies, they increasingly realize 480 00:27:32,400 --> 00:27:34,640 Speaker 1: that they need to shore up their system. So you're 481 00:27:34,640 --> 00:27:38,600 Speaker 1: seeing Brazil central bank intervening and foreign exchange markets, you're 482 00:27:38,600 --> 00:27:42,399 Speaker 1: seeing Turkey, you're seeing India. These central banks are are hiking. 483 00:27:42,400 --> 00:27:44,960 Speaker 1: They get it. They realize that as the fetest tightening 484 00:27:45,480 --> 00:27:48,040 Speaker 1: that they need to protect themselves. At the same time, 485 00:27:48,280 --> 00:27:50,480 Speaker 1: one way in which you know this e M quote 486 00:27:50,520 --> 00:27:53,959 Speaker 1: unquote crisis or or or sell off is different from 487 00:27:54,000 --> 00:27:56,600 Speaker 1: previous ones is that you know, China is doing pretty 488 00:27:56,720 --> 00:28:00,760 Speaker 1: pretty well. China's growth is is quite strong. Uh So 489 00:28:01,040 --> 00:28:03,920 Speaker 1: that keeps us from getting too bearish on e M. Here, 490 00:28:04,240 --> 00:28:05,840 Speaker 1: so when was the last time that you changed your 491 00:28:05,880 --> 00:28:10,320 Speaker 1: recommendations for acid allocation. We've tilted a little bit here 492 00:28:10,400 --> 00:28:13,360 Speaker 1: and there, But in terms of having a broadly constructive 493 00:28:13,400 --> 00:28:16,880 Speaker 1: outlook on risk and on equities and and a short 494 00:28:17,000 --> 00:28:21,880 Speaker 1: duration view globally. Um, it's been a while well, I mean, 495 00:28:22,080 --> 00:28:23,920 Speaker 1: and and as far as the little tankers is, it's 496 00:28:23,920 --> 00:28:27,320 Speaker 1: sort of more cash here, feed LUs duration here. Is 497 00:28:27,320 --> 00:28:29,320 Speaker 1: it that type of idea? Yeah, I think so. I mean, 498 00:28:29,680 --> 00:28:33,160 Speaker 1: one one thing that I think is becoming increasingly important 499 00:28:33,200 --> 00:28:36,199 Speaker 1: for US and and uh global acid allocators is that 500 00:28:36,720 --> 00:28:40,760 Speaker 1: as the FED is hiking rates, the short end of 501 00:28:40,800 --> 00:28:46,080 Speaker 1: the yeol curve or cash is increasingly in attractive option. So, um, 502 00:28:46,160 --> 00:28:48,160 Speaker 1: you know, we think about ways in which you want 503 00:28:48,200 --> 00:28:50,000 Speaker 1: to move to the shorter end of the yeol curve. 504 00:28:50,280 --> 00:28:52,080 Speaker 1: You know, there's a there's a decent argument. Why do 505 00:28:52,120 --> 00:28:55,400 Speaker 1: you want to be earning, say two ninety on the 506 00:28:55,440 --> 00:28:59,520 Speaker 1: tenure and be taking all that volatility, inflation restoration risk 507 00:28:59,640 --> 00:29:02,840 Speaker 1: when you can park your funds in the two year 508 00:29:02,880 --> 00:29:05,160 Speaker 1: yield that at about to fifty, is it is it 509 00:29:05,200 --> 00:29:07,080 Speaker 1: worth it to be out there? So I think if 510 00:29:07,120 --> 00:29:09,800 Speaker 1: there's if there's any shift, which I think will continue 511 00:29:09,800 --> 00:29:13,560 Speaker 1: to see, it's it's just moving shorter duration across you 512 00:29:13,600 --> 00:29:16,280 Speaker 1: know most of our US investments. Is anyone leveraging up 513 00:29:16,320 --> 00:29:19,479 Speaker 1: to your treasure yields right now? Not that I know, 514 00:29:20,120 --> 00:29:21,760 Speaker 1: because I'm really I was having a conversation with the 515 00:29:21,760 --> 00:29:24,360 Speaker 1: Trigger yesterday and and we were asking this question. You 516 00:29:24,400 --> 00:29:26,440 Speaker 1: at a certain point, if you're getting you know, four 517 00:29:26,480 --> 00:29:29,000 Speaker 1: and a half percent on junk bonds, you're getting you know, 518 00:29:29,160 --> 00:29:32,240 Speaker 1: the triple C a version of the of the spectrum 519 00:29:32,480 --> 00:29:37,960 Speaker 1: outperforming dramatically, why not just left her up to your No, 520 00:29:38,080 --> 00:29:40,120 Speaker 1: I think there's there's something to be said for that. 521 00:29:40,280 --> 00:29:43,840 Speaker 1: The risk there is that if you do get inflation 522 00:29:43,840 --> 00:29:46,760 Speaker 1: accelerating in the FED hiking a lot more aggressively than 523 00:29:46,880 --> 00:29:49,640 Speaker 1: is currently priced, then that leads you vulnerable. You have 524 00:29:49,680 --> 00:29:52,040 Speaker 1: a problem. Evan Brown, thank you so much for being here. 525 00:29:52,120 --> 00:29:55,160 Speaker 1: Really great. Evan Brown, director of Asset Allocation, is part 526 00:29:55,160 --> 00:30:03,640 Speaker 1: of the investment solutions team of EUBS Asset Management. Thanks 527 00:30:03,640 --> 00:30:06,280 Speaker 1: for listening to the Bloomberg P and L podcast. You 528 00:30:06,320 --> 00:30:10,080 Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud, 529 00:30:10,200 --> 00:30:13,680 Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm 530 00:30:13,720 --> 00:30:17,720 Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. 531 00:30:17,840 --> 00:30:20,400 Speaker 1: It's one before the podcast. You can always catch us 532 00:30:20,480 --> 00:30:22,040 Speaker 1: worldwide on Bloomberg Radio.