WEBVTT - Look at Value Compared to growth says Bent Hunt 0:00:05.800 --> 0:00:08.360 Welcome to the Bloomberg p m L Podcast. I'm pim 0:00:08.400 --> 0:00:11.440 Fox along with my co host Lisa Bramowitz. Each day 0:00:11.480 --> 0:00:15.000 we bring you the most important, noteworthy, and useful interviews 0:00:15.040 --> 0:00:17.520 for you and your money, whether you're at the grocery 0:00:17.560 --> 0:00:20.560 store or the trading floor. Find the Bloomberg p m 0:00:20.680 --> 0:00:33.080 L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. 0:00:33.080 --> 0:00:35.120 We have a big meeting coming up or at least 0:00:35.120 --> 0:00:39.519 announcement tomorrow. Today the Fed begins it's two day monthly 0:00:39.600 --> 0:00:42.960 meeting or I guess not monthly ten times a year UM. 0:00:43.000 --> 0:00:44.960 I want to bring in Ira Jersey. He's chief US 0:00:45.040 --> 0:00:48.800 interest rate strategist for Bloomberg in chaligence, and before we 0:00:48.840 --> 0:00:52.120 look ahead to what we're expecting from the Federal Reserve tomorrow, 0:00:52.159 --> 0:00:54.080 I want to talk about this inflation data that we 0:00:54.160 --> 0:00:57.400 got out this morning. UH inflation accelerating to its highest 0:00:57.560 --> 0:01:03.160 in six years, and yet not a wholesale cheer necessarily 0:01:03.480 --> 0:01:07.080 from markets. Why Yeah, high A couple of things, Lisa. 0:01:07.120 --> 0:01:10.880 I think one is that the UH UM the market 0:01:10.920 --> 0:01:13.119 was expecting the numbers that we received. And I think 0:01:13.120 --> 0:01:16.399 one of the reasons why you have UM, certainly interest 0:01:16.440 --> 0:01:18.640 rates near where they are you know, tenure yield right 0:01:18.640 --> 0:01:21.360 close to three percent, yet again after the big risk 0:01:21.440 --> 0:01:24.000 off we had two weeks ago. Is because we are 0:01:24.120 --> 0:01:27.600 expecting inflation to kind of hover with co inflation at 0:01:27.959 --> 0:01:30.880 just over two percent. So um, you know, you have 0:01:31.000 --> 0:01:33.440 that plus a risk premium on top of that, and 0:01:33.640 --> 0:01:35.680 that gets you too close to three percent and that's 0:01:35.720 --> 0:01:38.240 where um, we're we're likely to hover for for a 0:01:38.280 --> 0:01:40.760 little while. Um. It does have big implications for the 0:01:40.760 --> 0:01:43.679 economy though, because when one of the things that that 0:01:43.760 --> 0:01:46.440 we calculate based on this inflation data is what are 0:01:46.440 --> 0:01:49.640 real wages? So what are wages minus inflation? And those 0:01:49.640 --> 0:01:53.080 have been coming down from from a from a high 0:01:53.240 --> 0:01:55.480 last month. So um, so that's something we have to 0:01:55.560 --> 0:01:57.880 keep track of. Is is you know, will spending be 0:01:57.920 --> 0:02:00.360 able to be kept up if inflation can and used 0:02:00.360 --> 0:02:03.280 to rise? So how will the FED view this? Yeah, 0:02:03.360 --> 0:02:05.000 so I think the FED is going to say, Okay, 0:02:05.000 --> 0:02:07.760 this is evidence that what we're doing is the right 0:02:07.880 --> 0:02:12.200 policy path because we've been hiking you know, irregularly, but 0:02:12.280 --> 0:02:16.280 certainly consistently, and as such, we you know, we were 0:02:16.280 --> 0:02:19.040 trying to get inflation under control. We don't want inflation 0:02:19.120 --> 0:02:23.359 to be significantly above where it is today. UM. But 0:02:23.760 --> 0:02:26.480 you know, it says that their gradual path hasn't really 0:02:26.639 --> 0:02:30.000 disrupted the economy, but it also hasn't yet brought inflation 0:02:30.040 --> 0:02:33.360 and inflation expectations down very much. So until it does that, 0:02:33.400 --> 0:02:37.120 I think that they're going to continue to be reasonably hawkish. 0:02:37.480 --> 0:02:40.280 So right now I'm looking at the expectations that are 0:02:40.280 --> 0:02:43.480 being priced into the futures market for a FED rate 0:02:43.600 --> 0:02:47.560 hike tomorrow. It is pretty much chance of a rate 0:02:47.639 --> 0:02:51.359 hike tomorrow. UM. I think the more interesting thing that 0:02:51.440 --> 0:02:55.040 we can hear from the Fed is guidance for the 0:02:55.080 --> 0:02:57.680 rest of the year for next year, and there's been 0:02:57.720 --> 0:03:01.440 some speculation that the Fed might hint that it would 0:03:01.440 --> 0:03:06.160 be willing to slow or cretail it's balance sheet normalization 0:03:07.040 --> 0:03:10.919 if the economy didn't accelerate more. Have you heard about that? 0:03:10.960 --> 0:03:13.680 What do you make of that? Yeah? So, so certainly 0:03:13.720 --> 0:03:16.520 one or two UM, what one or two economists have 0:03:16.720 --> 0:03:20.320 suggested that maybe the UM the FED might consider slowing 0:03:20.360 --> 0:03:22.880 the pace of adjustment. I think part of the reason 0:03:22.919 --> 0:03:25.560 for that is that you've seen the FED funds market 0:03:25.720 --> 0:03:28.760 start to creep up toward the interest that the FED 0:03:28.840 --> 0:03:32.400 pays on access reserves and because of that, they're thinking, oh, well, 0:03:32.480 --> 0:03:34.760 that means that money markets are very tight, and because 0:03:34.800 --> 0:03:37.760 money markets are tight, we should maybe not reduce the 0:03:37.800 --> 0:03:40.320 balance sheet as much. I'm not convinced that it's really 0:03:40.600 --> 0:03:42.920 it's port folio runoff that's doing this. There's a lot 0:03:43.000 --> 0:03:45.840 of other factors that are involved in the pricing of 0:03:45.880 --> 0:03:48.960 Fed funds and and other short end um short end 0:03:49.040 --> 0:03:51.520 rate So, for example, right now, there's a lot of 0:03:51.520 --> 0:03:54.560 treasury bills in the market because of the fiscal stimulus. 0:03:54.600 --> 0:03:57.040 The Treasury departments issued a lot of them, so that's 0:03:57.080 --> 0:04:00.360 caused almost every single front end interest rate to move 0:04:00.400 --> 0:04:03.080 a bit higher than it had been prior to this year. 0:04:03.560 --> 0:04:05.880 So it's not that the Fed can really do much 0:04:05.880 --> 0:04:09.640 about it except maybe lower um and not hike interests 0:04:09.640 --> 0:04:12.920 that paid on reserves by as much as they do 0:04:13.000 --> 0:04:15.400 their UH, their range of where they want to keep 0:04:15.440 --> 0:04:17.200 the Fed funds right. You know, I'm glad that you 0:04:17.279 --> 0:04:21.280 mentioned bills. We've been talking a lot about the treasury 0:04:21.279 --> 0:04:25.320 auctions this week. They're nearly two hundred billion dollars of 0:04:25.880 --> 0:04:28.599 debt auctions. Most of them are bills. UH. The ten 0:04:28.680 --> 0:04:32.200 year auction of a coupon debt yesterday went really well. 0:04:32.440 --> 0:04:35.080 Today we have more bill sales. How are the bill 0:04:35.120 --> 0:04:38.640 sales going? And who is buying? Yeah? So the so 0:04:38.680 --> 0:04:42.000 the bill sales have really been, uh been up and down, 0:04:42.080 --> 0:04:44.720 and in particular, what's been really good is actually six 0:04:44.760 --> 0:04:47.440 months bills, which which a little bit surprises me because 0:04:47.480 --> 0:04:49.240 when we don't know if the Federal Reserve is going 0:04:49.279 --> 0:04:52.000 to hike perhaps two times over the next couple of 0:04:52.000 --> 0:04:54.119 months or one time over the next couple of months, 0:04:54.279 --> 0:04:56.159 you know, why lock in for six months when you 0:04:56.200 --> 0:04:58.520 can just do a four week bill or three months 0:04:58.520 --> 0:05:01.479 bill and be able to capture and additional FED hike 0:05:01.560 --> 0:05:04.160 if if the Fed happens the hike in both June 0:05:04.160 --> 0:05:08.240 and September. Um so so demands good. Who's buying it's 0:05:08.279 --> 0:05:11.520 it's mostly it's mostly end users. So when you look 0:05:11.560 --> 0:05:15.320 at at who's purchasing those longer term securities, it's UM, 0:05:15.360 --> 0:05:18.920 it's UH investment funds and the like. The front end 0:05:18.920 --> 0:05:21.080 bills of four week bills tend to go to dealers, 0:05:21.080 --> 0:05:23.520 and then the dealers then UM then sell them on 0:05:23.640 --> 0:05:26.720 to other other investors such as money market funds and 0:05:26.720 --> 0:05:30.279 and UH and just cash equivalent investors. Um I do 0:05:30.320 --> 0:05:33.000 want to just bring you some headlines just crossing. The 0:05:33.040 --> 0:05:36.760 Senate panel voted twenty four and five against rich Clorida 0:05:36.960 --> 0:05:41.159 for his nomination is FED vice chair? Excuse me. The 0:05:41.160 --> 0:05:44.560 Senate panel also voted eighteen four seven against for Bowman 0:05:44.680 --> 0:05:47.560 for his FED nomination. And do you think that any 0:05:47.600 --> 0:05:50.159 of these sort of changes to the composition of the 0:05:50.160 --> 0:05:53.960 Federals or of will affect sort of the direction of policy? 0:05:54.400 --> 0:05:57.080 I don't think so. I think Richard Clarenda, in particular 0:05:57.279 --> 0:06:01.560 is is a pretty mainstream, um mainstream economists. I think 0:06:01.560 --> 0:06:04.159 that he'll look at the economy where it's going, and 0:06:04.240 --> 0:06:09.200 how policy might might impact both markets and importantly the economy, 0:06:09.560 --> 0:06:12.400 and as such he'll you know, he's not going to 0:06:12.480 --> 0:06:15.200 really rock the boat as much as some other people 0:06:15.240 --> 0:06:17.839 that we may be thought, um that that President Trump 0:06:17.920 --> 0:06:20.520 might might actually pick um. You know, he's not a 0:06:20.520 --> 0:06:23.960 particularly hawkish or dovist person. Um. You know, when you 0:06:24.000 --> 0:06:26.320 know you've spoken to him, I've spoken to him. He's 0:06:26.360 --> 0:06:29.480 really a reasonable, a reasonable person when it comes in 0:06:29.600 --> 0:06:32.479 and a real monetary policy expert. So I think when 0:06:32.520 --> 0:06:35.760 when it comes to things like changes in the Balancie composition, 0:06:35.839 --> 0:06:38.600 he'll be one person that they'll definitely lean on for 0:06:38.680 --> 0:06:41.080 his opinion as to you know, what size the balance 0:06:41.200 --> 0:06:43.679 should be or the pace of reduction there I Jersey, 0:06:43.720 --> 0:06:45.560 thank you so much for being with us our Jersey 0:06:45.640 --> 0:06:50.040 chief US interest rate strategist for Bloomberg Intelligence. Great insight 0:06:50.080 --> 0:06:53.120 ahead of the announcement to borrow from the Federal Reserve 0:06:53.360 --> 0:06:55.360 as well as all of the Treasury auctions the first 0:06:55.360 --> 0:07:12.760 two days of this week. This is a confusing US economy. 0:07:12.760 --> 0:07:16.440 While it is very strong now, certainly a growing number 0:07:16.480 --> 0:07:18.840 of traders are saying, perhaps this is as good as 0:07:18.840 --> 0:07:21.880 it gets, and how do you maneuver given the fact 0:07:21.960 --> 0:07:26.520 that the hangover from the really incredible expansion that we've 0:07:26.520 --> 0:07:29.680 seen could be potentially dramatic. Joining us now, Ben Hunt, 0:07:29.920 --> 0:07:33.360 He has chief investment strategist at Salient, which manages about 0:07:33.360 --> 0:07:37.360 thirteen billion dollars and is focused on real assets. Ben 0:07:37.440 --> 0:07:42.240 Hunt is also the author of Epsilon Theory dot com 0:07:42.360 --> 0:07:46.920 um and it has a hundred thousand professional investors as 0:07:47.000 --> 0:07:50.000 regular readers. Ben, thank you so much for joining me. Um. 0:07:50.000 --> 0:07:52.560 I want to start with how you're viewing the economy 0:07:52.680 --> 0:07:55.640 right now, because on one hand, you're seeing US inflation 0:07:55.680 --> 0:07:59.360 at six years six year highs. You're seeing wages that 0:07:59.400 --> 0:08:02.240 are not being up to the degree that people would 0:08:02.280 --> 0:08:06.200 like to see, a federal reserve that's hiking. Where where 0:08:06.200 --> 0:08:08.200 are you thinking as far as the sort of risk 0:08:08.200 --> 0:08:10.680 appetite that you're willing to make. Well, it's great to 0:08:10.680 --> 0:08:12.880 be on again, Lisa, Thank thanks for having me. And 0:08:13.040 --> 0:08:15.520 I think you put your finger on what is the 0:08:15.600 --> 0:08:18.680 real I'll use a ten dollar word dichotomy. You know, 0:08:18.760 --> 0:08:22.480 it's this, it's this real uh fracture that we're seeing 0:08:22.560 --> 0:08:26.960 between the real economy and what i'll call the market economy. 0:08:27.000 --> 0:08:28.840 You know, what's happening in the in the in the 0:08:28.840 --> 0:08:32.680 stock market. And look, you know, for the last nine years, 0:08:33.280 --> 0:08:36.920 we've had a stock market that is really rocked uh 0:08:36.920 --> 0:08:40.120 and A and a real economy, particularly here in the US, 0:08:40.200 --> 0:08:43.800 it's been mich right. And and what what I think 0:08:43.800 --> 0:08:47.680 you're seeing today is that that's really been turned on 0:08:47.800 --> 0:08:50.440 his head, right, that you've got a real economy that 0:08:50.559 --> 0:08:53.280 is starting to to really pick up here. And we 0:08:53.320 --> 0:08:56.040 can talk about signs off of that and what's driving that. 0:08:56.720 --> 0:08:59.319 But at the same time, you're you're seeing the markets 0:08:59.800 --> 0:09:03.040 you here kind of looking mech right, and and what 0:09:03.080 --> 0:09:05.600 I'm trying to say, is that's not an accident. Right. 0:09:05.640 --> 0:09:09.240 We've had this split in this this this dichotomy between 0:09:09.280 --> 0:09:11.839 the real world, the real economy and markets for about 0:09:11.920 --> 0:09:15.760 nine years now, and now it's truly flipping on his head. Well, 0:09:16.000 --> 0:09:17.760 you know, I want to just push back a little 0:09:17.800 --> 0:09:20.320 bit because I think that when you talk about the 0:09:20.320 --> 0:09:23.240 real economy, what are you looking at? Because you know, 0:09:23.240 --> 0:09:25.520 there are signs that you know, there still is a 0:09:25.600 --> 0:09:28.200 large swath of people that have been left behind in 0:09:28.240 --> 0:09:31.480 the recovery because there has been so much focus on 0:09:31.640 --> 0:09:34.880 the stock market and you know, assets that only the 0:09:34.880 --> 0:09:38.640 wealthiest people are really heavily invested in. And so I'm 0:09:38.640 --> 0:09:41.199 just wondering, you know, what's where are you getting the 0:09:41.240 --> 0:09:43.560 sense it's going to accelerate? Yeah? Yeah, No, what I 0:09:43.600 --> 0:09:47.319 mean by the real economy, I'm really focusing on small 0:09:47.360 --> 0:09:50.880 and medium businesses here in the United States. You know, 0:09:50.920 --> 0:09:53.760 we got some some some new data out today. You know, 0:09:53.800 --> 0:09:57.240 the I'll call it the confidence, the intention to grow, 0:09:57.760 --> 0:10:02.600 the intention to spend, the intention to higher from small businesses, 0:10:02.960 --> 0:10:07.520 which still are the economic backbone of this country, of 0:10:07.600 --> 0:10:11.360 our real economy. You know, that confidence at least for 0:10:11.400 --> 0:10:14.720 intention to grow, it's never been higher since they've been 0:10:14.720 --> 0:10:16.440 taking this survey, and they've been taking it for a 0:10:16.480 --> 0:10:18.960 long time. Now. Look, I totally agree with you that 0:10:19.000 --> 0:10:22.400 there are so many people that have been left behind 0:10:22.920 --> 0:10:25.760 in what i'll call the inflation we have had over 0:10:25.800 --> 0:10:29.800 the last nine years, which is an inflation in asset prices. 0:10:29.840 --> 0:10:35.160 So we're seeing wealth inequality return to levels we haven't 0:10:35.160 --> 0:10:39.720 seen since the nineteen thirties, and that has enormous consequences, 0:10:39.760 --> 0:10:42.520 particularly in politics. But what I'm talking about with the 0:10:42.520 --> 0:10:45.800 real economy, I'm talking about small the medium businesses year 0:10:45.800 --> 0:10:51.320 in the United States and their perception, their intention has 0:10:51.480 --> 0:10:57.160 never been more growth oriented. Uh, new hiring, new expansion, 0:10:57.280 --> 0:10:59.080 all of that. That's what I'm talking about with the 0:10:59.080 --> 0:11:01.840 real economy. How are you capitalizing on that? How are 0:11:01.840 --> 0:11:05.600 you investing around that? Well, look, it's it's it. It 0:11:05.760 --> 0:11:09.920 really means, you know, thinking about how to invest your 0:11:09.960 --> 0:11:14.440 money away from the public markets that have been the 0:11:14.440 --> 0:11:18.840 beneficiary of what I'll call is the monetary stimulus, you know, 0:11:18.880 --> 0:11:22.240 central banks buying everything inside for the last nine years. 0:11:22.559 --> 0:11:25.280 And now how do you think about, well, what if 0:11:25.320 --> 0:11:28.400 that gets turned on his head with the SAD now 0:11:28.600 --> 0:11:31.880 shrinking its balance sheet, with the tide going out on 0:11:31.920 --> 0:11:35.120 the monetary stimulus. But at the same same time, you've 0:11:35.120 --> 0:11:38.400 got fiscal stimulus in the form of tax cuts. You've 0:11:38.440 --> 0:11:41.080 got and I know this sounds weird, but as the 0:11:41.120 --> 0:11:44.760 Fed normalizes interest rates from this very low base, I 0:11:44.760 --> 0:11:49.520 think that's actually stimulative again to these small and medium businesses. 0:11:50.000 --> 0:11:53.000 And third, I don't think you can overestimate I really don't. 0:11:53.720 --> 0:11:57.560 What I'll call is the Donald Trump narrative that you know, 0:11:57.600 --> 0:12:00.960 whatever the reality is, there is a reception that there's 0:12:01.080 --> 0:12:05.840 enormous change of foot particularly informs of deregulation, all of 0:12:05.880 --> 0:12:11.120 those things benefiting the mindset, let's call it the expectations 0:12:11.160 --> 0:12:13.360 of small to medium businesses. So what do you do 0:12:13.440 --> 0:12:16.920 for that for investing? Well, look, you can certainly look 0:12:16.960 --> 0:12:20.200 at private markets as opposed to public markets, but you 0:12:20.240 --> 0:12:24.120 can also look at value of compared to growth. And 0:12:24.160 --> 0:12:26.559 you can look at you know, the Russell two thousand, 0:12:26.760 --> 0:12:31.240 which tends to doesn't tend it's comprised of those smaller 0:12:31.320 --> 0:12:36.160 cap stocks which tend to match or mimic those smaller 0:12:36.200 --> 0:12:39.480 to medium businesses in the real economy. But one thing 0:12:39.520 --> 0:12:41.480 that I'm struck by is that the Russell two thousand 0:12:41.559 --> 0:12:45.720 is actually outperformed dramatically this year. I mean, it's almost 0:12:46.080 --> 0:12:47.920 what I'm talking about. Yeah, I mean, I'm just wondering 0:12:47.920 --> 0:12:54.520 how much is left. Look, I think there's a lot left, frankly, 0:12:54.760 --> 0:12:57.400 right because I I think there's been such a tent 0:12:57.679 --> 0:13:01.640 up I'll call it demand, but it's it's there's there's 0:13:01.679 --> 0:13:04.720 such a tent up energy in the small and medium 0:13:04.760 --> 0:13:08.280 businesses in this country that I think this can go 0:13:08.320 --> 0:13:12.840 on for quite a long time. Now. Look, ultimately, mistakes 0:13:12.880 --> 0:13:15.720 will be made, right, the said will hike rates too 0:13:16.120 --> 0:13:19.479 you know, an an interest rate hike too far. Ultimately 0:13:19.559 --> 0:13:23.480 we will get really inflation starting to kick in, which 0:13:23.559 --> 0:13:27.199 hits the margins not just of you know, big companies, 0:13:27.200 --> 0:13:29.760 but also small and medium companies. That that that's all 0:13:29.800 --> 0:13:33.000 going to happen. But right now we're at this phase 0:13:33.080 --> 0:13:36.319 where these small and medium businesses are really picking their 0:13:36.320 --> 0:13:40.640 heads up and are intending to spend expand and that 0:13:40.679 --> 0:13:43.880 can do well for stocks to represent that. Then, what 0:13:43.960 --> 0:13:46.960 do you think is the biggest thing that investors are 0:13:46.960 --> 0:13:51.440 getting wrong right now? You know, the biggest thing they're 0:13:51.440 --> 0:13:54.240 getting wrong had in my view, is that we are 0:13:54.280 --> 0:13:57.960 still trapped in this perception that we live in a 0:13:58.040 --> 0:14:02.600 deflationary world forever and ever. I'm in just as far 0:14:02.640 --> 0:14:05.320 as the eye can see. And you know, frankly, this 0:14:05.360 --> 0:14:08.360 has been the right bet for forty years, right that 0:14:08.360 --> 0:14:11.840 that we have been in this deflationary rates are always 0:14:11.880 --> 0:14:15.040 going down type of world. What I'm trying to suggest 0:14:15.200 --> 0:14:19.240 is is that when these big picture items like are 0:14:19.280 --> 0:14:22.600 we in an inflationary world or deflationary world? When these 0:14:22.680 --> 0:14:26.680 ideas change is at moments just like this, because it's 0:14:26.720 --> 0:14:30.600 driven by change in politics, is driven by a change 0:14:30.600 --> 0:14:35.320 in the mindset, the expectations, particularly of small to medium businesses. 0:14:35.840 --> 0:14:38.000 So I think there's a you know, I'll use another 0:14:38.040 --> 0:14:41.440 ten dollar phrase, a non trivial chance that where at 0:14:41.440 --> 0:14:46.960 the cusp of a big shift here in the investment environment, 0:14:47.080 --> 0:14:50.280 our business environment, and that's moving from a world where 0:14:50.280 --> 0:14:53.720 it's deflation all the time to where we really have 0:14:53.840 --> 0:14:56.880 to start flexing those How do you invest in an 0:14:56.920 --> 0:15:00.800 inflationary market all over again? And Hunt, thank you so 0:15:00.840 --> 0:15:03.560 much for joining me, really really interesting. Ben Hunt, chief 0:15:03.600 --> 0:15:08.120 investment strategist at Salient. Salient Managers about thirteen billion dollars. 0:15:08.120 --> 0:15:11.320 It's focused on real assets. Been also is the author 0:15:11.400 --> 0:15:31.040 of a blog epsilon theory. Dot com markets have been 0:15:31.280 --> 0:15:35.200 struggling to figure out the real world impact from the 0:15:35.400 --> 0:15:40.200 increasing trade tensions between the US and other major economies. 0:15:40.360 --> 0:15:43.320 One place so where perhaps we'll be able to see 0:15:43.320 --> 0:15:47.640 that is with tourism. And the question is has tourism 0:15:47.720 --> 0:15:51.520 to the United States declined? Joining US now Chris Thompson, President, 0:15:51.600 --> 0:15:55.280 chief executive officer of Brand USA. It is a federal 0:15:55.400 --> 0:16:01.200 agency that focuses on trying to attract international dull travelers 0:16:01.280 --> 0:16:03.360 to the U as Chris, thank you so much for 0:16:03.440 --> 0:16:06.760 being with me, so good morning, my pleasure. So I'd 0:16:06.800 --> 0:16:10.120 love to get your sense of exactly this, whether or 0:16:10.160 --> 0:16:13.600 not fewer tourists are coming to the US as a 0:16:13.680 --> 0:16:18.120 response of to the growing tension that has frankly erupted 0:16:18.320 --> 0:16:22.440 during President Trump and some of these longstanding allies. You know, 0:16:22.480 --> 0:16:25.760 we have seen some softness in international visitation to the 0:16:25.840 --> 0:16:30.320 United States. That was after record visitation for six or 0:16:30.360 --> 0:16:33.800 eight years, But the majority of that actually happened prior 0:16:33.840 --> 0:16:35.960 to the elect of the majority of the reasons for 0:16:36.000 --> 0:16:38.600 that happened prior to the election and have really been 0:16:38.640 --> 0:16:41.760 influencing since then, the main thing being the strength of 0:16:41.800 --> 0:16:44.720 the dollar. You know, you look at market flag Canada, 0:16:44.800 --> 0:16:48.160 Mexico and others. You know, when the dollars strong and 0:16:48.200 --> 0:16:51.520 obviously makes it a little more challenging for folks looking 0:16:51.520 --> 0:16:54.520 to travel to the United States. So that has been 0:16:55.080 --> 0:16:58.800 the case for uh an extended period of time at 0:16:58.840 --> 0:17:02.400 at levels that have been higher than normal. So I 0:17:02.440 --> 0:17:07.240 think that's contributed significantly some of our uh you know, 0:17:07.280 --> 0:17:10.840 some of the things that affect people's intent to travel 0:17:10.880 --> 0:17:13.360 and their willingness to travel or what's affecting them back home. 0:17:13.440 --> 0:17:17.400 So a lot of economic, political, social tensions back home 0:17:17.640 --> 0:17:20.439 also influence intent to travel. So I'm not sure you 0:17:20.440 --> 0:17:23.320 can really pay it on, uh, the things that are 0:17:23.320 --> 0:17:26.320 happening at the moment um. You know, the beautiful thing 0:17:26.359 --> 0:17:29.959 about travel is it really has the ability to transcend politics. 0:17:30.040 --> 0:17:34.159 It's you know about destinations, experiences and US as Americans. 0:17:34.240 --> 0:17:36.480 And you know, we know once people travel to the 0:17:36.560 --> 0:17:39.680 United States and they can immerse themselves and our destinations 0:17:39.720 --> 0:17:43.560 and and they get to feel from US as Americans, uh, 0:17:43.600 --> 0:17:45.560 as far as as being some of the most welcoming 0:17:45.600 --> 0:17:48.040 people in the world, that that has ability to kind 0:17:48.080 --> 0:17:50.159 of rise above all that. Did you notice an uptick 0:17:50.440 --> 0:17:54.440 in visitors international visitors to the US earlier this year 0:17:54.560 --> 0:17:57.600 when the dollar weakened. Yeah, you know, there was some 0:17:58.600 --> 0:18:02.400 some moderation in the dollar, so it was hard to tell. 0:18:02.800 --> 0:18:05.800 The numbers that we get are lagging numbers from the 0:18:05.800 --> 0:18:07.639 Department of Commerce, so I'm not sure we'll really know 0:18:07.680 --> 0:18:10.639 the true impact on what our final numbers as a 0:18:10.680 --> 0:18:14.040 result of that. But we did see some some increases 0:18:14.080 --> 0:18:17.879 in numbers going into seen which was encouraging. And a 0:18:17.880 --> 0:18:20.119 lot of that, as you pointed out, had to do 0:18:20.160 --> 0:18:22.080 with the fact that the dollar was weakening a bit. 0:18:22.119 --> 0:18:24.879 But I think now it's maybe heading back in the 0:18:24.920 --> 0:18:28.120 other direction, and and so it just depends on where 0:18:28.119 --> 0:18:30.639 that all ends. Can you give us some perspective on 0:18:30.760 --> 0:18:35.119 how important tourism is to the U. S economy? So 0:18:35.119 --> 0:18:37.600 most people don't realize that travel is actually an export. 0:18:37.640 --> 0:18:41.080 The product is the experienced people have, the memories they 0:18:41.080 --> 0:18:44.399 take home. As an export, it's a service export. So 0:18:45.640 --> 0:18:48.520 of everything the United States exports that's a service is 0:18:48.560 --> 0:18:52.040 tried to tie to people coming here, having the experiences 0:18:52.080 --> 0:18:55.280 and leaving their money. Eleven percent of everything the largest 0:18:55.320 --> 0:18:57.960 economy in the world exports is tied to people traveling 0:18:57.960 --> 0:19:01.000 to the United States enjoying them els and leaving their 0:19:01.000 --> 0:19:04.399 money behind. You know, you look at balance of trade. 0:19:04.440 --> 0:19:07.480 Trade is obviously a big topic right now. In the 0:19:07.560 --> 0:19:10.880 last time we had annual numbers, we had seventy six 0:19:10.960 --> 0:19:15.120 million people spend two billion dollars and that was an 0:19:15.160 --> 0:19:18.600 eighty four billion dollar positive contribution to the balance of trade. 0:19:18.680 --> 0:19:21.399 So when you look at it as an economic engine, 0:19:21.440 --> 0:19:24.120 it's certainly a huge contributor. And then on the soft 0:19:24.119 --> 0:19:26.520 diplomacy side, we know that, as I said earlier, once 0:19:26.520 --> 0:19:29.240 people have a chance to come and experience the United States, 0:19:29.280 --> 0:19:33.000 they always walk away with a more positive opinion of it, 0:19:33.040 --> 0:19:36.480 whatever their opinion was coming in Chris. Last year, there 0:19:36.480 --> 0:19:39.360 were a number of stories that came out saying that 0:19:39.760 --> 0:19:44.680 President Trump's budget eliminated funding for Brand USA and would 0:19:44.720 --> 0:19:49.040 effectively kill the organization. Have you heard more about that? 0:19:49.200 --> 0:19:52.840 What was your response? You know, anytime a president comes 0:19:52.880 --> 0:19:55.560 in the way for them to make a statement of 0:19:55.560 --> 0:19:58.480 priorities through budget. Uh And so obviously there were a 0:19:58.520 --> 0:20:00.960 lot of priorities. There's never enough money in Washington to 0:20:01.040 --> 0:20:03.879 do everything that everybody wants to do. Uh. So the 0:20:03.880 --> 0:20:06.159 good news is that the people that actually appropriate or 0:20:06.160 --> 0:20:11.840 Congress Congress we have a tremendous bipartisan, strong majority relationship. 0:20:12.200 --> 0:20:15.320 As far as support in Congress, UH, when Congress actually 0:20:15.400 --> 0:20:19.400 got to the business of appropriations are funding state impact 0:20:19.760 --> 0:20:23.080 as as budgets were moved forward. So UH, though we 0:20:23.119 --> 0:20:25.280 would have liked it, liked it to have been a 0:20:25.280 --> 0:20:28.440 different situation. As far as the President's budget, we understand 0:20:28.840 --> 0:20:30.520 that it is a statement of priorities and it's a 0:20:31.000 --> 0:20:34.080 way to navigate a situation where there's really never enough funding. 0:20:34.640 --> 0:20:37.280 Just a real quick what is how exactly do you 0:20:37.400 --> 0:20:42.040 market the US to international investors? So our job is 0:20:42.080 --> 0:20:45.439 to reach out to all the markets around the world. 0:20:45.760 --> 0:20:48.920 We're we're headquartered here at Washington, d C. We're actually 0:20:48.920 --> 0:20:51.000 a private company that had that's in partnership with the 0:20:51.000 --> 0:20:53.679 federal government. We have fifteen offices around the world. We 0:20:53.760 --> 0:20:58.880 take UH messages direct to consumers, and in this year, 0:21:00.000 --> 0:21:04.080 our theme is music. Before there were destination marketing organizations 0:21:04.119 --> 0:21:06.879 like Brand USA, the way people found out about US 0:21:06.920 --> 0:21:10.080 was through movies and music. And we just released a 0:21:10.200 --> 0:21:15.240 Imax film called America's Musical Journey, which documents the heritage 0:21:15.240 --> 0:21:18.120 of American music and the cities that it was founded 0:21:18.119 --> 0:21:22.560 in and tells a story about how UH that is 0:21:23.280 --> 0:21:25.440 is a great way to talk about the United States, 0:21:25.440 --> 0:21:27.840 America and what there is to see and do through music. 0:21:27.920 --> 0:21:30.879 So our job is to be storytellers, to inspire travel 0:21:31.119 --> 0:21:33.680 uh from our friends and visitors from around the world, 0:21:33.760 --> 0:21:36.360 and in the end to really remind them why they 0:21:36.359 --> 0:21:38.119 want to come to the United States, why it is 0:21:38.160 --> 0:21:40.959 the most aspirational destination in the world. Chris Thompson, thank 0:21:41.000 --> 0:21:42.920 you so much for being with me, President and Chief 0:21:42.960 --> 0:21:47.280 executive Officer of Brand USA, coming to us from Washington, 0:21:47.440 --> 0:22:06.320 d C. One notable thing about this week, which some 0:22:06.400 --> 0:22:09.639 have dubbed the most important week of the year, is 0:22:09.720 --> 0:22:14.000 that markets just don't care. They have not cared about 0:22:14.040 --> 0:22:18.640 the Trump Kim Jung summit. UH. They haven't necessarily cared 0:22:18.680 --> 0:22:21.360 about the inflammatory rhetoric out of the G seven meetings. 0:22:21.720 --> 0:22:24.399 Here we had inflation data that came out pretty much 0:22:24.440 --> 0:22:27.159 in line with expectations. No one cared. The Fed's going 0:22:27.200 --> 0:22:30.600 to raise rates tomorrow, and then the ECB meets. Evan 0:22:30.640 --> 0:22:33.520 Brown joins us now to see what'll make him care 0:22:33.680 --> 0:22:37.280 and change potentially his views on the market. Right now, 0:22:37.320 --> 0:22:40.320 Evan Brown is Director of Asset Allocation as part of 0:22:40.320 --> 0:22:43.960 the Investment Solutions team for UBS Asset Management and he 0:22:44.040 --> 0:22:47.119 joins us here in our eleven three oh studios. So, Evan, 0:22:48.680 --> 0:22:51.760 what will make people care sort of change their strategies 0:22:52.440 --> 0:22:55.800 that that's coming out potentially this week? Yes, So I think, 0:22:56.080 --> 0:22:58.560 I mean, if anything is gonna gonna make us care, 0:22:58.640 --> 0:23:02.080 it's it should be the tomb important central banks, arguably 0:23:02.119 --> 0:23:04.480 at least in the development in developed markets to fend 0:23:04.480 --> 0:23:07.520 the e CB this week. So um, I think for 0:23:07.560 --> 0:23:11.359 the FED, we are going to get hike. We're finally 0:23:11.400 --> 0:23:15.520 going to get to a priced in at its priced in. 0:23:15.680 --> 0:23:17.760