WEBVTT - Bloomberg Surveillance TV: January 8th, 2026 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordert. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:36.960 Terminal and the Bloomberg Business app. We begin the sound 0:00:36.960 --> 0:00:39.680 with investors searching for direction in a pivotal year potentially 0:00:39.680 --> 0:00:42.400 for the Federal Reserve. FED Governor Stephen Myron doubling down 0:00:42.400 --> 0:00:44.320 on his dubvish starts calling for the Central Bank to 0:00:44.360 --> 0:00:46.680 cut interest rates by more than a percentage point in 0:00:46.720 --> 0:00:49.839 twenty twenty six. Governor Myron joins us. Now four more. Governor, 0:00:49.880 --> 0:00:50.919 good morning and happy new year. 0:00:51.040 --> 0:00:52.279 Happy to here, Thanks for having me back. 0:00:52.320 --> 0:00:54.520 It's good to see you've been very very transparent about 0:00:54.560 --> 0:00:56.279 where you were on the dot plot and what your 0:00:56.320 --> 0:00:59.160 forecast is. So let's start there. Where are you for 0:00:59.240 --> 0:01:01.440 this year? Wes you don't what are you looking fun. 0:01:01.600 --> 0:01:03.680 Yeah, so I'm on surprisingly the lowest dot. I'm looking 0:01:03.720 --> 0:01:05.440 for about a point and a half of cuts. A 0:01:05.440 --> 0:01:07.520 lot of that is driven by my view of inflation. 0:01:07.560 --> 0:01:09.199 I gave a speech about this and you know, about 0:01:09.240 --> 0:01:12.560 a month ago in December Columbia University. My view is 0:01:12.600 --> 0:01:15.679 that almost all of the excess inflation over target is 0:01:15.760 --> 0:01:18.480 due to quirks of how we calculate inflation. So, as 0:01:18.520 --> 0:01:20.280 you have talked about with many of your guests many 0:01:20.280 --> 0:01:23.240 times before, shelter inflation really really lags a lot. And 0:01:23.280 --> 0:01:25.640 because average tenant rents have caught up to new tenant rents, 0:01:25.640 --> 0:01:27.520 because market rents have been running at at one percent 0:01:27.640 --> 0:01:29.520 rate for a couple of years now, I think it's 0:01:29.560 --> 0:01:33.480 appropriate to sort of think about underlying inflation as abstracting 0:01:33.520 --> 0:01:36.000 from that a little bit. You know, the shelter inflation 0:01:36.040 --> 0:01:37.959 is indicative of a supply demand in balance from twenty 0:01:38.000 --> 0:01:40.440 twenty two to twenty twenty three, not twenty twenty seven. 0:01:40.480 --> 0:01:42.200 We need to be making policy for twenty twenty seven 0:01:42.200 --> 0:01:44.120 because of policy lags. And there side of it is 0:01:44.120 --> 0:01:46.119 the portfolio management fees that I'm sure you've talked about 0:01:46.120 --> 0:01:48.320 again with many of your guests. Many times stock market 0:01:48.320 --> 0:01:51.520 went up mechanically inflation was higher despite many of your 0:01:51.520 --> 0:01:53.840 other guests, I'm sure no doubt telling you about fee 0:01:53.840 --> 0:01:56.960 compression and these asset management industry for decades, so you 0:01:57.120 --> 0:01:59.760 was tracked from those two things. Underlying inflation is running 0:01:59.760 --> 0:02:01.680 a two point three percent that's with the noise of 0:02:01.680 --> 0:02:02.120 our target. 0:02:02.400 --> 0:02:04.440 That sounds like an argument for neutral. You're making an 0:02:04.520 --> 0:02:06.680 argument though, for this year, for a combination. Where does 0:02:06.720 --> 0:02:09.240 that come from? Why are you looking for a combinative 0:02:09.280 --> 0:02:12.240 monetary policy? Stats coming out to Washington. Yeah, so a 0:02:12.240 --> 0:02:12.760 couple things. 0:02:12.760 --> 0:02:15.360 First of all, as I just said, underlying inflation's running 0:02:15.400 --> 0:02:17.880 within noise of our target, and that's a good indication 0:02:17.919 --> 0:02:19.680 of where overall inflation is going to be going in 0:02:19.680 --> 0:02:21.919 the medium term. But then the unemployment rate is four 0:02:21.919 --> 0:02:24.160 point six percent, right, So that means that there's about 0:02:24.200 --> 0:02:26.920 a million Americans who don't have jobs, who could have 0:02:27.040 --> 0:02:30.079 jobs without causing unwanted inflation, without causing unwanted up, we're 0:02:30.080 --> 0:02:32.079 pressure on inflation. I don't think it's right to tell 0:02:32.120 --> 0:02:34.280 those people that they shouldn't have jobs because we're just 0:02:34.480 --> 0:02:37.760 mechanically calculating inflation in some silly way. I just don't 0:02:37.760 --> 0:02:39.600 think that makes a lot of sense. The other thing 0:02:39.680 --> 0:02:42.200 is that because we've kept policy tighter than I think 0:02:42.240 --> 0:02:44.440 it ought to be, that makes me mark down our 0:02:44.440 --> 0:02:47.200 growth forecast for the future relative to where it should be. 0:02:47.560 --> 0:02:49.919 And so if we didn't need if we hadn't kept 0:02:49.919 --> 0:02:53.120 been keeping policy in my view too tight over the 0:02:53.160 --> 0:02:55.480 last year or so, it wouldn't be necessary to provide 0:02:55.520 --> 0:02:56.280 that type just correctly. 0:02:56.320 --> 0:02:58.480 You say marked down in the future, because they fat 0:02:58.520 --> 0:03:01.600 actually marked up GDP for twenty six What do you 0:03:01.639 --> 0:03:02.360 mean in the future. 0:03:02.600 --> 0:03:04.760 No, So, like when you look at these dots right 0:03:05.120 --> 0:03:09.440 in the set, they're projections of appropriate policy, and projections 0:03:09.480 --> 0:03:15.760 of economic fundamentals like growth and inflation conditional upon appropriate policy. 0:03:15.840 --> 0:03:19.200 So my projections for growth and inflation are conditional upon 0:03:19.240 --> 0:03:22.040 getting my policy forecast right, my policy projection. If I 0:03:22.040 --> 0:03:24.000 don't get my policy projection because the rest of the 0:03:24.040 --> 0:03:26.280 committee is more hawkish than I am, then we wouldn't 0:03:26.280 --> 0:03:30.240 meet my growth and inflation projections. We'd underperform them. And 0:03:30.280 --> 0:03:32.440 so because policy has been in my view too tight 0:03:32.520 --> 0:03:35.040 for the last year, that means that my expectations of 0:03:35.080 --> 0:03:38.880 growth will ultimately be will ultimately be unsatisfied because we 0:03:38.920 --> 0:03:40.080 didn't get the policy that I wanted. 0:03:40.200 --> 0:03:43.520 You have GDP two point six percent roughly over the 0:03:43.560 --> 0:03:46.360 next few years. Are you saying that the appropriate growth 0:03:46.440 --> 0:03:48.640 rate is something like that two percent and two point 0:03:48.680 --> 0:03:51.080 six percent and not necessarily three percent. 0:03:50.800 --> 0:03:53.560 Are above Well, so that's conditional upon getting upon getting 0:03:53.560 --> 0:03:57.080 the policy projection that I want, right, I think, and 0:03:57.440 --> 0:03:59.440 I think, and part of that is due part of 0:03:59.440 --> 0:04:01.680 the reason why it's a little bit lower than I 0:04:01.720 --> 0:04:03.680 think two point eight two point nine is probably where 0:04:03.880 --> 0:04:05.400 more where it would be if we got if we 0:04:05.600 --> 0:04:08.000 sort of had the great policy the entire time. Part 0:04:08.000 --> 0:04:09.200 of the reason it's a little bit lower than that 0:04:09.280 --> 0:04:11.720 is because we got to account for policy having been 0:04:11.720 --> 0:04:13.200 too tight over the last twelve months. 0:04:13.760 --> 0:04:15.480 There's also a question about the reaction function. 0:04:15.720 --> 0:04:17.159 You're talking about the data that we're going to be 0:04:17.160 --> 0:04:18.320 getting tomorrow. 0:04:18.400 --> 0:04:20.359 What would you have to see to change your view? 0:04:20.440 --> 0:04:22.719 I mean, if we saw, let's say, the unemployment rate 0:04:23.000 --> 0:04:26.120 go down to four point four percent, would you start 0:04:26.160 --> 0:04:28.520 to question whether one hundred and fifty basis points of 0:04:28.560 --> 0:04:30.000 cuts is really necessary this year? 0:04:30.200 --> 0:04:32.240 That's a great question. And before I answer it, let 0:04:32.279 --> 0:04:36.039 me step back a foot and say that my forecast 0:04:36.080 --> 0:04:38.960 is conditional upon shelter inflation coming down right, And there's 0:04:38.960 --> 0:04:40.359 people who agree with me, by the way, like you 0:04:40.360 --> 0:04:42.000 look at the research from Goldman Sachs, you know, it's 0:04:42.040 --> 0:04:44.440 pretty similar to where I am on shelter. They've got 0:04:44.480 --> 0:04:46.840 shelter inflation running below the pre COVID rate by the 0:04:46.920 --> 0:04:48.520 end of the year, similar to where I have it. 0:04:49.720 --> 0:04:52.400 Where I differ from a lot of my colleagues again, 0:04:52.600 --> 0:04:55.080 is thinking that goods inflation is not drive being driven 0:04:55.080 --> 0:04:57.680 by tariffs. Don'tee tariffs drive being driven by goods inflation. 0:04:58.000 --> 0:05:00.480 I see goods inflation. I'm not sure what driving I 0:05:00.560 --> 0:05:03.359 listed a few possibilities in the speech in December. I 0:05:03.400 --> 0:05:05.359 think the jury is still out on that one. But 0:05:05.520 --> 0:05:07.919 if I end up being right on inflation and gold 0:05:07.960 --> 0:05:09.800 sorry on shelter. If I end up being right in 0:05:09.800 --> 0:05:11.960 shelter and Goldman ends up being read in shelter, and 0:05:12.000 --> 0:05:14.000 I end up being wrong on tariffs and everybody else 0:05:14.040 --> 0:05:16.440 is right on tariffs, then we're going to undershoot our target. 0:05:16.880 --> 0:05:18.880 Two sided risk is back, And I think that people 0:05:18.920 --> 0:05:21.680 haven't really internalized that yet. And I think it's important 0:05:21.720 --> 0:05:24.480 to appreciate that. Now, where would I be wrong? Because 0:05:24.520 --> 0:05:27.240 so much of my disinflation forecast is based upon shelter. 0:05:27.560 --> 0:05:29.800 I'm going to be wrong if market rents pick up again. 0:05:29.880 --> 0:05:31.600 So you're saying this is all an inflation issue and 0:05:31.680 --> 0:05:33.080 not anything to do with the labor market. 0:05:33.360 --> 0:05:35.760 Now, as I said before, unemployment is unemployment is somewhat 0:05:35.760 --> 0:05:38.880 above the somewhat above what where I view the natural rate, 0:05:38.960 --> 0:05:42.120 and so it's sixty basis points a million people you 0:05:42.120 --> 0:05:45.120 know of unnecessary unemployment that we could reduce by having 0:05:45.120 --> 0:05:46.000 a more appropriate policy. 0:05:46.040 --> 0:05:47.040 Now it's Talisa's point. 0:05:47.040 --> 0:05:48.599 Is there a line in the sand and the unemployment 0:05:48.640 --> 0:05:50.719 rate tomorrow that would maybe have you think about this 0:05:50.760 --> 0:05:52.960 a little bit differently? What if the unemployment rate drops 0:05:53.000 --> 0:05:55.239 down four point five percent or even four point four percent? 0:05:55.320 --> 0:05:57.560 Yeah, I would absolutely add I would absolutely jus my projection. 0:05:57.640 --> 0:05:59.800 So if you look at the September step, right, I 0:05:59.880 --> 0:06:01.680 was fifty business points higher than I was in the 0:06:01.680 --> 0:06:04.240 December step. Part of the reason why I adjusted my 0:06:04.279 --> 0:06:06.919 dot down by fifty basis points is because the labor 0:06:06.960 --> 0:06:10.960 market didn't perform from my expectations that I had in September, 0:06:11.000 --> 0:06:13.880 and because inflation actually I performed to the downside, right, 0:06:13.920 --> 0:06:15.880 So it was appropriate to adjust my dot down and 0:06:15.920 --> 0:06:17.400 then on top of that, we had the two type 0:06:17.400 --> 0:06:19.600 policies I described. So if the data come in a 0:06:19.640 --> 0:06:21.279 little bit better, yeah, of course I'm going to adjust 0:06:21.279 --> 0:06:21.800 my expectation. 0:06:21.960 --> 0:06:23.400 In just the past few weeks, we've heard from a 0:06:23.480 --> 0:06:26.480 number of your colleagues talking about how actually they feel 0:06:26.520 --> 0:06:28.839 like we're pretty close to neutral. Have you made any 0:06:28.880 --> 0:06:32.159 inroads convincing them that they're not right about this the 0:06:32.160 --> 0:06:33.039 way you see the world. 0:06:33.080 --> 0:06:34.960 You know, I can't, I can't speak for them, but 0:06:35.440 --> 0:06:37.000 you know, I think that every month we come in 0:06:37.040 --> 0:06:39.040 and the unemployment rate takes up a little bit, and 0:06:39.080 --> 0:06:41.400 the inflation, you know, the inflation data sort of seemed 0:06:41.400 --> 0:06:43.039 to be doing a little bit better. I think it's 0:06:43.080 --> 0:06:45.800 really difficult to argue that policy is neutral, especially when 0:06:45.800 --> 0:06:48.800 we've been on this course of gradual listening to the 0:06:48.880 --> 0:06:51.200 labor market for a couple of years now. It's just 0:06:51.279 --> 0:06:53.680 really difficult in my mind to sort of argue that 0:06:53.440 --> 0:06:56.200 that that policy is not is not restricting the economy. 0:06:56.240 --> 0:06:57.600 A couple of ways I want to pick, can yeah, 0:06:57.640 --> 0:07:00.240 and one is neutral and the other is correct. I 0:07:00.279 --> 0:07:02.760 think it's very difficult to say this is where I 0:07:02.760 --> 0:07:05.560 think neutral is, and this should be the correct policy rate, 0:07:05.600 --> 0:07:07.600 because it's such a guessing game as to where neutral is. 0:07:07.640 --> 0:07:08.640 And I think you understand that. 0:07:08.800 --> 0:07:10.920 Of course, I also want to pick up the difference 0:07:10.960 --> 0:07:13.600 between being an economist and being a policy maker. When 0:07:13.600 --> 0:07:15.560 you say two way risk, I think that really makes 0:07:15.640 --> 0:07:18.040 us all think about speed and the appropriate speed to 0:07:18.080 --> 0:07:21.440 adjust monetary policy when there risk two sided risk. Why 0:07:21.480 --> 0:07:23.880 do you think we should be going this fast this 0:07:24.000 --> 0:07:27.200 year in your mind to cut that aggressively in twenty 0:07:27.280 --> 0:07:27.840 twenty six. 0:07:28.280 --> 0:07:30.680 Sure, so, same thing as I said in the lest 0:07:30.720 --> 0:07:33.160 few times I've been here. We're still materially above neutral 0:07:33.160 --> 0:07:35.360 in my mind, And there's not really a reason to 0:07:35.400 --> 0:07:37.600 be materially above neutral if the labor market isn't a 0:07:37.600 --> 0:07:41.920 weakening path and inflation is underlying inflation's already running close 0:07:42.000 --> 0:07:44.200 store target and on trajectory to hit it. To hit 0:07:44.200 --> 0:07:46.280 the target, there's just not a real reason to be 0:07:46.320 --> 0:07:49.600 so restrictive. And we're running unnecessary risks on the labor 0:07:49.600 --> 0:07:52.120 market by being so restrictive, And so in my mind, 0:07:52.240 --> 0:07:54.520 it's like we're selling options for nothing, and I don't 0:07:54.560 --> 0:07:55.680 see why we're selling those options. 0:07:55.760 --> 0:07:58.360 This just requires such a strong amount of conviction, though 0:07:58.440 --> 0:07:59.920 coming down to the pandemic. I think what we all 0:08:00.160 --> 0:08:02.640 lean was a massive degree of humidity because there were 0:08:02.680 --> 0:08:05.720 so many things that we thought were obvious that actually 0:08:05.960 --> 0:08:08.280 things just turned out to be completely the opposite. And 0:08:08.320 --> 0:08:09.920 I wonder if this year we should have the same 0:08:09.960 --> 0:08:12.720 approach to monetary policy. As a monetary policy official, do 0:08:12.760 --> 0:08:14.680 you have to sit here and say, actually, the prudent 0:08:14.680 --> 0:08:16.640 way to do things is actually to move slowly and 0:08:16.680 --> 0:08:18.920 work things out meeting by meeting, because that's what I 0:08:18.920 --> 0:08:21.080 hear from other members of the committee, And I'm wondering 0:08:21.120 --> 0:08:22.800 why you see things so differently. 0:08:23.080 --> 0:08:24.600 Sure, so, first of all, I'll say that I was 0:08:24.640 --> 0:08:27.200 right about inflation at coming out of the pandemic. And 0:08:27.240 --> 0:08:29.080 if you sort of go back to twenty twenty when 0:08:29.080 --> 0:08:30.760 I was in the Treasury Department, you know, we were 0:08:30.840 --> 0:08:33.880 arguing for a smaller stimulus package because we didn't see 0:08:34.120 --> 0:08:36.520 we didn't see COVID as a similar type of recession 0:08:36.559 --> 0:08:39.520 that we had POSTGFC, post dot com bubble, where you 0:08:39.520 --> 0:08:42.959 had persistently leveraging, dragging on demand that caused the balance 0:08:43.000 --> 0:08:46.720 sheet recession with a persistent, slow, crappy recovery. Right, COVID 0:08:46.800 --> 0:08:49.240 was like a switch turned off. Right people stayed home 0:08:49.360 --> 0:08:51.280 and the switch turned on when they started going out again, 0:08:51.320 --> 0:08:52.840 and so there wasn't going to be a slow recovery. 0:08:52.920 --> 0:08:55.880 And that's why we were pushing for smaller stimulus packages, 0:08:56.160 --> 0:08:58.880 because we didn't think that it narrated that type of package. 0:08:58.880 --> 0:09:01.960 We were concerned about inflation picking up. So I did 0:09:01.960 --> 0:09:04.920 get that. I did get that right, and I do 0:09:05.040 --> 0:09:10.280 understand the value of of being cautions and having humiliating 0:09:10.320 --> 0:09:12.560 these things. I will say my forecast, as I said before, 0:09:12.640 --> 0:09:16.080 is predicated upon shelter inflation, and shelter is a weird 0:09:16.120 --> 0:09:19.360 thing where market rents give us a window into measured 0:09:19.440 --> 0:09:22.199 into the path of measured inflation that's very different than 0:09:22.240 --> 0:09:25.840 other sections of the inflation index. We know that market rents, 0:09:25.880 --> 0:09:28.120 a weighted average of single family and multi family market 0:09:28.200 --> 0:09:29.960 rents have been growing at a one percent rate for 0:09:30.000 --> 0:09:32.360 two years now. We know that average tenant rents have 0:09:32.400 --> 0:09:35.200 caught up to new tenant rents. Right, there are statistically 0:09:35.240 --> 0:09:38.240 mechanical relationships that give you a lot of confidence that 0:09:38.320 --> 0:09:40.760 measured shelter inflation is going to come down a lot. Right. 0:09:40.960 --> 0:09:42.800 You don't have that type of confidence when you're talking 0:09:42.800 --> 0:09:44.520 about goods. I said before, I don't know what's driving 0:09:44.559 --> 0:09:47.920 goods inflation, right, I don't have this this forecast that 0:09:47.960 --> 0:09:49.800 goods inflation is going to is going to come down 0:09:49.960 --> 0:09:52.439 because it's just driven by tariffs that my colleagues seem 0:09:52.480 --> 0:09:55.760 to have. Right. I don't have that type of confidence 0:09:55.800 --> 0:09:57.400 on areas the index that I think are much more 0:09:57.440 --> 0:10:01.120 difficult to understand. Shelter is a mechanic thing from market 0:10:01.120 --> 0:10:04.640 rents to measured inflation, and therefore it's in my mind 0:10:04.640 --> 0:10:06.719 appropriate to have that high degree of confidence. And to 0:10:06.840 --> 0:10:09.000 Leasa's point, where would I be wrong if the market 0:10:09.000 --> 0:10:11.360 rents pick up again? If the market rents pick up, 0:10:11.520 --> 0:10:14.520 then I'm going to say my mechanical pass through from 0:10:14.559 --> 0:10:17.760 market rents into measured shelter inflation is getting invalided, and 0:10:17.800 --> 0:10:18.319 we'll see that. 0:10:18.559 --> 0:10:21.079 Just to hone in a little bit on the housing aspect, 0:10:21.120 --> 0:10:23.760 since that has been a really hot topic, how much 0:10:23.800 --> 0:10:26.000 signal would you take if you did start cutting more 0:10:26.040 --> 0:10:28.720 aggressively at the fetcher reserve and tenure yield rows and 0:10:28.760 --> 0:10:31.559 that actually created an issue for mortgage rates and the 0:10:31.640 --> 0:10:33.719 pass through there. It might actually help with the disinflation, 0:10:33.800 --> 0:10:35.959 but it might as exactly be the outcome that you're 0:10:36.000 --> 0:10:36.480 looking for. 0:10:37.160 --> 0:10:39.959 Yeah, so this is an area where I where I'd 0:10:40.000 --> 0:10:42.920 want to have I'd want to not jump to conclusions 0:10:42.920 --> 0:10:44.520 because I want to sort of try and analyze it 0:10:44.640 --> 0:10:46.360 very carefully and think about what the market is saying, 0:10:46.440 --> 0:10:48.559 think about what the economy is doing. And if it's 0:10:48.600 --> 0:10:51.040 the case that you cut rates and you sort of 0:10:51.080 --> 0:10:52.959 get a burst of activity in some sector of the 0:10:52.960 --> 0:10:55.840 economy that's not housing and that ends up crowding out housing, 0:10:56.240 --> 0:10:58.840 then you know, you wouldn't really mind. You're focused on aggregates, 0:10:58.840 --> 0:11:02.800 You're focused on inflation, very inflation, You're focused on er unemployment. Right. 0:11:04.000 --> 0:11:06.760 If it looks like you cut rates and the bottom 0:11:06.760 --> 0:11:09.480 market is giving you a very clear signal and I'm 0:11:09.480 --> 0:11:11.880 not just talking about like you know, trading behavior for 0:11:11.920 --> 0:11:14.560 a week. I'm talking about a very clear signal over 0:11:14.559 --> 0:11:16.160 the course of a period of time that it's not 0:11:16.360 --> 0:11:18.320 the right move, then I think, yeah, you want to 0:11:18.360 --> 0:11:19.880 you want to take that signal, and you want to 0:11:19.880 --> 0:11:21.839 think about what's the market telling me that I missed? 0:11:21.920 --> 0:11:24.360 Is the market right? Am I wrong? Let me rethink 0:11:24.360 --> 0:11:24.880 my framework. 0:11:25.040 --> 0:11:25.760 You're going to miss this. 0:11:26.600 --> 0:11:28.320 When it's all over, it feels like you're enjoying this 0:11:28.559 --> 0:11:29.760 are you going to miss this when you have to 0:11:29.960 --> 0:11:30.840 leave the Federal Reserve? 0:11:32.000 --> 0:11:35.440 Well, you know, Uh, that's not part of my forecast. 0:11:36.160 --> 0:11:37.160 How are you going to hang around? 0:11:37.520 --> 0:11:37.679 Oh? 0:11:37.720 --> 0:11:39.199 I have no idea. You know, we'll see. I don't 0:11:39.240 --> 0:11:40.480 I don't make personal decisions. 0:11:40.679 --> 0:11:43.200 Okay, you've had nothing at all from anybody. 0:11:43.920 --> 0:11:46.280 Uh, you know, I think that you know, we're very 0:11:46.280 --> 0:11:48.600 clearly now getting into getting into the new year, and 0:11:48.640 --> 0:11:50.480 the president. You know, the President has said in the 0:11:50.559 --> 0:11:52.920 past that he would make announcements as we got there, 0:11:53.000 --> 0:11:56.360 So you know, I imagine we'll be getting some at 0:11:56.360 --> 0:11:59.080 some point. But you know, I don't know. I don't 0:11:59.120 --> 0:12:01.280 know anything about my future, so I would I wouldn't 0:12:01.280 --> 0:12:01.600 mind it. 0:12:01.760 --> 0:12:02.400 Stay with us. 0:12:02.720 --> 0:12:15.000 More Bloomberg surveillance coming up after this. We'll begin this 0:12:15.080 --> 0:12:17.480 hour with stocks continuing to pull back from all time high, 0:12:17.480 --> 0:12:21.119 seemshap of principal asset management seeing upside ahead, writing, widespread 0:12:21.120 --> 0:12:26.280 fiscal stimulus, monetary normalization, accelerating AI driven capex, and adoption 0:12:26.360 --> 0:12:29.520 are all factors that should underpin robust growth. SEEMA joint 0:12:29.600 --> 0:12:31.640 is now for more seeming there they kind of structure 0:12:31.640 --> 0:12:34.400 all big picture stories for the next twelve twenty four 0:12:34.400 --> 0:12:37.079 months or so. Let's talk about the last twelve twenty 0:12:37.120 --> 0:12:40.560 four hours, Seema. We're pushing back on executive pay, on 0:12:40.679 --> 0:12:43.440 capital return. These are things you wouldn't typically associate with 0:12:43.480 --> 0:12:46.400 the United States, certainly wouldn't typically associate them with the 0:12:46.440 --> 0:12:49.120 Republican Party. As you sit there in London and your 0:12:49.160 --> 0:12:52.720 investors think about allocating capital to the United States, does 0:12:52.720 --> 0:12:53.400 it give you pause? 0:12:55.800 --> 0:12:58.160 Well, Hi, John, I think it does to some extent. 0:12:58.200 --> 0:13:00.320 I mean, at any time that you have government into mention, 0:13:00.559 --> 0:13:04.120 it typically does put off investors, obviously by varying amounts. 0:13:05.000 --> 0:13:07.320 There are some things that he said there which I 0:13:07.320 --> 0:13:09.760 think they don't necessarily add up. I mean, in terms 0:13:09.760 --> 0:13:13.280 of putting off investors from corporate housing, you almost need 0:13:13.320 --> 0:13:17.440 them there to encourage greater supply, which would be your 0:13:17.440 --> 0:13:20.360 best way of resolving afordability issues. And then even on 0:13:20.360 --> 0:13:22.520 the defense side, you know, trying to put off the 0:13:22.559 --> 0:13:25.520 investment is hardly going to be conducive to some of 0:13:25.559 --> 0:13:28.040 the things that he's saying. The other thing about this 0:13:28.080 --> 0:13:30.120 as well, is that coming into twenty twenty six, there's 0:13:30.120 --> 0:13:31.880 obviously been a lot of optimism. One of the thing 0:13:31.920 --> 0:13:36.840 that's been non people's assumptions is that policy upheaval volatility 0:13:36.920 --> 0:13:38.160 is going to be a little bit less in what 0:13:38.200 --> 0:13:39.960 we had last year, And of course, as you said, 0:13:39.960 --> 0:13:43.359 the last for the eight hours suggests the exact opposite. 0:13:43.480 --> 0:13:46.360 So I think that there's some things in here which 0:13:46.400 --> 0:13:49.320 may not have immediate impact, but cerddenly from an investor's standpoint, 0:13:49.679 --> 0:13:52.360 this is a moment of pause that maybe twenty twenty 0:13:52.400 --> 0:13:54.560 six is not going to be as smooth as a 0:13:54.559 --> 0:13:55.640 lot of people anticipated. 0:13:55.679 --> 0:13:57.920 Well, let's just reflect on the last twelve months. So 0:13:58.040 --> 0:13:59.000 earnings have been great. 0:13:59.360 --> 0:14:02.679 Payroll growth it's been absolutely terrible, and investors have been 0:14:02.679 --> 0:14:04.319 okay with that because earnings have been great and the 0:14:04.360 --> 0:14:06.079 equity market has been hitting all time highs. At the 0:14:06.080 --> 0:14:08.440 same time, consumer sentiment has been rock bottom. Now, if 0:14:08.440 --> 0:14:11.719 you're a politician, to address the consumer sentiment issues, you 0:14:11.800 --> 0:14:13.480 might have to introduce policies that aren't going to be 0:14:13.559 --> 0:14:15.600 favorable for the kind of things that have driven us 0:14:15.600 --> 0:14:17.360 to all time highs and the equity market, the kind 0:14:17.360 --> 0:14:19.240 of things that are driven a long term bull market 0:14:19.560 --> 0:14:21.280 in the United States. Se I mean, do we have 0:14:21.320 --> 0:14:23.120 to think about those issues a little bit more going 0:14:23.160 --> 0:14:25.760 into the midterms and beyond that for a whole generation 0:14:25.800 --> 0:14:27.880 of individuals that haven't participated in this run up in 0:14:27.880 --> 0:14:30.600 the equity market. They're voting for this stuff and they're 0:14:30.640 --> 0:14:32.280 going to keep voting for this stuff, and it's the 0:14:32.360 --> 0:14:34.320 kind of stuff that's not going to be favorable for 0:14:34.440 --> 0:14:35.200 risk assets. 0:14:36.840 --> 0:14:39.120 It is, I think it's you know, some of those pockets. 0:14:39.160 --> 0:14:41.080 So it's a question of how much does it impact 0:14:41.080 --> 0:14:43.360 the aggregate. So you know, as you said to your point, 0:14:43.640 --> 0:14:46.000 affordability is going to be the buzzword. It has been 0:14:46.000 --> 0:14:48.640 for the last month or two, it's likely to continue. 0:14:49.360 --> 0:14:51.320 How could we see that playing out, Well, there's obviously 0:14:51.360 --> 0:14:55.600 the couple of policies around a dividend. There's also the 0:14:55.640 --> 0:14:58.080 idea about maybe potentially lowering some of the tariffs that 0:14:58.080 --> 0:15:01.920 are impacting some of the lowing hassles the most. Now, 0:15:02.200 --> 0:15:04.840 those things ideally if we think about think that through 0:15:04.840 --> 0:15:07.080 if they can get passed, and that would suggest that 0:15:07.160 --> 0:15:10.479 you could see some upside for consumer discretionary. But ultimately, 0:15:10.880 --> 0:15:13.560 because of the case show, but mainly because the top 0:15:13.600 --> 0:15:16.040 ten percent really do it count thro around half of 0:15:16.080 --> 0:15:19.720 you as consumer spending, it doesn't necessarily move the needle. 0:15:19.760 --> 0:15:23.160 What we want to see is a constructive and can 0:15:23.240 --> 0:15:26.520 back up where Ernie's can continue to do well, and 0:15:26.560 --> 0:15:28.680 it's important that those policies, and at the moment it 0:15:28.720 --> 0:15:30.480 doesn't look like it will be, but it doesn't as 0:15:30.520 --> 0:15:33.080 long as those policies are not going to be impacting 0:15:33.080 --> 0:15:35.000 the Ernie's growth for a lot of these companies that 0:15:35.040 --> 0:15:35.760 we're focusing on. 0:15:35.920 --> 0:15:37.360 This is the reason why I see that so many 0:15:37.360 --> 0:15:39.880 people have looked past some of the volatility and at 0:15:39.960 --> 0:15:43.560 least headlines coming from Washington, DC. There is one aspect 0:15:43.560 --> 0:15:47.120 though that has remained relatively unnoticed, at least with respect 0:15:47.160 --> 0:15:49.440 to bond markets, and that is that you can expect 0:15:49.440 --> 0:15:53.480 an expansion of the fiscal deficit, possibly quite considerably, especially 0:15:53.520 --> 0:15:56.200 if anything even close to what the President is proposing 0:15:56.440 --> 0:15:59.680 relating to the government relating to the military comes to pass. 0:16:00.040 --> 0:16:02.000 Why do you think that's not shaking up fixed income 0:16:02.080 --> 0:16:04.160 markets in any material way. 0:16:04.880 --> 0:16:07.080 Well, I think at the moment, one of the considerations 0:16:07.160 --> 0:16:08.920 is a lot of this won't get past your Congress. 0:16:08.920 --> 0:16:12.920 So there's enough I wouldn't say fiscal discipline or considerable concern, 0:16:13.000 --> 0:16:15.440 but there's enough of a pushback that a lot of 0:16:15.440 --> 0:16:16.480 this won't come to pass. 0:16:16.720 --> 0:16:18.360 But I think that you're absolutely right. 0:16:18.280 --> 0:16:19.760 And saying that this is a key risk. When we're 0:16:19.760 --> 0:16:22.440 looking at the acuity market, we feel pretty positive about 0:16:22.440 --> 0:16:25.600 the macro backdrop and earnings. The one caveat to this 0:16:25.720 --> 0:16:28.960 so or is that bond deals have to stay fairly 0:16:28.960 --> 0:16:32.400 well behaved. You cannot see a very significant sell off 0:16:33.120 --> 0:16:35.360 against this backdrop. I mean, ultimately for this year, what 0:16:35.400 --> 0:16:38.240 we're expecting is that earnings or is it equity returns 0:16:38.600 --> 0:16:40.800 won't be driven by multiple expansions. They have to come 0:16:40.800 --> 0:16:44.640 from earnings, and any significant increase in interest rates bond 0:16:44.680 --> 0:16:49.240 deals could be a real hurdle for the expectations of 0:16:50.000 --> 0:16:52.000 I guess low double digit returns that we have. 0:16:52.400 --> 0:16:53.440