1
00:00:05,080 --> 00:00:08,280
Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Lisa A.

2
00:00:08,320 --> 00:00:11,640
Speaker 2: Bromwoit's along with Tom Keane and Jonathan Ferrow. Join us

3
00:00:11,680 --> 00:00:15,280
Speaker 2: each day for insight from the best in economics, geopolitics,

4
00:00:15,320 --> 00:00:16,440
Speaker 2: finance and investment.

5
00:00:16,760 --> 00:00:18,760
Speaker 1: Subscribe to Bloomberg Surveillance.

6
00:00:18,360 --> 00:00:21,840
Speaker 2: On demand on Apple, Spotify and anywhere you get your podcasts,

7
00:00:22,160 --> 00:00:25,200
Speaker 2: and always on Bloomberg dot Com, the Bloomberg Terminal, and

8
00:00:25,200 --> 00:00:26,440
Speaker 2: the Bloomberg Business app.

9
00:00:27,040 --> 00:00:30,280
Speaker 3: The Chairman of the Federal Reserve System, I'm truly in

10
00:00:30,480 --> 00:00:33,120
Speaker 3: historic day. As or Michael McKee said with some emotion

11
00:00:33,240 --> 00:00:36,320
Speaker 3: at two pm, made super hawkish. Fred I saw a

12
00:00:36,320 --> 00:00:40,080
Speaker 3: couple of research notes saying hawkish hawkish. I don't know

13
00:00:40,120 --> 00:00:42,720
Speaker 3: what hawkish means. I certainly don't know what hawkish squared

14
00:00:43,400 --> 00:00:46,519
Speaker 3: means as well, but there you have some piercing questions there,

15
00:00:46,560 --> 00:00:49,120
Speaker 3: and we've got some of the video to playback. That

16
00:00:49,200 --> 00:00:52,200
Speaker 3: did move the market, Lisa, what I would suggest here

17
00:00:52,240 --> 00:00:55,240
Speaker 3: with markets sort of a sigh of relief. We went

18
00:00:55,360 --> 00:00:58,880
Speaker 3: down off the statement, we came back with a nice

19
00:00:59,000 --> 00:01:02,240
Speaker 3: Nasdaq one hundred turn, Apple breaking out to new highs.

20
00:01:02,280 --> 00:01:04,560
Speaker 3: We may have time to get to that, but it

21
00:01:04,600 --> 00:01:07,720
Speaker 3: was in the two year yield a twenty eight basis

22
00:01:07,760 --> 00:01:11,760
Speaker 3: point swing to a much higher two year yield, resetting

23
00:01:11,840 --> 00:01:14,800
Speaker 3: to the new hawkish hawkish, and then we came in,

24
00:01:15,240 --> 00:01:17,040
Speaker 3: is he calm the markets?

25
00:01:17,080 --> 00:01:20,160
Speaker 2: My takeaway is j Powell wants to sound hawkish. He

26
00:01:20,200 --> 00:01:22,840
Speaker 2: wanted to double down on super hawkishness, and he failed

27
00:01:22,880 --> 00:01:25,440
Speaker 2: because basically the real key moment was that when you

28
00:01:25,480 --> 00:01:28,960
Speaker 2: couldn't commit to any July rate hike. To me, this

29
00:01:29,000 --> 00:01:32,160
Speaker 2: stood out in response to a question about what the

30
00:01:32,520 --> 00:01:35,560
Speaker 2: change in the statement of economic projections to shift upward

31
00:01:35,640 --> 00:01:38,320
Speaker 2: fifty basis points of further rate hikes, what that meant

32
00:01:38,440 --> 00:01:39,000
Speaker 2: about July.

33
00:01:39,080 --> 00:01:39,640
Speaker 1: Take a listen.

34
00:01:39,800 --> 00:01:41,440
Speaker 4: We didn't make a decision about July. I mean, of

35
00:01:41,480 --> 00:01:45,160
Speaker 4: course it came up in the meeting from time to time,

36
00:01:45,200 --> 00:01:47,280
Speaker 4: but really the focus was on what to do today.

37
00:01:47,360 --> 00:01:50,960
Speaker 4: I would say about about July two things. One decision

38
00:01:50,960 --> 00:01:53,520
Speaker 4: hasn't been made to I do expect that it will

39
00:01:53,520 --> 00:01:54,280
Speaker 4: be a live meeting.

40
00:01:54,600 --> 00:01:57,280
Speaker 2: The live meeting was not the same as we have

41
00:01:57,320 --> 00:01:59,480
Speaker 2: an indication that we are going to raise rates, and

42
00:01:59,520 --> 00:02:01,800
Speaker 2: at that point you start to see the shift in markets,

43
00:02:02,000 --> 00:02:04,080
Speaker 2: with equity starting to lift and getting it at one

44
00:02:04,080 --> 00:02:06,080
Speaker 2: point up as much as a half a percent on

45
00:02:06,080 --> 00:02:09,200
Speaker 2: the Nasdaq, and you can see a real retracement of

46
00:02:09,240 --> 00:02:11,799
Speaker 2: those bond yields. Basically, if you're not going to commit

47
00:02:11,840 --> 00:02:14,520
Speaker 2: to a July rate hike, why should we believe the

48
00:02:14,639 --> 00:02:17,680
Speaker 2: average of a statement of economic projections by committee members?

49
00:02:17,720 --> 00:02:20,160
Speaker 3: We chat Aaron a moment. We've got some very important

50
00:02:20,200 --> 00:02:22,560
Speaker 3: stuff from some of the great academics across the nation.

51
00:02:22,600 --> 00:02:25,639
Speaker 3: I'm going to feature Jason Furman here in a bit.

52
00:02:25,639 --> 00:02:28,000
Speaker 3: If you're just joining us, we welcome you on radio,

53
00:02:28,080 --> 00:02:32,320
Speaker 3: on television at Worldwide. Tom Keen and Lisa Bramwis. Jonathan

54
00:02:32,320 --> 00:02:35,320
Speaker 3: Ferrell on assignment on one of three islands in Italy.

55
00:02:35,360 --> 00:02:37,080
Speaker 3: I'm not sure which one is, Like you know, I

56
00:02:37,080 --> 00:02:37,600
Speaker 3: think Capri.

57
00:02:37,919 --> 00:02:41,680
Speaker 1: How do you call vacation assignment? I don't understand.

58
00:02:41,280 --> 00:02:44,200
Speaker 3: Because I'm American. We don't go on vacation. Little faraoh

59
00:02:44,240 --> 00:02:46,920
Speaker 3: goes in holiday, which is a good and beautiful thing.

60
00:02:46,919 --> 00:02:49,880
Speaker 3: We're gonna have some great conversation coming up here and

61
00:02:49,960 --> 00:02:53,919
Speaker 3: in moments, Talia, do we have the Furman tweet here?

62
00:02:54,000 --> 00:02:56,079
Speaker 3: I think this is too important. It's in a good

63
00:02:56,120 --> 00:02:59,359
Speaker 3: SAGIWI and the Jeffrey Rosenberg here in a moment, did

64
00:02:59,360 --> 00:03:02,520
Speaker 3: we get that this is Jason Furman of Harvard. Of course,

65
00:03:02,560 --> 00:03:05,640
Speaker 3: with his public service to the nation and teaching, I

66
00:03:05,639 --> 00:03:09,480
Speaker 3: should say x ten at Harvard, which gives him great

67
00:03:09,520 --> 00:03:14,400
Speaker 3: credit as well. The FOMC is signaling a baby step

68
00:03:14,520 --> 00:03:18,320
Speaker 3: away from a belief in low equilibrium interest rates. The

69
00:03:18,440 --> 00:03:22,360
Speaker 3: median long run FFR was unchanged, two and a half

70
00:03:22,360 --> 00:03:25,639
Speaker 3: of the central tenantcy shifted up, and then all three

71
00:03:26,240 --> 00:03:29,960
Speaker 3: of the lowest long run dots shifted up. Expect more

72
00:03:30,000 --> 00:03:35,440
Speaker 3: of this shift over time, Professor Furman of Harvard University.

73
00:03:35,840 --> 00:03:39,520
Speaker 3: Joining us on Jeffrey Rosenberg, portfolio manager of Systemic Multi

74
00:03:39,520 --> 00:03:41,640
Speaker 3: Strategy Fund at Blackrock.

75
00:03:42,320 --> 00:03:43,200
Speaker 1: Oh, he's not good yet.

76
00:03:43,200 --> 00:03:47,080
Speaker 3: Okay, we'll get to Jeffrey Rosenberg in a moment. Joining

77
00:03:47,120 --> 00:03:51,120
Speaker 3: us now our academic Michael McKee here, which I thought

78
00:03:51,160 --> 00:03:52,920
Speaker 3: what was great, Mic is for the first time in

79
00:03:52,960 --> 00:03:55,160
Speaker 3: age if someone had a ruder question than you, which

80
00:03:55,160 --> 00:03:59,800
Speaker 3: I think was very good. Michael McKee, Jason Furman, I think,

81
00:03:59,800 --> 00:04:03,280
Speaker 3: with summary here of the history that Mike I heard

82
00:04:03,360 --> 00:04:08,600
Speaker 3: in your voice at two o'clock, this is an extraordinary moment, Mike.

83
00:04:09,240 --> 00:04:13,320
Speaker 3: Is this where the FED begins to shift, where we're

84
00:04:13,360 --> 00:04:16,680
Speaker 3: heading up to our former vice chair? Clarity says so

85
00:04:17,120 --> 00:04:20,479
Speaker 3: the Jason Furman alludes to that finally we're beginning to

86
00:04:20,520 --> 00:04:22,600
Speaker 3: find a new level above two percent.

87
00:04:23,880 --> 00:04:26,800
Speaker 5: Well, it may be the issue there is going to

88
00:04:26,800 --> 00:04:29,520
Speaker 5: be how long it takes inflation to come down, which

89
00:04:29,560 --> 00:04:31,599
Speaker 5: is sort of the genesis of the question that I

90
00:04:31,680 --> 00:04:34,120
Speaker 5: asked in terms of whether it's time or data that's

91
00:04:34,160 --> 00:04:36,120
Speaker 5: going to make a difference. I think a lot of

92
00:04:36,160 --> 00:04:39,520
Speaker 5: what went into today's decision was the Reserve Bank of

93
00:04:39,560 --> 00:04:42,880
Speaker 5: Australia and the Bank of Canada took rate moves off

94
00:04:42,920 --> 00:04:45,440
Speaker 5: the table, and the markets were then shocked when they

95
00:04:45,440 --> 00:04:48,000
Speaker 5: had to come back and raise rates again. So they

96
00:04:48,000 --> 00:04:50,160
Speaker 5: don't know if they're going to need to raise rates again.

97
00:04:50,240 --> 00:04:53,080
Speaker 5: They think if nothing changes that they may need to.

98
00:04:53,320 --> 00:04:56,960
Speaker 5: They're giving themselves that flexibility. They don't want markets to

99
00:04:57,040 --> 00:05:00,400
Speaker 5: price in the end of tightening or any of rate

100
00:05:00,440 --> 00:05:04,120
Speaker 5: reductions in the near term. But Pole seemed to indicate

101
00:05:04,200 --> 00:05:08,279
Speaker 5: that while they have these two rate moves priced into

102
00:05:08,520 --> 00:05:12,200
Speaker 5: their dot plot, it doesn't mean they're necessarily going to

103
00:05:12,279 --> 00:05:15,240
Speaker 5: do them. They will see what happens with inflation with

104
00:05:15,320 --> 00:05:19,120
Speaker 5: the economy going forward. So July may be live, as

105
00:05:19,160 --> 00:05:21,320
Speaker 5: he said, but if we don't see a lot of change,

106
00:05:22,000 --> 00:05:23,320
Speaker 5: I think you're going to see a lot of people

107
00:05:23,440 --> 00:05:26,400
Speaker 5: leaning towards the idea of the Fed holding again.

108
00:05:26,240 --> 00:05:28,200
Speaker 2: That I thought was really interesting, and you asked a

109
00:05:28,200 --> 00:05:30,279
Speaker 2: great question which he did not answer. He really just

110
00:05:30,360 --> 00:05:32,640
Speaker 2: kept saying, look at the statement of economic projections, Look

111
00:05:32,640 --> 00:05:35,839
Speaker 2: at the dot plot. How much we witnessing attention between

112
00:05:35,920 --> 00:05:39,920
Speaker 2: j Powell as an individual representative on the FMC versus

113
00:05:39,920 --> 00:05:42,880
Speaker 2: the committee which is significantly more hawkish than he is.

114
00:05:43,839 --> 00:05:46,360
Speaker 5: I think it's going to be very interesting, Lisa, to

115
00:05:46,400 --> 00:05:48,400
Speaker 5: listen to what the Fed officials have to say over

116
00:05:48,440 --> 00:05:52,000
Speaker 5: the coming weeks, Because if you had asked where we

117
00:05:52,040 --> 00:05:55,440
Speaker 5: would get dissents at this meeting, we would have said,

118
00:05:55,680 --> 00:05:57,400
Speaker 5: and I think everybody on Wall Street would have said,

119
00:05:57,400 --> 00:06:00,039
Speaker 5: from the hawkish members. But now it appears that the

120
00:06:00,080 --> 00:06:04,280
Speaker 5: hawks led the way, Powell going in, Jefferson going in,

121
00:06:04,600 --> 00:06:08,479
Speaker 5: and William's going in, essentially leaning towards the pause and

122
00:06:08,600 --> 00:06:12,080
Speaker 5: leaning perhaps more Dubvish than others. So what was it

123
00:06:12,160 --> 00:06:15,120
Speaker 5: that drew them into this idea of an additional two

124
00:06:15,200 --> 00:06:17,760
Speaker 5: rate moves? If they indeed joined in, it's hard to

125
00:06:17,800 --> 00:06:20,440
Speaker 5: imagine Powell not doing it. But there were some dots

126
00:06:20,440 --> 00:06:25,960
Speaker 5: below the new median, but it does seem that the

127
00:06:26,000 --> 00:06:30,640
Speaker 5: group as a whole group more hawkish. So what brought

128
00:06:30,680 --> 00:06:34,160
Speaker 5: that on? And is their division? Was their division or

129
00:06:34,160 --> 00:06:36,320
Speaker 5: did we all kind of misread it. It's it be

130
00:06:36,360 --> 00:06:38,279
Speaker 5: interesting to listen to their speeches in the next couple

131
00:06:38,320 --> 00:06:38,880
Speaker 5: of weeks.

132
00:06:38,680 --> 00:06:41,200
Speaker 2: Agreed, and he even indicated that listen to their speeches

133
00:06:41,240 --> 00:06:43,080
Speaker 2: and they'll tell you what they think. Michael VICKI thank

134
00:06:43,120 --> 00:06:44,840
Speaker 2: you so much as always for your terrific world and

135
00:06:44,960 --> 00:06:47,120
Speaker 2: just sort of saying right now we are seeing that

136
00:06:47,200 --> 00:06:50,719
Speaker 2: lift reignite inequities NASDAC up three times on the percent

137
00:06:51,120 --> 00:06:54,360
Speaker 2: as you really reassess the commitment that this FMC truly

138
00:06:54,440 --> 00:06:56,400
Speaker 2: has trans rates next.

139
00:06:56,160 --> 00:06:58,400
Speaker 3: Month critically, and this is perfect to go to Jeffrey

140
00:06:58,480 --> 00:07:00,839
Speaker 3: Rosenberg on the VICS, which is in the equity space.

141
00:07:00,920 --> 00:07:04,040
Speaker 3: This is the volatility measurement around the standard of course

142
00:07:04,080 --> 00:07:07,920
Speaker 3: five hundred bursts down to a constructive thirteen point nine.

143
00:07:07,960 --> 00:07:11,720
Speaker 3: A boy, we taken volatility out of the equity markets here,

144
00:07:11,760 --> 00:07:14,520
Speaker 3: and of course Jeff Rosenberg that's part of his view

145
00:07:14,560 --> 00:07:18,280
Speaker 3: as the systemic multi strategy fund manager for black Rock.

146
00:07:18,360 --> 00:07:21,000
Speaker 3: He's been so wonderful to be with surveillance here for

147
00:07:21,080 --> 00:07:22,640
Speaker 3: a good amount of time. Jeff, I'm going to go

148
00:07:22,680 --> 00:07:24,280
Speaker 3: to the history right now. We'll get to the vix

149
00:07:24,360 --> 00:07:27,080
Speaker 3: in a moment and what it means for the yield space.

150
00:07:27,440 --> 00:07:30,880
Speaker 3: Professor Furman at Harvard says, today's a sea change. And

151
00:07:31,000 --> 00:07:34,520
Speaker 3: finally we're getting the verbiage from our central bank to

152
00:07:34,600 --> 00:07:36,720
Speaker 3: get away from what you know. I'm going to associate

153
00:07:36,760 --> 00:07:39,400
Speaker 3: this with John Taylor, where we had a run rate

154
00:07:39,520 --> 00:07:42,080
Speaker 3: under two percent one point eight one point seven percent.

155
00:07:42,440 --> 00:07:45,480
Speaker 3: We use two percent as a language, and finally we're

156
00:07:45,520 --> 00:07:47,720
Speaker 3: going to start admitting we're going to come down to

157
00:07:47,960 --> 00:07:53,000
Speaker 3: something above two percent. Is that what hawkish hawkish meant today?

158
00:07:53,600 --> 00:07:55,960
Speaker 6: You know, it could be part of that Tom That's a.

159
00:07:56,120 --> 00:07:58,600
Speaker 7: That's a that's a huge deal long run, because it

160
00:07:58,680 --> 00:08:02,800
Speaker 7: implies that lot or space for the FED to reach

161
00:08:02,840 --> 00:08:05,920
Speaker 7: its terminal rate because the real neutral rate is higher

162
00:08:06,200 --> 00:08:10,200
Speaker 7: than anticipated. I'm not sure that's so clear. I think

163
00:08:10,200 --> 00:08:13,080
Speaker 7: that's an interesting read. I think what's really clear here

164
00:08:13,120 --> 00:08:15,680
Speaker 7: in the market reaction is the FED, you know, mark

165
00:08:15,760 --> 00:08:16,800
Speaker 7: to market and upgrade.

166
00:08:16,800 --> 00:08:19,400
Speaker 6: It's upgraded its assessment.

167
00:08:19,120 --> 00:08:23,640
Speaker 7: Of the economy, and you know that's good news in

168
00:08:23,680 --> 00:08:26,320
Speaker 7: some sense. This is about you know, really pushing back

169
00:08:26,480 --> 00:08:34,800
Speaker 7: hard against the recession. Consensus, the recession expectations from consensus

170
00:08:34,880 --> 00:08:38,640
Speaker 7: in terms of economics, and consistent refrain all year long

171
00:08:38,720 --> 00:08:41,679
Speaker 7: that it's just around the corner. It's just around the corner,

172
00:08:42,200 --> 00:08:44,760
Speaker 7: not around the corner. And yes, you've got the FED

173
00:08:44,800 --> 00:08:47,440
Speaker 7: who's got to push back against that. But for the

174
00:08:47,520 --> 00:08:50,280
Speaker 7: kind of back in and forth in financial markets is

175
00:08:50,280 --> 00:08:52,600
Speaker 7: a little bit about, hey, this economy is a little

176
00:08:52,600 --> 00:08:56,480
Speaker 7: bit more resilient, and Powell admitted it, it's been much

177
00:08:56,520 --> 00:08:59,920
Speaker 7: more resilient to the five hundred basis points than they expect,

178
00:09:00,080 --> 00:09:02,319
Speaker 7: than anyone expected, both in terms of the economy.

179
00:09:02,760 --> 00:09:05,199
Speaker 3: Jeff, to me, this is a foundational moment, and your

180
00:09:05,280 --> 00:09:09,720
Speaker 3: colleague Waylee nailed this a couple of days ago, and

181
00:09:09,760 --> 00:09:13,040
Speaker 3: that there just seems to be a resilience here that

182
00:09:13,240 --> 00:09:17,439
Speaker 3: deserves a higher interest rate structure. Did we get wrong

183
00:09:17,559 --> 00:09:22,960
Speaker 3: the recession idea in the sense that for whatever reason, technology, demographics,

184
00:09:23,040 --> 00:09:26,480
Speaker 3: the other factors. Blenchard talks about that this is just

185
00:09:26,520 --> 00:09:31,720
Speaker 3: simply a much more resilient American economy that we have

186
00:09:31,760 --> 00:09:33,079
Speaker 3: to deal with in finance.

187
00:09:33,600 --> 00:09:37,920
Speaker 7: Yeah, and resilient to what resilient to interest rate sensitivity?

188
00:09:38,160 --> 00:09:38,280
Speaker 8: Right?

189
00:09:38,360 --> 00:09:42,480
Speaker 7: I got done talking about housing interest rate sensitive sectors

190
00:09:42,559 --> 00:09:45,160
Speaker 7: they're the most, they're the fastest to respond.

191
00:09:45,440 --> 00:09:48,040
Speaker 6: Yes, we've seen that. What we haven't seen is the

192
00:09:48,080 --> 00:09:50,160
Speaker 6: rest of the economy. And so what that might.

193
00:09:50,760 --> 00:09:55,080
Speaker 7: Imply is a lot less interest rate sensitivity to tightening,

194
00:09:55,360 --> 00:09:58,400
Speaker 7: and higher interest rate than is expected. And so either

195
00:09:58,480 --> 00:10:01,800
Speaker 7: you need a lot more and what's really missing here

196
00:10:01,880 --> 00:10:04,120
Speaker 7: is the admission that you need to do a lot

197
00:10:04,160 --> 00:10:06,920
Speaker 7: more damage to the labor markets to really reign in

198
00:10:06,960 --> 00:10:07,640
Speaker 7: that inflation.

199
00:10:08,040 --> 00:10:08,840
Speaker 6: Otherwise you're going.

200
00:10:08,760 --> 00:10:11,720
Speaker 7: To be living with a lot longer, more persistent inflation

201
00:10:12,640 --> 00:10:15,480
Speaker 7: than a lot of the forecasts, including the FED, and

202
00:10:15,520 --> 00:10:17,319
Speaker 7: these updated SAP are implying.

203
00:10:17,679 --> 00:10:20,320
Speaker 2: Jeff, do you believe Fed Chair J Powell that this

204
00:10:20,400 --> 00:10:21,679
Speaker 2: FED is going to go twice more?

205
00:10:23,320 --> 00:10:26,480
Speaker 7: I think twice more is not too high of a bar.

206
00:10:26,559 --> 00:10:29,000
Speaker 7: I think the market had one more. A little bit

207
00:10:29,000 --> 00:10:32,120
Speaker 7: of the surprise in the sep here is that you've

208
00:10:32,160 --> 00:10:35,439
Speaker 7: got two more. I don't really think that's the surprise.

209
00:10:35,559 --> 00:10:37,880
Speaker 7: I think the surprise is what I was just sort

210
00:10:37,880 --> 00:10:42,800
Speaker 7: of implying that, if indeed you don't see inflation.

211
00:10:42,520 --> 00:10:44,720
Speaker 6: Respond more aggressively.

212
00:10:45,440 --> 00:10:48,880
Speaker 7: And to Tom's first question, if indeed the real neutral

213
00:10:48,960 --> 00:10:52,200
Speaker 7: rate is much higher than what Williams was just highlighting

214
00:10:52,200 --> 00:10:55,280
Speaker 7: in a recent speech. Yes, and what people think is,

215
00:10:55,640 --> 00:10:59,040
Speaker 7: you know, no change from the pre COVID environment, then

216
00:10:59,080 --> 00:11:02,720
Speaker 7: that terminal rate is much higher. Not fifty basis points,

217
00:11:02,720 --> 00:11:05,400
Speaker 7: but hundreds of basis points, and that would end up

218
00:11:05,400 --> 00:11:07,600
Speaker 7: being a big surprise. I'm not saying that's where we're going.

219
00:11:07,760 --> 00:11:10,960
Speaker 7: But the longer that you don't see the response in

220
00:11:11,080 --> 00:11:15,280
Speaker 7: labor markets in inflation, the more the data is telling

221
00:11:15,320 --> 00:11:18,320
Speaker 7: you that you're not tight in terms of policy, and

222
00:11:18,400 --> 00:11:20,560
Speaker 7: to get tight you got to go a much higher.

223
00:11:20,800 --> 00:11:23,000
Speaker 2: If that's the case, then why are equity markets up

224
00:11:23,080 --> 00:11:25,960
Speaker 2: right now? Why is the Nasdaq actually gaining stability and

225
00:11:26,000 --> 00:11:29,240
Speaker 2: then some even on the heels of projected further tightening.

226
00:11:30,320 --> 00:11:32,760
Speaker 7: So I think, you know, there's a big story around

227
00:11:32,760 --> 00:11:37,520
Speaker 7: the Nasdaq and some concentration issues around spots.

228
00:11:38,240 --> 00:11:41,040
Speaker 6: Tech is back as sort of the safe haven and

229
00:11:41,120 --> 00:11:41,880
Speaker 6: the safe.

230
00:11:41,600 --> 00:11:43,280
Speaker 7: Place to go, so you have a little bit of

231
00:11:43,320 --> 00:11:45,719
Speaker 7: that issue. It's not a high breadth market move.

232
00:11:45,760 --> 00:11:48,280
Speaker 2: You well, one a second, but Jeff, I'm sorry to interrupt,

233
00:11:48,320 --> 00:11:50,640
Speaker 2: and I realized this is difficult, but this is important

234
00:11:50,640 --> 00:11:53,280
Speaker 2: because it's not just what it has been doing. It

235
00:11:53,360 --> 00:11:56,520
Speaker 2: is in response to what we saw today that as

236
00:11:56,760 --> 00:11:59,319
Speaker 2: j Powell started to talk, and as he was basically

237
00:11:59,360 --> 00:12:01,760
Speaker 2: saying they have no committed to a July rate hike,

238
00:12:02,080 --> 00:12:06,040
Speaker 2: you saw a real enthusiasm kind of percolate up. Doesn't

239
00:12:06,040 --> 00:12:08,640
Speaker 2: that tell you something more than just simply AI hype.

240
00:12:09,679 --> 00:12:10,920
Speaker 6: Well, it is more than that.

241
00:12:11,040 --> 00:12:14,120
Speaker 7: And what I was going to extend that is it's

242
00:12:14,240 --> 00:12:17,640
Speaker 7: back to what is the safe haven for equity investors.

243
00:12:17,679 --> 00:12:21,000
Speaker 7: The safe haven is large cap tech and so you've

244
00:12:21,040 --> 00:12:24,839
Speaker 7: added a few new semiconductor companies in that list. We

245
00:12:24,960 --> 00:12:30,280
Speaker 7: got new funny acronyms to describe that new equity market concentration.

246
00:12:30,920 --> 00:12:34,000
Speaker 7: But it's about where do I go when I'm uncertain.

247
00:12:34,120 --> 00:12:36,959
Speaker 7: I go into these large cap companies because that's what's say.

248
00:12:37,080 --> 00:12:39,560
Speaker 7: If you want to see the broader economic impact, then

249
00:12:39,600 --> 00:12:41,520
Speaker 7: you got to look at Russell two thousand. You got

250
00:12:41,520 --> 00:12:43,400
Speaker 7: to look at small caps and you see a big

251
00:12:43,440 --> 00:12:46,000
Speaker 7: gap in that performance today. I think that's where you

252
00:12:46,160 --> 00:12:49,920
Speaker 7: search more about the economic sensitivity and where the vulnerabilities.

253
00:12:49,960 --> 00:12:52,520
Speaker 6: Thank you very much for pulling that up.

254
00:12:52,559 --> 00:12:55,199
Speaker 7: And that's where you see the disconnected and that's where

255
00:12:55,240 --> 00:12:58,480
Speaker 7: I think you can square somewhat of the Oh that's

256
00:12:58,480 --> 00:13:00,880
Speaker 7: got to do more, that's not so good for the economy.

257
00:13:01,080 --> 00:13:02,160
Speaker 6: Okay, so that's not so.

258
00:13:02,200 --> 00:13:06,280
Speaker 7: Good for the movement into economic sensitive stuff. If you

259
00:13:06,360 --> 00:13:08,120
Speaker 7: if you run this back a little bit further from

260
00:13:08,160 --> 00:13:10,160
Speaker 7: the beginning of the month, from the end of May payrolls,

261
00:13:10,160 --> 00:13:13,880
Speaker 7: you see Russell was actually leading the stock markets.

262
00:13:13,920 --> 00:13:15,760
Speaker 6: And so this kind of rotation is.

263
00:13:15,720 --> 00:13:17,640
Speaker 7: About uh oh, all right, I go back to my

264
00:13:17,760 --> 00:13:20,920
Speaker 7: safe haven. It's just my safe haven in this new

265
00:13:20,960 --> 00:13:23,960
Speaker 7: world is large cap tech. It's not the two The

266
00:13:23,960 --> 00:13:26,680
Speaker 7: Fed's raising rates, and so this is where you see

267
00:13:26,720 --> 00:13:27,600
Speaker 7: market dynamics going.

268
00:13:27,600 --> 00:13:29,000
Speaker 6: I think it's all very consistent.

269
00:13:29,559 --> 00:13:32,080
Speaker 3: Jeff Rosenberg, thank you so much today with black Rock

270
00:13:32,160 --> 00:13:34,400
Speaker 3: on a busy, busy afternoon. You want to get Michael

271
00:13:34,440 --> 00:13:37,360
Speaker 3: McKeon here for one more question before we get to

272
00:13:37,400 --> 00:13:40,800
Speaker 3: doctor Carpenter as well. Mike, I'm going to assume the

273
00:13:40,840 --> 00:13:45,000
Speaker 3: dots of twenty twenty three, I was twenty five sprawl

274
00:13:45,040 --> 00:13:48,280
Speaker 3: from Bullard to Goulesby. What are we going to hear

275
00:13:48,360 --> 00:13:51,480
Speaker 3: in the next FED speak Derby? How do all these

276
00:13:51,559 --> 00:13:55,320
Speaker 3: speakers deal with a hawkish hawkish statement?

277
00:13:56,559 --> 00:13:58,400
Speaker 5: Well, I think first of all, you throw out the

278
00:13:58,400 --> 00:14:01,200
Speaker 5: twenty twenty five dots because those are just sort of

279
00:14:01,360 --> 00:14:02,240
Speaker 5: darts on a board.

280
00:14:03,160 --> 00:14:06,559
Speaker 8: They don't have Yes, you may.

281
00:14:07,800 --> 00:14:09,400
Speaker 5: They don't have any idea where we're going to be

282
00:14:09,440 --> 00:14:12,520
Speaker 5: in twenty twenty five. They don't know about twenty twenty four.

283
00:14:12,800 --> 00:14:15,400
Speaker 5: As Powell admitted today, the economy has surprised with its

284
00:14:15,440 --> 00:14:18,559
Speaker 5: strength this year, and we got these surprising move in

285
00:14:18,679 --> 00:14:21,200
Speaker 5: the dot plot this time. So I wouldn't look that

286
00:14:21,320 --> 00:14:23,480
Speaker 5: far out. But I think what you do want to

287
00:14:23,560 --> 00:14:27,920
Speaker 5: say is that we're going to see who can define

288
00:14:28,080 --> 00:14:31,880
Speaker 5: what it would take for them to move again. Obviously

289
00:14:31,920 --> 00:14:34,760
Speaker 5: Austin Golesby probably doesn't want to do very much. But

290
00:14:35,000 --> 00:14:37,160
Speaker 5: if the Fed is going to move, if Jim Bullard

291
00:14:37,200 --> 00:14:39,120
Speaker 5: is going to move, is it going to be that

292
00:14:39,320 --> 00:14:42,920
Speaker 5: time question, the fact that inflation doesn't come down, or

293
00:14:42,960 --> 00:14:45,280
Speaker 5: is it going to be the fact that inflation goes

294
00:14:45,320 --> 00:14:46,200
Speaker 5: back up again.

295
00:14:46,280 --> 00:14:47,760
Speaker 8: That's what they need to find out.

296
00:14:48,080 --> 00:14:51,040
Speaker 2: Based on this question that Tom is rightly asking. Are

297
00:14:51,040 --> 00:14:53,960
Speaker 2: you seeing this shift as evidenced by some of these

298
00:14:54,000 --> 00:14:57,200
Speaker 2: projections and even what we heard from j Powell? Are

299
00:14:57,240 --> 00:15:00,120
Speaker 2: they moving the terminal rate higher than what we've I'm

300
00:15:00,120 --> 00:15:00,720
Speaker 2: accustomed to.

301
00:15:01,840 --> 00:15:03,400
Speaker 8: Well, yes, I think they are.

302
00:15:03,800 --> 00:15:07,160
Speaker 5: They do think that we could go to as much

303
00:15:07,240 --> 00:15:09,560
Speaker 5: as five and three quarters percent.

304
00:15:09,360 --> 00:15:10,160
Speaker 8: Or six percent.

305
00:15:10,480 --> 00:15:13,000
Speaker 5: The issue is if they start to get that high,

306
00:15:13,160 --> 00:15:15,680
Speaker 5: what second round effects are there, and so they're going

307
00:15:15,720 --> 00:15:17,840
Speaker 5: to be reluctant to move, but they want to leave

308
00:15:17,880 --> 00:15:21,360
Speaker 5: that possibility open because the economy has been so strong

309
00:15:21,400 --> 00:15:23,920
Speaker 5: and they don't think that it is going to react

310
00:15:24,480 --> 00:15:27,520
Speaker 5: as it has in the past. And one interesting thing

311
00:15:27,560 --> 00:15:30,040
Speaker 5: today is by moving up to one percent for a

312
00:15:30,160 --> 00:15:32,080
Speaker 5: GDP growth figure this year, they're.

313
00:15:31,920 --> 00:15:34,359
Speaker 8: Implicitly pricing out a recession.

314
00:15:34,640 --> 00:15:36,720
Speaker 5: So while pal says the risks are still onto the

315
00:15:36,800 --> 00:15:39,920
Speaker 5: upside for inflation, they're not to the downside anymore, at

316
00:15:40,000 --> 00:15:42,200
Speaker 5: least as far as the Fed is concerned, it seems,

317
00:15:42,760 --> 00:15:45,760
Speaker 5: with going too far, tightening too much and sending the

318
00:15:45,800 --> 00:15:47,080
Speaker 5: economy into contraction.

319
00:15:47,520 --> 00:15:50,360
Speaker 3: Michael McKeith, thank you so much, really really exceptional. They're

320
00:15:50,360 --> 00:15:52,880
Speaker 3: reporting us out at two o'clock and how original this

321
00:15:52,960 --> 00:15:55,960
Speaker 3: statement was today, mister McKee in charge of all of

322
00:15:56,000 --> 00:16:00,960
Speaker 3: our economic coverage, we finished strong. Lisa with the or ghost.

323
00:16:00,840 --> 00:16:03,560
Speaker 2: With someone who has extensive experience at the Federal Reserve

324
00:16:03,960 --> 00:16:06,680
Speaker 2: and beyond in government making some of these decisions and

325
00:16:06,680 --> 00:16:10,160
Speaker 2: seeing the mechanics of it. Someone who currently heads the

326
00:16:10,320 --> 00:16:13,800
Speaker 2: economics team as global chief Economist at Morgan Stanley, Seth

327
00:16:13,800 --> 00:16:17,120
Speaker 2: Carpenter joining us now, and I am curious your reaction.

328
00:16:17,520 --> 00:16:20,720
Speaker 2: Why are markets up if the FED is shifting upward

329
00:16:20,800 --> 00:16:22,800
Speaker 2: its expectation of terminal rates.

330
00:16:24,080 --> 00:16:26,080
Speaker 9: Yeah, I think there was a lot to impact there.

331
00:16:26,120 --> 00:16:28,240
Speaker 9: I think Lisa was listening to the show earlier and

332
00:16:28,280 --> 00:16:32,880
Speaker 9: you pointed out that Powell was unwilling to commit to July,

333
00:16:33,200 --> 00:16:35,760
Speaker 9: called it a live meeting, which I think makes sense,

334
00:16:35,800 --> 00:16:38,080
Speaker 9: but he didn't want to lock himself in. And I

335
00:16:38,080 --> 00:16:41,400
Speaker 9: think the equity market might be saying, gosh, maybe we

336
00:16:41,440 --> 00:16:43,480
Speaker 9: got off easy. There could have been an even more

337
00:16:43,640 --> 00:16:46,920
Speaker 9: hawkish outcome. Look what happened with the dots, and now

338
00:16:47,400 --> 00:16:50,000
Speaker 9: Powell is saying, Okay, that's not baked in the cake.

339
00:16:50,040 --> 00:16:52,280
Speaker 8: So I think your analysis earlier was pretty.

340
00:16:52,040 --> 00:16:53,640
Speaker 1: Spot on at this point.

341
00:16:53,840 --> 00:16:56,560
Speaker 2: Was that a failure at a time when inflation has

342
00:16:56,600 --> 00:17:00,160
Speaker 2: been sticky or is it FED seeing something that perhaps

343
00:17:00,160 --> 00:17:03,920
Speaker 2: others are overlooking in terms of how quickly this economy

344
00:17:03,960 --> 00:17:04,879
Speaker 2: is seeing justinflation.

345
00:17:06,640 --> 00:17:08,399
Speaker 9: I wouldn't call it a failure, and I don't know

346
00:17:08,440 --> 00:17:10,840
Speaker 9: that they're seeing something that other people are. And I

347
00:17:10,840 --> 00:17:14,400
Speaker 9: think one way you can interpret the rates market reaction,

348
00:17:14,680 --> 00:17:18,439
Speaker 9: which is say, not solely pricing in what dot plot says,

349
00:17:18,600 --> 00:17:22,720
Speaker 9: is the market understands that the FED decisions will be

350
00:17:22,800 --> 00:17:25,440
Speaker 9: dependent on the incoming data, and I don't think the

351
00:17:25,480 --> 00:17:28,399
Speaker 9: market shares the view that inflation is going to be

352
00:17:28,480 --> 00:17:30,480
Speaker 9: nearly as high as what the Fed's written down.

353
00:17:30,600 --> 00:17:32,560
Speaker 8: Their forecast for core.

354
00:17:32,400 --> 00:17:35,159
Speaker 9: PCE inflation at the end of this year went up

355
00:17:35,200 --> 00:17:39,840
Speaker 9: by a sizeable amount. Looking at my colleague Ellen Zenner

356
00:17:39,920 --> 00:17:43,400
Speaker 9: and her team's forecast for CPI inflation, just the next

357
00:17:43,480 --> 00:17:46,000
Speaker 9: print that we get next month, it's going to be really,

358
00:17:46,040 --> 00:17:49,080
Speaker 9: really hard to get anywhere close to the Fed's core

359
00:17:49,320 --> 00:17:52,040
Speaker 9: inflation forecast for this year. And so if we're right,

360
00:17:52,119 --> 00:17:54,080
Speaker 9: and if the market's right on where inflation is going

361
00:17:54,160 --> 00:17:57,080
Speaker 9: to go for the next print, boyd, the committee probably

362
00:17:57,119 --> 00:17:58,560
Speaker 9: will be seeing a different tune.

363
00:17:58,640 --> 00:18:00,600
Speaker 8: I think that's part of what's going on.

364
00:18:00,720 --> 00:18:03,400
Speaker 9: That will actually, I think did a reasonably good job

365
00:18:03,520 --> 00:18:07,040
Speaker 9: keeping that hawkish option there while not having a hike

366
00:18:07,080 --> 00:18:07,639
Speaker 9: at this meeting.

367
00:18:07,920 --> 00:18:10,399
Speaker 3: It's original territory to say the least focus is not

368
00:18:10,440 --> 00:18:14,200
Speaker 3: a cliche. This is not something Seth. Carpenter was taught

369
00:18:14,200 --> 00:18:17,640
Speaker 3: at Princeton by a guy named Bernanki and Alan Blinder

370
00:18:17,720 --> 00:18:22,080
Speaker 3: and other greats of a Princeidon. Doctor Carpenter, I look

371
00:18:22,119 --> 00:18:24,359
Speaker 3: at where we are, and if I can state it

372
00:18:24,520 --> 00:18:29,720
Speaker 3: is original territory, it's in some form original economics. Do

373
00:18:29,800 --> 00:18:33,040
Speaker 3: we just simply have to really start thinking of a

374
00:18:33,160 --> 00:18:38,040
Speaker 3: higher our start is Jeff Rosenberg said, maybe away from

375
00:18:38,040 --> 00:18:41,080
Speaker 3: what John Williams codified a few weeks ago.

376
00:18:42,119 --> 00:18:45,399
Speaker 9: I'm not convinced that we have enough information yet to

377
00:18:45,440 --> 00:18:48,480
Speaker 9: get there. And in fact, any estimation that gets done

378
00:18:48,760 --> 00:18:51,720
Speaker 9: of our star just takes so many years of data

379
00:18:51,760 --> 00:18:53,320
Speaker 9: to get any sort of precision on it.

380
00:18:53,800 --> 00:18:55,280
Speaker 8: And the committee really.

381
00:18:55,040 --> 00:18:57,760
Speaker 9: Has to make decisions at a meeting by meeting basis.

382
00:18:57,800 --> 00:19:00,600
Speaker 9: So they're going to do in practice what all of

383
00:19:00,640 --> 00:19:03,919
Speaker 9: those fancy statistical techniques do, which is look at the

384
00:19:04,000 --> 00:19:07,600
Speaker 9: data and ask the question, given where the industrate is now,

385
00:19:07,760 --> 00:19:10,800
Speaker 9: is inflation rising or falling? Is the economy slowing or

386
00:19:10,840 --> 00:19:13,680
Speaker 9: speeding up? And if the answer is inflation's coming down

387
00:19:13,720 --> 00:19:15,600
Speaker 9: a bit and the economy is slowing down a bit,

388
00:19:15,640 --> 00:19:19,800
Speaker 9: then you just conclude we're above are star. It's literally

389
00:19:19,840 --> 00:19:22,000
Speaker 9: as simple as that, and in real time, it is

390
00:19:22,040 --> 00:19:23,040
Speaker 9: the best that they can do.

391
00:19:23,920 --> 00:19:27,479
Speaker 3: I first met ellen Zettner in a true expertise of

392
00:19:27,560 --> 00:19:31,359
Speaker 3: measuring the American consumer. I believe it saw a FED

393
00:19:31,359 --> 00:19:34,720
Speaker 3: today walk greatly away from a recession call. Maybe we'll

394
00:19:34,720 --> 00:19:38,520
Speaker 3: see contractions slow down in some form of stag nation.

395
00:19:38,680 --> 00:19:42,640
Speaker 3: Who knows, but doctor Carpenter. If I look at Alan

396
00:19:42,760 --> 00:19:46,679
Speaker 3: Zettner's study of the American consumer, the great miscall of

397
00:19:46,720 --> 00:19:50,560
Speaker 3: the last six months is this is a good economy.

398
00:19:50,680 --> 00:19:54,240
Speaker 3: We are buoyant, we are spending money. Do you see

399
00:19:54,280 --> 00:19:57,479
Speaker 3: any amendment of that today? I mean, can we believe

400
00:19:57,480 --> 00:20:01,720
Speaker 3: in that forward that it's a better than good econom.

401
00:20:02,200 --> 00:20:04,959
Speaker 9: So good is in the eye of the beholder a bit.

402
00:20:05,000 --> 00:20:07,880
Speaker 9: I mean, the unemployment rate is quite low. We've had

403
00:20:07,960 --> 00:20:11,040
Speaker 9: spending hold up. But I would just stress we have

404
00:20:11,200 --> 00:20:13,879
Speaker 9: had here at Morgan Stanley since the beginning of this

405
00:20:14,000 --> 00:20:16,920
Speaker 9: rate hiking cycle, a call that we would get as

406
00:20:16,920 --> 00:20:19,440
Speaker 9: soft landing. We think inflation is coming down, we think

407
00:20:19,440 --> 00:20:22,320
Speaker 9: inflation will continue to come down. But we have never

408
00:20:22,440 --> 00:20:25,119
Speaker 9: had as a baseline forecast of the US economy we

409
00:20:25,119 --> 00:20:29,040
Speaker 9: would go into recession. And I feel really comfortable that

410
00:20:29,080 --> 00:20:31,040
Speaker 9: we had that view before that we're sticking to that

411
00:20:31,160 --> 00:20:31,640
Speaker 9: view now.

412
00:20:32,160 --> 00:20:34,919
Speaker 2: Jeff Rosenberg had an interesting comment when he was looking

413
00:20:35,119 --> 00:20:38,600
Speaker 2: at the performance of the Nasdaq as per usual these days,

414
00:20:39,000 --> 00:20:40,639
Speaker 2: seeing gaines on both the S and P and the

415
00:20:40,720 --> 00:20:44,320
Speaker 2: Nasdaq and then looking at nearly a percent loss on

416
00:20:44,440 --> 00:20:47,119
Speaker 2: the Russell two thousand and basically this goes into the

417
00:20:47,160 --> 00:20:50,560
Speaker 2: haven stocks. The haven assets are the big companies and

418
00:20:50,600 --> 00:20:54,000
Speaker 2: the smaller ones are being increasingly left behind. Even if

419
00:20:54,040 --> 00:20:57,040
Speaker 2: we do get a soft landing, how is that dynamic

420
00:20:57,200 --> 00:21:01,240
Speaker 2: going to rejigger the haves emma have nots in corporate America.

421
00:21:02,560 --> 00:21:06,280
Speaker 9: I think there's just a whole set of cross currents

422
00:21:06,320 --> 00:21:08,920
Speaker 9: going on here. And as we often like to say,

423
00:21:09,000 --> 00:21:11,399
Speaker 9: the economy is not the market. In the market is

424
00:21:11,440 --> 00:21:14,919
Speaker 9: not the economy. We do think there's still more slowing

425
00:21:14,960 --> 00:21:16,880
Speaker 9: to happen. There's probably going to be a little bit

426
00:21:16,920 --> 00:21:20,000
Speaker 9: more slowing going on in some of the good sectors

427
00:21:20,760 --> 00:21:22,840
Speaker 9: than in the services sector, and so that's going to

428
00:21:22,920 --> 00:21:24,840
Speaker 9: change a bit who the winners and the losers are.

429
00:21:25,359 --> 00:21:27,320
Speaker 9: We do think Europe is going to be slow as well,

430
00:21:27,359 --> 00:21:29,800
Speaker 9: and so those companies that are exposed to the rest

431
00:21:29,840 --> 00:21:31,800
Speaker 9: of the world through exports are probably going to fare

432
00:21:31,840 --> 00:21:34,400
Speaker 9: a bit differently than those that are just domestically focused.

433
00:21:34,920 --> 00:21:37,040
Speaker 9: So I think it is a very very tricky time

434
00:21:37,480 --> 00:21:40,640
Speaker 9: now for investors to try to parse out just from

435
00:21:40,640 --> 00:21:42,560
Speaker 9: the headline macro numbers, what is going to.

436
00:21:42,520 --> 00:21:45,320
Speaker 8: Mean for the individual components of the equity market.

437
00:21:45,480 --> 00:21:48,480
Speaker 2: Are you seeing signs set of material disinflation on the

438
00:21:48,480 --> 00:21:51,040
Speaker 2: wage front at a time when Jay Powell did talk

439
00:21:51,080 --> 00:21:53,800
Speaker 2: about the fact that there was some sort of right

440
00:21:53,920 --> 00:21:57,520
Speaker 2: sizing or in the balance between supply and demand for labor,

441
00:21:57,880 --> 00:21:59,800
Speaker 2: are you seeing signs that there is going to be

442
00:21:59,840 --> 00:22:02,840
Speaker 2: a significant drop bar resistant area that remains.

443
00:22:02,560 --> 00:22:04,600
Speaker 1: Sticky even as you see disinflation in goods.

444
00:22:05,480 --> 00:22:08,160
Speaker 9: So two critical points that I would make here. One

445
00:22:08,400 --> 00:22:11,840
Speaker 9: is we have been just pounding the table for quite

446
00:22:11,920 --> 00:22:15,040
Speaker 9: some time that the labor market is tight, but it's

447
00:22:15,040 --> 00:22:17,600
Speaker 9: tight in the sense that they're actually there's a bit

448
00:22:17,600 --> 00:22:19,840
Speaker 9: of a shortage of workers relative to the amount of

449
00:22:19,880 --> 00:22:22,680
Speaker 9: economic activity. So we can get the economy to slow

450
00:22:22,760 --> 00:22:26,080
Speaker 9: down without there having to be a whole wave of layoffs.

451
00:22:26,080 --> 00:22:28,159
Speaker 9: And that's part of our thesis for a soft landing.

452
00:22:28,480 --> 00:22:30,800
Speaker 9: And I think Powell sort of nodded in that direction

453
00:22:30,840 --> 00:22:33,920
Speaker 9: by pointing out that vacancies are coming down, hirings are

454
00:22:33,920 --> 00:22:36,160
Speaker 9: coming down, but firings are not really going.

455
00:22:36,000 --> 00:22:36,360
Speaker 8: Up a lot.

456
00:22:36,400 --> 00:22:38,760
Speaker 9: So I think that's the first point. The second point

457
00:22:38,760 --> 00:22:42,119
Speaker 9: that I think is very much worth emphasizing. However, and

458
00:22:42,440 --> 00:22:43,920
Speaker 9: Jay Powell was asked about this.

459
00:22:43,840 --> 00:22:44,360
Speaker 8: A little bit.

460
00:22:44,400 --> 00:22:47,679
Speaker 9: He referred to the Bernanki and Blanchard paper. But we

461
00:22:47,760 --> 00:22:50,480
Speaker 9: have been saying now from several quarters in a row.

462
00:22:51,000 --> 00:22:55,680
Speaker 9: People overestimate how critical wage inflation is for the resulting

463
00:22:55,800 --> 00:22:59,639
Speaker 9: consumer price inflation. They are clearly correlated. But most of

464
00:22:59,680 --> 00:23:03,440
Speaker 9: the direct action of caudality is from consumer prices to wages.

465
00:23:03,800 --> 00:23:05,880
Speaker 9: I am not worried about the current setting of wage

466
00:23:05,920 --> 00:23:08,679
Speaker 9: inflation being the thing that drives inflation higher.

467
00:23:08,840 --> 00:23:11,240
Speaker 3: So the carpenter, I've got two and a half minutes left.

468
00:23:11,359 --> 00:23:14,400
Speaker 3: Let's look at the heritage of Morgan Stanley economics. Steve

469
00:23:14,480 --> 00:23:18,960
Speaker 3: Roach invented it. You followed on with great international economics.

470
00:23:18,960 --> 00:23:19,560
Speaker 8: You come down the.

471
00:23:19,600 --> 00:23:22,080
Speaker 3: Ramp at the Hong Kong Airport and there are the

472
00:23:22,080 --> 00:23:26,240
Speaker 3: two billboards. It's Morgan Stanley, Greet you to China, Greet

473
00:23:26,320 --> 00:23:29,320
Speaker 3: you to Hong Kong. And certainly it changed Hong Kong.

474
00:23:29,400 --> 00:23:33,159
Speaker 3: Now our Secretary of State will visit China. That is

475
00:23:33,200 --> 00:23:36,239
Speaker 3: in the news today. And the great mystery is the

476
00:23:36,320 --> 00:23:40,240
Speaker 3: strength of the Chinese economy and what it means for America.

477
00:23:40,640 --> 00:23:43,400
Speaker 3: What is the reporting of Morgan Stanley on the strength

478
00:23:43,840 --> 00:23:45,080
Speaker 3: of the Chinese economy.

479
00:23:45,320 --> 00:23:49,760
Speaker 9: Well, we remain reasonably upbeat about the outlook for Chinese

480
00:23:50,080 --> 00:23:52,600
Speaker 9: economic growth this year, and it has been such a

481
00:23:52,800 --> 00:23:56,240
Speaker 9: roller coaster over time. We were bullish on China a

482
00:23:56,320 --> 00:23:59,040
Speaker 9: bit before the market was, and then the market got

483
00:23:59,080 --> 00:24:01,320
Speaker 9: way over at SKI when the first quarter data came

484
00:24:01,359 --> 00:24:03,040
Speaker 9: out and the opening.

485
00:24:02,680 --> 00:24:04,160
Speaker 8: Up process started happening.

486
00:24:04,680 --> 00:24:07,240
Speaker 9: Now I see lots of people getting super bullish on China,

487
00:24:07,280 --> 00:24:09,919
Speaker 9: and our view is and has been, it will be

488
00:24:10,000 --> 00:24:12,879
Speaker 9: domestic spending leading the way. It will be domestic spending

489
00:24:12,880 --> 00:24:16,040
Speaker 9: on services, that's the biggest part of it. And if

490
00:24:16,080 --> 00:24:18,800
Speaker 9: and when the rest of the economy starts to weaken

491
00:24:19,240 --> 00:24:21,560
Speaker 9: as we have started to see for some Q two data,

492
00:24:21,880 --> 00:24:24,679
Speaker 9: there's going to be some policy support coming out to

493
00:24:24,800 --> 00:24:28,200
Speaker 9: keep the housing market from collapsing again, to keep infrastructure

494
00:24:28,240 --> 00:24:30,960
Speaker 9: from being a drag on the economy. But no two

495
00:24:31,000 --> 00:24:33,640
Speaker 9: ways about it, we think China's going to have far

496
00:24:33,720 --> 00:24:37,040
Speaker 9: exceed its official five percent growth rate target this year.

497
00:24:37,240 --> 00:24:39,600
Speaker 2: Seth Carpenter, thank you so much for taking the time

498
00:24:39,680 --> 00:24:41,480
Speaker 2: as always, and we look forward to catching up with

499
00:24:41,560 --> 00:24:44,560
Speaker 2: you throughout the weeks ahead as we continue to contemplate

500
00:24:44,840 --> 00:24:47,800
Speaker 2: the pace of disinflation and the nexcess of China, which

501
00:24:47,800 --> 00:24:50,440
Speaker 2: is actually really interesting, this idea that any stimulus could

502
00:24:50,440 --> 00:24:53,440
Speaker 2: then reignite some of the growth that people have been

503
00:24:53,440 --> 00:24:53,760
Speaker 2: looking for.

504
00:24:53,880 --> 00:24:56,720
Speaker 3: And it goes right over to the ramifications of thees

505
00:24:57,000 --> 00:25:01,600
Speaker 3: ESB easier, good afternoon, folks here for fifteen hours. And

506
00:25:01,640 --> 00:25:04,680
Speaker 3: what it goes over to, Lisa, here is the ECB

507
00:25:05,080 --> 00:25:07,920
Speaker 3: and how they react to a hawkish hawkish fed.

508
00:25:08,160 --> 00:25:11,000
Speaker 2: Right, the idea of a hawkish skip, a super hawkish

509
00:25:11,040 --> 00:25:14,399
Speaker 2: skip over to you, Christine Legard. Tomorrow we will hear

510
00:25:14,440 --> 00:25:17,160
Speaker 2: from our here's the score in markets, an ASTAC still

511
00:25:17,200 --> 00:25:19,119
Speaker 2: maintaining a gain app and tens of percent on the

512
00:25:19,160 --> 00:25:21,240
Speaker 2: S and P down about a tenth of a percent.

513
00:25:21,359 --> 00:25:23,479
Speaker 2: But I keep going back to what Jeff Rosenberg had

514
00:25:23,480 --> 00:25:25,920
Speaker 2: to say about the Russell two thousand. There you're seeing

515
00:25:25,920 --> 00:25:31,200
Speaker 2: a material decline, regardless of any potential optimism about perhaps

516
00:25:31,640 --> 00:25:34,480
Speaker 2: fewer rate hikes or a temperate fed. That is where

517
00:25:34,480 --> 00:25:37,000
Speaker 2: you're seeing it sell off almost a percent. As people

518
00:25:37,040 --> 00:25:39,280
Speaker 2: take a look at smaller companies and how much they're

519
00:25:39,280 --> 00:25:40,280
Speaker 2: going to struggle.

520
00:25:40,040 --> 00:25:41,919
Speaker 3: Or they take a look at big companies, as we

521
00:25:41,960 --> 00:25:45,320
Speaker 3: showed Apple earlier, buttressed ride up against those recent highs,

522
00:25:45,640 --> 00:25:49,160
Speaker 3: a little bit away from being a three trillion dollar company,

523
00:25:49,200 --> 00:25:51,119
Speaker 3: and to me, it's again I go back to my

524
00:25:51,240 --> 00:25:53,680
Speaker 3: arch theme to Americas that have and they have nots

525
00:25:53,720 --> 00:25:56,240
Speaker 3: and of course Chairman Paul trying to speak to both

526
00:25:56,359 --> 00:25:59,160
Speaker 3: parts of our economy. Let's be honest, there's a huge

527
00:25:59,160 --> 00:26:00,399
Speaker 3: part of America flat in.

528
00:26:00,400 --> 00:26:02,639
Speaker 2: Their back, which really is perhaps the reason why he

529
00:26:02,680 --> 00:26:05,760
Speaker 2: started with saying our dual mandates, they want to support employment,

530
00:26:05,840 --> 00:26:08,320
Speaker 2: they want to bring inflation down. That was a nod

531
00:26:08,440 --> 00:26:10,359
Speaker 2: perhaps to some of the political pressures.

532
00:26:10,840 --> 00:26:12,879
Speaker 3: We're looking at the Marcus now the down negative two

533
00:26:12,960 --> 00:26:15,280
Speaker 3: sixty six. If the vix is really cinteresting with a

534
00:26:15,359 --> 00:26:19,000
Speaker 3: thirteen handle here fourteen point zero one on the Vicks

535
00:26:19,040 --> 00:26:22,480
Speaker 3: and market close here will be very very interesting A

536
00:26:22,520 --> 00:26:25,440
Speaker 3: good minutes away, fifteen minutes away from that, what we're

537
00:26:25,480 --> 00:26:27,399
Speaker 3: going to give you a course is more reaction to

538
00:26:27,440 --> 00:26:30,439
Speaker 3: the FED decision what it means for the American economy.

539
00:26:30,920 --> 00:26:34,440
Speaker 3: Torsten Slock has been absolutely on fire at Apollo. He

540
00:26:34,480 --> 00:26:37,639
Speaker 3: will join Jay Barry, co Head of US Rates Strategies

541
00:26:37,680 --> 00:26:41,399
Speaker 3: at JP Morgan and we're thrilled to close out with

542
00:26:41,560 --> 00:26:45,240
Speaker 3: our team here on a FED Decide's Day with Ethan Harris,

543
00:26:45,320 --> 00:26:49,440
Speaker 3: Bank of America, Head of Global Economic Research. When you'd

544
00:26:49,480 --> 00:26:51,639
Speaker 3: say thank you to all of you, and particularly John

545
00:26:51,840 --> 00:26:56,320
Speaker 3: Ferrell on assignment. We'll see in July the Fed decize.

546
00:26:56,400 --> 00:26:56,960
Speaker 3: Good morning.

547
00:26:57,440 --> 00:27:00,879
Speaker 2: Subscribe the Bloomberg Surveillance podcast on a well, Spotify, and

548
00:27:00,960 --> 00:27:04,360
Speaker 2: anywhere else you get your podcasts. Listen live every weekday

549
00:27:04,400 --> 00:27:07,000
Speaker 2: starting at seven am Eastern on Bloomberg dot com, the

550
00:27:07,040 --> 00:27:09,080
Speaker 2: iHeartRadio app tune In, and.

551
00:27:09,200 --> 00:27:10,440
Speaker 1: The Bloomberg Business app.

552
00:27:10,720 --> 00:27:14,000
Speaker 2: You can watch us live on Bloomberg Television and always

553
00:27:14,080 --> 00:27:17,520
Speaker 2: on the Bloomberg Terminal. Thanks for listening. I'm Lisa Abramowitz,

554
00:27:17,560 --> 00:27:18,600
Speaker 2: and this is Bloomberg