Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring
Speaker 1: you insight from the best and economics, finance, investment, and
Speaker 1: international relations. Find Bloomberg Surveillance on Apple podcast, SoundCloud, Bloomberg
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Speaker 1: bring at Jared wood It now Banks America Security's head
Speaker 1: of the Research Investment Committee. Jarre's your line, not mine.
Speaker 1: We update our view on the US China shift from
Speaker 1: trade war to Capitol Wall. What does that mean, Jared? Well, hey, John,
Speaker 1: it means that, you know, this is this goes from
Speaker 1: a very narrow you know, fight around soybeans and then
Speaker 1: maybe semi conductors under the last administration too. In the future,
Speaker 1: much more open ended, all hands on deck, you know,
Speaker 1: complete follow mobilization. Well that's a year anyway. When we
Speaker 1: looked at this bill, you know, one of the things
Speaker 1: we saw is that is that although of course you
Speaker 1: guys are right, there's there's this bipartisan you know, rhetoric,
Speaker 1: there's there's some unanimity politically in Congress. I mean, Congress
Speaker 1: voted unanimously. I believe, you know, to delist Chinese A
Speaker 1: d R s from US exchanges last year. But when
Speaker 1: we look at this bill, we find something a little different.
Speaker 1: The numbers will teams that quite match up. I mean,
Speaker 1: if you think about research and development, which is undoubtedly
Speaker 1: you know, the front lines of the future of new
Speaker 1: technology and who's gonna win the future, I think the
Speaker 1: Chinese National Party Congress just to prove something like five
Speaker 1: hundred billion dollars for R and D. They've they've been
Speaker 1: beating the US on this measure for a while and
Speaker 1: really ramping up the bill that the Bide administration just produced.
Speaker 1: It's not five billion. I think it's about a hundred
Speaker 1: and eighty billion for research and development investment. And that
Speaker 1: doesn't sound like catching up to me. Such a watertime
Speaker 1: King brning to you, and I really want to congratulate you, folks.
Speaker 1: It is rare that someone at any bank puts on
Speaker 1: a research report where the world stops. I think John
Speaker 1: and I at least you can agree that when Woodard
Speaker 1: publishes really the whole global Wall Street world stops to
Speaker 1: read what he's talking about. Jared, what are you in
Speaker 1: Bank of America say about what institutions are gonna do
Speaker 1: with their cash, not what the public is gonna do,
Speaker 1: but what is Global Wall Street going to do with
Speaker 1: their cash in a boom economy. Well, they're there time
Speaker 1: there is. There's some reason for optimism because our our
Speaker 1: at Bank of America is that we're on the cusp
Speaker 1: of one of the biggest capex booms in modern history.
Speaker 1: I mean, I think you'll have to go back to
Speaker 1: Ronald Reagan to see a period over the next five
Speaker 1: years that will look, you know, uh, quite like this one.
Speaker 1: So we do expect the industrials, um technology, other firms
Speaker 1: are going to be expanding capacity rapidly. Part of that
Speaker 1: is just an organic rebound coming out of the recession,
Speaker 1: but part of it is going to be planning unmet
Speaker 1: demand that they'll want to build into for the first
Speaker 1: time in a very long time. And so we do
Speaker 1: expect that there's gonna be new building in property, plants,
Speaker 1: and equipment, I mean real fixed aff that physical investment um,
Speaker 1: not just intellectual property, not just ways to squeeze you know,
Speaker 1: more efficiency out of workers, which has been the trend
Speaker 1: for for quite time. So if we have supercent capex growth,
Speaker 1: you know, as our trend for a while. Um, you know,
Speaker 1: our commists expect our our analysts expect a wide ranging surge,
Speaker 1: and I think that's gonna be a real positive for
Speaker 1: US GDP Jared. How do you factor in potentially higher
Speaker 1: taxes on corporations with this expectation for a capex boom.
Speaker 1: It's a tricky moment. Obviously, a lot of a lot
Speaker 1: of you know, corporate leaders are going to push back
Speaker 1: about this, and I say, I think it's important to
Speaker 1: keep in mind from the from the bide administration side
Speaker 1: of things, that this is undoubtedly an opening bid. You know,
Speaker 1: you have to play a bad cop before you can
Speaker 1: play good cop. You have to show two progressives that
Speaker 1: you know, you try to to hike taxes on the
Speaker 1: rich and tack taxes on corporations, etcetera. So that when
Speaker 1: moderates UH come in and then pushed back, you can
Speaker 1: sort of make some compromises. So you know, I don't
Speaker 1: think anyone expects that the final bill, whatever does get past,
Speaker 1: will necessarily look like this. But that being said, I
Speaker 1: think everyone agrees, including corporate leaders, that if you grow
Speaker 1: the high enough, um, you know, paying a slightly higher
Speaker 1: share of taxes is a trade well worth making this
Speaker 1: is the analysis. What's the market kill? The market call
Speaker 1: is that the real openings priced then, I mean the
Speaker 1: summer spending, the wet, hot American summer that we're about
Speaker 1: to get where everyone you know goes a little that
Speaker 1: nuts for a little while. Uh is gonna feel great
Speaker 1: for the real economy. It's it's already priced into Wall Street,
Speaker 1: and it may not feel great to Wall Street. Remember April,
Speaker 1: you had the real economy in tatters and stocks, you know,
Speaker 1: ripping higher. I think we're about to see something more
Speaker 1: like the reverse in which the real economy reopened. It's
Speaker 1: a great time for people who you need to find
Speaker 1: jobs and and and markets don't really have that much
Speaker 1: actually to go on, so it could be a little
Speaker 1: bit of a digestion moment um. I think what matters
Speaker 1: more is what happens when you do see infrastructure paths. Now,
Speaker 1: we're gonna be talking about this for a while. There's
Speaker 1: gonna be a lot of political back and forth, you know,
Speaker 1: this summer around these builds. I think it's one of
Speaker 1: these unusual moments where you actually want to you know,
Speaker 1: sell the tell the rumor and buy the news like
Speaker 1: by and once you actually know what's in the bill
Speaker 1: and what can get passed and will get done, and
Speaker 1: and on on that front, I think you know investors
Speaker 1: have not at all priced anything, and and you are
Speaker 1: not ready in oppositions for for what's going to come.
Speaker 1: It's just gonna acquire a lot more analysis until we
Speaker 1: get there, Jared, I want to finish on this idea
Speaker 1: of how individuals are going to spend cash, not just corporations.
Speaker 1: And you had in your phenomenal note the idea that
Speaker 1: sixty of the excess savings, the excess cash savings the
Speaker 1: United States, about more than one and a half trillion dollars,
Speaker 1: has gone to the top of income earners. The idea
Speaker 1: here that they are less likely to spend perhaps not
Speaker 1: as inflationary as people had expected. Can you please elaborate
Speaker 1: on that absolutelyly. So. We know from history that folks
Speaker 1: who already have quite a lot of money don't tend
Speaker 1: to spend it in an aggressive way if they get
Speaker 1: a little bit more. That's not true for middle and
Speaker 1: lower income households, who are sort of hands the mouth
Speaker 1: every every paycheck matters. So historically, when you give some
Speaker 1: ext r income to the bottom brackets, you know they
Speaker 1: will send it more. And that's that's been the kind
Speaker 1: of hopes I think in the Byte administration, uh, even
Speaker 1: the Trump administration last year in terms of getting aid
Speaker 1: out to people. Well, we found in this survey is
Speaker 1: that some of the you know, some of the respondents
Speaker 1: are telling us that with the sinus checks, they're actually
Speaker 1: gonna save um most of it or or majority said
Speaker 1: that they're going to save either keep it in cash,
Speaker 1: payoff debts. Uh, you know, maybe save it in some
Speaker 1: financial assets, put it into the market, but they're not
Speaker 1: going to be spending in the real economy by the
Speaker 1: same degree that history would suggest. And that's why our
Speaker 1: comments expect, yes, a surgeon inflation this summer, you know,
Speaker 1: a bit of a wild moment, but that by next
Speaker 1: December we're back below two percent inflation. Jared, before you run,
Speaker 1: let's talk about something actual economist suggests the same, Michelle
Speaker 1: Mind leading them a million tomorrow, a million payrolls growth.
Speaker 1: What's behind it? Jarrett, I think you're seeing, I mean
Speaker 1: in in in some parts of the country where folks
Speaker 1: are are keeping it tight, uh, you know, where things
Speaker 1: haven't changed very much from you know, six or eight
Speaker 1: months ago. But other parts of the country. They reopened already,
Speaker 1: and I said, I think that's going to feed through
Speaker 1: to the job numbers because people, you know, want to
Speaker 1: get back to normal. Employers want to get back to normal,
Speaker 1: and they're not waiting for the CDC to tell them
Speaker 1: that they can. Very true, Jeff, which said that repeatedly
Speaker 1: on this show. That's for sure, Jared, What did Jared
Speaker 1: get to see you? Jo want to get from Bank America.
Speaker 1: Let's talk to the White House right now at least
Speaker 1: to say that back where us is Jared Bernstein, White
Speaker 1: House Council of Economic Advisors Member Jarget have to forgive me.
Speaker 1: The last conversation we had was about whether the bill
Speaker 1: was too much. Now we're having a conversation about whether
Speaker 1: it's too little. Two point two five trillion over eight years.
Speaker 1: Why does this get it done? This is like the
Speaker 1: Goldilocks story of economic policy. Right, it's too hot, it's
Speaker 1: too cold? Uh? The uh, the bill is UH is
Speaker 1: of a magnitude to really dig into the infrastructure deficiencies
Speaker 1: that have evolved in this country over so many years.
Speaker 1: And as people have said something, praise something, criticism, we
Speaker 1: define it infrastructure quite broidly here to include not just
Speaker 1: roads and bridges, which are essential and something the President's
Speaker 1: long talked about, but also clean energy, housing, the care economy. UM.
Speaker 1: There are many components to this bill. The factory is
Speaker 1: twenty five pages long, and of course there are a
Speaker 1: set of paid for us that more than pay for
Speaker 1: the the expenditures over over fifteen years. I want to
Speaker 1: pick out one of the numbers, jared a hundred and
Speaker 1: eighty billion, of which goes to what's billed is the
Speaker 1: biggest non defense research and development program on record. The
Speaker 1: President keeps bringing up China in the White House statement.
Speaker 1: You talk about the ambitions of an autocratic China a
Speaker 1: challenge of our time, and we've seen the Made in
Speaker 1: China plan that was released several years ago. Jared a
Speaker 1: hundred and eighty billion. It just feels like a dip
Speaker 1: in the ocean. We caught up with Bank of America
Speaker 1: about forty minutes ago on this very topic, who said
Speaker 1: exactly that it's not enough. Why do you think it is?
Speaker 1: Because I think you have to just look at a
Speaker 1: lot of other line items and not just that one.
Speaker 1: This uh, this measure, This American Jobs Plan is replete
Speaker 1: with many more tax credits and incentives for R and
Speaker 1: D and innovation that dig a lot deeper than that.
Speaker 1: There's the ones in the manufacturing space, but there's a
Speaker 1: full spate of ones in the clean energy space. When
Speaker 1: you get to electric vehicles, we do a very deep
Speaker 1: dive into incentivizing the production of not just electric vehicles,
Speaker 1: but charging station and batteries here in this country. So
Speaker 1: this is the largest play I've seen in my economic
Speaker 1: career to onshore industries, to build up nascent industries, to
Speaker 1: grab global market share in areas where we could we
Speaker 1: could beat our competitors. Jared Berson, I want to go
Speaker 1: to your claim book altogether now. The goal here is
Speaker 1: altogether now, and every report I see is a huge
Speaker 1: body of America is in support of infrastructure, etcetera. I
Speaker 1: want you to speak right now to some fancy Republican
Speaker 1: sitting fat nap in a suburb about why they should
Speaker 1: support this bill even if their senator doesn't. Well, if
Speaker 1: they do feel that way, they're they're among a significant
Speaker 1: majority of Republicans support investment in infrastructure. So uh, this
Speaker 1: is something that is widely recognized, as your own reporting
Speaker 1: has showed as a great need. I think there's been
Speaker 1: a pretty significant disconnect between Republican opposition to anything that
Speaker 1: comes from the other side and where constituents and the
Speaker 1: population is at large. And look, Joe Biden got eighty
Speaker 1: one million votes from all of America to not just
Speaker 1: uh fight with folks here, but to make sure that
Speaker 1: he meets the needs of the country. And that's what
Speaker 1: that's that's what he's doing here. What's the mix that
Speaker 1: you see and how do you respond to those on
Speaker 1: the left? What's the mix that I see in the
Speaker 1: mix within the bill? The social programs versus bridges. You know,
Speaker 1: Jinna Romando, the Secretary of Commerce has to fix a
Speaker 1: bridge in Rhode Island. Great, we all get that. But
Speaker 1: in this program, whatever anybody wants to say, there's a
Speaker 1: lot of social messaging, social hope, and plan. How do
Speaker 1: you respond to progressives that want more well, I mean,
Speaker 1: it's funny you should say that. I was just reading
Speaker 1: an article in the Washington Post where Derek Hamilton's, who's
Speaker 1: a I think quite a brilliant and also a renowned progressive,
Speaker 1: a scholar of of of racial disparities, was was pointing
Speaker 1: out that our definition of infrastructure here is broad, and
Speaker 1: it should be not only does the bill do the
Speaker 1: kinds of traditional measures we've talked about and and the
Speaker 1: clean energy and the innovation and the manufacturing part, but
Speaker 1: there's also a deep housing policy that goes after exclusionary zoning,
Speaker 1: which is something you rarely see from the federal government
Speaker 1: with a really interesting competitive program. And and and this
Speaker 1: is an area where systemic racism is embedded. If you
Speaker 1: look at how we stand up the care economy, this
Speaker 1: is something progressives care a lot about. So I think
Speaker 1: if people start looking at what's in here, they're going
Speaker 1: to recognize that it's it's plenty progressive, and especially when
Speaker 1: you get to the highly progressive tax pay for us.
Speaker 1: And I'll just point out that Gina Raimondo is going
Speaker 1: to be on Bloomberg Television today at thirty p m.
Speaker 1: To weigh in more, you know, Jared, I think there's
Speaker 1: a lot of agreement on the end goals of this
Speaker 1: two point to five trillion dollar plan. How we get there, though,
Speaker 1: is a point of contention. And there is this reputation
Speaker 1: of government funded operations being incredibly inefficient. People point the
Speaker 1: DMV waiting in line and waiting on it for hours
Speaker 1: to just speak to someone for a basic procedure. What
Speaker 1: are you telling people to ensure them that we're not
Speaker 1: going to end up with forty d m vs that
Speaker 1: are inefficient and not using money. Well, yeah, that's a
Speaker 1: great question. I have a two word answer for you,
Speaker 1: President by Ok. I worked for Vice President Biden at
Speaker 1: the time during the implementation of the Recovery Act, and
Speaker 1: he recognizes, really more than any politician I've ever worked
Speaker 1: for it. That's simply signing legislation and moving on to
Speaker 1: the next thing. You know, going to land the next
Speaker 1: airplane is not the way to go. We have to
Speaker 1: This is a passion of his. We have to show, uh,
Speaker 1: the American people who are footing the bill for this,
Speaker 1: that we are not just signing documents here, that we're
Speaker 1: paying full attention to implementation. And if you look and
Speaker 1: if you look at the distribution and production of the vaccine,
Speaker 1: I think you see good governance is back in town
Speaker 1: and at work, and you're going to see that in
Speaker 1: this plan as well. I am chucked Jarrett that you
Speaker 1: think the current president is part of the solution. Let
Speaker 1: me get to the next question. Looking forward, where's the
Speaker 1: rest of it? Where the tax hikes now? Swear what
Speaker 1: can we expect, Jared, and when I think the President
Speaker 1: said something to the tune of mid April in terms
Speaker 1: of the next part of this called the Family's Plan,
Speaker 1: And I'm not gonna get ahead of him on on
Speaker 1: the announcements in there, but don't expect you to. Just
Speaker 1: in the time we have charity, you could just characterize
Speaker 1: the effort just a little bit more clearly for us,
Speaker 1: is this a bigger redistribution effort, a big a wealthy
Speaker 1: distribution effort that's still to come in a couple of weeks.
Speaker 1: Much more in the sense of building back better, That is,
Speaker 1: this is an effort to deal to dive more deeply
Speaker 1: into the to the parts of that you see that
Speaker 1: you don't see that much in this point. We do
Speaker 1: have some care economy in here, but there's more to
Speaker 1: do there. There's education, uh, and then there's tax tax
Speaker 1: issues on the personal side of the code. So there's
Speaker 1: there's more to get back to and and we will
Speaker 1: in a matter of weeks, not months, Jered. People view
Speaker 1: this plan as being a starting point in negotiations. Picking
Speaker 1: up on the tax point are the higher taxes on
Speaker 1: corporations and individuals making more than four hundred thousand dollars
Speaker 1: non negotiable going forward. Well, the President has put that
Speaker 1: four hundred thousand line in the sand, and uh, that's
Speaker 1: something he is continually elevated. And I don't think, I
Speaker 1: don't want to say anything's non negotiable because the President
Speaker 1: is consistently shown that he's willing to reach across the
Speaker 1: aisle and try to get input from the other side.
Speaker 1: But that's been a very solid commitment of his. I
Speaker 1: think I think that the idea that we're going to
Speaker 1: just keep doing things and never paying for them. If
Speaker 1: you want to come forward with different ideas of how
Speaker 1: to pay for things as long if you recognize that
Speaker 1: four hundred k boundary, you know we're willing to listen.
Speaker 1: Dr Bernstein. Will the Congressional Budget Office score or analyze
Speaker 1: this bill and what will be their timeline? Eight years,
Speaker 1: fifteen years, or thirty years. Typically the Congressional Budget Office
Speaker 1: uses a ten year budget window, so that would be
Speaker 1: their timeline. Now, this is about an eight year spending plan,
Speaker 1: but the tax increases just continue on uh forever, So
Speaker 1: by year fifteen, the revenue razors pay for the plan.
Speaker 1: But the CBO tends to use a ten year window. Jared,
Speaker 1: It's always good to catch up, and we appreciate the
Speaker 1: on guning contributions to this probagram. Thank you for the tryansparency,
Speaker 1: Jack Bernstein. That White House Council of Economic Advices right now,
Speaker 1: Michael Wilson joins us, MIKEA. Wilson. He has been dead
Speaker 1: on with Morgan Stanley on small Camp. Michael, let me
Speaker 1: just cut to the chase. How do you adapt to
Speaker 1: adjust to Q two? Yeah, well, thanks Toime. Yeah, I
Speaker 1: think the Q two is going to be the actual
Speaker 1: reopening right. So, Um, the dream of reopening, the dream
Speaker 1: of restarting the economy is always you know, bullish, and
Speaker 1: it's a you know, because there's no prove prove it moment. Now, Um,
Speaker 1: as we actually reopen the economy, um, we're gonna have
Speaker 1: to do it. Um and execution risk goes up. So
Speaker 1: that's not the end of the bullmark is and a disaster.
Speaker 1: But at the stock level, you know, we're expecting disappointment.
Speaker 1: I mean, we think it's gonna be difficult for a
Speaker 1: lot of companies to manage this, and all by the way,
Speaker 1: some companies are gonna take advantage of it, take share
Speaker 1: and will operate quite well. So one of our recent
Speaker 1: calls is, you know, we did downgrade small caps instead
Speaker 1: a heck of a run, and it's kind of a
Speaker 1: lower quality area, and we're basically recommending that people do
Speaker 1: upgrade the portfolio bit on the quality side as we
Speaker 1: go through this reopening period in Q two and Q three.
Speaker 1: It's a fair to say you think this is a
Speaker 1: sound the news of ent Mike Well, I don't think
Speaker 1: it's to sell the news in terms of, you know,
Speaker 1: equities over bonds and that we go. I think it's
Speaker 1: more of a let's just get I mean, the low
Speaker 1: quality part of the trade has really worked, as you know, John,
Speaker 1: I mean we've been bullish from the lows on the
Speaker 1: idea that's what always happens, and low quality does really
Speaker 1: well coming off a recession. We looked at that data
Speaker 1: recently and the relative out performance of low quality over
Speaker 1: higher quality and some other things we can talk about
Speaker 1: has been extraordinary small caps over large for example, and
Speaker 1: we just want to capture that because this is the
Speaker 1: time of the recoveries in any cycle where you revert
Speaker 1: back a little consolidation and quality actually becomes more invador again,
Speaker 1: at least temporarily. A foundation for your coal. Mike, along
Speaker 1: with the rest of the team, has just been where
Speaker 1: we are on the cycle, the old playbook, the reopening,
Speaker 1: the recession playbook, the early stage part of the cycle.
Speaker 1: We've moved on from that. In your words, you and
Speaker 1: I've caught up several times on this in the last month.
Speaker 1: Now you're thinking about the duration of the cycle, the
Speaker 1: intensity of the cyclists. Well, can you add in those
Speaker 1: dynamics and why that shapes your thoughts right now? Mike, Yeah,
Speaker 1: I mean we've been waiting to write this note for
Speaker 1: a couple of years, to be honest, because we always
Speaker 1: felt that as we went into this recession, we didn't
Speaker 1: predict a pandemic, but we felt like this next recession
Speaker 1: was going to challenge policymakers because we're still very close
Speaker 1: to the zero bound, and this transition to fiscal policy
Speaker 1: um has only been accentuated by the fact that we're
Speaker 1: in a pandemic. Right there's no governor on what you know,
Speaker 1: politicians can do because it's a health crisis, and that
Speaker 1: was a perfect foil for this accelerated transition to a
Speaker 1: new regime. We think it looks very much like the
Speaker 1: post World War two period in many ways. We we
Speaker 1: wrote about this, and what that really means, bottom line,
Speaker 1: is that we're likely to have more of a boom
Speaker 1: bust type outcome the last thirty years. I mean, as
Speaker 1: rates have been coming down, the fit has been allowed
Speaker 1: to be extraordinarily accommodative, and that's why you had these
Speaker 1: long economic expansions. There was no pressure from monetary policy.
Speaker 1: But we're always shooting below trend on targets on growth
Speaker 1: and inflation. We think that's changing now and what that
Speaker 1: means is more frequent recessions. That's actually a great investment opportunity.
Speaker 1: You know what you're doing, Um, I mean that cycle
Speaker 1: analysis one oh one, And that's why we think this
Speaker 1: note is pretty important for people to read. So, Mike,
Speaker 1: how are you preparing for the bust? And when could
Speaker 1: it be? Oh? It's I mean, look, the next recession
Speaker 1: is not anytime soon. I mean, but look, let's let's
Speaker 1: talk about the last couple of expansions. Least I mean
Speaker 1: the lasted eight years. We think it's probably more like
Speaker 1: four to five years. So and so what that means
Speaker 1: in the very near term is you move out of
Speaker 1: that early cycle playbook to more of a mid cycle playbook,
Speaker 1: and that means, you know, once again, low quality tends
Speaker 1: to you know, not perform as well. As an example,
Speaker 1: small caps tend to not do as well. Um, we
Speaker 1: just upgraded consumer staples relative to consumer discretionary. Consumer discretionary
Speaker 1: tends to be the best early cycle performing group. Well,
Speaker 1: that period is probably coming to an end. So there's
Speaker 1: a lot of things to think about in your portfolio construction.
Speaker 1: How does big tech factor into this, Mike, especially considering
Speaker 1: how high the run up was and where evaluations are. Yeah,
Speaker 1: so tech is um you know, obviously from a cynical standpoint,
Speaker 1: tech should be doing quite well. Because obviously as you
Speaker 1: come out of a recession, things like semi conductors and
Speaker 1: some of the more cynical parts of tech benefit from that.
Speaker 1: There's gonna be a huge camp x boom um. I
Speaker 1: think that's I think that's something to look forward to.
Speaker 1: And so like tech hardware, some of the older traditional
Speaker 1: type tech companies that could benefit from that may do
Speaker 1: better for us. It's a neutral for a couple of reasons.
Speaker 1: Number one, the pandemic was unusual and that we saw
Speaker 1: a pull forward of demand last year for a lot
Speaker 1: of technology companies. As we digitize the economy and and
Speaker 1: made it easier to work from home. So there's gonna
Speaker 1: be some payback on demand the short term there we
Speaker 1: think that could be a bit of a head wind.
Speaker 1: But then structurally longer term, you know, this idea that
Speaker 1: rates are now bottoming from a long term perspective and
Speaker 1: they're gonna continue to rise is gonna be a headwin
Speaker 1: on valuation for some of these secular growth companies. So
Speaker 1: it's much once again, it's much more about picking pots
Speaker 1: and trying to find things that can buck that trend.
Speaker 1: My ten years back fifteen point six per year, twenty
Speaker 1: years back eight point seven percent per year, sp X
Speaker 1: thirty years back ten point three percent per year, the
Speaker 1: great wrong call has been as an actual single digit
Speaker 1: equity world forward, can you be double digit in the US?
Speaker 1: I don't think so over long periods. If if you
Speaker 1: buy into our view that rates are bottoming, I mean,
Speaker 1: the reason those returns have been above trend time is
Speaker 1: directly reproportional to the fall and long term interest rates.
Speaker 1: Stocks are long duration assets, okay, and they do they
Speaker 1: do better when obviously rates are falling. So if you
Speaker 1: buy into the idea that rates a bottom for the
Speaker 1: long cycle. That's a head wind and that's not once again,
Speaker 1: it's not the end of the world, but it's it's
Speaker 1: it's harder, you know, it's running into the wind. Mike, tremendous,
Speaker 1: always getting us. That's a thing more, Mike Wilson that
Speaker 1: Morgan Stanley, chief US equity strategist on this market as
Speaker 1: we reopen and the dietist starts to come through. Amber
Speaker 1: just SUSA is expert on what we call risk behavior
Speaker 1: on a Swarthmoor and of course a John Hopkins Bloomberg
Speaker 1: School of Public Health Drs just SUSA is knee deep
Speaker 1: and what we do with our behavior given medical crisis.
Speaker 1: Dr de Seusas, thank you so much for joining us
Speaker 1: this morning. We are changing our behavior now and pros
Speaker 1: like you are worried about rising cases, rising hospitalizations, indeed
Speaker 1: a fourth wave. Do we risk a fourth wave with
Speaker 1: our behavior based on pandemic optimism? Ys, Good morning, m Absolutely,
Speaker 1: we have seen rates increase for the past week or
Speaker 1: two across all states um and we are in a
Speaker 1: moment where there's a lot of reasons for optimism. We
Speaker 1: have more than a quarter of all Americans have their
Speaker 1: firsts of the vaccine. The end isn't sight. Things will
Speaker 1: be getting better, but we are not there right now,
Speaker 1: and we see rates rising because people are being less cautious.
Speaker 1: And this is normal behavior. I mean, I know it's
Speaker 1: Swathmore Amber. You had to read Comus the Plague at gunpoint.
Speaker 1: I mean, that's what you do with Swathmore. And there's
Speaker 1: that optimism at the end of the book. But the
Speaker 1: pandemic keeps going. For our our listeners and viewers across
Speaker 1: this nation and worldwide, what is the best practice right
Speaker 1: now to manage our optimism. Well, we year into this pandemic.
Speaker 1: We do know what behaviors transmit the infection, and we
Speaker 1: do know how to be safe. So people want to
Speaker 1: see their friends and loved ones. We understand that we
Speaker 1: can be social wall still physically distancing, so we need
Speaker 1: to maintain mass squaring. And when you're getting together with
Speaker 1: unvaccinated people, not get together in large groups um and
Speaker 1: and we are seeing people not make those choices. There's
Speaker 1: a question of what happens when we are perhaps six
Speaker 1: months post pandemic, how often we have to get booster shots,
Speaker 1: how often we have to revisit COVID, whether COVID will
Speaker 1: become a sort of omnipresent virus that we have to
Speaker 1: grapple with and that continues to mutate. This visor study
Speaker 1: that John was talking about crucial and indicating that perhaps
Speaker 1: the vaccination has a longer lasting shelf life. What's your
Speaker 1: sense by in the budding research of how present coronavirus
Speaker 1: will be and also with respect to the vaccines, how
Speaker 1: long lasting their effects will be. Yeah, this is a
Speaker 1: race right now of the virus first vaccine, and it
Speaker 1: depends on several factors. We do have really good news.
Speaker 1: We have high efficacy of the virus of the vaccine.
Speaker 1: It looks like the vaccine is also going to be
Speaker 1: effective in younger individuals from initial studies as was mentioned, UM,
Speaker 1: but we do have virus is mutate and so with
Speaker 1: the initial information that we have on immunogenicity suggests that UM,
Speaker 1: people that that it will last for months and probably
Speaker 1: years UM the vaccine efficacy or natural immunity from affection.
Speaker 1: But as the virus mutates, it's very likely we will
Speaker 1: need some kind of booster shot at some future point.
Speaker 1: It won't be lifelong protection when it comes to her immunity.
Speaker 1: Do you have a sense of what that means now
Speaker 1: that we're getting an acceleration of vaccination. Yeah, so her
Speaker 1: to me, and he's not an exact point, but we
Speaker 1: do need to have a critical map of people vaccinated
Speaker 1: before we get that that benefit of reduced transmission. And
Speaker 1: so we're going to need to see the majority of infection,
Speaker 1: majority of Americans vaccinated, so more than fifty, likely sixty
Speaker 1: or seventy before we really begin to see that benefit.
Speaker 1: But it is a matter where the more individuals and
Speaker 1: are vaccinated, the higher the benefit is. So we'll want
Speaker 1: to keep going and get those rates as high as
Speaker 1: we can. Dr de sus So when you see Delta
Speaker 1: Airlines say things are better and we're going to fill
Speaker 1: the middle seat in economy on an airplane, how does
Speaker 1: the prolo you respond? I mean, these are really difficult choices.
Speaker 1: And so if there's vaccinated individuals who are wearing masks
Speaker 1: um and you know, getting together in a middle seat,
Speaker 1: the risk is going to be lower. But if it's
Speaker 1: if it's unvaccinated individuals, if people are making choices before
Speaker 1: they get on as planes that have put them in
Speaker 1: increased risks, it really is a concern. And so I
Speaker 1: see us opening up at the same time, we need
Speaker 1: to be driven by the data, and we were bringing
Speaker 1: rates down. Things were looking good a few weeks ago,
Speaker 1: but they have taken a real turn for the worst,
Speaker 1: and I think that's why the alarm is being raised.
Speaker 1: We need to follow the data, and it suggests the
Speaker 1: increases that we see pretend really badly for the next
Speaker 1: few weeks, and we need to turn this around if
Speaker 1: we don't want to see a huge court way. Dontor
Speaker 1: thanks for paying with us, come back soon one you
Speaker 1: doctor Amber disos that at Jones Holkins, Bloomberg School, the
Speaker 1: Public House. This is the Bloomberg Surveillance Podcast. Thanks for listening.
Speaker 1: Join us live weekdays from seven to ten am Eastern
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Speaker 1: the terminal. I'm Tom keene In. This is Bloomer