WEBVTT - Jerome Powell’s Second Term And The Latest On Markets 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.560 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.959 at Bloomberg dot com slash podcast. We had news yesterday 0:00:23.000 --> 0:00:28.120 President Biden reappointed FED Chair j Pale, but also elevated 0:00:28.680 --> 0:00:30.800 Layo Bringer to the vice chair of the FED. But 0:00:30.800 --> 0:00:34.080 there's still some other openings there at the FED. Let's 0:00:34.080 --> 0:00:36.520 get a lay of the land there on all things FED. 0:00:36.560 --> 0:00:38.720 We can do that with the Caleb Nyeguard, Senior Research 0:00:38.720 --> 0:00:43.360 associated at the Yale Program on Financial Stability, previously worked 0:00:43.520 --> 0:00:46.400 in Statistics division at the Federal Reserve Bank of Chicago, 0:00:46.440 --> 0:00:49.000 Sonosa thing or two about the FED. Caleb, thanks so 0:00:49.040 --> 0:00:52.440 much for joining us here. Um, President Biden did not 0:00:52.720 --> 0:00:57.160 announce a full slate of FED nominees yesterday. Why do 0:00:57.240 --> 0:01:01.600 you think we don't have everything filled here? Yeah, it's 0:01:01.680 --> 0:01:05.319 it's great to be with you. Um, it's President Biden 0:01:05.440 --> 0:01:09.400 kind of operates on this definition of FED independence. That uh, 0:01:09.840 --> 0:01:12.480 that's basically that he doesn't comment on specific actions that 0:01:12.560 --> 0:01:15.479 the Central Bank takes. So he really has one big 0:01:15.520 --> 0:01:20.039 shot to send a message to the FED, to Congress, 0:01:20.120 --> 0:01:23.280 to financial markets, and to the broader publican general about 0:01:23.280 --> 0:01:26.319 what he thinks about the FED. And you know, I 0:01:26.360 --> 0:01:31.520 think he missed his opportunity yesterday by only filling two 0:01:31.640 --> 0:01:34.720 of the seats um two of the positions. He could 0:01:34.760 --> 0:01:37.880 have billed three others. Uh, there's the open seat from 0:01:37.920 --> 0:01:40.759 that Trump tried to fill with Judy Shelton Quarrels has 0:01:40.760 --> 0:01:42.440 gone and that seat's gonna need to be filled, and 0:01:42.880 --> 0:01:45.360 Clara does is leaving, so that seat needs to be filled. 0:01:45.720 --> 0:01:47.760 I mean, just imagine how powerful it would have been 0:01:48.240 --> 0:01:50.800 for Biden to account walk up to that Mike yesterday 0:01:51.160 --> 0:01:54.560 flanks not just by the feds number one and number two, 0:01:55.040 --> 0:01:58.080 but the fed's top five, and kind of the message 0:01:58.080 --> 0:02:01.480 that would have sense about what Biden thinks. Who the 0:02:01.520 --> 0:02:04.240 sen is, what their job is, what their priorities are, 0:02:04.360 --> 0:02:06.600 and you know who they represent and not just skin 0:02:06.680 --> 0:02:10.079 color and gender, but also economic background. I think he 0:02:10.160 --> 0:02:12.880 missed that opportunity because there are three those three seats 0:02:12.880 --> 0:02:15.160 he says he's going to fill them in early December, 0:02:15.200 --> 0:02:18.480 but between the debt feeling and the holidays, I just 0:02:18.520 --> 0:02:20.520 don't think that message is going to get through this 0:02:20.919 --> 0:02:23.760 same degree that it would have. And why not, I mean, 0:02:23.960 --> 0:02:26.839 why not come out and make these decisions sooner rather 0:02:26.880 --> 0:02:30.200 than later. We've had plenty of time to debate, to 0:02:30.360 --> 0:02:34.320 have an open conversation about especially with the vice here 0:02:34.440 --> 0:02:38.680 of supervision that all important seed, why leave it open 0:02:38.760 --> 0:02:43.280 for so long? Yeah, that's right, And I don't think that, 0:02:43.960 --> 0:02:47.720 you know, I think this is a messaging issue. I'm 0:02:47.760 --> 0:02:50.519 not one of those that believe that a month or 0:02:50.560 --> 0:02:54.839 two of one of these seats for the job itself 0:02:55.000 --> 0:02:57.000 is going to make a huge difference in the medium 0:02:57.080 --> 0:03:00.320 and especially not in the long term. Of what it doesn't. 0:03:00.320 --> 0:03:02.000 It shows what it has kind of showed for the 0:03:02.000 --> 0:03:04.200 FED chair race, which is the President Biden is just 0:03:04.320 --> 0:03:07.760 not considers just doesn't consider the said to be a priority. 0:03:07.800 --> 0:03:12.360 And maybe it's political concerns about distracting the different wings 0:03:12.400 --> 0:03:16.280 of the of the Democrats Democratic senators, but I but 0:03:16.360 --> 0:03:18.720 I think the concern is real that this is just 0:03:18.720 --> 0:03:22.639 showing that Biden just doesn't U as a priority. So Caleb, 0:03:23.240 --> 0:03:27.480 a lot of the progressives, particularly UH Elizabeth Warren where 0:03:27.560 --> 0:03:31.560 came out against reappointing FED Chairman J Pale. What do 0:03:31.600 --> 0:03:34.320 you think that the political calculus was for the president 0:03:34.360 --> 0:03:38.320 in the announcement he did make. Yeah, So, you know, 0:03:38.440 --> 0:03:43.320 I think this was a big loss by the progressive movement. 0:03:43.360 --> 0:03:45.760 You know, over the last couple of years, they've proven 0:03:45.840 --> 0:03:49.560 themselves quite a dept at picking battles that they think 0:03:49.600 --> 0:03:51.960 they're probably gonna lose, but in the process they can 0:03:51.960 --> 0:03:54.200 shift the window, expand the potential, you know, kind of 0:03:54.240 --> 0:03:57.400 win this war of ideas. Uh, And this time the 0:03:57.400 --> 0:04:00.360 progressive just didn't really bring their their A game to this. 0:04:00.480 --> 0:04:03.720 They have never named an alternative. You know, Warren's dangerous 0:04:03.760 --> 0:04:06.840 man kind of comment was appeared to be off the 0:04:06.880 --> 0:04:09.680 cuff and didn't have a big follow up. The squads 0:04:09.760 --> 0:04:14.600 and how their letter to that was released over the summer. 0:04:14.960 --> 0:04:18.640 You know, they had some shallow issue things concerns that 0:04:18.680 --> 0:04:20.960 they were bringing up, but they didn't name any names. 0:04:20.960 --> 0:04:23.320 They didn't even have a short list, and they didn't 0:04:23.320 --> 0:04:26.880 really collect around what it exactly is that they wanted, 0:04:27.360 --> 0:04:31.960 uh from the FED. What do you want to see then, 0:04:32.160 --> 0:04:35.120 particularly when it comes to the vice chair for supervision, 0:04:35.760 --> 0:04:38.080 as you mentioned before. Biden has talked a lot about 0:04:38.279 --> 0:04:43.159 gender and race diversity and inclusion as well. What are 0:04:43.320 --> 0:04:45.839 some of the qualifications of the people that you've seen 0:04:45.920 --> 0:04:50.960 floated around. Yeah, so that that diversity in in both 0:04:51.600 --> 0:04:54.360 both gender, race, and then and then background is really important. 0:04:54.360 --> 0:04:57.479 And I'll throw up at the top that in the law, 0:04:57.839 --> 0:05:01.960 the Federal Reserve Act itself says that that these the 0:05:02.080 --> 0:05:05.479 leadership should include various sectors of the economy, and it 0:05:05.560 --> 0:05:08.719 explicitly includes labor. And then you know, we've never had 0:05:09.080 --> 0:05:11.920 a member of the Federal Open Market Committee, so either 0:05:12.000 --> 0:05:15.000 from a Reserve Bank president or one of the governors 0:05:15.520 --> 0:05:18.400 that came from a background of of organized labor. We've 0:05:18.400 --> 0:05:21.719 had labor economists, we've not had someone from the actual movement. 0:05:21.839 --> 0:05:23.480 And so that would be something for one of the 0:05:23.480 --> 0:05:26.080 three seats UH that I would I would be interested 0:05:26.120 --> 0:05:28.200 in seeing. And then there are others on the on 0:05:28.279 --> 0:05:30.479 the actual supervision stuff. We want to see somebody that 0:05:30.560 --> 0:05:33.560 has experience in that matter, that has a track record 0:05:33.600 --> 0:05:36.560 of of of having having views um and there are 0:05:36.640 --> 0:05:38.120 there are a few people on the list that just 0:05:38.160 --> 0:05:43.360 don't really have much supervisory experience or public messages about that. 0:05:43.400 --> 0:05:44.640 And so that's what That's one of the things I 0:05:44.760 --> 0:05:46.839 want to see. All right, Caleb, thank you so much 0:05:46.960 --> 0:05:49.159 for joining us. We really appreciate you taking the time. 0:05:49.240 --> 0:05:53.159 Caleb Nyeguard, Senior Research Associate for the Yale Program on 0:05:53.240 --> 0:06:01.279 Financial Stability, part of the Yale School of Management. I 0:06:01.279 --> 0:06:03.760 want to bring on Jim Shariko. He's a president CEO 0:06:03.800 --> 0:06:07.279 of a Via Holdings uh symbol a v y A. 0:06:08.240 --> 0:06:09.599 But we're gonna get to that in just a moment. 0:06:09.600 --> 0:06:11.800 But first let's check in with Kritty Gupta. Get some 0:06:11.800 --> 0:06:14.720 small cap stocks that's coming up right now. Paul the 0:06:14.800 --> 0:06:18.800 Russell two thousand down one percent, underperforming the broader market. 0:06:18.839 --> 0:06:20.599 The move that looks a lot like tech, but under 0:06:20.680 --> 0:06:23.000 the hood you're seeing a little bit of a mixed picture. 0:06:23.120 --> 0:06:25.760 Jack in the Box shares down six percent tigger J 0:06:26.000 --> 0:06:28.560 A c K after the fast food chain reported same 0:06:28.600 --> 0:06:32.520 store sales that missed expectations and restaurant margin declines driven 0:06:32.560 --> 0:06:35.280 by higher costs and higher wages, kind of thing we've 0:06:35.320 --> 0:06:38.080 been hearing lately. Abercrombie and Fish is another one. Tigger 0:06:38.120 --> 0:06:40.920 A n F. Those shares down sixteen percent, the most 0:06:41.080 --> 0:06:45.120 intra day since March of once again hitting those supply 0:06:45.279 --> 0:06:48.440 chain issues. You also have Urban Outfitters down fourteen percent. 0:06:48.760 --> 0:06:52.320 Those third quarter results mixed. Uh, they did beat those expectations. 0:06:52.360 --> 0:06:55.200 The outlook was encouraging, but once again supply chain disruptions 0:06:55.240 --> 0:06:58.400 and pressure from higher costs weighing on that stock. To 0:06:58.440 --> 0:07:00.120 the upside though, because we've gotta have some good is 0:07:00.160 --> 0:07:03.600 in their American Eagle shares up five percent, took your 0:07:03.640 --> 0:07:07.039 a EO, also reporting better than expected earnings, this time 0:07:07.160 --> 0:07:10.320 on strong in store sales ahead of the holidays. And lastly, 0:07:10.720 --> 0:07:13.520 die Coum Industries took her d Y shares that fifteen 0:07:13.600 --> 0:07:17.800 percent after the infrastructure company whose sales turned positive for 0:07:17.880 --> 0:07:20.360 the first time in a year and even in margins 0:07:20.400 --> 0:07:24.200 also stabilized thanks to a client or some improvement when 0:07:24.200 --> 0:07:28.560 the client that Bloomberg Intelligence expects is Verizon. Interesting. Interesting, 0:07:28.600 --> 0:07:30.480 all right, Gretty goop that thank you so much. We 0:07:30.600 --> 0:07:34.240 appreciate getting that small cap report. Look at one of 0:07:34.280 --> 0:07:36.880 these small caps via holdings of the stock was up 0:07:37.400 --> 0:07:39.600 had a nice movie actually from eighteen to twenty two, 0:07:40.120 --> 0:07:43.200 pulling back at six point six percent today. Jim Shariko, 0:07:43.520 --> 0:07:46.480 president and CEO of A Villa, joins us here. Jim, 0:07:46.520 --> 0:07:48.960 thanks so much for joining us here via Again, a 0:07:49.040 --> 0:07:54.000 technology communications company that offers collaboration and kee communication tools 0:07:54.440 --> 0:07:57.600 for businesses. Talk to us about your business, Jim. We're 0:07:57.640 --> 0:07:59.720 seeing Zoom Technologies trade off a lot today and a 0:07:59.760 --> 0:08:02.640 lot of the companies that had benefited from some of 0:08:02.720 --> 0:08:05.760 the work from home issues getting a little bit under 0:08:05.800 --> 0:08:07.960 pressure here. Talked to us about your company, what you're 0:08:07.960 --> 0:08:11.560 seeing in your business. Yeah, Hi, good morning, Thanks for 0:08:11.640 --> 0:08:13.800 having me on UM. Yeah, for a viot look. We 0:08:13.960 --> 0:08:17.000 had our fourth quarter of fifthical year results yesterday. Was 0:08:17.040 --> 0:08:20.280 a strong year on many fronts. We exceeded the street 0:08:20.680 --> 0:08:24.360 expectations across the board UM, and we've really been focusing 0:08:24.480 --> 0:08:29.119 on delivering a three pillar value creation strategy. FIRSTUS growth. 0:08:29.560 --> 0:08:32.000 We've had six consecutive quarters a year on year growth. 0:08:32.400 --> 0:08:35.200 We reversed more than a decade of revenue declines by 0:08:35.280 --> 0:08:38.960 being up roughly a hundred million dollars to very close 0:08:39.040 --> 0:08:42.000 to three billion of revenue for the year UM. We 0:08:42.160 --> 0:08:47.040 have moved to a cloud uh cloud first company. Our 0:08:47.440 --> 0:08:51.720 annually recurring revenues finished up roughly a hundred and seventy 0:08:51.800 --> 0:08:55.760 seven percent year on year, so we're seeing strength across 0:08:55.840 --> 0:08:57.920 the board. We operate in a hundred and ninety countries. 0:08:57.960 --> 0:09:00.640 We have more than a hundred thousand UH customers, and 0:09:00.800 --> 0:09:05.360 we've been investing significantly and really focusing on reshaping a 0:09:05.400 --> 0:09:07.839 bye to a cloud company and a real leader in 0:09:08.000 --> 0:09:11.640 large enterprise communication and collaboration. You know, it's interesting we 0:09:11.840 --> 0:09:15.199 heard from Zoom as well yesterday and they really in 0:09:15.280 --> 0:09:17.880 their press release we're highlighting how they have to be 0:09:18.520 --> 0:09:22.000 wherever some of these large enterprise companies are. So if 0:09:22.040 --> 0:09:24.960 it's a hybrid work environment, if it's fully work from home, 0:09:25.320 --> 0:09:28.920 if it's all returned to office, they're having to you know, 0:09:29.080 --> 0:09:31.880 sort of sort of tackle all of that. How are 0:09:32.080 --> 0:09:37.520 you thinking about finding a customer where they are, even 0:09:37.600 --> 0:09:39.679 if it's at work from home, even if it's a 0:09:40.040 --> 0:09:43.600 percent in office. Yeah, if you take a look at 0:09:43.640 --> 0:09:47.360 our overall solutions, in fact, we're purpose built for exactly that. 0:09:47.960 --> 0:09:50.720 We are a portfolio company, in fact for the only 0:09:50.800 --> 0:09:55.400 portfolio company that offers solutions that cover both the unified 0:09:55.480 --> 0:09:58.839 communications space as well as the contact center space. And 0:09:58.960 --> 0:10:02.640 we provide solution whether it's hybrid, whether it's private and 0:10:02.920 --> 0:10:07.560 or public. Um. Many of our competitors really offer basically 0:10:07.640 --> 0:10:10.199 one or maybe two of those solutions, but we're a 0:10:10.280 --> 0:10:14.320 complete portfolio company and in fact really focusing on from 0:10:14.360 --> 0:10:18.040 our point of view, how people communicate and collaborate, whether 0:10:18.240 --> 0:10:21.240 it's uh, you know, work at home or from from 0:10:21.320 --> 0:10:26.360 the office, because we view that work has been significantly disrupted, 0:10:26.520 --> 0:10:28.559 it won't go back to where it once was, and 0:10:29.080 --> 0:10:34.000 these disruptions provide us an opportunity to grow really predicated 0:10:34.040 --> 0:10:37.840 on the fact that our line platform enables enables business 0:10:38.400 --> 0:10:42.520 to really have that customer as well as employee experience, 0:10:42.840 --> 0:10:45.800 and that's a real differentiator in today's market. So, Jimmy, 0:10:45.840 --> 0:10:48.440 you know, you guys have just a fantastic advantage point 0:10:48.480 --> 0:10:51.280 talking you know, working with your clients. How do you 0:10:51.440 --> 0:10:54.880 think the future of work will be? Will it be hybrid? 0:10:55.040 --> 0:10:59.080 Is that kind of the new norm now for corporations? 0:11:00.600 --> 0:11:03.200 You know it really is. You know we did I said, 0:11:03.280 --> 0:11:06.560 we deal with you know, the largest of large enterprises 0:11:06.679 --> 0:11:10.400 down to the SMB marketplace, and no matter what vertical 0:11:10.520 --> 0:11:14.120 you look across, be at healthcare or banking or government, um, 0:11:14.200 --> 0:11:17.760 we're seeing that the workforce will be um really more 0:11:17.800 --> 0:11:21.040 of a hybrid environment as as we see it out 0:11:21.080 --> 0:11:24.520 through you know, the foreseeable future and what that means 0:11:24.679 --> 0:11:28.360 is that businesses today need more flexibility and how they 0:11:28.480 --> 0:11:33.240 use technology, how they can create this purposeful and consistent experience. 0:11:33.760 --> 0:11:36.559 And that's UM. You know, that's a huge opportunity for 0:11:36.720 --> 0:11:40.800 us because we UM. We provide that platform, We provide 0:11:40.840 --> 0:11:43.839 the end to end solutions. You know, we've been running 0:11:43.920 --> 0:11:48.000 mission critical applications for our number of customers for for 0:11:48.240 --> 0:11:51.400 for many many years. And the challenge is pretty clear, 0:11:51.559 --> 0:11:55.840 and that's to eliminate these departmental silos, UH and really 0:11:55.880 --> 0:11:59.280 eliminate friction on how businesses conduct commerce and and we're 0:11:59.320 --> 0:12:02.640 excited about the opportunity for the company. Hey, Jim, thanks 0:12:02.679 --> 0:12:04.520 so much, sure for taking some time here. We really 0:12:04.559 --> 0:12:08.439 appreciate getting your thoughts here. It's really the future of 0:12:08.559 --> 0:12:11.040 business and working and as Jim was just mentioning, it 0:12:11.120 --> 0:12:12.800 kind of feels like a hybrid is here to stay. 0:12:12.880 --> 0:12:16.240 Jim Shariko, president and CEO of a Vaya symbol A 0:12:16.800 --> 0:12:19.520 the y A. They stalk us up about eight percent 0:12:19.920 --> 0:12:22.400 year to day, had a big big move up yesterday 0:12:22.559 --> 0:12:24.720 on the earnings eighteen to twenty two, pulling back about 0:12:24.720 --> 0:12:27.280 six percent today, but a big move there, and we 0:12:27.320 --> 0:12:32.679 appreciate Jim taking the time Taylor, you're looking at the 0:12:32.760 --> 0:12:35.199 NASTAC here today it's off one percent. We've kind of 0:12:35.240 --> 0:12:38.559 got the SMP flatish, but the nasdak off, you know, 0:12:38.760 --> 0:12:41.120 a little more than one percent. We've got the you know, 0:12:41.200 --> 0:12:44.160 looking at the rates rising a little bit here, it 0:12:44.160 --> 0:12:45.839 could be a little bit of a challenge. Well, and 0:12:45.920 --> 0:12:48.640 I think we're gonna pull in pretty coopta back in 0:12:48.760 --> 0:12:51.640 here because you had a big sort of you know, 0:12:51.800 --> 0:12:54.400 it was so interesting, Paul. Yesterday we stood here and 0:12:54.520 --> 0:12:56.840 early in the morning we got the Fed announcement. Sort 0:12:56.880 --> 0:12:59.760 of it seemed to be this clarity rally, big relief 0:12:59.800 --> 0:13:02.160 for then you had a decline of one point three 0:13:02.200 --> 0:13:04.240 percent on the NASTACK by the end of the session, 0:13:04.640 --> 0:13:06.560 and then you wake up today and you're off again 0:13:06.720 --> 0:13:10.240 another one percent. And one key metric I'm looking at 0:13:10.360 --> 0:13:12.400 is the number of stocks in the NASTAC that are 0:13:12.440 --> 0:13:15.400 making fifty two week lows. It's go up to five 0:13:15.520 --> 0:13:21.199 hundred and news stocks it was four three days ago. 0:13:21.600 --> 0:13:23.839 So that's sort of giving you an indication when you 0:13:23.960 --> 0:13:26.840 think about breadth and the magnitude. And again, a one 0:13:26.920 --> 0:13:29.520 percent sell off is nothing in the scheme of things, 0:13:29.640 --> 0:13:32.400 but underneath the surface there seems to be something going on, 0:13:32.600 --> 0:13:35.520 and that is the highest now since March of when 0:13:35.520 --> 0:13:37.320 you think about the number of stocks that are making 0:13:37.440 --> 0:13:41.000 fresh fifty two week lows. So just some really interesting dynamics. 0:13:41.080 --> 0:13:43.839 And you know, again with yields rising, you do, as 0:13:43.880 --> 0:13:46.839 you know better than anyone, talk about that discount rate 0:13:47.000 --> 0:13:49.160 and cash flows. And then you've had a lot of 0:13:49.200 --> 0:13:52.040 push pool with this COVID narrative though as you and 0:13:52.120 --> 0:13:54.600 I've been talking about hard to talk about cases. It's 0:13:54.600 --> 0:13:57.599 better to be talking about death and hospitalizations when you 0:13:57.720 --> 0:14:00.120 think about, uh, sort of the stay at home home 0:14:00.200 --> 0:14:02.840 trades all over again, Yeah, exactly, And you think about 0:14:03.040 --> 0:14:04.840 the nastac and some of these tech names that kind 0:14:04.840 --> 0:14:07.079 of goes to that you know, push and pull we've 0:14:07.120 --> 0:14:09.199 had in this market really since the beginning of the pandemic. 0:14:09.240 --> 0:14:10.600 Where do you want to be in some of those 0:14:11.000 --> 0:14:15.520 traditional growth stories that have worked so well for really 0:14:15.559 --> 0:14:17.839 since a financial crisis back in two thousand eight, or 0:14:17.920 --> 0:14:22.280 do you really make that cyclical play, that reopening play 0:14:22.640 --> 0:14:24.720 on you know, whether it's you know, some of the 0:14:24.880 --> 0:14:27.360 energy names, or the financials or even some of the 0:14:27.440 --> 0:14:29.440 small cap names. It's that push and pull there that 0:14:29.520 --> 0:14:32.040 we see in this market, um, and we see kind 0:14:32.040 --> 0:14:34.440 of waves where tech does well and then again some 0:14:34.520 --> 0:14:36.680 of the more cyclical names do well. Yeah, let's do 0:14:36.920 --> 0:14:38.760 all of this and more with Critty Gupta who we've 0:14:38.800 --> 0:14:41.600 swooped in here and pretty you know. Again, we don't 0:14:41.640 --> 0:14:43.480 want to make too much of a one percent here, 0:14:43.560 --> 0:14:46.360 one percent there, But it was the price action at 0:14:46.360 --> 0:14:49.280 the end of the day yesterday and sort of this continued, uh, 0:14:50.000 --> 0:14:53.560 small slight cell off today that catches our attention. Is 0:14:53.880 --> 0:14:59.400 this a rewriting or is this a yield reaction story? Well, 0:14:59.480 --> 0:15:02.200 you know this is going to see I would say 0:15:02.240 --> 0:15:04.680 neither actually, because I think this is where and you're 0:15:04.680 --> 0:15:07.000 guys are gonna hate me for saying this, but it's 0:15:07.040 --> 0:15:10.640 a little technical brace yourselves. Let me explain why. Because 0:15:10.880 --> 0:15:13.160 you do start to see these tiny pullbacks. One of 0:15:13.280 --> 0:15:16.080 the main themes of has been that there's been this 0:15:16.200 --> 0:15:19.600 major rally and no major corrections. Instead, you see these 0:15:19.800 --> 0:15:24.480 very shallow pullback to three percent drops, usually lead by 0:15:24.600 --> 0:15:26.520 big tech, And I think that's what you're seeing right 0:15:26.560 --> 0:15:29.320 now because in the past I'm looking at to chart 0:15:29.400 --> 0:15:32.440 here two months, you do start to see that tech 0:15:32.520 --> 0:15:35.880 without performing with this ev boom, with this a semis boom, 0:15:36.160 --> 0:15:38.760 so tech was kind of a big part of that 0:15:38.920 --> 0:15:40.760 trade in the last two months, and now it's taking 0:15:40.800 --> 0:15:43.760 a breather because for two reasons. One, it's found that 0:15:43.920 --> 0:15:46.520 big kind of jumping yields that we talked about about 0:15:46.600 --> 0:15:49.440 yesterday at ten basis point move in today, which so 0:15:49.680 --> 0:15:51.840 we do see that yield tensitivity coming back. But you 0:15:51.960 --> 0:15:54.960 also have us going into the holiday period where you 0:15:55.080 --> 0:15:57.920 are going to see a little less volume, a little 0:15:58.040 --> 0:16:00.440 less cash on the table. And I think that's really 0:16:00.520 --> 0:16:03.280 what markets are preparing for here, and they're just doing 0:16:03.360 --> 0:16:07.040 that through tech in a very normal reaction that you've 0:16:07.040 --> 0:16:10.440 seen this year, which is those shallow pullback. And it's interesting. 0:16:10.480 --> 0:16:13.920 We've seen earnings come through, you know, generally very very 0:16:14.000 --> 0:16:17.840 well across the SMP five hundred, but particularly in tech. 0:16:17.960 --> 0:16:20.440 But again it just seems I think, as you mentioned, 0:16:20.480 --> 0:16:23.080 pretty investors are trying to get a sense of boy, 0:16:23.160 --> 0:16:27.720 the next six to twelve months. You know, how positive 0:16:27.760 --> 0:16:31.520 can I be about earnings about top line growth? Yeah, Well, 0:16:31.560 --> 0:16:34.320 this is a conversation that we had in right this 0:16:34.480 --> 0:16:37.680 idea that it's going to see all about the recovery 0:16:37.760 --> 0:16:40.840 trade and how you really compare yourself year over year 0:16:41.200 --> 0:16:44.080 to the depths of every all the numbers were going 0:16:44.160 --> 0:16:48.600 to be good because your comparisons or two in the 0:16:48.680 --> 0:16:50.920 next essentially year, the next six to twelve months is 0:16:50.960 --> 0:16:54.000 going to be a completely different story because now those 0:16:54.040 --> 0:16:57.360 comparisons aren't going to be you don't have that kind 0:16:57.400 --> 0:17:00.480 of extra leeway, that extra slack there. In stead, they're 0:17:00.480 --> 0:17:02.840 going to be compared to how much progress have these 0:17:02.880 --> 0:17:07.720 companies made relative we're talking about oil prices for example. 0:17:07.880 --> 0:17:10.600 Today we're talking about energy stocks, so we're talking about 0:17:10.920 --> 0:17:13.480 their capacity, and still when you look at the production 0:17:13.600 --> 0:17:15.960 levels or you look at their revenue stream, they're not 0:17:16.119 --> 0:17:18.960 anywhere near what they were in twenty nineteen. They're also 0:17:19.359 --> 0:17:22.360 in terms of what values they're trading at, they're still 0:17:22.440 --> 0:17:25.400 note and there's all those kind of questions that you're 0:17:25.400 --> 0:17:28.280 going to start to see, whether it's tech, whether it's semis, 0:17:28.320 --> 0:17:32.119 whether it's your industrial companies, whether or not they're actually 0:17:32.160 --> 0:17:36.119 making that progress that we really wan them sing. Hey, Crety, 0:17:36.160 --> 0:17:38.200 thanks so much for joining us to really appreciate as 0:17:38.280 --> 0:17:45.560 always getting your thoughts on these markets. You know, tell, 0:17:45.600 --> 0:17:48.800 I'm looking at a chart of the two year treasury 0:17:48.880 --> 0:17:51.560 back in June the two years trading about fifteen basis points. Here, 0:17:51.600 --> 0:17:55.919 we are today at sixty one basis points. It seems 0:17:55.920 --> 0:17:58.960 like the market, because the markets are already doing its job, 0:17:59.280 --> 0:18:03.600 let's see kind of how the FED should react. Managing 0:18:03.680 --> 0:18:06.600 director and global head of rate strategy at TV Securities 0:18:07.119 --> 0:18:11.040 pre is the Fed kind of falling behind the market 0:18:11.080 --> 0:18:15.480 at all here. So we think that the FED threshold 0:18:15.560 --> 0:18:18.879 to either accelerate, taper or hike as soon as priced 0:18:18.960 --> 0:18:21.840 in that I think the threshold is much higher than 0:18:21.880 --> 0:18:24.119 what the markets pricing in. But to your question, I 0:18:24.200 --> 0:18:27.560 think the market is pricing in an economic outlook and 0:18:27.600 --> 0:18:30.200 a Fed response to that outlook. And I think the 0:18:30.280 --> 0:18:33.280 economic outlook that the market is pricing in is that 0:18:33.440 --> 0:18:36.639 inflation remains a problem and that the labor market shows 0:18:36.720 --> 0:18:40.160 signs of being tight, much more tight than we think 0:18:40.200 --> 0:18:42.560 it is, which will sort of force the Fed's hand. 0:18:42.600 --> 0:18:44.960 And that's why we've moved the timing of the first 0:18:45.040 --> 0:18:47.120 hike now, which just a month ago you were talking 0:18:47.160 --> 0:18:50.199 about where the two year was. We're pricing in end 0:18:50.240 --> 0:18:54.159 of twenty two to now June two first hike, and 0:18:54.440 --> 0:18:56.359 more than three hikes in the first year of the 0:18:56.440 --> 0:18:59.200 hiking cycle. So it's a normal start to the hiking cycle. 0:18:59.560 --> 0:19:01.720 It's the timing that I struggled with. And I also 0:19:01.760 --> 0:19:04.600 struggled with the endpoint because the market saying, well, they'll 0:19:04.640 --> 0:19:08.119 start really early, but after the first few hikes, the 0:19:08.200 --> 0:19:11.280 hiking cycle will sort of abort because it's impact in 0:19:11.359 --> 0:19:14.560 a long term growth is lower. And so I struggled 0:19:14.600 --> 0:19:17.000 with the start in the end. But the market I 0:19:17.080 --> 0:19:19.760 think is pricing in that the FED will be forced 0:19:19.800 --> 0:19:22.920 in sooner than what they're indicating right now. And is 0:19:23.000 --> 0:19:28.080 that um perhaps maybe confusion or uncertainty about the start 0:19:28.240 --> 0:19:31.240 the pace in the end. Is that what a yield 0:19:31.280 --> 0:19:33.520 curve on the two stands it just around a hundred 0:19:33.600 --> 0:19:37.879 basis points is telling you right, yes, I think so 0:19:37.960 --> 0:19:40.800 it's not as steep as you normally would expect that 0:19:40.920 --> 0:19:44.400 two stands curve because the endpoint is much lower than 0:19:44.680 --> 0:19:48.119 historically heading into a hiking cycle. In fact, what we 0:19:48.240 --> 0:19:50.359 noticed in the last two cycles was as we were 0:19:50.400 --> 0:19:53.399 getting closer to the endpoint the market, or to the 0:19:53.440 --> 0:19:55.680 start of the hiking cycle, the market was moving the 0:19:55.880 --> 0:19:59.400 endpoint higher. And that's just not happening this time. Because 0:19:59.440 --> 0:20:03.480 there are pretty big questions I think among investors minders 0:20:03.560 --> 0:20:08.000 to the structural impact of COVID, as COVID slowed down 0:20:08.280 --> 0:20:11.639 productivity or is it impacting long term growth? And so 0:20:11.760 --> 0:20:14.080 the FED. The assumption is that the FED might be 0:20:14.200 --> 0:20:17.080 forced to start hiking because of inflation, but they won't 0:20:17.119 --> 0:20:20.280 be able to hike too much. So the we're estimating 0:20:20.320 --> 0:20:22.320 the endpoint of the hiking cycle that the market is 0:20:22.400 --> 0:20:25.280 pricing in it less than one in three quarters. So 0:20:25.359 --> 0:20:27.600 that's a very short hiking cycle if the market is right. 0:20:28.119 --> 0:20:31.840 But ultimately, yes, that's what's impacting that curve where those 0:20:31.920 --> 0:20:35.000 long end rates are not able to rise, because if 0:20:35.080 --> 0:20:37.480 the endpoint of the hiking cycle is only one and 0:20:37.520 --> 0:20:39.960 a half, then there's a limit to how high that 0:20:40.080 --> 0:20:42.320 two year can go. But I disagree with that. I 0:20:42.400 --> 0:20:44.680 think the FED is going to try and let the 0:20:44.760 --> 0:20:47.520 economy run hot to get all the people back into 0:20:47.800 --> 0:20:49.720 a large number of people who have left the labor 0:20:49.800 --> 0:20:52.440 force back in and so if they start a little 0:20:52.480 --> 0:20:55.040 bit late, I think they can go much more. And 0:20:55.119 --> 0:20:57.520 so we think that the endpoint Priceton should be closer 0:20:57.560 --> 0:20:59.359 to two and a half, which is where it was 0:20:59.400 --> 0:21:03.080 in the last If the labor force and labor participation 0:21:03.240 --> 0:21:05.040 is one of the variables that the FED is looking at. 0:21:05.359 --> 0:21:08.280 What do you make of the argument that people a 0:21:08.400 --> 0:21:11.800 sizeable portion of the people that have left they're not 0:21:11.920 --> 0:21:14.280 coming back. How do you think about the labor market? 0:21:15.240 --> 0:21:17.119 So I think that's the big question, right, are they 0:21:17.320 --> 0:21:22.119 not coming back forever or are they being picky about 0:21:22.160 --> 0:21:25.000 the type of job or what we call the reservation wage? 0:21:25.040 --> 0:21:27.440 At what wage level do they come back? I think 0:21:27.520 --> 0:21:30.840 the savings high level of savings, partly because we had 0:21:30.960 --> 0:21:34.920 the fiscal transfer, partly because spending on services was just 0:21:35.080 --> 0:21:36.879