WEBVTT - Reacting to PCE and Market Look Ahead 0:00:02.529 --> 0:00:04.210 Bloomberg Audio Studios. 0:00:04.670 --> 0:00:05.370 Podcasts. 0:00:05.690 --> 0:00:07.040 Radio. News. 0:00:12.520 --> 0:00:16.660 This is the Bloomberg Surveillance Podcast. Catch us live weekdays 0:00:16.720 --> 0:00:20.230 at 7 a.m. Eastern on Apple CarPlay or Android Auto 0:00:20.290 --> 0:00:23.890 with the Bloomberg Business app. Listen on demand wherever you 0:00:23.910 --> 0:00:26.990 get your podcasts or watch us live on YouTube. 0:00:27.510 --> 0:00:29.790 Had a broad market fixed income. He's in charge of 0:00:29.810 --> 0:00:35.440 yield at Morgan Stanley Investment Management. Vishal Kanduja joins us. 0:00:35.460 --> 0:00:38.140 Do you and Jim Caron disagree? Like when you go 0:00:38.220 --> 0:00:40.880 to a meeting with Jim Caron, are you on the 0:00:40.940 --> 0:00:41.640 same page? 0:00:43.450 --> 0:00:45.190 A lot of times you're on the same page, but 0:00:45.229 --> 0:00:47.970 there is quite a bit of times healthy disagreement. 0:00:48.150 --> 0:00:48.350 Good. 0:00:48.430 --> 0:00:49.520 What's the point? 0:00:49.630 --> 0:00:50.300 Because of time. 0:00:50.380 --> 0:00:54.300 What's the key distinction now in that disagreement at Morgan Stanley? 0:00:55.230 --> 0:00:57.480 I think there are two key themes right now. I 0:00:57.500 --> 0:01:00.480 think Fed definitely was and remains to be the center stage. 0:01:00.500 --> 0:01:03.920 We'll find out more at 10 o'clock on Friday from 0:01:03.980 --> 0:01:06.800 Kevin Warsh, a reiteration of the 2% and maybe a 0:01:06.800 --> 0:01:10.770 little bit more hawkish reiteration of the same. I think 0:01:10.790 --> 0:01:14.010 the big thing now, Scott Besson, the Treasury Secretary, wants 0:01:14.030 --> 0:01:17.990 to take the center stage. So things that have not changed, fundamentally, 0:01:18.110 --> 0:01:20.690 we still don't have a very clear plan to for 0:01:20.750 --> 0:01:23.460 deficit reduction. But they say that they're going to have 0:01:23.680 --> 0:01:26.780 something for us in the next two weeks. Things that 0:01:26.819 --> 0:01:30.380 have changed is now you have clearly gone out of 0:01:30.420 --> 0:01:34.370 your way to come out, surprise the market, and then 0:01:34.450 --> 0:01:38.090 give us a little bit more information that this is 0:01:38.230 --> 0:01:40.490 some sort of a pain threshold has been reached. Either 0:01:40.510 --> 0:01:43.750 it is the curve shape, it is absolute level of yields, 0:01:43.950 --> 0:01:46.000 or it is a worry that these higher yields are 0:01:46.020 --> 0:01:47.540 going to add to deficits even more. 0:01:49.980 --> 0:01:53.450 So Vishal, one of the narratives for higher interest rates 0:01:53.710 --> 0:01:56.630 is this whole crowding out issue that all this investment 0:01:56.670 --> 0:02:00.320 grade AI debt is crowding out the treasury market. 0:02:00.780 --> 0:02:02.140 Is that really happening? 0:02:03.770 --> 0:02:05.560 It's definitely happening on the margin. 0:02:05.800 --> 0:02:08.600 The way we measure this is just the amount of 0:02:08.660 --> 0:02:13.820 duration that is coming out. High-quality balance sheets, which are AA, AAA, 0:02:14.020 --> 0:02:17.500 almost by quality, are now finally trying to use the 0:02:17.520 --> 0:02:19.580 strength of those balance sheets, the corporate ones that I'm 0:02:19.620 --> 0:02:22.320 talking about. And they're going to use quite a bit 0:02:22.340 --> 0:02:25.760 of that given the amount that they need for the CapEx. Now, 0:02:26.220 --> 0:02:30.609 the same high-quality buyer of long-end duration also buys a 0:02:30.630 --> 0:02:34.490 lot of treasuries in their balance. So definitely they're scouting out, 0:02:34.590 --> 0:02:37.709 but size is very different. You're talking about a $ 40 0:02:37.330 --> 0:02:40.880 trillion market versus a less than $ 2 trillion market on 0:02:40.900 --> 0:02:41.440 the other side. 0:02:41.620 --> 0:02:43.360 Do we need to get used to higher rates? We 0:02:43.380 --> 0:02:47.950 had a guest earlier, Rochelle, who suggested grinding yields, you know, 0:02:47.970 --> 0:02:52.110 just sort of a movement here, dare I say to 5%. 0:02:52.110 --> 0:02:52.989 Are you in that camp? 0:02:54.139 --> 0:02:56.560 So four and three quarters, I think we might spike 0:02:56.600 --> 0:02:57.940 to five on the 10-year. 0:02:58.040 --> 0:02:59.400 But four and three quarters. 0:02:59.120 --> 0:03:02.280 Is a pretty fantastic threshold here. And why we say 0:03:02.320 --> 0:03:06.650 that is because of the fundamental reasons. We do see 0:03:06.830 --> 0:03:11.050 very clear-cut, broad-based disinflationary pressures. 0:03:11.090 --> 0:03:11.690 In the economy. 0:03:11.970 --> 0:03:14.530 Got a little bit delayed because of the conflict, because 0:03:14.610 --> 0:03:17.590 of the nominal growth picking up, because of the capex 0:03:18.130 --> 0:03:19.750 spend that you're seeing from the corporates. 0:03:20.200 --> 0:03:21.920 But we do see quite a bit of. 0:03:21.900 --> 0:03:23.540 Disinflationary pressures, which then. 0:03:24.139 --> 0:03:27.279 brings down that yield or anchors that yield down over 0:03:27.300 --> 0:03:27.899 the long term. 0:03:27.919 --> 0:03:29.380 So, yes, quite a bit of value. 0:03:29.460 --> 0:03:31.080 And we do see that we are topping up in 0:03:31.120 --> 0:03:34.040 yields at these levels on the 10-year in the U.S. 0:03:34.560 --> 0:03:36.500 Vishal, I understand a lot of smart folks are heading 0:03:36.520 --> 0:03:38.640 out to Jackson Hole, Wyoming, which I presume is for 0:03:38.680 --> 0:03:43.000 the bison burger thing. But I guess we're going to 0:03:43.020 --> 0:03:44.750 hear from some economists. What do you expect to hear 0:03:44.820 --> 0:03:46.730 from Fed Chairman Warsh? What do you think the market 0:03:46.770 --> 0:03:47.890 would really like to hear? 0:03:49.590 --> 0:03:52.410 I think the market would love to hear some reiteration 0:03:52.950 --> 0:03:57.450 of the target and then a little bit more about 0:03:57.930 --> 0:04:00.690 those five working groups or forums that we've heard about. 0:04:00.730 --> 0:04:04.310 The leadership of those forums that has been set is 0:04:04.380 --> 0:04:07.380 pretty fantastic and terrific. We would love to see what 0:04:07.660 --> 0:04:10.260 the initial work from those forums. 0:04:10.020 --> 0:04:11.020 Tells us at the moment. 0:04:11.400 --> 0:04:13.440 So I think a little bit more on that one 0:04:13.620 --> 0:04:16.580 and a little bit more about What is your assessment 0:04:16.620 --> 0:04:19.500 about the economy? We don't need some forward guidance here, 0:04:19.920 --> 0:04:22.279 but that will tell us if there is some piece 0:04:22.320 --> 0:04:25.430 of information that is you looking at that we should 0:04:25.450 --> 0:04:27.589 be also focused on as a market participant. 0:04:27.930 --> 0:04:30.090 Thank you so much for the brief here into the 0:04:30.150 --> 0:04:34.429 PCE report. joins us, head of broad market fixed income 0:04:34.470 --> 0:04:36.770 at Morgan Stanley. And so I got red and green 0:04:36.800 --> 0:04:42.460 in the screen, the 10-year yield into the report, 4.6208%. 0:04:42.460 --> 0:04:47.479 Across America from New York, it's Bloomberg Surveillance. 0:04:48.750 --> 0:04:52.900 And the government's personal consumption expenditures price index, otherwise known 0:04:53.020 --> 0:04:56.160 as the Fed's favorite gauge of inflation, is out. And 0:04:56.279 --> 0:05:00.620 month over month, PCE increased by two-tenths of a percent, 0:05:00.720 --> 0:05:05.549 rebounding from a 0.1% decrease in the previous month, hotter 0:05:05.890 --> 0:05:08.230 than the estimate of a tenth of a percent. Year 0:05:08.390 --> 0:05:12.530 over year, the PCE price index rose by to 3.7% 0:05:12.529 --> 0:05:15.670 in July, matching what happened in June when we saw 0:05:15.690 --> 0:05:19.190 a rise of 3.7%, a bit hotter than the 3.6% 0:05:19.190 --> 0:05:21.730 we were expecting. Now, if you exclude volatile food and 0:05:21.830 --> 0:05:27.310 energy costs, core PCE month over month edging up 0.2% 0:05:27.310 --> 0:05:30.349 versus the 0.1% rise the prior month, and that's right 0:05:30.390 --> 0:05:33.370 in line with estimates, and the annual core rate holding 0:05:33.430 --> 0:05:37.810 steady at 3.3%, right in line with estimates, In terms 0:05:37.860 --> 0:05:41.140 of personal income and spending, it seems like we made 0:05:41.180 --> 0:05:44.479 more than we spent. Personal income up four-tenths of a percent, 0:05:44.560 --> 0:05:47.159 besting the estimate of two-tenths of a percent versus a 0:05:47.180 --> 0:05:49.960 rise of two-tenths of a percent the prior month, spending 0:05:50.020 --> 0:05:52.220 up two-tenths of a percent, down a bit from that 0:05:52.260 --> 0:05:54.640 three-tenths of a percent rise we saw the prior month, 0:05:54.880 --> 0:05:58.060 and that versus the one-tenth of a percent increase we 0:05:58.080 --> 0:06:01.190 were expecting. So once again here, the headline number, PCE 0:06:01.230 --> 0:06:05.710 price index year over year coming in at 3.7% right 0:06:05.750 --> 0:06:08.539 in line with estimates. Back over to Tom and Paul. 0:06:08.960 --> 0:06:12.260 Thanks so much, Alexis. Really, really appreciate that. It's a really... 0:06:12.700 --> 0:06:17.280 A churning, almost confusing report with important revisions as well. 0:06:17.300 --> 0:06:20.050 We'll get to that here in a moment. Bloomberg Surveillance 0:06:20.089 --> 0:06:22.650 and all that we do in economics. It's brought to 0:06:22.770 --> 0:06:27.390 you by IBKR. Trade, election, climate, and economic outcomes with 0:06:27.450 --> 0:06:31.870 IBKR prediction markets right alongside your stocks and options. Earn 0:06:31.930 --> 0:06:36.520 interest on your position and receive $ 1 per contract. If 0:06:36.560 --> 0:06:42.430 you're right, learn more at IBKR.com slash economics. predictions. I'm 0:06:42.470 --> 0:06:46.890 looking at the yield space. And I mean, it's directionally, Paul, 0:06:47.550 --> 0:06:50.969 it wants to give me higher yields, but I'm not 0:06:51.010 --> 0:06:53.210 getting the higher yields I thought I'd be getting here. 0:06:53.430 --> 0:06:53.670 Yeah. 0:06:53.710 --> 0:06:56.260 I mean, the two-year, Tom, is up about almost two 0:06:56.320 --> 0:06:59.520 basis points, 4.19%. But that's at the level we've been 0:06:59.560 --> 0:07:02.440 at for several weeks, if not months at this point. 0:07:02.500 --> 0:07:05.300 So I mean, and the stock market future is really 0:07:05.339 --> 0:07:07.480 showing No real move here. The S & P is 0:07:07.520 --> 0:07:10.060 down eight points. The Dow is up 30 and the 0:07:10.100 --> 0:07:11.260 Nasdaq is down 100 points. 0:07:11.560 --> 0:07:14.060 I'm looking at the second view of GDP. This is 0:07:14.190 --> 0:07:17.990 ancient data, folks, ending June 30. Look once, look twice, 0:07:18.010 --> 0:07:21.470 look three times, and Michael Ball revises it five years later. 0:07:21.550 --> 0:07:25.230 Joining us now from Bloomberg News and a macro strategist, 0:07:25.510 --> 0:07:28.500 Michael Ball. I'm looking at a screen, and I don't 0:07:28.510 --> 0:07:31.380 have the statistic in front of me, but it's still 0:07:31.440 --> 0:07:35.220 a boom economy, Michael Ball, on nominal GDP. You add 0:07:35.280 --> 0:07:41.630 real GDP, sort of, eh, big inflation ending June 30, 0:07:41.630 --> 0:07:46.870 and this Jackson Hole is a big nominal GDP Jackson Hole. 0:07:47.660 --> 0:07:49.740 Yeah, I mean, again, as you guys know, I love 0:07:49.760 --> 0:07:52.150 to look at real final domestic demand because it takes out. 0:07:52.050 --> 0:07:54.210 That sort of import noise. 0:07:54.790 --> 0:07:55.010 Really? 0:07:55.190 --> 0:07:57.790 Yeah, because it's just basically what people are spending domestically 0:07:57.870 --> 0:08:01.270 versus import noise from the CapEx boom. Remember, we had 0:08:01.310 --> 0:08:03.370 a low GDP print because we imported a lot. And 0:08:03.410 --> 0:08:05.530 also the inventory cycle was doing what it did, which 0:08:05.550 --> 0:08:06.010 was a boost. 0:08:06.190 --> 0:08:07.650 So what's domestic final sales? 0:08:07.680 --> 0:08:09.540 Strong. And this is what the upgrades are. 0:08:09.580 --> 0:08:12.400 And they're sticking apparently in Q2, which is good because 0:08:12.440 --> 0:08:14.340 now we're starting to see the finalization of that. So 0:08:14.380 --> 0:08:18.280 we had good momentum coming into the third quarter. The 0:08:18.320 --> 0:08:19.920 worry here, again, is that we're going to be losing 0:08:19.960 --> 0:08:22.000 some of this momentum. So this personal spending number is 0:08:22.040 --> 0:08:24.140 catching my eye a little. And we also recently had 0:08:24.160 --> 0:08:26.580 a big note out from Goldman basically saying that their 0:08:26.620 --> 0:08:28.800 July and August data is showing that there is a 0:08:28.840 --> 0:08:31.630 slowing in consumer activity. Despite all the boom we're seeing 0:08:31.670 --> 0:08:33.610 at the U.S. Open and the World Cup and all that. 0:08:34.210 --> 0:08:36.170 So there's a little bit of a divergence here with 0:08:36.350 --> 0:08:38.850 the momentum coming out of Q2 going into Q3 where 0:08:38.890 --> 0:08:41.600 we're going to still have this fixed investment boom from 0:08:41.700 --> 0:08:44.100 CapEx and from the reshoring and from the defense spending. 0:08:44.440 --> 0:08:46.640 But the consumer itself now is looking more wavery. 0:08:46.720 --> 0:08:49.020 Can I just say Michael Ball starts talking in the 0:08:49.040 --> 0:08:50.710 10-year move to basis points? 0:08:50.830 --> 0:08:51.050 I know. 0:08:51.350 --> 0:08:52.610 Higher yields here right now. 0:08:53.330 --> 0:08:56.830 So you go out there, if you were at the 0:08:56.870 --> 0:08:58.810 Fed here, what would be your big concern? What would 0:08:58.830 --> 0:09:01.000 you want to get a little bit smarter at, maybe 0:09:01.059 --> 0:09:01.920 at Jackson Hole here? 0:09:02.670 --> 0:09:05.319 So, again, this probably isn't going to be a great 0:09:05.400 --> 0:09:09.859 platform for speaking about policy in its core function because, again, 0:09:09.880 --> 0:09:12.740 this is about future payment systems. And this might have 0:09:12.780 --> 0:09:14.440 to do with why crypto, again, is having a couple 0:09:14.460 --> 0:09:16.199 of good weeks here. It kind of falls into some 0:09:16.220 --> 0:09:18.179 of that. But to your point, guys, we need to 0:09:18.220 --> 0:09:21.559 talk about what the actual structural inflation story is versus 0:09:21.580 --> 0:09:23.920 what the cyclical story is and what the Fed can affect. 0:09:24.100 --> 0:09:25.760 So parse the distinction there. 0:09:26.120 --> 0:09:28.040 So that's a great question that I think they need 0:09:28.059 --> 0:09:30.280 to clarify. I myself am not clear on because what 0:09:30.300 --> 0:09:31.520 do we want to do? Do we want to step 0:09:31.620 --> 0:09:33.890 on AI capex inflation? No, probably not. 0:09:33.950 --> 0:09:34.130 Right. 0:09:34.170 --> 0:09:34.360 We do. 0:09:34.390 --> 0:09:37.309 We want to actually look at wage inflation. Well, that's 0:09:37.350 --> 0:09:39.850 not actually going to going anywhere. So then you have 0:09:39.890 --> 0:09:41.630 a case to hold. So there are plenty of things 0:09:41.670 --> 0:09:45.069 to cut and parse through as far as the inflation picture, 0:09:45.090 --> 0:09:46.510 which is exactly why we hear from Warsh that he 0:09:46.550 --> 0:09:47.720 wants to take a different look at it. 0:09:48.059 --> 0:09:55.100 Second quarter GDP price index. 6.2, which is ginormous, and 0:09:55.150 --> 0:09:57.840 it came in even bigger than that, 6.4%. That's not 0:09:57.860 --> 0:09:58.380 a normal. 0:09:58.290 --> 0:10:04.040 Economy, is it? No, again, it's a tale of two 0:10:04.080 --> 0:10:04.660 stories here. 0:10:04.700 --> 0:10:08.340 We have a real drive, not only from AI build out, 0:10:08.380 --> 0:10:10.920 but also from our own government to kind of reshore. 0:10:10.940 --> 0:10:12.479 And then obviously we have a lot of defense spending 0:10:12.500 --> 0:10:15.559 coming through now. So the fiscal pulse has been quite strong. 0:10:15.900 --> 0:10:18.640 That's expected to fade into year end, but that's clearly 0:10:18.679 --> 0:10:21.699 reflected in Q2 data. And again, the momentum right now 0:10:21.760 --> 0:10:23.950 is pretty strong. So we are looking at an economy 0:10:23.970 --> 0:10:26.850 that is above trend. And that is a problem for 0:10:26.890 --> 0:10:29.689 the Fed, given that inflation remains stickier in that kind 0:10:29.730 --> 0:10:30.250 of backdrop. 0:10:31.330 --> 0:10:35.190 W.I.R.P., the world interest rate fund probability, blah, blah, blah, blah. 0:10:35.830 --> 0:10:38.660 Markets pricing in one rate hike by. 0:10:38.559 --> 0:10:39.319 The end of the year. 0:10:40.140 --> 0:10:40.480 I don't know. 0:10:40.520 --> 0:10:41.860 How do you think that looks these days? 0:10:42.280 --> 0:10:45.370 Yeah, after July, when we had sort of the lack 0:10:45.410 --> 0:10:49.099 of communication from the press conference. That's exactly where it 0:10:49.140 --> 0:10:51.920 went to. And actually, we crept into January and out 0:10:51.960 --> 0:10:54.600 of December. Now the idea being, if they don't go 0:10:54.620 --> 0:10:57.800 in September, which again, it's not looking too good as 0:10:57.840 --> 0:10:58.860 far as what probability is. 0:10:58.900 --> 0:11:00.460 Now let's keep in mind, we went into July. 0:11:00.960 --> 0:11:03.320 I think we were somewhere around between 30% and 40% 0:11:03.320 --> 0:11:05.579 chance anyway. And that was one of the lowest probabilities 0:11:05.980 --> 0:11:08.300 going into a meeting, which goes to show this new 0:11:08.440 --> 0:11:11.230 error where the chairman doesn't want to guide markets into 0:11:11.250 --> 0:11:12.949 a meeting. So we need to get accustomed to this 0:11:13.010 --> 0:11:13.689 new reality. 0:11:14.309 --> 0:11:16.550 I just found this statistic I was looking for. Thank you, 0:11:16.590 --> 0:11:23.520 Google Gemini, for this. Nominal GDP ending second quarter, first look, 0:11:24.090 --> 0:11:30.490 an annualized rate of 7.9%. I have never perceived that 0:11:30.630 --> 0:11:34.870 in my academic life. I've never witnessed it. That's something 0:11:34.950 --> 0:11:38.150 I get out of Southeast Asia, you know, given a 0:11:38.210 --> 0:11:38.990 war going on. 0:11:39.150 --> 0:11:40.689 You know, I mean, me and you have talked about 0:11:40.710 --> 0:11:43.449 this for a couple months now, about this reacceleration sort of, 0:11:43.480 --> 0:11:46.189 and it's broadening as we get— the consumer was active in Q2— 0:11:47.140 --> 0:11:49.640 This is why the market is doing quite well, the 0:11:49.660 --> 0:11:51.180 stock market. I mean, this is why it's not about 0:11:51.240 --> 0:11:53.820 AI anymore and momentum and higher beta trading. It's about 0:11:53.840 --> 0:11:56.140 a broadening and a rotation and some more cyclical parts 0:11:56.179 --> 0:11:56.300 of it. 0:11:56.300 --> 0:11:58.319 And I don't understand Druckenmiller. I'm going to say, look, 0:11:58.360 --> 0:12:01.060 I took this off AI. Anna Wong's smarter than me. 0:12:01.559 --> 0:12:05.579 She's going to figure this statistic out. But Paul, 7.9% 0:12:05.580 --> 0:12:09.920 run rate, a nominal GDP, tells me in no way, shape, 0:12:10.000 --> 0:12:12.179 or form, is this a normal Jackson Hole? 0:12:12.440 --> 0:12:15.100 No. It'd be interesting to see kind of how people... 0:12:15.500 --> 0:12:19.720 factoring today's data into the discussion. AI, Michael, how much 0:12:20.720 --> 0:12:23.220 of economic growth, of that number Tom just quoted, how 0:12:23.240 --> 0:12:25.480 much of all this is AI spending? 0:12:25.559 --> 0:12:26.439 A good chunk of it. 0:12:26.500 --> 0:12:28.949 And again, that's sort of where we get this kind 0:12:28.970 --> 0:12:31.040 of tale of two cities. And I'm, again, going back 0:12:31.090 --> 0:12:33.990 to this real personal spending being zero. It's good that 0:12:34.050 --> 0:12:36.790 income was up. When we adjust that, though, for inflation, 0:12:36.830 --> 0:12:38.750 that's obviously going to be a little lower. But what 0:12:38.770 --> 0:12:40.610 we need to see is it's not just a fixed 0:12:40.790 --> 0:12:43.690 investment boom in a certain pocket that now has become 0:12:43.730 --> 0:12:47.630 highly political and very uncertain and also very expensive. Meaning 0:12:47.650 --> 0:12:49.929 that every kind of buck they're spending in CapEx now 0:12:49.990 --> 0:12:53.569 gets less marginal compute because everyone's kind of rushing into. 0:12:53.850 --> 0:12:55.250 One door at the same time. 0:12:55.290 --> 0:12:56.030 Didn't think about that. 0:12:56.370 --> 0:12:58.150 So we want to see the broadening out and we 0:12:58.170 --> 0:13:00.050 want to see the consumer play its role. And again, 0:13:00.090 --> 0:13:02.130 the worry is that we are going to become more 0:13:02.150 --> 0:13:05.429 tapped out as people are going into savings, going up 0:13:05.490 --> 0:13:06.350 in credit spending. 0:13:06.730 --> 0:13:08.010 But this has. 0:13:07.929 --> 0:13:10.930 Been a story I've been told for quarters now and 0:13:10.950 --> 0:13:12.870 that the resilience of the consumer has kind of baffled 0:13:12.890 --> 0:13:13.730 everyone and it continues. 0:13:13.750 --> 0:13:15.820 So I'm not calling for an immediate end. I'm just 0:13:15.860 --> 0:13:16.910 saying this is where all eyes are. 0:13:17.500 --> 0:13:21.910 How urgent is it to get the run rate of 0:13:22.010 --> 0:13:26.450 our economy down to begin to get inflation back to? 0:13:26.830 --> 0:13:30.410 Forget about mandates. Forget about Taylor and the rest of it. 0:13:30.850 --> 0:13:35.109 What's the urgency to get the vector on inflation. 0:13:36.010 --> 0:13:36.370 Lower? 0:13:36.590 --> 0:13:38.850 I mean, one would argue not urgent or they would 0:13:38.870 --> 0:13:42.030 have gone in July. There's been no material change since that. 0:13:42.050 --> 0:13:45.470 Why is it not urgent with a banana republic nominal GDP? 0:13:45.650 --> 0:13:47.330 I mean, a lot of theories on that. 0:13:47.390 --> 0:13:50.210 We don't want to step on sort of the overall 0:13:50.290 --> 0:13:54.810 consumer by raising rates and tightening Main Street while trying 0:13:54.850 --> 0:13:58.160 to pop maybe a financial bubble or some fraud scene. 0:13:58.010 --> 0:14:00.439 In real assets. So in Jackson Hole, it's a political Fed. 0:14:00.640 --> 0:14:00.960 Could be. 0:14:01.240 --> 0:14:04.720 They can't step on half of America flat on their back. 0:14:04.900 --> 0:14:05.040 Yeah. 0:14:05.200 --> 0:14:09.120 Because somebody's paying Paul Sweeney ticket prices at the U.S. Open. 0:14:09.340 --> 0:14:10.300 Yeah, but this is a divergence. 0:14:10.320 --> 0:14:12.459 Like when you heard from Hammock and Logan, they're talking 0:14:12.500 --> 0:14:15.040 about what their business, they're telling them the cost increases there, 0:14:15.080 --> 0:14:16.740 the problems they're having with managing that. And when you 0:14:16.780 --> 0:14:18.540 talk to some of the other guys, the more dovish guys, 0:14:18.559 --> 0:14:20.600 they're talking about Main Street and they're talking about the consumer. 0:14:20.640 --> 0:14:23.100 Paul wants to get one more in here quickly. Beth Hammock, 0:14:23.180 --> 0:14:25.780 I believe, leading our coverage on Friday. 0:14:26.300 --> 0:14:26.760 Very good. 0:14:27.840 --> 0:14:31.330 NVIDIA after the close tonight. What's a macro guy? take 0:14:31.370 --> 0:14:33.010 away from NVIDIA. What are you going to be looking for? 0:14:33.030 --> 0:14:35.650 Yeah, so I've been looking sort of for NVIDIA to 0:14:35.770 --> 0:14:39.410 reassert this kind of AI capex winter momentum, which is cool, 0:14:39.430 --> 0:14:41.950 then actually kind of split open, right? So there's certain 0:14:41.990 --> 0:14:44.430 parts of AI still doing well, like optics and memory, 0:14:44.470 --> 0:14:45.500 where you've seen some of the. 0:14:45.860 --> 0:14:48.050 Core chip guys and others lose momentum. 0:14:48.080 --> 0:14:49.920 And it's been more of a divergent trade versus this 0:14:49.980 --> 0:14:52.540 just higher beta, all ships rising, anything to do with AI. 0:14:53.200 --> 0:14:55.040 So what we need from NVIDIA is maybe to settle 0:14:55.080 --> 0:14:57.320 some of that. Just the passage of that event being 0:14:57.360 --> 0:14:59.100 in line would help cool that. And then you get, 0:14:59.120 --> 0:15:02.060 you know, the volatility picture sort of settles. And again, 0:15:02.100 --> 0:15:05.550 more participation. Because that really has been a lagger, sort of, 0:15:05.740 --> 0:15:07.680 you know, semis have been one of the bigger laggers 0:15:07.720 --> 0:15:10.080 and they're right on top of momentum. All that kind 0:15:10.100 --> 0:15:12.240 of needs to settle a little for the market's breadth 0:15:12.300 --> 0:15:13.940 and the broadening that we see to continue in a 0:15:13.960 --> 0:15:15.960 healthier way. Like, we don't want to see AI left behind. 0:15:15.980 --> 0:15:17.580 We want to see everyone to participate if you want 0:15:17.620 --> 0:15:19.580 to keep going to 8,000 XPX. 0:15:19.820 --> 0:15:21.720 It sounds like he's running for office. 0:15:22.380 --> 0:15:23.240 I'd vote for him. 0:15:23.600 --> 0:15:25.640 Stock market mayor. If I'm elected, I'm going to be 0:15:25.660 --> 0:15:27.620 your Michael Paul. Yes, exactly. 0:15:27.790 --> 0:15:29.170 We'll see how that goes. 0:15:29.410 --> 0:15:34.330 So, again, the next thing for this market here, what 0:15:34.370 --> 0:15:34.580 is it? 0:15:34.670 --> 0:15:35.530 What do we need to focus on? 0:15:35.550 --> 0:15:37.850 Yeah, it is NVIDIA, I think, to your point. We 0:15:37.890 --> 0:15:39.170 need the passage of this earnings season. 0:15:39.190 --> 0:15:41.950 I mean, someone was saying that we've got banks coming 0:15:41.990 --> 0:15:43.770 in a week or two, so we're right back in 0:15:43.820 --> 0:15:46.900 it now. But to your point, Jackson Hole is starting 0:15:46.920 --> 0:15:48.580 to smell like it may not be a risk event 0:15:48.620 --> 0:15:49.720 as much as we like to hype it up. 0:15:49.720 --> 0:15:50.020 I agree. 0:15:50.040 --> 0:15:51.080 Because I think he's got a. 0:15:51.040 --> 0:15:51.480 Kind of bulk. 0:15:52.160 --> 0:15:54.380 Which leaves us status quo, which means it's probably a 0:15:54.420 --> 0:15:55.960 more dovish tilt to the Fed. So we don't have 0:15:55.980 --> 0:15:57.730 to worry about tightening there, which is good for stocks. 0:15:57.760 --> 0:15:59.890 And back to Tom's point, like nominal GDP is so high, 0:16:00.210 --> 0:16:02.910 the earnings picture has broadened so well in Q2 that 0:16:02.930 --> 0:16:05.190 it's just like everything is kind of working, even though 0:16:05.210 --> 0:16:07.950 we all still have this mainstream kind of affordability crisis 0:16:07.990 --> 0:16:08.930 going on in the backdrop. 0:16:09.010 --> 0:16:10.880 And geopolitics, obviously, are still not settled. 0:16:11.540 --> 0:16:15.440 It's a $ 23 honey deuce cocktail at the US Open. 0:16:15.520 --> 0:16:16.680 That goes up every year. 0:16:16.720 --> 0:16:19.630 We have like a thousand cups at our house. 0:16:19.730 --> 0:16:21.490 But is it like 16 ounce? 0:16:21.510 --> 0:16:21.950 No. 0:16:23.030 --> 0:16:27.420 It's a 12 ounce. And it's like that much vodka. 0:16:27.460 --> 0:16:30.479 Yeah, exactly. They put like eight buckets of ice in it. 0:16:30.600 --> 0:16:30.800 Yes. 0:16:31.700 --> 0:16:33.350 And I buy it every year. 0:16:33.500 --> 0:16:36.550 You buy it for him. Don't get me wrong. 0:16:36.590 --> 0:16:38.090 You kind of have to. You're already all in at 0:16:38.130 --> 0:16:38.530 that point. 0:16:38.570 --> 0:16:40.090 Michael Ball, brilliant. 0:16:40.190 --> 0:16:41.850 Thank you so much. We've got to do better. Ball 0:16:41.870 --> 0:16:44.530 was okay, but Jess Benton will be better. Michael Ball, 0:16:44.550 --> 0:16:49.580 thank you so much. here this morning. Red and green 0:16:49.620 --> 0:16:52.360 on the screen right now. It's a really quiet screen. 0:16:52.420 --> 0:16:55.610 It's got that August feel after the PCE and the 0:16:55.660 --> 0:16:59.370 churn of it. The yields finally changed. Michael Ball was talking, 0:16:59.750 --> 0:17:04.070 and we finally got price down, yield up. 30-year bond 0:17:04.130 --> 0:17:07.129 up just a point. 10-year yield gives me more, up 0:17:07.290 --> 0:17:10.369 two basis points. In the Sweeney two year, the Fed 0:17:10.430 --> 0:17:13.970 sensitive yield up a big four basis points as well. 0:17:14.010 --> 0:17:17.490 Why don't you bring in our next guest? 0:17:17.820 --> 0:17:18.649 Absolutely. 0:17:18.690 --> 0:17:21.980 Jess Metten, she is deputy team lead for the equities 0:17:22.340 --> 0:17:25.420 group over there at Bloomberg News. Jess, I mean, inflation, 0:17:25.740 --> 0:17:28.970 it's there. It's kind of in line with what. I 0:17:29.050 --> 0:17:31.929 guess the market was kind of discounting here. Not much 0:17:31.990 --> 0:17:35.900 happening in the equity markets here. Or maybe the yields. 0:17:35.600 --> 0:17:36.139 Lift a little bit. 0:17:36.160 --> 0:17:37.720 But what are you looking at in the equities market 0:17:37.760 --> 0:17:38.000 this morning? 0:17:38.020 --> 0:17:40.180 Well, part of it and why it looks like there's 0:17:40.220 --> 0:17:42.500 not a lot happening is it's still been more of 0:17:42.520 --> 0:17:45.960 a micro story rather than a macro. Anytime like Mandy 0:17:45.980 --> 0:17:47.990 Zhu over at Subo's talked a lot about this if 0:17:48.010 --> 0:17:49.929 you're looking at the options side of things. And especially 0:17:49.950 --> 0:17:53.030 during earnings season, of course, we have NVIDIA. reporting after 0:17:53.090 --> 0:17:55.610 the bell today. So that's more when I'm talking to 0:17:55.650 --> 0:17:59.689 portfolio managers, what their focus is on today. Even though 0:17:59.710 --> 0:18:02.650 we have, of course, Jackson Hole, Kevin Moore speaking, his 0:18:02.670 --> 0:18:05.970 first speech at Jackson Hole. Typically, I've compiled some data. 0:18:05.990 --> 0:18:08.030