1 00:00:05,120 --> 00:00:09,200 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 2 00:00:09,240 --> 00:00:13,080 Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Lee. We bring 3 00:00:13,119 --> 00:00:17,159 Speaker 1: you insight from the best and economics, finance, investment, and 4 00:00:17,280 --> 00:00:23,280 Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg 5 00:00:23,360 --> 00:00:29,680 Speaker 1: dot com, and of course, on the Bloomberg terminal. Laurie 6 00:00:29,720 --> 00:00:31,680 Speaker 1: Cavassin that joining us now the head of US equity 7 00:00:31,720 --> 00:00:35,360 Speaker 1: strategy at OBBC Capital Markets. Laurie, your year end, next 8 00:00:35,440 --> 00:00:40,239 Speaker 1: year fifty fifty? Walk us through it? Sure, Look, it's 9 00:00:40,280 --> 00:00:42,120 Speaker 1: all about the numbers for us, John. And before I 10 00:00:42,120 --> 00:00:44,240 Speaker 1: get into that, let me just tell you I sympathize 11 00:00:44,240 --> 00:00:45,920 Speaker 1: with where your head is at. We called our weekly 12 00:00:45,960 --> 00:00:48,479 Speaker 1: this morning good bye one. We're ready for it to 13 00:00:48,520 --> 00:00:51,879 Speaker 1: be God. But look, I think it's you know, it's 14 00:00:52,040 --> 00:00:54,960 Speaker 1: first off, the strong economy. Most of our economic modeling 15 00:00:55,040 --> 00:00:58,240 Speaker 1: is playing us to an SMP five hundred north. Then 16 00:00:58,240 --> 00:01:00,160 Speaker 1: it is looking at stocks versus bond that Lee for 17 00:01:00,200 --> 00:01:02,120 Speaker 1: another year. I think stocks are still the best game 18 00:01:02,120 --> 00:01:04,440 Speaker 1: in town. So are models. They are appointing us to 19 00:01:04,440 --> 00:01:07,280 Speaker 1: about an eight percent type return. I think where things 20 00:01:07,280 --> 00:01:10,240 Speaker 1: get interesting is what happens with pe multiples. If you 21 00:01:10,240 --> 00:01:13,080 Speaker 1: assume a flattish pe we should be you know, around 22 00:01:13,080 --> 00:01:16,039 Speaker 1: my target if you assume some crack contraction, but based 23 00:01:16,080 --> 00:01:19,240 Speaker 1: on more aggressive FED and that's a realistic risk in here. 24 00:01:19,480 --> 00:01:21,479 Speaker 1: Um that does point you to about down two percent 25 00:01:21,520 --> 00:01:23,040 Speaker 1: on the year on our models, that would be our 26 00:01:23,040 --> 00:01:25,480 Speaker 1: worst case scenario. It's a real risk monitor But the 27 00:01:25,520 --> 00:01:28,240 Speaker 1: preponderance of the evidence on the economy and again stocks 28 00:01:28,319 --> 00:01:30,960 Speaker 1: versusponse is telling us to look for another good year 29 00:01:30,959 --> 00:01:32,800 Speaker 1: in stock, not as good as what we had this year, 30 00:01:32,880 --> 00:01:35,000 Speaker 1: though frankly it felt lousy to get to this return 31 00:01:35,080 --> 00:01:37,360 Speaker 1: that we've gotten UM, but I think we'll have another 32 00:01:37,400 --> 00:01:39,080 Speaker 1: good year next year, but it's gonna be a bit harder. 33 00:01:39,120 --> 00:01:41,280 Speaker 1: It's gonna be a bit harder on your outline. How 34 00:01:41,319 --> 00:01:43,360 Speaker 1: in the first half of the year you might get 35 00:01:43,400 --> 00:01:45,480 Speaker 1: an out performance of the value trades of some of 36 00:01:45,520 --> 00:01:47,560 Speaker 1: the cyclicals, and in the back end it's going to 37 00:01:47,640 --> 00:01:49,920 Speaker 1: be a rotation back into growth. Can you give us 38 00:01:49,920 --> 00:01:52,880 Speaker 1: a sense of what that means in terms of the 39 00:01:52,920 --> 00:01:56,560 Speaker 1: ongoing barishness in terms of economic growth that you see 40 00:01:56,760 --> 00:02:00,040 Speaker 1: to the second half of the year. So look at it, 41 00:02:00,040 --> 00:02:01,840 Speaker 1: it's not and you know, I'm sure my economist is 42 00:02:01,880 --> 00:02:04,200 Speaker 1: kind of shuddering if he's hearing this right now. But 43 00:02:04,480 --> 00:02:06,520 Speaker 1: you know, what we're seeing in tree is that if 44 00:02:06,560 --> 00:02:08,960 Speaker 1: you look where the street economists are forecasting, they're right 45 00:02:08,960 --> 00:02:11,320 Speaker 1: and around two and a half percent. Now, that's not 46 00:02:11,360 --> 00:02:14,040 Speaker 1: a recession by any stretch, but it is a deceleration 47 00:02:14,200 --> 00:02:16,919 Speaker 1: back to trend like growth. And what we do tend 48 00:02:16,960 --> 00:02:19,320 Speaker 1: to see is that when markets and markets again are 49 00:02:19,400 --> 00:02:21,320 Speaker 1: very forward looking, when we're in a hot economy like 50 00:02:21,320 --> 00:02:23,639 Speaker 1: we're supposed to be in next year, for percent is 51 00:02:23,680 --> 00:02:25,600 Speaker 1: basically the number in place for next year by most 52 00:02:25,600 --> 00:02:29,200 Speaker 1: economists value, small cap cyclicals tend to outperform. But when 53 00:02:29,240 --> 00:02:31,800 Speaker 1: you move back down to trend like growth or below 54 00:02:31,840 --> 00:02:34,120 Speaker 1: trend like growth, that's when those more defensive parts of 55 00:02:34,120 --> 00:02:37,000 Speaker 1: the market, like large cap secular growers and the growth 56 00:02:37,040 --> 00:02:39,440 Speaker 1: trade itself tend to outperform. And we think at some 57 00:02:39,480 --> 00:02:41,040 Speaker 1: point in the middle of next year, we're going to 58 00:02:41,120 --> 00:02:43,679 Speaker 1: see markets start to focus on three and be done 59 00:02:43,680 --> 00:02:46,560 Speaker 1: with two, and once that happens, will probably be well 60 00:02:46,600 --> 00:02:48,480 Speaker 1: into fed rate hikes, and that also tends to be 61 00:02:48,520 --> 00:02:51,160 Speaker 1: a trigger to get you away from those cyclical trades 62 00:02:51,320 --> 00:02:55,120 Speaker 1: and back towards the growth trades. Wishing time away all right, 63 00:02:55,160 --> 00:02:56,720 Speaker 1: let's dwell on the hair and the now for our 64 00:02:56,840 --> 00:03:00,440 Speaker 1: radio audience. You've got a beautiful backtrol sciantistic communing or house. 65 00:03:00,480 --> 00:03:02,400 Speaker 1: I love the name. My son's called Leo two, and 66 00:03:02,440 --> 00:03:04,880 Speaker 1: you've got one for Leo of your family. I'm interested 67 00:03:04,919 --> 00:03:07,640 Speaker 1: in Santa rally or lack thereof talk to us at 68 00:03:07,639 --> 00:03:10,240 Speaker 1: the very end of one, even though there's but this 69 00:03:10,280 --> 00:03:13,519 Speaker 1: week left. According to John Farrow, are you expecting value 70 00:03:13,520 --> 00:03:15,480 Speaker 1: to still stabilizes it in last week a little bit 71 00:03:15,520 --> 00:03:18,520 Speaker 1: towards the end. It's a great question, Caroline, and we've 72 00:03:18,520 --> 00:03:20,480 Speaker 1: said in the very near term, if you're trying to 73 00:03:20,560 --> 00:03:23,280 Speaker 1: trade now through December thirty feet, we just stay balanced 74 00:03:23,280 --> 00:03:26,600 Speaker 1: on everything. Look, I think, oh Macron is really, at 75 00:03:26,639 --> 00:03:28,560 Speaker 1: the end of the day a threat to the value trade. 76 00:03:29,040 --> 00:03:30,799 Speaker 1: And while the little drifts and drafts of news we've 77 00:03:30,800 --> 00:03:34,560 Speaker 1: been getting have helped stabilize the value trade, ultimately if 78 00:03:34,600 --> 00:03:37,600 Speaker 1: we do see case counts worsen that actually all year 79 00:03:37,680 --> 00:03:40,440 Speaker 1: has portended out performance by things like growth, large cap 80 00:03:40,520 --> 00:03:43,240 Speaker 1: and secular more defensive positioning. But the problem we have 81 00:03:43,480 --> 00:03:45,920 Speaker 1: right now is that the Fed in this more hawkish tilt, 82 00:03:45,920 --> 00:03:48,160 Speaker 1: that we're all of a sudden having to digest is 83 00:03:48,200 --> 00:03:50,040 Speaker 1: really a threat to the growth trade because that's where 84 00:03:50,040 --> 00:03:53,320 Speaker 1: the expensive valuations are, and when we're in hiking periods, 85 00:03:53,520 --> 00:03:57,880 Speaker 1: expensive stocks tend to underperform um when rapes are rising um. 86 00:03:57,880 --> 00:03:59,880 Speaker 1: And so we really think that that's we're sort of 87 00:04:00,040 --> 00:04:01,640 Speaker 1: hot between a rock and a hard place. Over the 88 00:04:01,680 --> 00:04:03,320 Speaker 1: next couple of weeks, we just build on that a 89 00:04:03,320 --> 00:04:05,080 Speaker 1: little bit because what we've seen in Credit Suite have 90 00:04:05,120 --> 00:04:07,760 Speaker 1: pointed this out that the expectations for high rates that 91 00:04:07,800 --> 00:04:10,280 Speaker 1: have fed haven't translated into high yields and that hasn't 92 00:04:10,360 --> 00:04:12,760 Speaker 1: hurt the multiple. Can you want me through the relationship 93 00:04:12,800 --> 00:04:16,200 Speaker 1: between fed rate high expectations and multiples on the SMP 94 00:04:16,600 --> 00:04:19,680 Speaker 1: that you expect to evolve through next year? So look, 95 00:04:19,720 --> 00:04:22,680 Speaker 1: I think the multiple question is a very very challenging one. 96 00:04:22,680 --> 00:04:24,080 Speaker 1: And I know that there are some of my peers 97 00:04:24,080 --> 00:04:26,120 Speaker 1: out there in the strategy world here saying, hey, fed 98 00:04:26,200 --> 00:04:28,640 Speaker 1: rate HIGs always produced contraction, we gotta bake that in 99 00:04:28,680 --> 00:04:31,000 Speaker 1: for next year. And I actually don't think it's quite 100 00:04:31,000 --> 00:04:33,760 Speaker 1: that simple, John. We're starting to see pe multiples compressed 101 00:04:33,800 --> 00:04:35,600 Speaker 1: at the individual stock level. If you look at the 102 00:04:35,680 --> 00:04:37,479 Speaker 1: Russell two thousand, if you even look at the medium 103 00:04:37,520 --> 00:04:40,680 Speaker 1: stock in the SMP. But we've seen a very kind 104 00:04:40,680 --> 00:04:44,240 Speaker 1: of flattish move on the overall top down numbers. And 105 00:04:44,240 --> 00:04:46,360 Speaker 1: I'll just take you back to the fact that we're 106 00:04:46,400 --> 00:04:48,920 Speaker 1: still in this keewee world. And yes, the tapering is coming, 107 00:04:48,920 --> 00:04:51,840 Speaker 1: it's more aggressive than expected. But the FED balance sheet 108 00:04:51,880 --> 00:04:55,680 Speaker 1: has really kind of distorted what happens with PE multiples recently. 109 00:04:55,880 --> 00:04:57,960 Speaker 1: If you expect sort of a flattish balance sheet over 110 00:04:58,000 --> 00:05:00,480 Speaker 1: the next year or so, what that should tell you 111 00:05:00,600 --> 00:05:02,599 Speaker 1: is that we should have a flat ish PE multiple. 112 00:05:02,640 --> 00:05:04,840 Speaker 1: It's really when you get into quantitative tightening and he 113 00:05:04,960 --> 00:05:07,560 Speaker 1: contracts and you contract the balance sheet, that's what the 114 00:05:07,600 --> 00:05:09,800 Speaker 1: recent history is telling that should cause the contraction and 115 00:05:09,839 --> 00:05:12,280 Speaker 1: the multiple. So it's just very complicated right now, Lori. 116 00:05:12,680 --> 00:05:15,160 Speaker 1: This is a really important point and goes to the 117 00:05:15,200 --> 00:05:17,919 Speaker 1: idea that we heard out of out of Seth Carpenter 118 00:05:17,960 --> 00:05:20,520 Speaker 1: from Morgan Stanley over the weekend. The Fed is not 119 00:05:20,680 --> 00:05:23,280 Speaker 1: willing to go to quantitative tightening too quickly because they 120 00:05:23,320 --> 00:05:26,719 Speaker 1: do not understand the effect on Marcus the same degree. 121 00:05:26,760 --> 00:05:28,920 Speaker 1: Are you saying that that's had a bigger effect in 122 00:05:28,960 --> 00:05:32,039 Speaker 1: propping up equity valuations and on the flip side, would 123 00:05:32,040 --> 00:05:34,320 Speaker 1: have a bigger effect on the downside if they were 124 00:05:34,360 --> 00:05:36,800 Speaker 1: starting to withdraw that liquidity than even rate hikes or 125 00:05:36,839 --> 00:05:39,800 Speaker 1: anything else. So let's go back to you know, John 126 00:05:39,880 --> 00:05:42,720 Speaker 1: and my Frankly desire for this year to just be over. Um. 127 00:05:42,800 --> 00:05:44,919 Speaker 1: If you go back to I remember I was on 128 00:05:45,000 --> 00:05:46,800 Speaker 1: vacation at the time that last week of the year. 129 00:05:46,800 --> 00:05:48,880 Speaker 1: I thought I could take vacation, and we had just 130 00:05:49,240 --> 00:05:52,040 Speaker 1: a ridiculous down draft in the equity market. A lot 131 00:05:52,040 --> 00:05:54,200 Speaker 1: of holidays were ruined on, a lot of portfolios were 132 00:05:54,240 --> 00:05:56,400 Speaker 1: ruined in that last week of the year. But what 133 00:05:56,440 --> 00:05:59,440 Speaker 1: we were dealing with back then, um was the kind 134 00:05:59,440 --> 00:06:01,120 Speaker 1: of two through ats right. It was a threat to 135 00:06:01,200 --> 00:06:03,000 Speaker 1: growth from the trade war, and it was a tighter 136 00:06:03,040 --> 00:06:06,240 Speaker 1: fed that we were actually pricing and quantitative tightening. So 137 00:06:06,440 --> 00:06:08,960 Speaker 1: that's really you know, it's not in my base case, 138 00:06:09,040 --> 00:06:10,560 Speaker 1: it's not even on my poe Haast to rise on. 139 00:06:10,640 --> 00:06:12,880 Speaker 1: But that is sort of a dire scenario that you know, 140 00:06:12,920 --> 00:06:14,760 Speaker 1: Frankly will keep me up at night on on some 141 00:06:14,839 --> 00:06:17,080 Speaker 1: of the nights where I'm you know, letting my mind 142 00:06:17,240 --> 00:06:19,400 Speaker 1: race um. But look, I think at the end of 143 00:06:19,440 --> 00:06:22,320 Speaker 1: the day, quantitative easing, quantitative tightening, this is all a 144 00:06:22,320 --> 00:06:24,440 Speaker 1: new tool right. But what I can tell you, Lisa, 145 00:06:24,520 --> 00:06:27,760 Speaker 1: is that since the year over year trend in the 146 00:06:27,760 --> 00:06:30,880 Speaker 1: FED balance sheet has really dovetailed very nicely with the 147 00:06:30,960 --> 00:06:34,680 Speaker 1: year over year trend in the PE multiples in the market. Um, 148 00:06:34,720 --> 00:06:37,200 Speaker 1: so it is having an impact. And I've sympathize, you know, 149 00:06:37,240 --> 00:06:39,279 Speaker 1: with with those who say they don't quite understand what 150 00:06:39,320 --> 00:06:41,200 Speaker 1: the unwind is going to do. But what I can 151 00:06:41,279 --> 00:06:43,560 Speaker 1: tell you is that the Fed has propped up PE 152 00:06:43,640 --> 00:06:47,159 Speaker 1: multiples through the balance sheet. Laurie magnificent as always and 153 00:06:47,160 --> 00:06:48,840 Speaker 1: going to catch up with you. Thank you for everything 154 00:06:48,880 --> 00:06:50,279 Speaker 1: you've done for us this year. Have been great to 155 00:06:50,279 --> 00:06:53,400 Speaker 1: work with you. Lorie Cavassein that of Obbos on a 156 00:06:53,480 --> 00:07:01,880 Speaker 1: secret market. She wants the year done. Mike College joins 157 00:07:01,920 --> 00:07:05,040 Speaker 1: us now City of Portfolio Manager for PATM Fixed Income. Mike, 158 00:07:05,080 --> 00:07:07,040 Speaker 1: I promise would get to this coal at the front end. 159 00:07:07,520 --> 00:07:10,320 Speaker 1: You think that maybe we've seen the peak of ye's 160 00:07:10,360 --> 00:07:11,800 Speaker 1: at the front end and at the long end on 161 00:07:11,920 --> 00:07:14,240 Speaker 1: tent as well. Might just walk us through the framework 162 00:07:14,240 --> 00:07:16,640 Speaker 1: at PATM right now when you get around the table together, 163 00:07:16,960 --> 00:07:21,200 Speaker 1: how you explain this Jonathan, Again, it's looking at the 164 00:07:21,320 --> 00:07:24,360 Speaker 1: long term view, right, and everybody's so caught up on 165 00:07:24,440 --> 00:07:27,760 Speaker 1: this growth surge and on this inflation surgeon, and we've 166 00:07:27,760 --> 00:07:29,440 Speaker 1: done a lot of work on this, and when you 167 00:07:29,520 --> 00:07:33,480 Speaker 1: really peel it back, it's been more demand driven than 168 00:07:33,560 --> 00:07:36,680 Speaker 1: supply driven. Right. If you look at supply of stuff 169 00:07:36,720 --> 00:07:39,680 Speaker 1: that's being made around the world and being shipped, it's 170 00:07:39,840 --> 00:07:43,800 Speaker 1: higher in many places, in many cases than pre COVID, 171 00:07:43,840 --> 00:07:48,320 Speaker 1: but the demand has jumped, like especially for goods, for 172 00:07:48,440 --> 00:07:53,360 Speaker 1: durable goods, for imports. That demand is going to come down, right. 173 00:07:53,400 --> 00:07:55,560 Speaker 1: That big jump in the savings rate we saw last 174 00:07:55,640 --> 00:07:58,440 Speaker 1: year with all the fiscal stimulus, all the helicopter money 175 00:07:58,720 --> 00:08:02,480 Speaker 1: that has already been spent, it's gone, right, So what's 176 00:08:02,480 --> 00:08:07,320 Speaker 1: going to happen going forward as the fiscal stimulus really retrenches. 177 00:08:07,440 --> 00:08:11,680 Speaker 1: Notwithstanding these infrastructure and BBB packages, which I think are 178 00:08:11,720 --> 00:08:14,960 Speaker 1: just really non events in terms of their economic impact. 179 00:08:14,960 --> 00:08:18,400 Speaker 1: It was the helicopter money sending people cash last year 180 00:08:18,440 --> 00:08:21,800 Speaker 1: that really jumped spending and that is going away, right, 181 00:08:21,840 --> 00:08:24,760 Speaker 1: So so the supply demand in balance is going to 182 00:08:25,560 --> 00:08:27,760 Speaker 1: come back into balance over the next twelve months. So 183 00:08:27,800 --> 00:08:31,360 Speaker 1: that's really the big picture. And the FED, though, right 184 00:08:31,480 --> 00:08:33,439 Speaker 1: is kind of trapped or they paying themselves in the 185 00:08:33,520 --> 00:08:35,719 Speaker 1: corner they're going to hike rates because they see these 186 00:08:35,720 --> 00:08:38,439 Speaker 1: headline numbers. So the front end selling off the back 187 00:08:38,559 --> 00:08:41,120 Speaker 1: end is is flattening, which happens every time you get 188 00:08:41,120 --> 00:08:43,559 Speaker 1: a FED rate hiking cycle. So I think the curve 189 00:08:43,600 --> 00:08:46,360 Speaker 1: is going to continue to the point where it's totally flat. 190 00:08:47,240 --> 00:08:49,840 Speaker 1: But that's already priced in. If you look at the 191 00:08:49,880 --> 00:08:52,600 Speaker 1: one year note, Jonathan in two years from now, which 192 00:08:52,640 --> 00:08:55,120 Speaker 1: is reflected in the three year yield. Not to sound 193 00:08:55,120 --> 00:08:57,840 Speaker 1: to wonky on a Monday morning, but that's at one six. 194 00:08:59,600 --> 00:09:02,240 Speaker 1: The ten year note ten years forward is at one. 195 00:09:03,600 --> 00:09:07,439 Speaker 1: So the market is already priced in a totally flat curve, 196 00:09:07,520 --> 00:09:10,760 Speaker 1: which is ultimately what will happen when the Fed's done hiking. Michael, 197 00:09:10,760 --> 00:09:13,040 Speaker 1: you're talking about an idea that a lot of people 198 00:09:13,080 --> 00:09:16,000 Speaker 1: disagree about that you're going to see inflation come down 199 00:09:16,200 --> 00:09:19,600 Speaker 1: enough that can justify the Fed's patients. How can you 200 00:09:19,640 --> 00:09:23,480 Speaker 1: see their rhetoric this Wednesday kind of confirming that if say, 201 00:09:23,520 --> 00:09:25,920 Speaker 1: they do accelerate the taper as they're expected to do 202 00:09:26,280 --> 00:09:30,320 Speaker 1: and continue to talk about uncertainty, you know they're they're 203 00:09:30,320 --> 00:09:32,400 Speaker 1: not being patient, right, That's why the front end is 204 00:09:32,440 --> 00:09:35,480 Speaker 1: getting killed here. I mean two thirties this cycle. Just 205 00:09:35,600 --> 00:09:39,040 Speaker 1: earlier this year peaked at around basis points. I always 206 00:09:39,080 --> 00:09:41,000 Speaker 1: look at thirties because you know, we are, you know, 207 00:09:41,040 --> 00:09:43,320 Speaker 1: manage a lot of long term money. For insurance companies, 208 00:09:43,360 --> 00:09:46,000 Speaker 1: pension plans, they live in that thirty year space. Not 209 00:09:46,040 --> 00:09:48,520 Speaker 1: like retail investors that was at two thirty. It's at 210 00:09:48,559 --> 00:09:51,720 Speaker 1: one today. It's been cut in half, so it's halfway 211 00:09:51,760 --> 00:09:54,600 Speaker 1: to zero, right, and it will get to zero. But 212 00:09:54,679 --> 00:09:58,000 Speaker 1: again that's already priced in. The FED has turned really 213 00:09:58,040 --> 00:10:00,680 Speaker 1: hawk ish. Uh, they're getting really us if they're gonna 214 00:10:00,679 --> 00:10:03,679 Speaker 1: accelerate their taper, they're probably going to pull forward and 215 00:10:03,720 --> 00:10:07,560 Speaker 1: accelerate rate hikes. But ultimately, what's priced into that ten 216 00:10:07,640 --> 00:10:10,800 Speaker 1: year note and the twenty year note is where that 217 00:10:10,880 --> 00:10:14,640 Speaker 1: funds rate is going to average over the next ten years. 218 00:10:14,960 --> 00:10:18,240 Speaker 1: And yeah, an average, it's probably gonna be one percent 219 00:10:18,440 --> 00:10:20,240 Speaker 1: or less. They're gonna get it to one and a half. 220 00:10:20,640 --> 00:10:23,360 Speaker 1: Maybe they overshoot and get it to two or two 221 00:10:23,360 --> 00:10:25,640 Speaker 1: and a quarter this cycle, but sometime in the next 222 00:10:25,720 --> 00:10:28,520 Speaker 1: ten years, Lisa, it's going to be back to zero. Right. 223 00:10:28,640 --> 00:10:31,360 Speaker 1: So on average, it's gonna bounce around between zero and two, 224 00:10:31,480 --> 00:10:35,160 Speaker 1: and it's gonna average one or probably even less. Which puts, 225 00:10:35,160 --> 00:10:38,840 Speaker 1: you know, ten year notes at reasonable value. Here, Michael, 226 00:10:38,920 --> 00:10:41,480 Speaker 1: are you pricing in at all the risk that they 227 00:10:41,559 --> 00:10:43,720 Speaker 1: might have to be more patient? I'm here in England 228 00:10:43,880 --> 00:10:46,319 Speaker 1: with the Bank of England was really hawkish and none 229 00:10:46,320 --> 00:10:50,280 Speaker 1: and not. Yeah, I'm Caroline, good morning. That's that's the risk, right, 230 00:10:50,280 --> 00:10:53,680 Speaker 1: there's so much, so many ice stand in the front 231 00:10:53,760 --> 00:10:56,160 Speaker 1: end now. Basically, you know three next year and and 232 00:10:56,240 --> 00:10:59,440 Speaker 1: three three. That's a lot, right, That's a FED that's 233 00:10:59,480 --> 00:11:03,760 Speaker 1: really moved thing moving for two plus straight years, right, 234 00:11:03,800 --> 00:11:05,840 Speaker 1: I mean that's a lot. That's a long time to 235 00:11:05,880 --> 00:11:08,360 Speaker 1: try to price in and figure out what the economy 236 00:11:08,400 --> 00:11:10,800 Speaker 1: is gonna look like, what inflation is gonna look like, 237 00:11:10,800 --> 00:11:12,760 Speaker 1: and what cold is gonna look right, So you're you're right, 238 00:11:12,800 --> 00:11:14,640 Speaker 1: one of the risks right now. I think the hawk 239 00:11:14,679 --> 00:11:17,360 Speaker 1: is scenario has kind of been priced in with this 240 00:11:17,440 --> 00:11:20,920 Speaker 1: really flat forward curve. But but the risk is that 241 00:11:20,960 --> 00:11:24,120 Speaker 1: you do get a big drop in activity over the 242 00:11:24,160 --> 00:11:27,319 Speaker 1: next six and twelve months, and that inflation comes down 243 00:11:27,360 --> 00:11:30,640 Speaker 1: a little more quickly than people think, and the FED 244 00:11:31,120 --> 00:11:33,720 Speaker 1: and other central banks say, we're not going to be 245 00:11:33,760 --> 00:11:36,800 Speaker 1: able to hike three times a year. Let's pull that back, 246 00:11:36,840 --> 00:11:39,560 Speaker 1: and then the curve, you know, bull Bull Stephens, right, 247 00:11:39,600 --> 00:11:42,440 Speaker 1: and we're not really ideally positioned for that. We're in 248 00:11:42,480 --> 00:11:46,320 Speaker 1: the flattener, which has been working like crazy, but we're 249 00:11:46,320 --> 00:11:48,760 Speaker 1: starting to cover something that in because we are concerned 250 00:11:49,000 --> 00:11:51,720 Speaker 1: about that risk that the FED isn't able to hike 251 00:11:51,800 --> 00:11:54,880 Speaker 1: six times, which is a pretty pretty high probability for sure. Mike, 252 00:11:54,960 --> 00:11:57,200 Speaker 1: you always get me thinking, it's always great a cash 253 00:11:57,240 --> 00:11:59,880 Speaker 1: out with you, Sir Michael Collins that of ahm, Mike, 254 00:12:00,280 --> 00:12:06,440 Speaker 1: you're the best. Thank you. Sir. Ye joining us now 255 00:12:06,520 --> 00:12:08,959 Speaker 1: is white leg level chief investment strategists at Black Rock, 256 00:12:09,000 --> 00:12:10,760 Speaker 1: whiley I wanted to start with China and then we'll 257 00:12:10,760 --> 00:12:12,800 Speaker 1: work our way back to the United States. But can 258 00:12:12,800 --> 00:12:15,040 Speaker 1: you give me your rate on the Chinese economy following 259 00:12:15,040 --> 00:12:17,880 Speaker 1: a week where people already started to reset their expectations 260 00:12:17,880 --> 00:12:20,679 Speaker 1: for a policy shift from the Chinese Communist Party, what's 261 00:12:20,720 --> 00:12:24,280 Speaker 1: your view on that? Well, what we have seen so 262 00:12:24,360 --> 00:12:28,080 Speaker 1: far this year is that there is this greater pivot 263 00:12:28,200 --> 00:12:33,720 Speaker 1: towards social objectives and common prosperity, and as evidenced in 264 00:12:33,800 --> 00:12:36,840 Speaker 1: the regulatory climb down earlier in the year. But what 265 00:12:36,920 --> 00:12:39,560 Speaker 1: we have also seen this year is that growth is 266 00:12:39,640 --> 00:12:44,080 Speaker 1: deteriorating from quarter to quarter, from above in Q one 267 00:12:44,320 --> 00:12:47,120 Speaker 1: to now below five percent in Q three, and kill 268 00:12:47,200 --> 00:12:49,520 Speaker 1: Foy is looking even worse in terms of the kind 269 00:12:49,520 --> 00:12:52,440 Speaker 1: of the growth levels. And as a result of the 270 00:12:52,520 --> 00:12:56,880 Speaker 1: deteriorating growth trajectory, we have been off the view that 271 00:12:57,600 --> 00:13:02,160 Speaker 1: support will have to ramp up heading into a significant year. 272 00:13:02,280 --> 00:13:06,679 Speaker 1: There is twenty two, characterized by the Winter Olympics, characterized 273 00:13:06,720 --> 00:13:09,680 Speaker 1: by the Party Congress, and sure enough we have seen 274 00:13:10,400 --> 00:13:14,440 Speaker 1: support actually date comes through in the form of triple 275 00:13:14,480 --> 00:13:18,319 Speaker 1: our cut, in the form of greater phisical standing expectations 276 00:13:18,320 --> 00:13:20,560 Speaker 1: that we continue to think that will be the case 277 00:13:20,640 --> 00:13:22,760 Speaker 1: as we head into next year, which is why we 278 00:13:22,840 --> 00:13:27,760 Speaker 1: are modestly constructive China assets, both on the equity side 279 00:13:27,800 --> 00:13:31,120 Speaker 1: as well as on fixing come site CGB. You are 280 00:13:31,160 --> 00:13:33,080 Speaker 1: not alone in this. A lot of people have said 281 00:13:33,080 --> 00:13:35,800 Speaker 1: that there needs to be more accommodation in China because 282 00:13:35,880 --> 00:13:38,199 Speaker 1: of some of these issues. And yet over the weekend 283 00:13:38,280 --> 00:13:41,360 Speaker 1: the polop Euro of China it came out with rhetoric 284 00:13:41,440 --> 00:13:44,520 Speaker 1: that was new around the housing market, talking about bringing 285 00:13:44,559 --> 00:13:47,840 Speaker 1: down pricing because this is a place that people live, 286 00:13:48,160 --> 00:13:50,960 Speaker 1: not just invested. How much is there sort of a 287 00:13:51,040 --> 00:13:53,680 Speaker 1: talking out of both sides of the mouth, and frankly 288 00:13:53,720 --> 00:13:56,840 Speaker 1: a harder line in maintaining the de leveraging stands from 289 00:13:56,840 --> 00:13:59,839 Speaker 1: the polop era over the past few weeks. It's a 290 00:14:00,160 --> 00:14:02,640 Speaker 1: It's a fine balance, isn't it. There's always a dance 291 00:14:02,679 --> 00:14:07,840 Speaker 1: between this longer term journey of quality revolution, thinking about 292 00:14:07,880 --> 00:14:12,559 Speaker 1: the leveraging and balancing that with the near term support. 293 00:14:12,640 --> 00:14:15,080 Speaker 1: So indeed, we have seen kind of rhetoric pointing to 294 00:14:15,480 --> 00:14:18,560 Speaker 1: wanting to deliver in the private sector in the housing 295 00:14:18,640 --> 00:14:22,200 Speaker 1: market and also thinking about the resolution of how is 296 00:14:22,240 --> 00:14:24,920 Speaker 1: it going to look like for a grant. But in 297 00:14:25,040 --> 00:14:28,440 Speaker 1: order to make sure that in order to contain the 298 00:14:28,480 --> 00:14:33,040 Speaker 1: spill over effects from the leveraging activities, growth side needs 299 00:14:33,080 --> 00:14:34,920 Speaker 1: to be showed up even more, which is why we 300 00:14:35,000 --> 00:14:38,600 Speaker 1: see easing policy coming through to make sure that the 301 00:14:39,640 --> 00:14:43,720 Speaker 1: way is happening the housing market is properly contained within 302 00:14:43,720 --> 00:14:46,320 Speaker 1: the housing market and does not lead to a broader 303 00:14:46,360 --> 00:14:49,680 Speaker 1: spill over on the economic more broadly, uh and leading 304 00:14:49,720 --> 00:14:52,680 Speaker 1: to a broader risk of which is not what we 305 00:14:52,760 --> 00:14:56,400 Speaker 1: expect heading into next year. The warning really, I mean, 306 00:14:56,400 --> 00:14:59,520 Speaker 1: it's great to get your perspective from China moving out 307 00:14:59,560 --> 00:15:02,440 Speaker 1: to its worldwide impact. Of course, as China tries to 308 00:15:02,480 --> 00:15:04,600 Speaker 1: give some support to its own economy and the acting 309 00:15:04,600 --> 00:15:07,960 Speaker 1: markets reacted off US earlier. What about the supply chain 310 00:15:08,000 --> 00:15:10,400 Speaker 1: issues is Jonathan was just mentioning, we get that first 311 00:15:10,400 --> 00:15:12,640 Speaker 1: case of Omcrown coming into China, are you worried at 312 00:15:12,680 --> 00:15:15,240 Speaker 1: any point of the inflationary pressure that we might see 313 00:15:15,240 --> 00:15:17,760 Speaker 1: once again if indeed the new variant hits China, hits 314 00:15:17,760 --> 00:15:20,440 Speaker 1: supply chains, hits US in Europe and in the US. 315 00:15:20,920 --> 00:15:26,640 Speaker 1: You're absolutely right in that the zero policy, zero tolerance 316 00:15:26,920 --> 00:15:30,920 Speaker 1: policy in China does mean that omic crown cases popping 317 00:15:31,000 --> 00:15:34,400 Speaker 1: up in China will have even more kind of significant 318 00:15:34,520 --> 00:15:38,560 Speaker 1: impact on the supply side, on the economic activity side, 319 00:15:38,600 --> 00:15:42,440 Speaker 1: which is why we expect on the policy side things 320 00:15:42,480 --> 00:15:44,960 Speaker 1: will have come to even more because they would have 321 00:15:45,040 --> 00:15:47,440 Speaker 1: to kind of shut down on the economic side even 322 00:15:47,880 --> 00:15:52,040 Speaker 1: more in comparison with their developed market develop market counterparts. 323 00:15:52,280 --> 00:15:55,800 Speaker 1: Now in terms of the spill over more broadly and 324 00:15:55,840 --> 00:15:59,960 Speaker 1: thinking about the kind of policy room we do see 325 00:16:00,200 --> 00:16:03,960 Speaker 1: on the inflation side not too elevated. In the case 326 00:16:04,000 --> 00:16:08,600 Speaker 1: of China, PPI is hyher CPI is still reasonably contained, 327 00:16:08,680 --> 00:16:12,640 Speaker 1: and that actually does give them room to ease a 328 00:16:12,640 --> 00:16:14,400 Speaker 1: bit more, even needs to be and if you think 329 00:16:14,400 --> 00:16:18,680 Speaker 1: about versus last year, developed world has really kind of 330 00:16:18,920 --> 00:16:23,080 Speaker 1: come through with policy revolution coordination of monetary side as 331 00:16:23,080 --> 00:16:26,760 Speaker 1: well as the physical side. China has been rather reserved 332 00:16:27,080 --> 00:16:30,440 Speaker 1: in their policy response, leaving the great room to to 333 00:16:30,440 --> 00:16:32,720 Speaker 1: to to to act. So that that that is why 334 00:16:32,920 --> 00:16:37,040 Speaker 1: our case in China is modestly constructive against the broader 335 00:16:37,080 --> 00:16:41,080 Speaker 1: backdrop of a very very low starting allocation to China 336 00:16:41,160 --> 00:16:45,280 Speaker 1: in global portfolios. But more broadly, thinking about twenty twenty 337 00:16:45,360 --> 00:16:49,280 Speaker 1: two UM, we talked about supply side constraint. We do 338 00:16:49,440 --> 00:16:52,880 Speaker 1: expect that kind of getting alleviated somewhat second half of 339 00:16:52,920 --> 00:16:57,320 Speaker 1: the next year, and the combination of still robots to 340 00:16:57,360 --> 00:17:01,040 Speaker 1: growth dynamics as well as the negative rate environment should 341 00:17:01,040 --> 00:17:04,520 Speaker 1: continue to support equities. And within aquities, we prefer developed 342 00:17:04,560 --> 00:17:08,600 Speaker 1: market aquities over emerging market aquities. Really within d M, 343 00:17:08,960 --> 00:17:11,680 Speaker 1: it's for an international bias to the asset allocation, that 344 00:17:11,760 --> 00:17:15,200 Speaker 1: equity allocation away from the United States towards the US. 345 00:17:16,320 --> 00:17:19,119 Speaker 1: It's interesting that you should mention that so our d 346 00:17:19,359 --> 00:17:21,679 Speaker 1: M equity core has gone through a bit of a 347 00:17:21,760 --> 00:17:25,400 Speaker 1: journey in twenty twenty one. The first half of twenty one, 348 00:17:25,400 --> 00:17:29,399 Speaker 1: we preferred US equities because the restart was way ahead 349 00:17:29,560 --> 00:17:33,400 Speaker 1: in the US, but at the media point we pivoted 350 00:17:33,720 --> 00:17:37,520 Speaker 1: from US to European maquities. Is the baton of growth 351 00:17:38,000 --> 00:17:43,040 Speaker 1: pick acceleration shifted from the US to Europe. And sure enough, 352 00:17:43,160 --> 00:17:47,600 Speaker 1: this this differentiated approach to play the uneven pace of 353 00:17:47,720 --> 00:17:50,760 Speaker 1: restart was also reflected in the fact that the difference 354 00:17:50,800 --> 00:17:55,200 Speaker 1: in earnings materialized earnings growth in Europe and in the US. 355 00:17:55,280 --> 00:17:58,720 Speaker 1: The differences so far this year almost fifteen. But now 356 00:17:58,800 --> 00:18:02,760 Speaker 1: looking ahead to twenty one, the uneven pace of restart 357 00:18:02,960 --> 00:18:06,640 Speaker 1: is washing through a little bit. And if you look 358 00:18:06,680 --> 00:18:12,840 Speaker 1: as kind of the earnings expectation difference across the US, Europe, Japan, 359 00:18:13,040 --> 00:18:15,720 Speaker 1: you know they're different, arranging from to half percent to 360 00:18:15,840 --> 00:18:20,080 Speaker 1: fifteen percent. So well, less kind of playing the theme 361 00:18:20,119 --> 00:18:23,520 Speaker 1: of uneven restart and instead we see actually what I 362 00:18:23,600 --> 00:18:26,840 Speaker 1: just talked about, this combination of netive real rate and 363 00:18:27,560 --> 00:18:32,480 Speaker 1: dynamic kind of growth environments supporting DM aquities across the 364 00:18:33,160 --> 00:18:36,879 Speaker 1: across the board were modestly constructive across DM aquiti is. 365 00:18:36,920 --> 00:18:38,640 Speaker 1: But under that we also want to kind of think 366 00:18:38,640 --> 00:18:43,480 Speaker 1: about bar boweling across cyclical sectors as well as secular growers. 367 00:18:43,760 --> 00:18:46,960 Speaker 1: Growers like technology and healthcare. Well, they always smile, weally 368 00:18:47,000 --> 00:18:50,120 Speaker 1: of black Rock on Europe, the international story, China too, 369 00:18:50,280 --> 00:18:59,040 Speaker 1: against the United States. The focus right now on the pandemic. 370 00:18:59,040 --> 00:19:03,320 Speaker 1: Primarister Boris john S saying O Macron represents of COVID 371 00:19:03,400 --> 00:19:06,480 Speaker 1: nineteen cases right now in London and by tomorrow it 372 00:19:06,520 --> 00:19:09,040 Speaker 1: will become the dominant strain. Joining us now to discuss 373 00:19:09,119 --> 00:19:12,760 Speaker 1: is Joshua Chastein, weistein the Johns Hopkins bloom By skill 374 00:19:13,160 --> 00:19:16,440 Speaker 1: of public health. Josh when let's start right here. Trust. 375 00:19:16,920 --> 00:19:19,800 Speaker 1: How much trust is that of these politicians delivering these 376 00:19:19,840 --> 00:19:22,960 Speaker 1: emphatic statements and scaring society. And that's the issue we 377 00:19:23,000 --> 00:19:26,159 Speaker 1: have right now, isn't it. Who should we trust? And 378 00:19:26,240 --> 00:19:28,080 Speaker 1: how long do we have to wait to have some data, 379 00:19:28,160 --> 00:19:31,760 Speaker 1: some numbers that we can trust. Well, I think that 380 00:19:32,080 --> 00:19:35,240 Speaker 1: you know the numbers themselves. How many cases, what percentages 381 00:19:35,240 --> 00:19:38,919 Speaker 1: are of amacon those are true. The governments are saying, 382 00:19:39,040 --> 00:19:42,200 Speaker 1: unfortunately there's some percentage of the population that has tuned 383 00:19:42,280 --> 00:19:45,240 Speaker 1: everything out. But I think most people realize that this 384 00:19:45,320 --> 00:19:47,560 Speaker 1: is a new variant, just like Delta was a new variant, 385 00:19:47,560 --> 00:19:50,439 Speaker 1: and we're going to have to respond accordingly. Given the 386 00:19:50,440 --> 00:19:53,000 Speaker 1: fact that omicron is now expected to become the dominant 387 00:19:53,040 --> 00:19:56,000 Speaker 1: strain in the United Kingdom. As Boris Johnson was outlining 388 00:19:56,000 --> 00:19:59,480 Speaker 1: this morning, is the third dose, is the booster shot 389 00:19:59,720 --> 00:20:03,359 Speaker 1: go to be considered required in order to be fully vaccinated? 390 00:20:04,800 --> 00:20:08,760 Speaker 1: I think that is becoming a distinct possibility with each 391 00:20:08,800 --> 00:20:12,560 Speaker 1: study that comes out suggesting actually good news, which is, 392 00:20:12,640 --> 00:20:15,440 Speaker 1: with three shots of the MR and a vaccine, people 393 00:20:15,480 --> 00:20:19,080 Speaker 1: have a reasonable degree of protection from amacron. This is 394 00:20:19,119 --> 00:20:22,399 Speaker 1: not the case of complete escape from the vaccines, but 395 00:20:22,520 --> 00:20:25,320 Speaker 1: that third dose seems to really help, and that may 396 00:20:25,359 --> 00:20:27,760 Speaker 1: in fact, you know, change some of the policies, but 397 00:20:28,040 --> 00:20:31,720 Speaker 1: was considered fully vaccinated so far, companies have really led 398 00:20:31,800 --> 00:20:34,760 Speaker 1: private companies when it comes to setting policy. You see 399 00:20:34,760 --> 00:20:37,600 Speaker 1: in the United States a survey of companies actually shows 400 00:20:37,640 --> 00:20:40,000 Speaker 1: that nearly two thirds of all of them are going 401 00:20:40,040 --> 00:20:43,200 Speaker 1: to mandate vaccines for their workers, whether or not there 402 00:20:43,240 --> 00:20:46,280 Speaker 1: is any sort of overarching law about that or policy. 403 00:20:46,400 --> 00:20:49,960 Speaker 1: How have you seen the discussion changing among private corporations 404 00:20:50,240 --> 00:20:52,800 Speaker 1: to get that third shot, the booster as part of 405 00:20:52,840 --> 00:20:58,119 Speaker 1: the requirement. Well, I think the recognition right now is 406 00:20:58,160 --> 00:21:01,120 Speaker 1: that to have a safe work place, which people want, 407 00:21:01,720 --> 00:21:05,480 Speaker 1: you really can't you know, open up to a macron 408 00:21:05,680 --> 00:21:09,240 Speaker 1: and doing things that are necessary to prevent this virus 409 00:21:09,280 --> 00:21:11,920 Speaker 1: from getting into the workplace, spreading in the workplace, really 410 00:21:11,920 --> 00:21:15,040 Speaker 1: rereaking havoc on all the plans that companies have is 411 00:21:15,359 --> 00:21:18,119 Speaker 1: um you know, a priority to doing something to prevent that. 412 00:21:18,240 --> 00:21:21,080 Speaker 1: So I think that companies are looking at the data 413 00:21:21,160 --> 00:21:23,440 Speaker 1: just like public health officials are looking at the data, 414 00:21:23,480 --> 00:21:26,640 Speaker 1: and it wouldn't surprise me if they start requiring the 415 00:21:26,640 --> 00:21:29,000 Speaker 1: third chat. I mean, the third chat is very safe 416 00:21:29,359 --> 00:21:32,360 Speaker 1: and it protects against amacron, So it's pretty logical that 417 00:21:32,440 --> 00:21:35,520 Speaker 1: we could get there. You talk about we can have 418 00:21:35,600 --> 00:21:37,520 Speaker 1: it in terms of the workplace, we can have it 419 00:21:37,600 --> 00:21:39,920 Speaker 1: con travel plans ahead of the holidays as well. And 420 00:21:40,280 --> 00:21:42,920 Speaker 1: I'm seeing, of course Prime Minister Johnson saying that the 421 00:21:42,960 --> 00:21:45,840 Speaker 1: U has already supply of COVID lateral flow tests. It's 422 00:21:45,880 --> 00:21:49,560 Speaker 1: interesting from a cultural perspective coming into the UK, everyone 423 00:21:49,640 --> 00:21:52,080 Speaker 1: is testing every single day using these collateral flow tests 424 00:21:52,080 --> 00:21:53,760 Speaker 1: that are being given out on the street or you're 425 00:21:53,760 --> 00:21:57,119 Speaker 1: into your nearest pharmacy. How is testing distinguishing itself? As 426 00:21:57,119 --> 00:22:01,040 Speaker 1: I'm looking at airlines fighting back against more PCR testing 427 00:22:01,080 --> 00:22:02,960 Speaker 1: because of the length of weight and the hoops you 428 00:22:03,000 --> 00:22:04,840 Speaker 1: have to jump in the price tag. What are the 429 00:22:04,880 --> 00:22:08,560 Speaker 1: testing could they do well? I mean they could be 430 00:22:08,560 --> 00:22:10,760 Speaker 1: doing the an engine testing as well. I mean I 431 00:22:10,800 --> 00:22:13,919 Speaker 1: think that we now are at a point where with 432 00:22:14,000 --> 00:22:17,359 Speaker 1: the virus sticking around and you know, making itself the 433 00:22:17,440 --> 00:22:21,280 Speaker 1: unwanted holiday guests, it's really important to have testing, but 434 00:22:21,359 --> 00:22:25,040 Speaker 1: to integrate testing into our lives and PCR testing isn't 435 00:22:25,040 --> 00:22:26,679 Speaker 1: that great for that if you've got to wait an 436 00:22:26,880 --> 00:22:30,600 Speaker 1: entire day, because even if you were negative, something could 437 00:22:30,640 --> 00:22:33,800 Speaker 1: have happened in the interim. And so these an engine 438 00:22:33,800 --> 00:22:36,440 Speaker 1: tests offer the opportunity to do things quicker. I don't 439 00:22:36,440 --> 00:22:40,200 Speaker 1: think we really figured out completely, particularly with travel, how 440 00:22:40,280 --> 00:22:43,479 Speaker 1: to integrate it into our routine. Just like you know, 441 00:22:43,880 --> 00:22:46,439 Speaker 1: you know, not too many years ago we integrated all 442 00:22:46,440 --> 00:22:48,880 Speaker 1: the security stuff into our routine. We have to integrate 443 00:22:48,880 --> 00:22:51,480 Speaker 1: testing for a while into our routine. And you know, 444 00:22:51,520 --> 00:22:53,200 Speaker 1: we're in a little bit of a rocky phase while 445 00:22:53,240 --> 00:22:57,200 Speaker 1: that gets worked out. And this is what everyone from 446 00:22:57,200 --> 00:23:00,760 Speaker 1: an individual perspective, war is about and comes a macro 447 00:23:00,920 --> 00:23:03,840 Speaker 1: issue if everyone starts to worry. From Mr Johnson saying, 448 00:23:04,080 --> 00:23:07,560 Speaker 1: look he declines to rule out new COVID curbs before Christmas, 449 00:23:07,960 --> 00:23:10,800 Speaker 1: it's an important family moment, but it's an important important 450 00:23:10,840 --> 00:23:15,119 Speaker 1: economic moment for spending, for consumer sentiment. How likely are 451 00:23:15,160 --> 00:23:18,320 Speaker 1: we to see further lockdowns in the United States and worldwide? 452 00:23:19,320 --> 00:23:21,320 Speaker 1: I don't think we're likely to see you know, full 453 00:23:21,480 --> 00:23:25,400 Speaker 1: lockdowns unless we have a situation where there's just an 454 00:23:25,440 --> 00:23:29,080 Speaker 1: incredible searche and hospitalizations. And you know, we don't yet 455 00:23:29,240 --> 00:23:32,040 Speaker 1: have evidence that that i'm o'con is going to cause 456 00:23:32,080 --> 00:23:35,679 Speaker 1: that in highly vaccine and population, so we are going 457 00:23:35,760 --> 00:23:38,680 Speaker 1: to have to see UM if that were to happen, 458 00:23:38,720 --> 00:23:40,840 Speaker 1: and of course the health care systemwhere to come, you know, 459 00:23:41,160 --> 00:23:43,679 Speaker 1: be at risk, then probably all bets are off on 460 00:23:43,720 --> 00:23:46,280 Speaker 1: the kind of restrictions that might be necessary. But probably 461 00:23:46,320 --> 00:23:50,080 Speaker 1: we'll see very, very limited and target targeted policies to 462 00:23:50,119 --> 00:23:53,560 Speaker 1: reduce the spread UM. And you know, again it's the 463 00:23:53,640 --> 00:23:56,880 Speaker 1: uncertainty that gives everyone anxiety. But we are not back 464 00:23:56,880 --> 00:24:00,800 Speaker 1: in March. We have vaccines that provide for action. We 465 00:24:00,840 --> 00:24:02,639 Speaker 1: know a lot about the virus, we can find it, 466 00:24:02,720 --> 00:24:05,359 Speaker 1: we can test for it. So I don't think that 467 00:24:05,840 --> 00:24:08,119 Speaker 1: people have to be so worried they're going to be 468 00:24:08,119 --> 00:24:10,359 Speaker 1: watching a replay of last year. Don't just quickly How 469 00:24:10,440 --> 00:24:12,720 Speaker 1: much more time do you need personally to conclude that 470 00:24:12,800 --> 00:24:17,840 Speaker 1: this is less natalie than previous variants. Well, it really 471 00:24:17,960 --> 00:24:20,199 Speaker 1: you know, there are a lot of different views out there. UM, 472 00:24:20,359 --> 00:24:23,679 Speaker 1: I think a very strong argument is we need to 473 00:24:23,680 --> 00:24:26,520 Speaker 1: see how it behaves in different populations. And so I 474 00:24:26,560 --> 00:24:29,920 Speaker 1: think when you see you know, for example, London, when 475 00:24:29,920 --> 00:24:33,480 Speaker 1: it really does become you know, the dominant variant, looking 476 00:24:33,520 --> 00:24:35,679 Speaker 1: at what happens to hospitalizations, I think we'll give a 477 00:24:35,720 --> 00:24:39,680 Speaker 1: really a good view for the United States. Um, what 478 00:24:39,880 --> 00:24:44,879 Speaker 1: the the the likely out come it's highly vaccinated population, 479 00:24:45,520 --> 00:24:49,040 Speaker 1: um getting omicron spreading around? Does that really make people 480 00:24:49,200 --> 00:24:51,679 Speaker 1: very sick? And we'll find out soon. Joshua, thank you 481 00:24:51,720 --> 00:24:54,359 Speaker 1: sir for catching up. As always, Joshua Shausting that of 482 00:24:54,440 --> 00:24:58,560 Speaker 1: John Sulkins. This is the Bloomberg Surveillance Podcast. Thanks for listening. 483 00:24:58,920 --> 00:25:01,679 Speaker 1: Join us live we days from seven to ten am 484 00:25:01,800 --> 00:25:06,280 Speaker 1: Eastern on Bloomberg Radio and on Bloomberg Television each day 485 00:25:06,320 --> 00:25:09,960 Speaker 1: from six to nine am for insight from the best 486 00:25:10,000 --> 00:25:15,040 Speaker 1: in economics, finance, investment, and international relations. And subscribe to 487 00:25:15,119 --> 00:25:19,880 Speaker 1: the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, 488 00:25:19,960 --> 00:25:23,240 Speaker 1: and of course on the terminal. I'm Tom keene In. 489 00:25:23,320 --> 00:25:25,240 Speaker 1: This is Bloomberg,