WEBVTT - Gold and Silver Fall as Record Rally Unwinds 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:21.240 on Apple car Play or Android Auto with the Bloomberg 0:00:21.320 --> 0:00:24.840 Business App. Listen on demand wherever you get your podcasts, 0:00:25.280 --> 0:00:27.040 or watch us live on YouTube. 0:00:27.560 --> 0:00:32.239 Cannot stop talking about the precious metals right, So we're 0:00:32.280 --> 0:00:35.519 seeing some signs of moderating here this morning. But the 0:00:35.560 --> 0:00:37.920 size of the losses that we have seen in precious 0:00:37.960 --> 0:00:40.839 metals and silver, gold, copper is one really for the 0:00:40.920 --> 0:00:43.360 history books. So let's talk more about it and where 0:00:43.400 --> 0:00:46.720 things might be headed with James Steele, chief Precious Metals 0:00:46.720 --> 0:00:50.760 analyst at HSBC. He joins us live in our Bloomberg Studios. James, 0:00:50.800 --> 0:00:52.159 good to see you. Happy Monday morning to. 0:00:52.120 --> 0:00:53.160 You, Thank you, good morning. 0:00:53.240 --> 0:00:56.240 So is this just really about this gold and silver 0:00:56.360 --> 0:00:59.400 trade being too crowded and people were just trying to 0:00:59.480 --> 0:01:01.520 try to get out or is there something else going 0:01:01.560 --> 0:01:02.040 on here? 0:01:02.800 --> 0:01:05.080 Well, I think you've effectively hit the head on the 0:01:05.120 --> 0:01:07.959 nail for the immediate reason. I mean, any commodity that 0:01:08.160 --> 0:01:12.040 has this parabolic rally that gold and silver had and 0:01:12.400 --> 0:01:15.119 the new entrance into the market, which way they were 0:01:15.120 --> 0:01:18.880 flooding in and have been for many, many months now. 0:01:19.680 --> 0:01:24.399 It really does invite a volatility and be profit taking 0:01:24.480 --> 0:01:29.000 stroke liquidation on any news or developments that run counter 0:01:29.640 --> 0:01:32.280 to gold, and we had a couple of them within 0:01:32.319 --> 0:01:35.920 a few days, and it really did give us a 0:01:35.959 --> 0:01:39.800 big and deserved, I think correction in both gold and silver. 0:01:40.120 --> 0:01:43.199 James, you've been at this precious metal game for decades now. 0:01:43.560 --> 0:01:47.440 Just put into context the volatility both on the upside 0:01:47.480 --> 0:01:51.160 and then the downside. On Friday, there's handful of daysaw, 0:01:51.280 --> 0:01:52.640 just extraordinary volatility. 0:01:52.680 --> 0:01:53.720 Just put that into context. 0:01:54.200 --> 0:01:57.880 Well, yes, you're right, and uh it's extraordinary and a 0:01:57.960 --> 0:02:00.880 bit so and so was a rally. Yep. You know, 0:02:01.600 --> 0:02:05.240 we were talking about gold made a fifty four I 0:02:05.280 --> 0:02:10.600 think new highs last night, and people were talking about 0:02:10.600 --> 0:02:13.519 a new high and new high and I always cautioned everybody. 0:02:13.520 --> 0:02:16.520 I said, look, it's not a new high until we 0:02:16.760 --> 0:02:20.440 go above in real terms what it was in nineteen eighty. 0:02:20.480 --> 0:02:23.200 In January of nineteen eighty, gold hit eight hundred and 0:02:23.280 --> 0:02:27.520 fifty dollars an ounce, and that's about thirty four hundred 0:02:27.560 --> 0:02:30.360 dollars in today's There you go, And they did that 0:02:30.400 --> 0:02:33.360 in April last year, and then I said, Okay, now 0:02:33.880 --> 0:02:36.600 we can genuinely talk about a new high. We can 0:02:36.680 --> 0:02:40.600 genuinely talk about a real rally. And the difference between 0:02:40.600 --> 0:02:44.400 now and seventy nine was a limited number of buyers 0:02:44.440 --> 0:02:49.480 at that time, a hunt Brothers, especially in silver, but 0:02:49.600 --> 0:02:53.880 also a much more broad based church this time, a 0:02:53.919 --> 0:02:57.600 lot of lot a lot in it. But the volatility, nonetheless, 0:02:58.160 --> 0:02:59.600 and to look at it this way, we had a 0:02:59.639 --> 0:03:02.840 swing in a couple of days that was equal to 0:03:02.880 --> 0:03:05.840 the absolute number that gold was trading at when I 0:03:05.880 --> 0:03:06.640 started covering it. 0:03:06.919 --> 0:03:09.920 Wow, that put it in perspective, right, So you know, 0:03:10.000 --> 0:03:14.240 it's just when you look at where we've come. I mean, 0:03:14.360 --> 0:03:17.120 gold top fifty five hundred dollars announced last week, it's 0:03:17.120 --> 0:03:19.520 now at about forty seven to fifty. I guess spot gold. 0:03:19.800 --> 0:03:23.280 Silver wiped out thirty percent of its value in just 0:03:23.400 --> 0:03:27.240 three days. Do you have a target for gold by 0:03:27.280 --> 0:03:29.280 the end of this year, because for many who had 0:03:29.320 --> 0:03:31.200 their target at fifty five hundred, well, it already blew 0:03:31.240 --> 0:03:32.480 past that in just the first month. 0:03:33.000 --> 0:03:35.040 Yeah, are high for the rest of the year is 0:03:35.080 --> 0:03:38.760 fifty five. We have an average which is almost where 0:03:38.760 --> 0:03:42.280 it is now, and we're expecting a very wide range. 0:03:43.160 --> 0:03:46.400 A good news could take us down closer to the 0:03:46.440 --> 0:03:51.680 four thousand dollars level. But what we think will likely 0:03:53.080 --> 0:03:56.760 the research view is that we have a moderately softer 0:03:56.880 --> 0:03:59.840 dollar this year according to our effects people who've been 0:04:00.000 --> 0:04:04.560 aready bang on on that. And also we would I 0:04:04.600 --> 0:04:07.400 think very likely see a resumption in a greater central 0:04:07.400 --> 0:04:10.560 bank buying. I mean, they are the ones that kicked 0:04:10.560 --> 0:04:14.280 off the genesis of this rally back in twenty twenty two. 0:04:15.520 --> 0:04:17.320 If you look at it this way, in twenty two, 0:04:17.440 --> 0:04:20.520 twenty three, twenty four, almost one out of every three 0:04:20.560 --> 0:04:23.400 ounces of gold that came out of the ground went 0:04:23.440 --> 0:04:28.000 into a central bank vault, double or triple the average 0:04:28.000 --> 0:04:29.080 for the previous ten years. 0:04:29.080 --> 0:04:29.799 That's incredible. 0:04:29.880 --> 0:04:30.920 Yeah, truly. 0:04:31.320 --> 0:04:32.719 So I think about a commodity. 0:04:32.839 --> 0:04:36.640 Let's just take oil prices spike up, they start drilling 0:04:36.680 --> 0:04:37.599 holes in Texas. 0:04:38.040 --> 0:04:40.840 What happens when you see gold just spike up? 0:04:40.960 --> 0:04:44.560 I mean they don't start digging more mind No, well 0:04:44.600 --> 0:04:46.440 not in the near term. 0:04:46.920 --> 0:04:47.120 You know. 0:04:48.080 --> 0:04:51.039 Again, when I first started covering the markets, by the 0:04:51.120 --> 0:04:54.080 time a group of geologists said I think there's some 0:04:54.120 --> 0:04:56.479 gold here, to the time when it went round your finger, 0:04:56.640 --> 0:05:02.200 your neck, it was about ten years wow, exploration, permitting, 0:05:02.320 --> 0:05:06.320 et cetera, et cetera. It's closer to twenty now. It 0:05:06.360 --> 0:05:09.880 takes a very long time. You know, it's highly capital 0:05:09.960 --> 0:05:14.240 intensive and the low hanging fruit has been picked. So 0:05:14.279 --> 0:05:18.760 we're going into into different regions and areas. What is 0:05:18.839 --> 0:05:23.599 flexible is recycling because gold, unlike oil and grain, is 0:05:23.640 --> 0:05:29.000 never consumed. It's stored somewhere. It's either around your bank 0:05:29.320 --> 0:05:31.680 or on your neck in a central bank vault and 0:05:32.240 --> 0:05:34.800 a vault some other place, and a bar and a coin, 0:05:35.560 --> 0:05:39.200 and that's what can be mobilized at fairly short Now. 0:05:39.240 --> 0:05:42.640 What we've noticed is that we haven't seen the response 0:05:42.800 --> 0:05:45.880 on the recycling side. It is higher, there's not as 0:05:45.960 --> 0:05:48.560 high as I would have expected. And it's rather like 0:05:48.600 --> 0:05:51.760 owning a home. If the market keeps going up, you 0:05:51.800 --> 0:05:56.000 may refrain from putting your flat on the market, but 0:05:56.040 --> 0:05:58.440 when it comes down a bit, you might then say, okay, 0:05:58.480 --> 0:06:01.040 maybe we've hit the high I should sell now. So 0:06:01.080 --> 0:06:03.000 we may see a pickup in recycling. 0:06:03.680 --> 0:06:05.880 You know, I just wonder, I mean, outside of just 0:06:06.080 --> 0:06:10.120 of investors, what is the larger impact on the economy, 0:06:10.360 --> 0:06:12.320 the fact that we have gold prices and we do 0:06:12.560 --> 0:06:16.320 use gold in different ways every day. Gold and silver 0:06:16.400 --> 0:06:19.120 prices being as high as they are, even despite the 0:06:19.160 --> 0:06:22.039 pullback we saw recently, they're still relatively high. What is 0:06:22.080 --> 0:06:23.920 that impact on the broader economy. 0:06:24.520 --> 0:06:29.800 Well, it has been good for jewelry, simply put. A 0:06:29.880 --> 0:06:33.440 jewelry is often about fifty percent of physical gold demand. 0:06:34.080 --> 0:06:36.800 We calculate that last year it was only thirty five percent. 0:06:37.720 --> 0:06:40.440 It's been down double digit. Also there's a reduction in 0:06:40.480 --> 0:06:45.599 coin demand. But generally speaking, gold does not have huge 0:06:45.600 --> 0:06:50.560 macroeconomic impacts. It reacts to macroecerdomics. It doesn't set It's 0:06:50.560 --> 0:06:53.239 not like oil. It doesn't set the stage. It reacts 0:06:53.279 --> 0:06:57.800 to the stage. And that's why you know, you've got 0:06:57.839 --> 0:07:00.960 to pay attention because the gold price, let's tell you 0:07:01.120 --> 0:07:05.240 that there are geopolitical or economic risks. It doesn't they 0:07:05.279 --> 0:07:09.000 may not materialize, but right, you know, the geopolitical risk 0:07:09.080 --> 0:07:12.800 index is fairly high and persistently high. 0:07:13.200 --> 0:07:13.880 All right, folks. 0:07:13.960 --> 0:07:16.880 G LCO that is the function of the day, gives 0:07:16.880 --> 0:07:18.960 you all the global commodities. You click on the metals 0:07:19.280 --> 0:07:22.320 and then it breaks it down between base metals, ferris metals, 0:07:22.360 --> 0:07:23.680 and precious metals. 0:07:23.680 --> 0:07:24.360 So there you go. 0:07:24.400 --> 0:07:26.400 That's the function you need to be on top of 0:07:26.520 --> 0:07:28.240 what's happening in the world of commodities. 0:07:28.280 --> 0:07:30.119 James Steel, thank you so much. We appreciate it. 0:07:30.240 --> 0:07:34.280 James's chief Precious Metals analyst at HSBC. Whatever we see 0:07:34.320 --> 0:07:37.440 big moves in precious metals by far. The first phone 0:07:37.440 --> 0:07:39.480 call we go out to is to James Steele, and 0:07:39.520 --> 0:07:41.320 he's kind of to give us some of his time there. 0:07:43.000 --> 0:07:46.160 Stay with us. More from Bloomberg Surveillance coming up after this. 0:07:52.360 --> 0:07:55.960 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:07:56.000 --> 0:07:59.960 weekday afternoons from seven to ten am Eastern Listen on Applecarplay, 0:08:00.040 --> 0:08:03.520 Android Auto with the Bloomberg Business Up, or watch us 0:08:03.600 --> 0:08:04.720 live on YouTube. 0:08:04.960 --> 0:08:07.840 The alexis Christopher sitting in for Tom Keena Paul Sweeneyer 0:08:07.880 --> 0:08:10.600 live here in our Bloomberg Interactive Brokers studio, streaming live 0:08:11.040 --> 0:08:13.560 on YouTube as well. I can see one of the 0:08:13.720 --> 0:08:16.280 other networks that Polsted Tiny Field. The Beast is out, 0:08:16.440 --> 0:08:17.920 so I just I'm not sure if the Beast has 0:08:17.920 --> 0:08:20.000 seen its shadow or not. We'll bring that to you 0:08:20.040 --> 0:08:22.600 as that news breaks. Let's get back to these markets 0:08:22.640 --> 0:08:26.880 here today. Madison Faller joins US Global investment strategists at 0:08:26.920 --> 0:08:31.400 JP Morgan Private Bank, located in London Madison. Twenty twenty 0:08:31.400 --> 0:08:34.040 five great year for equity markets. The US equity markets 0:08:34.080 --> 0:08:37.040 did really well. A lot of markets outside of the 0:08:37.120 --> 0:08:40.679 US did even better. How are you thinking about global 0:08:41.160 --> 0:08:42.280 equity stock. 0:08:42.040 --> 0:08:43.680 Price performance in twenty twenty six? 0:08:45.920 --> 0:08:48.240 Sure so, I think you know. Of course, twenty twenty 0:08:48.280 --> 0:08:51.760 five was an incredibly strong year for markets broadly and 0:08:51.840 --> 0:08:55.320 also for XUS, outperforming the US, which is not something 0:08:55.360 --> 0:08:58.720 that we always see. As we look forward into this year, 0:08:58.800 --> 0:09:02.080 I think it's another store where we are very much 0:09:02.120 --> 0:09:04.520 focused on being globally diversified. 0:09:04.800 --> 0:09:06.839 We still do believe that the US should. 0:09:06.559 --> 0:09:10.240 Remain the core of portfolios, given the access to growth 0:09:10.480 --> 0:09:14.040 in technology and potential productivity gains that it can provide. 0:09:14.200 --> 0:09:16.000 But at the same time, we are also seeing a 0:09:16.040 --> 0:09:21.080 world where national champions across different regions are also growing 0:09:21.280 --> 0:09:25.760 in increased focus, especially as it's underpinned by fiscal stimulus efforts, 0:09:25.760 --> 0:09:28.400 and that's also starting to show through into the earnings 0:09:28.480 --> 0:09:32.160 momentum as well. So I expect a continued narrowing of 0:09:32.200 --> 0:09:34.160 the gap between the US and the rest of the world, 0:09:34.240 --> 0:09:35.920 especially when it comes to earnings growth. 0:09:36.000 --> 0:09:36.720 Heading into this. 0:09:36.679 --> 0:09:40.199 Year in Madison, we keep talking about broader market participation 0:09:40.360 --> 0:09:42.679 with our guests and we're seeing more and more of it. 0:09:42.800 --> 0:09:46.760 Which sectors regions are sort of your top pick outside 0:09:46.880 --> 0:09:48.959 of the usual big tech names. 0:09:51.040 --> 0:09:54.079 So when we look across the market, there are a 0:09:54.120 --> 0:09:55.920 few different things that I would call out, and I 0:09:56.000 --> 0:09:59.960 think that different regions are showcasing that they have different 0:10:00.160 --> 0:10:00.800 strengths that. 0:10:00.760 --> 0:10:01.440 They can offer. 0:10:01.800 --> 0:10:04.680 So in the US, yes, you mentioned we do like 0:10:04.760 --> 0:10:06.680 big tech, but I do think that there's a broadening 0:10:06.679 --> 0:10:08.720 out beyond that where we want to be focused on 0:10:08.760 --> 0:10:12.559 the entire AI ecosystem, so not just the hyper scalers, 0:10:13.160 --> 0:10:15.880 but the entire AI value chain, from the hardware to 0:10:16.000 --> 0:10:21.240 the software, to power to data center infrastructure. But you're 0:10:21.240 --> 0:10:24.319 also seeing support within the US around financials and a 0:10:24.400 --> 0:10:26.120 catchup from healthcare, for instance. 0:10:26.720 --> 0:10:28.080 In Europe, I think it's very. 0:10:28.040 --> 0:10:32.000 Much a focus on energy security, on defense, we do 0:10:32.120 --> 0:10:35.800 know that spending continues to become unlocked in that area. 0:10:36.120 --> 0:10:38.599 When it comes to emerging markets. 0:10:38.880 --> 0:10:42.080 You know em can't be I think painted with one 0:10:42.200 --> 0:10:45.160 broad brushstroke, but there's certainly a lot of opportunity there 0:10:45.200 --> 0:10:49.680 where it be broad broad India, which is a focus 0:10:49.679 --> 0:10:52.880 of ours in addition to China Tech, and I would 0:10:52.880 --> 0:10:55.840 also call out Taiwan and Korea as well in terms 0:10:55.840 --> 0:10:57.200 of areas of focus within Asia. 0:10:57.679 --> 0:11:00.760 Breaking news here Hawks of Tony Phil predict six more 0:11:00.800 --> 0:11:04.480 weeks of winters to be no surprise, although two of 0:11:04.480 --> 0:11:07.040 my offspringer in California and they both are texting me 0:11:07.160 --> 0:11:07.640 like from the. 0:11:07.600 --> 0:11:09.600 Beach, from the golf course. 0:11:09.720 --> 0:11:13.480 Well that's just NaSTA, this is me, Yeah, Madison, talk 0:11:13.480 --> 0:11:16.080 to us about the bond market again. Fix income results 0:11:16.080 --> 0:11:19.040 in twenty twenty five for were really really solid. 0:11:19.080 --> 0:11:21.280 How do you think about opportunities to fixing come in 0:11:21.280 --> 0:11:22.040 twenty twenty six. 0:11:23.760 --> 0:11:26.439 What I think about fixed income, I think what I 0:11:26.480 --> 0:11:29.800 would be looking for are carry like returns. I think 0:11:29.840 --> 0:11:32.320 that now that we have most developed world central banks 0:11:32.320 --> 0:11:35.520 that are wrapping up their easing cycles, I do expect 0:11:35.520 --> 0:11:40.320 that bond yields will stabilize around these more elevated levels. 0:11:40.360 --> 0:11:41.960 And as a result of that, I think that we 0:11:42.000 --> 0:11:44.160 can expect to you know, clip that carry as we 0:11:44.200 --> 0:11:46.520 move along. Of course, if we were to be in 0:11:46.559 --> 0:11:50.800 a more downside growth scenario, bonds could offer protection, but 0:11:50.880 --> 0:11:52.560 I think at the you know, the flip side of 0:11:52.559 --> 0:11:55.760 that is that if we do see more inflation volatility, 0:11:55.800 --> 0:11:58.200 bonds might not be enough, which is why we're very 0:11:58.280 --> 0:12:03.520 much focused on complementing that with real assets like infrastructure 0:12:03.559 --> 0:12:04.800 and commodities like gold. 0:12:04.920 --> 0:12:06.040 Especially on the pullback. 0:12:06.520 --> 0:12:08.880 What are you doing with this gold trade right now? That, 0:12:09.000 --> 0:12:10.800 I mean, it went up so fast? I guess we 0:12:10.800 --> 0:12:13.319 shouldn't be too surprised, Paul, right that it's violently the 0:12:13.720 --> 0:12:17.800 violent move to the downside. But do you if you 0:12:17.920 --> 0:12:19.960 have gold, do you stick with it right now? Do 0:12:20.000 --> 0:12:21.920 you just hold if you're not in it, do you 0:12:22.000 --> 0:12:23.959 forget the fomo and stay out for now? 0:12:24.000 --> 0:12:24.839 What do you do with gold? 0:12:26.080 --> 0:12:27.000 We're buyers here. 0:12:27.280 --> 0:12:30.440 I think that this pullback offers another you know, re 0:12:30.600 --> 0:12:33.920 entry point for investors, especially if they aren't allocated already. 0:12:34.440 --> 0:12:37.160 For those that are allocated, we we'd certainly be holding 0:12:37.160 --> 0:12:38.000 those positions. 0:12:38.480 --> 0:12:38.840 Uh. 0:12:39.200 --> 0:12:41.160 And I think you mentioned mentioned it. 0:12:41.320 --> 0:12:41.440 Uh. 0:12:41.640 --> 0:12:42.960 You know, I think there's a you know a little 0:12:42.960 --> 0:12:45.560 bit of a sentiment driven effect that's you know driven 0:12:45.800 --> 0:12:48.200 driven prices lower over the course of the last few 0:12:48.280 --> 0:12:51.320 trading days. But I think the you know, structural drivers 0:12:51.480 --> 0:12:54.880 very much remain in place, whether that be this continued 0:12:54.960 --> 0:12:59.640 uncertainty premium, whether that's debt fiscal whether it's you know, 0:12:59.679 --> 0:13:02.320 do youolitically driven, But at the same time, we know 0:13:02.360 --> 0:13:05.640 that there's a lot of central bank buying. Retail buying 0:13:05.720 --> 0:13:09.040 is also not I think, to elevate it and remains 0:13:09.080 --> 0:13:11.800 below twenty twenty highs that we saw during COVID, So 0:13:11.840 --> 0:13:14.400 I think the seeds are still there. We'd certainly be buyers, 0:13:14.520 --> 0:13:18.280 and we actually just recently moved our targets higher north 0:13:18.360 --> 0:13:21.080 of six thousand Madison. 0:13:21.120 --> 0:13:22.599 We're just kind of right smack in the middle of 0:13:22.640 --> 0:13:27.079 earnings here. I guess to date they've been pretty solid. 0:13:27.400 --> 0:13:29.040 What are you taking away from earnings and what do 0:13:29.040 --> 0:13:30.600 you think the market needs to see from an earnings 0:13:30.679 --> 0:13:31.360 perspective here? 0:13:33.160 --> 0:13:35.719 I think the market needs to see that corporations can 0:13:35.800 --> 0:13:38.240 continue to you know, push through a lot of the 0:13:38.320 --> 0:13:41.720 unknowns that we've seen take place. It's certainly over the 0:13:41.720 --> 0:13:44.040 course of the last year. And so I think for 0:13:44.080 --> 0:13:46.640 me it's more, you know, whether or not they can 0:13:46.679 --> 0:13:49.600 really continue to show that resilience. We are looking at 0:13:49.679 --> 0:13:52.520 Q four looking to produce, you know, just under twelve 0:13:52.559 --> 0:13:55.240 percent year of year earnings growth, which is yet another 0:13:55.480 --> 0:13:58.240 quarter of double digit profit growth, which is really meaningful, 0:13:58.520 --> 0:14:00.760 and on top of that, we're all so seeing that 0:14:01.360 --> 0:14:06.679 profit margins are especially resilient and are historically high, so 0:14:07.000 --> 0:14:09.720 we're looking to see whether that continues to be the case. 0:14:10.320 --> 0:14:12.800 But the second thing that I would also point out is, 0:14:13.480 --> 0:14:16.040 you know how this continues to broaden out between sectors. 0:14:16.360 --> 0:14:18.199 So we know that the earnings growth. 0:14:17.920 --> 0:14:21.040 Gap between you know, the big tech, you know players 0:14:21.080 --> 0:14:22.600 of the world and the rest of the market was 0:14:22.640 --> 0:14:25.000 still quite wide and twenty twenty five, even if it 0:14:25.080 --> 0:14:27.680 narrowed a bit, we're looking to see if that continues 0:14:27.680 --> 0:14:29.960 to narrow and so far that that does seem to 0:14:30.000 --> 0:14:33.760 be the case, with other sectors certainly starting to participate more. 0:14:34.320 --> 0:14:36.800 I have exciting news. I'm looking at my weather app 0:14:36.840 --> 0:14:40.440 and it's hit double digits. So here in midtown Manhattan 0:14:40.640 --> 0:14:43.600 it is now of bolly twelve degrees. Madison, what is 0:14:43.640 --> 0:14:44.920 it like by you? Are you in London? 0:14:46.120 --> 0:14:49.440 I'm in London and it is cold and dreary and rainy, 0:14:49.720 --> 0:14:51.600 And I must say, I'm originally from Florida, So when 0:14:51.600 --> 0:14:54.760 you're talking about the weather and you know, pictures of sunshine, 0:14:54.760 --> 0:14:56.760 that's something that I certainly miss and I see from 0:14:56.760 --> 0:14:57.520 all my family members. 0:14:57.720 --> 0:14:59.960 You're also a graduate of the University of Notre Dame. 0:15:00.080 --> 0:15:02.440 So you're no stranger to like harsh Winters, right. 0:15:03.040 --> 0:15:05.640 Correct, correct, I felt all the climates. 0:15:06.200 --> 0:15:07.480 Madison, thanks so much for joining us. 0:15:07.480 --> 0:15:11.160 Appreciate it as always, Madison follow Global Investment Strategist JP Morgan, 0:15:11.200 --> 0:15:11.800 Private Bank. 0:15:13.800 --> 0:15:16.960 Stay with us. More from Bloomberg Surveillance coming up after this. 0:15:23.160 --> 0:15:26.760 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:15:26.800 --> 0:15:29.960 weekday afternoons from seven to ten am Eastern Listen on 0:15:30.040 --> 0:15:33.440 Apple Karplay and Android Auto with the Bloomberg Business app, 0:15:33.640 --> 0:15:35.360 or watch us live on YouTube. 0:15:35.600 --> 0:15:39.400 We're joined now by Joe Davis, Global Chief Economists at Vanguard. 0:15:39.720 --> 0:15:41.520 Joe, I want to start with our feder Reserve. 0:15:41.560 --> 0:15:43.440 We've had a lot of news over the last week 0:15:43.480 --> 0:15:47.240 the Federal Reserve kind of staying pat with their rates, 0:15:47.800 --> 0:15:50.680 but now we have the nomination of a new FED chair. 0:15:50.720 --> 0:15:52.920 I love to just kind of get your you know, 0:15:53.120 --> 0:15:56.120 FED thinking these days from at that thirty thousand foot level. 0:15:57.400 --> 0:16:00.280 Well, again, I think it's really a good choice just 0:16:00.320 --> 0:16:04.400 from what I know of just pass track records, and 0:16:04.480 --> 0:16:06.680 our view was that the Federal Reserve, you know, may 0:16:06.760 --> 0:16:10.480 ease once in twenty twenty six, but it would be 0:16:10.560 --> 0:16:13.560 GDP growth that could eventually add a little bit more 0:16:14.000 --> 0:16:16.960 half to labor market, which is pretty much stalled, and 0:16:17.040 --> 0:16:19.600 so I think we'll see that over the course of 0:16:19.640 --> 0:16:22.960 this year. Again we could have surprises on the jobs front. 0:16:23.880 --> 0:16:26.840 But again overall, plaud and I think the financial markets 0:16:27.160 --> 0:16:28.560 would agree. Joe. 0:16:28.560 --> 0:16:30.920 I want to talk a little inflation in twenty twenty six. 0:16:31.280 --> 0:16:33.320 Last week we got a backward looking number as we 0:16:33.360 --> 0:16:35.720 continue to play catch up from the government shutdown. We 0:16:35.800 --> 0:16:39.160 got the December producer price index and inflation at the 0:16:39.160 --> 0:16:42.720 wholesale level was hotter than expected. What are your expectations 0:16:42.720 --> 0:16:45.600 for inflation this year? And I wonder if the tariff 0:16:45.720 --> 0:16:49.000 passed through is now behind us, because I don't nobody's 0:16:49.040 --> 0:16:50.520 really talking about it anymore. 0:16:50.960 --> 0:16:53.320 I know, I know, well again it was delayed, was 0:16:53.480 --> 0:16:55.960 never dead. The tariff passed through, and so we should 0:16:56.000 --> 0:16:59.640 see some moderation and inflation. So the progress should be 0:16:59.680 --> 0:17:02.080 good yet frustrating. You know again, that's not you know, 0:17:02.280 --> 0:17:04.520 that's certainly our view, it's it's others view. I think 0:17:04.560 --> 0:17:07.120 as well. It's been stubborn inflation. It's almost five years 0:17:07.160 --> 0:17:11.120 above target. And again I applaud Kevin worse I think 0:17:11.119 --> 0:17:13.480 he's pointed to the fact that we found in our 0:17:13.480 --> 0:17:19.000 research fiscal easing or easy physical conditions have some modest 0:17:19.000 --> 0:17:20.960 boost on inflation. I think that's one of the reasons 0:17:21.000 --> 0:17:21.840 why it's been suffered. 0:17:23.320 --> 0:17:26.200 What is your call about inflation going forward here? Because 0:17:26.240 --> 0:17:30.399 again it's been persistent sticky. One could argue that this 0:17:30.440 --> 0:17:33.680 one big, beautiful bill may result in maybe even pushing 0:17:33.720 --> 0:17:34.760 inflation a little bit higher. 0:17:34.760 --> 0:17:35.439 How do you think about that? 0:17:36.359 --> 0:17:38.600 Well, I think what will happen in twenty twenty six 0:17:38.720 --> 0:17:41.359 is going to be the key just you know, tension 0:17:41.440 --> 0:17:43.840 for the next three years, and that is can AI 0:17:43.960 --> 0:17:46.520 and some of this productivity events as we've seen, be 0:17:46.600 --> 0:17:50.880 a relief valve on inflation versus if we don't have 0:17:51.040 --> 0:17:54.199 those sort of dividends, you're going to have, you know, 0:17:54.240 --> 0:17:57.720 some some fiscal based price pressures. That really is the 0:17:57.760 --> 0:17:59.600 tug of war we see, not just for this year. 0:17:59.720 --> 0:18:02.560 This year it's more modest, but is your bold enough 0:18:02.600 --> 0:18:04.439 to look out two or three years That is the 0:18:04.480 --> 0:18:06.680 tug of war. Can we get lower inflation with high 0:18:06.760 --> 0:18:10.360 growth or the inverse? That is clearly when I think 0:18:10.400 --> 0:18:12.800 the goal prices versus tech stocks point too on any 0:18:12.800 --> 0:18:14.679 given day Joe. 0:18:15.080 --> 0:18:17.520 Growth at four percent is pretty darn solid. Is it 0:18:17.640 --> 0:18:20.120 sustainable though? For the rest of the year. 0:18:20.760 --> 0:18:22.879 Well, I think we have some someone off. So we 0:18:22.960 --> 0:18:26.159 obviously had some trade you know, volatility that boosted the 0:18:26.200 --> 0:18:29.480 current numbers up. But our view was for twenty twenty 0:18:29.520 --> 0:18:32.080 six remains intact, and that is we could have economic 0:18:32.160 --> 0:18:35.960 upside from the US economic perspective, really driven at the 0:18:36.080 --> 0:18:40.399 margin by greater business investment and resilient consumer. You know, 0:18:40.440 --> 0:18:43.040 we were talking about, you know, the risks above two. 0:18:43.160 --> 0:18:46.240 Now we're clearly above that. We will see some moderation. 0:18:46.920 --> 0:18:51.200 But our our thesis of economic upside despite market froth, 0:18:51.280 --> 0:18:55.000 which gives us some concerns, that that core message remains intact. 0:18:55.840 --> 0:18:58.480 Hey, Joe, the labor market, I guess you know, one 0:18:58.480 --> 0:18:59.639 could call it resilient. 0:19:00.200 --> 0:19:02.000 Doesn't seem to be a lot of hiring, doesn't seem 0:19:02.040 --> 0:19:04.960 to be a lot of firing. Maybe that's okay. How 0:19:05.000 --> 0:19:06.200 do you think about the labor market. 0:19:07.160 --> 0:19:10.840 Well, again, we've had supply and demand moved down in locksteps, 0:19:10.880 --> 0:19:13.679 so clearly there's been a coin from a hiring perspective, 0:19:13.680 --> 0:19:15.359 But we have one of the one of the deepest 0:19:15.400 --> 0:19:17.760 labor market signals in the world. Given our four one 0:19:17.840 --> 0:19:22.000 k record keeping surface, you know, millions of real time 0:19:22.000 --> 0:19:23.800 we can see in real time how many are being 0:19:23.880 --> 0:19:27.560 hired let go, and also their wage increases. And so 0:19:27.600 --> 0:19:31.159 what we see is is affirming at a low level. 0:19:31.359 --> 0:19:35.760 Wage growth is stronger than employment growth. And if we're right, 0:19:36.080 --> 0:19:38.359 we should see a little bit greater, bigger in the 0:19:38.440 --> 0:19:39.960 labor market in the back half of the year. But 0:19:40.000 --> 0:19:41.320 we're not out of that yet. I mean, we are 0:19:41.359 --> 0:19:44.960 prepared to see in some month a modest negative non 0:19:45.000 --> 0:19:48.280 farm payroll that's that break, even with the supply having 0:19:48.320 --> 0:19:51.000 coming down, so that I think could be a you know, 0:19:51.119 --> 0:19:54.000 some market nervousness. You could see a federal reserve easing 0:19:54.040 --> 0:19:56.600 into that, you know, between now and the summer. But 0:19:56.640 --> 0:19:58.640 if you're bold enough to look past that, we see 0:19:58.680 --> 0:19:59.960 some firming in the labor market. 0:20:00.520 --> 0:20:01.720 Joe, thanks so much for joining us. 0:20:01.760 --> 0:20:04.159 Really appreciate getting a few minutes of your time. Joe Davis, 0:20:04.280 --> 0:20:07.520 he's global chief economist at Vanguard Group. 0:20:09.240 --> 0:20:12.359 Stay with us. More from Bloomberg Surveillance coming up after this. 0:20:18.600 --> 0:20:22.200 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:20:22.240 --> 0:20:25.399