WEBVTT - Surveillance: Positive Real Yields Unlikely, Bianco Says

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<v Speaker 1>Welcome to the Bloomberg Surveillance Podcast home term Keene. Along

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<v Speaker 1>with Jonathan Ferroll and Lisa Brownwitz Jaylie, we bring you

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<v Speaker 1>insight from the best and economics, finance, investment, and international relations.

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<v Speaker 1>Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg dot com

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<v Speaker 1>and of course on the Bloomberg terminal. John us now

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<v Speaker 1>is David Paige, Acts Investment Managers, Head of Macro Research. David,

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<v Speaker 1>Does that resonate with you, sir, that we could see

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<v Speaker 1>a broadening and price pressures go again too next year? Yeah,

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<v Speaker 1>I mean it's it's the key debate that every central

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<v Speaker 1>bank has to sort of focus on. How assistent is

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<v Speaker 1>this supply show? No question, there's a supply shop at

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<v Speaker 1>the moment, and we're going to see it in Q

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<v Speaker 1>three g d P numbers. We're thinking of states when

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<v Speaker 1>they come through. But the question is how assistant. So

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<v Speaker 1>for now we've had the view and we share this

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<v Speaker 1>view that we are seeing a relatively transit. Treatments apply restraints.

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<v Speaker 1>So if you look at, for example, participation, it's been

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<v Speaker 1>very lack luster in recent months. We do expect that

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<v Speaker 1>to pick up. I think part of this is just

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<v Speaker 1>a natural indigestion. I don't buy too much that it's

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<v Speaker 1>it's due to unemployment benefits. Certainly in states we've seen

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<v Speaker 1>that drop back. We haven't seen a miraculous recovery and

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<v Speaker 1>labor supply. But I think there is a natural indigestion,

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<v Speaker 1>and I think that indigestion should fade as we move

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<v Speaker 1>into the false quarter. But if it doesn't. If it

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<v Speaker 1>doesn't fade, then you are seeing a more restricted background.

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<v Speaker 1>You are going to see earnings continue at the sort

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<v Speaker 1>of relatively elevated monthly place that we see at the moment,

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<v Speaker 1>and that's something the FED has to take count of. Effectively,

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<v Speaker 1>what you're suggesting, or what it would conclude, is that

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<v Speaker 1>you're seeing a bigger supply shot than this pandemic. Now

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<v Speaker 1>that might be because you know, the workers that we're

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<v Speaker 1>looking for post pandemic a difference to the ones that

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<v Speaker 1>were employed pre pandemic, and there's a skills mismatch. There

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<v Speaker 1>could be all sorts of issues. We don't think that's

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<v Speaker 1>what's going to happen, but that's what we're going to

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<v Speaker 1>see over the next couple of months, and the FED

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<v Speaker 1>will have to if it changes that that transitory outlook David,

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<v Speaker 1>you and everybody else has lauring a GDP estimates. You've

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<v Speaker 1>got five point seven percent now and in the next

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<v Speaker 1>year four point three. Is that a linear extrapolation down

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<v Speaker 1>a potential GDP UM? No, because I think the potential

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<v Speaker 1>GDP adjustment that's going to come through UM is a

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<v Speaker 1>long term figgure, right, So it is a linear extrapolation

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<v Speaker 1>of the supply shop that we see coming through in

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<v Speaker 1>the third quarter. We do think that that that's been

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<v Speaker 1>an impact, but I don't think it's something that we

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<v Speaker 1>should therefore extrapolate going forever forwards. We would still see

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<v Speaker 1>US GDP potential growth in the fullness of time and

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<v Speaker 1>somewhere around two. So I don't think that that's too

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<v Speaker 1>much concerned. But in terms of the supply demand imbalance,

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<v Speaker 1>which is critical for the sort of inflation pressures, then yeah,

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<v Speaker 1>I mean, I think it is that supply has reduced

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<v Speaker 1>rather than to the drop off in the land. David.

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<v Speaker 1>Investment manager after investment manager has come on this show

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<v Speaker 1>and said that right now the dynaminism of the U

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<v Speaker 1>S economy has been pretty much priced in, and it's

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<v Speaker 1>time to turn to to Europe and potentially even to Asia.

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<v Speaker 1>For equity exposure. Do you agree, Well, I think the US,

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<v Speaker 1>the US rebound has been remarkable. It's got to the

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<v Speaker 1>point where we are closing the Apple gap. We're looking

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<v Speaker 1>at a very strong growth for that year next year,

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<v Speaker 1>UM that's going to continue m this this excess demand,

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<v Speaker 1>and I think there's still strength in the US marketing. Now.

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<v Speaker 1>You know, we can talk for all your life about

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<v Speaker 1>whether we see corrections coming up over the next little while,

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<v Speaker 1>but now I think you know, in general the U

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<v Speaker 1>S sector mark is going to remain relatively well underpinned.

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<v Speaker 1>But in terms of should we switch from a sort

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<v Speaker 1>of growth model, which is obviously something the US, you know,

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<v Speaker 1>really exemplifies, or a more value driven active performance, which

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<v Speaker 1>is perhaps something where Europe will do better. Then I

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<v Speaker 1>think as we start see really you pick up towards

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<v Speaker 1>here and we should start to move more into that

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<v Speaker 1>that value area. So I think there is scope, certainly

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<v Speaker 1>for more of a pickup to come through from Europe,

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<v Speaker 1>but we're not. Let's bring things up with the FED

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<v Speaker 1>timeline if we can. In the time we have left,

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<v Speaker 1>we pushed against the clock here. What are you looking

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<v Speaker 1>for into this September twenty two meeting? And beyond December

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<v Speaker 1>gets really interesting. The fIF is the FED, the sixte

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<v Speaker 1>is the e c B. So I think as you

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<v Speaker 1>look at September, they cleared the decks and suggest that

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<v Speaker 1>at any point they could announce paper. They won't do

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<v Speaker 1>it in September. I don't think they won't do it

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<v Speaker 1>at the end of October. I think they'll announced in

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<v Speaker 1>December and papering will start in January. And there's a

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<v Speaker 1>debate about whether it comes a little bit quicker than that,

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<v Speaker 1>But yeah, you're right with with the FED lightly to

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<v Speaker 1>announced paper in December, with DCB clearly lining up a

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<v Speaker 1>big set of policy moves at that time. December is

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<v Speaker 1>going to at the year end, it's gonna be an

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<v Speaker 1>interesting month a month obviously outlook, David, thank you. Going

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<v Speaker 1>to hear from you as always the weekend, Sir David Page,

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<v Speaker 1>actual investment manager's head of macro research. Right now, watching

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<v Speaker 1>all this is m alody and value at Wells Fargo

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<v Speaker 1>Asset Management in active equity as well, and on the

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<v Speaker 1>banking industry right now, on the big banks, on the

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<v Speaker 1>super re generals, is their value There is Shanali mentioned

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<v Speaker 1>they're dealing with a digital onslaught. Do you find value

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<v Speaker 1>in the big banks? I think our investment teams TOM

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<v Speaker 1>really do see value in the long run for the

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<v Speaker 1>big banks UM. But as you know, they're tied to

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<v Speaker 1>rates and UM, so as you see rates rise, the

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<v Speaker 1>banks will benefit. They've also benefit from some of the

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<v Speaker 1>lending UM as you guys talked about earlier. But they

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<v Speaker 1>are still attractive from evaluation standpoint. The secular challenges that

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<v Speaker 1>the banks have, though, are going to continue, so I

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<v Speaker 1>think you have to be selective as an investor. Well,

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<v Speaker 1>can we talk about who that campaigns with now? And

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<v Speaker 1>they're not competing with each other anymore, aren't they? They're

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<v Speaker 1>increasingly competing with others outside of their industry, the traditional industry.

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<v Speaker 1>That's right, they are And I think you know, in

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<v Speaker 1>the past people worried about credit cards, with the credit

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<v Speaker 1>cards were always linked to banks UM and benefited the

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<v Speaker 1>new technology, even bitcoin itself. How does that change the

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<v Speaker 1>future of banking both here and abroad globally. So UM,

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<v Speaker 1>I think those are all the things that investors have

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<v Speaker 1>to think about. And you know, look, I haven't had

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<v Speaker 1>time to really look into these changes at Bank of America,

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<v Speaker 1>but any bank that's thinking about the future is thinking

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<v Speaker 1>about the right things and making changes directed towards that.

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<v Speaker 1>And as an investor, this raises an issue of bold moves.

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<v Speaker 1>Do you want to see banks making bold moves using

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<v Speaker 1>some of their cash maybe to make acquisitions of smaller

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<v Speaker 1>tech firms to try to adapt the new normal and banking.

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<v Speaker 1>Is that something you would reward? Again, it depends on

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<v Speaker 1>the individual company, because when our investment teams are looking

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<v Speaker 1>at companies, they're looking at what does their balance sheet

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<v Speaker 1>look like, what has been their growth rate? And then

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<v Speaker 1>you know, sometimes you want to see a measured response,

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<v Speaker 1>both thinking about current business conditions and the business you

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<v Speaker 1>have at hand, but investing for that growth over a

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<v Speaker 1>long period of time. You don't want to just and

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<v Speaker 1>you don't want to lose the customers you have today

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<v Speaker 1>or the business you have today on your way to

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<v Speaker 1>the future. So most of the time it's measured, especially

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<v Speaker 1>for mature industries, but there are times where you have

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<v Speaker 1>to accelerate, especially a piece of the business. And as

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<v Speaker 1>you pointed out, the banks have gotten very far behind

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<v Speaker 1>in technology. They have outsourced a lot of it to

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<v Speaker 1>make it easy for you and I as consumers. Um

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<v Speaker 1>not that surprising now, coming out of oh eight oh nine, um,

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<v Speaker 1>the financial crisis, all of the other things they had

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<v Speaker 1>to focus on. Right now, it seems like the banks

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<v Speaker 1>are trading in a bucket of cyclicals. The banks are

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<v Speaker 1>trading alongside airlines and other reopening stocks as people look

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<v Speaker 1>towards the post pandemic reality. I'd love to get your

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<v Speaker 1>sense and something that we saw yesterday where when we

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<v Speaker 1>see dat or information that puts a damper on this narrative,

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<v Speaker 1>like Airlines coming out and down grading their expectations, you

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<v Speaker 1>saw the shares rally significantly and lead the charge. What

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<v Speaker 1>do you make of that? Is this basically the appropriate

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<v Speaker 1>response from investors like yourself? But I think what the

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<v Speaker 1>market is finally recognized and as something that we've been

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<v Speaker 1>talking about for a long time. Don't pick growth or value,

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<v Speaker 1>or don't pick the marketing, you know, the economy opening

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<v Speaker 1>or back on shutdown. You have to have a collection

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<v Speaker 1>of both. And it's because the growth rates in some

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<v Speaker 1>of these cyclical companies are the strongest of any industry.

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<v Speaker 1>And it's not surprising. UM. I think there's also a

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<v Speaker 1>lot of demand and pent up demand, as you all

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<v Speaker 1>talk about, and so you see things like yes fears

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<v Speaker 1>of the delta variant, but also a greater proportion of

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<v Speaker 1>the population getting vaccinated. And so we're at the tipping

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<v Speaker 1>point where things are going to get better and investors

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<v Speaker 1>are always forward looking at what's going to change and

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<v Speaker 1>always enjoy catching O with you. Thanks for being with us,

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<v Speaker 1>and Lady the West Fonca Basset Management, head of ACTID Equity.

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<v Speaker 1>Right now in bonds the US rates, Sadra Rajapa joins

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<v Speaker 1>us with society general. Wonderful to have you on and

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<v Speaker 1>I just want to go to one phrase within your

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<v Speaker 1>good research note, which is overwhelming demand. What is the

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<v Speaker 1>why of overwhelming demand for bills, notes and bonds? There's

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<v Speaker 1>just a lot of cash in the sidelines, right, I mean,

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<v Speaker 1>this was a week where we got spectacular amounts of

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<v Speaker 1>of supply, not just in treasuries but also in corporate bonds,

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<v Speaker 1>and yet everything was absorbed well by the markets. You

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<v Speaker 1>have over a trillion dollars that the that's parked with

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<v Speaker 1>the Feds over an r RP program. There's just a

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<v Speaker 1>lot of cash to be put to work, and policy

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<v Speaker 1>for the most part looks like it's going to be

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<v Speaker 1>somewhat and nine there's no fears of taper, either from

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<v Speaker 1>the e c B or the U or the the Fed.

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<v Speaker 1>So broadly speaking, I think that the market parties but

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<v Speaker 1>feel very comfortable putting money to work. Here, Which duration

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<v Speaker 1>is most attractive, which duration has the silliest demand? Well,

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<v Speaker 1>I think you're seeing demand pretty much across the curve.

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<v Speaker 1>I mean, the front end is a little bit distorted

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<v Speaker 1>because bill supplies going down as we head into the

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<v Speaker 1>death ceiling debate, But broadly speaking, across the curve, you know,

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<v Speaker 1>three stents thirties, we've seen very very strong demand from

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<v Speaker 1>end investors. I mean you're seeing demand from pensions and

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<v Speaker 1>insurance companies for the very long end, the intermediate sector,

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<v Speaker 1>the ten year bond as well, we saw very good

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<v Speaker 1>and investor demand. So I think that there's just a

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<v Speaker 1>lot of work cash should be put to work. Equities

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<v Speaker 1>are all time high. It's possible that you're seeing some

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<v Speaker 1>of these acid liability managers put some money into bonds

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<v Speaker 1>as well as a diversification going forward. What is the

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<v Speaker 1>signal from treasure yields where they are at the time

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<v Speaker 1>of supply. Is it just people looking only in the

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<v Speaker 1>next couple of days and weeks, or is it a

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<v Speaker 1>statement about low growth going ahead. Um, I think we're

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<v Speaker 1>really waiting on on center banking policy. I think we're

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<v Speaker 1>looking for you clear sign that we've made substantial for

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<v Speaker 1>the progress on employment so that the FED can start

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<v Speaker 1>tapering acid purchases. But I would say that in my conversations,

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<v Speaker 1>the preoccupation is much more on the inflation side and

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<v Speaker 1>whether the Fed can and will raise rates sooner than

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<v Speaker 1>the market expects. So we just don't have enough clarity.

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<v Speaker 1>So the bond market fields a little bit like a

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<v Speaker 1>deer cotton headlines, waiting for more information before we could

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<v Speaker 1>reprice higher. Although the information that we have, you know,

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<v Speaker 1>the Fed is going to wait for a very long

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<v Speaker 1>time and probably a much longer than they have ever

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<v Speaker 1>before before raising rates, before tightening policy. In any way,

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<v Speaker 1>we are seeing inflation. We just got that PPI data

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<v Speaker 1>that came in, uh, you know, pretty much in line

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<v Speaker 1>with esmiates, but the highest going back a decade. We've

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<v Speaker 1>gotten this idea that wages are going up. At one point,

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<v Speaker 1>we'll inflation called the Fed's hand and actually slow down

0:12:03.280 --> 0:12:06.720
<v Speaker 1>growth while crimping a lot of the economic activity that

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<v Speaker 1>corporations depend on. So that's a very good question. List

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<v Speaker 1>and I think that we just don't have enough data

0:12:14.160 --> 0:12:17.880
<v Speaker 1>yet for to make that assessment. But you're right. I mean,

0:12:18.000 --> 0:12:21.599
<v Speaker 1>to me, what's really concerning is the areas of inflation,

0:12:21.800 --> 0:12:26.600
<v Speaker 1>especially things like rents, medical medical care costs, wages, UH

0:12:26.640 --> 0:12:29.559
<v Speaker 1>and supply chain destructions. These all tend to be somewhat sticky,

0:12:30.040 --> 0:12:33.000
<v Speaker 1>and that could lead to a persistence of inflation, which

0:12:33.040 --> 0:12:35.440
<v Speaker 1>I think is an underpressed risk in the market. We

0:12:35.480 --> 0:12:37.800
<v Speaker 1>just don't have enough data to corroborate that. I think

0:12:38.120 --> 0:12:41.680
<v Speaker 1>what we're getting so far anecdotally from CEOs, even the

0:12:41.679 --> 0:12:43.880
<v Speaker 1>Beige Book shows that there are a lot of supply

0:12:43.960 --> 0:12:47.360
<v Speaker 1>chain instructions and and and uh, you know, corporations not

0:12:47.480 --> 0:12:51.080
<v Speaker 1>being able to source materials. But we just have to

0:12:51.120 --> 0:12:53.840
<v Speaker 1>see more data points before we can see what the

0:12:53.880 --> 0:12:56.720
<v Speaker 1>impact will be on and the feed through to the consumer.

0:12:56.840 --> 0:12:59.400
<v Speaker 1>And Sivadrea said that it's not being priced into the market.

0:12:59.679 --> 0:13:02.160
<v Speaker 1>Which markets. Is it just the rates market that yields

0:13:02.160 --> 0:13:04.959
<v Speaker 1>should be higher, or is it incorporations that yield should

0:13:04.960 --> 0:13:07.760
<v Speaker 1>be higher. And frankly, some of the corporate bind uh

0:13:08.200 --> 0:13:12.480
<v Speaker 1>spremiums or spreads should also be higher. So I think

0:13:12.480 --> 0:13:15.040
<v Speaker 1>it's in all markets, right, even equities don't seem to

0:13:15.080 --> 0:13:18.319
<v Speaker 1>be that concerned about the rise and potential for a

0:13:18.360 --> 0:13:21.640
<v Speaker 1>persistence of inflation or rising inflation. I think the bond

0:13:21.679 --> 0:13:25.240
<v Speaker 1>market has break evens tenny break evens inway between two

0:13:25.320 --> 0:13:28.280
<v Speaker 1>twenty five and two fifty. So again, longer term inflation

0:13:28.320 --> 0:13:31.200
<v Speaker 1>expectations are are quite high, but not out of control.

0:13:31.640 --> 0:13:35.960
<v Speaker 1>But you know, going forward, the question is how persistent

0:13:36.040 --> 0:13:39.560
<v Speaker 1>this inflation will be. And when there's evidence that that

0:13:39.679 --> 0:13:42.680
<v Speaker 1>there's resistence of inflation, you'll see all of these markets

0:13:42.679 --> 0:13:45.120
<v Speaker 1>react very very quickly. You'll see a rise and break evens.

0:13:45.120 --> 0:13:48.000
<v Speaker 1>You'll see that also reflected in the equity market. We're

0:13:48.040 --> 0:13:50.760
<v Speaker 1>just not there yet. We're not there yet. Give us

0:13:50.760 --> 0:13:53.880
<v Speaker 1>a tenure call out twelve months. I mean, I'm absolutely fascinated.

0:13:53.880 --> 0:13:56.800
<v Speaker 1>Are you Are you in the range or you outside

0:13:56.800 --> 0:14:01.760
<v Speaker 1>the range? Um? We are thinking that a year from now,

0:14:01.800 --> 0:14:04.559
<v Speaker 1>we just published our forecast yesterday will be somewhere between

0:14:04.559 --> 0:14:08.440
<v Speaker 1>two and two UM. Again, I think that this is

0:14:08.559 --> 0:14:11.960
<v Speaker 1>we're on the high side because we think that uh,

0:14:12.000 --> 0:14:16.319
<v Speaker 1>you know, the market's enterprising these these risks, and also, uh,

0:14:16.360 --> 0:14:19.720
<v Speaker 1>you know, ten year yields could gradually rise from from

0:14:19.720 --> 0:14:22.280
<v Speaker 1>here on if they're if fundamentals start to improve. I

0:14:22.280 --> 0:14:25.280
<v Speaker 1>think that there's a lot of pessimism on delta delta

0:14:25.320 --> 0:14:27.440
<v Speaker 1>variants as well as a lot of pestimism on the

0:14:27.440 --> 0:14:29.920
<v Speaker 1>stowdown in growth. So once we get through that wall

0:14:29.960 --> 0:14:32.320
<v Speaker 1>of worry, I think that there's a trajectory towards higher

0:14:32.360 --> 0:14:35.680
<v Speaker 1>yiels from here on. I looked abroad at the demands

0:14:35.720 --> 0:14:37.440
<v Speaker 1>of the market, and you know, it's just simple or

0:14:37.480 --> 0:14:40.640
<v Speaker 1>clipping a coupon. Is anybody with that call on yield

0:14:41.000 --> 0:14:45.280
<v Speaker 1>managing for total return? I don't think so. Yeah. So

0:14:45.320 --> 0:14:47.800
<v Speaker 1>I think that the real risk in the bond market.

0:14:47.920 --> 0:14:49.680
<v Speaker 1>I think that is that is the fact that people

0:14:49.720 --> 0:14:52.680
<v Speaker 1>aren't really focused on on real returns. Right, you look

0:14:52.720 --> 0:14:55.920
<v Speaker 1>at tenny real yields, they're negative one percent. Even if

0:14:55.960 --> 0:14:58.240
<v Speaker 1>you look at high yield. If you inflation is going

0:14:58.280 --> 0:15:00.160
<v Speaker 1>to be in the context of fortified percent for the

0:15:00.160 --> 0:15:04.120
<v Speaker 1>next several months, you're not getting very strong you know,

0:15:04.200 --> 0:15:07.160
<v Speaker 1>negative in real returns. So that has to be a

0:15:07.200 --> 0:15:10.160
<v Speaker 1>concern for anybody that's holding bonds, and that's not again

0:15:10.200 --> 0:15:12.520
<v Speaker 1>a concern that's reflected in the in the market. Given

0:15:12.520 --> 0:15:15.000
<v Speaker 1>the fact that deals are stubbornly low, I think that

0:15:15.000 --> 0:15:17.240
<v Speaker 1>that repressing has to happen over the next year. We're

0:15:17.240 --> 0:15:19.080
<v Speaker 1>on the Canada' Sadbantra. Do you think the fetch starts

0:15:19.120 --> 0:15:24.359
<v Speaker 1>to worry they've got it wrong? I would say probably

0:15:24.480 --> 0:15:28.360
<v Speaker 1>sometime early next year. If these inflation prints that we're seeing,

0:15:28.400 --> 0:15:31.120
<v Speaker 1>the hild fish prints that we're seeing persist, I think

0:15:31.120 --> 0:15:33.160
<v Speaker 1>that that's definitely going to be concerned, and the Fed's

0:15:33.160 --> 0:15:36.400
<v Speaker 1>actually being very very prudent. What they're doing is preparing

0:15:36.440 --> 0:15:38.560
<v Speaker 1>for that now. I think that they start tapering acid

0:15:38.560 --> 0:15:41.520
<v Speaker 1>purchases early next year. They probably end by the middle

0:15:41.520 --> 0:15:44.120
<v Speaker 1>of the year, so that they can start raising rates

0:15:44.120 --> 0:15:46.320
<v Speaker 1>if they need to in the second half of next year.

0:15:46.320 --> 0:15:49.240
<v Speaker 1>So they're prepared for that scenario, but they're just not

0:15:49.600 --> 0:15:52.520
<v Speaker 1>expressing that concern as of now. How they manage that

0:15:52.600 --> 0:15:55.800
<v Speaker 1>message if they have to, will be fascinating. Sabantra, Thank you,

0:15:55.840 --> 0:16:06.400
<v Speaker 1>Sapantraampre sock Gen. They had a US right strategy. John

0:16:06.520 --> 0:16:10.200
<v Speaker 1>us now is David Paigeacks investment manager's head and macro research. David.

0:16:10.560 --> 0:16:12.440
<v Speaker 1>Does that resonate with you, sir, that we could see

0:16:12.440 --> 0:16:16.680
<v Speaker 1>a broadening and price pressures going againto next year? Yeah,

0:16:16.720 --> 0:16:19.280
<v Speaker 1>I mean, it's it's the key debate that every central

0:16:19.320 --> 0:16:21.800
<v Speaker 1>bank has to sort of focus on how persistent is

0:16:21.840 --> 0:16:24.200
<v Speaker 1>the supply show a question. There's a supply shock at

0:16:24.240 --> 0:16:25.400
<v Speaker 1>the moment, and we're going to see it in Q

0:16:25.560 --> 0:16:27.440
<v Speaker 1>three g d P numbers we think in the States

0:16:27.440 --> 0:16:29.880
<v Speaker 1>when they come through. But the question is how persistent.

0:16:30.440 --> 0:16:33.200
<v Speaker 1>So for now we've had the view and we share

0:16:33.240 --> 0:16:37.800
<v Speaker 1>this view that we are seeing a relatively transitory supply restraints.

0:16:37.800 --> 0:16:40.080
<v Speaker 1>So if you look at, for example, participation, it's been

0:16:40.240 --> 0:16:43.520
<v Speaker 1>very lack luster in recent months. We do expect that

0:16:43.560 --> 0:16:45.280
<v Speaker 1>to pick up. I think part of this is just

0:16:45.320 --> 0:16:48.280
<v Speaker 1>a natural indigestion. I don't buy too much that it's

0:16:48.600 --> 0:16:51.880
<v Speaker 1>it's due to unemployment benefits. Certainly in states we've seen

0:16:51.960 --> 0:16:54.640
<v Speaker 1>that drop back. We haven't seen a miraculous recovery and

0:16:54.720 --> 0:16:57.160
<v Speaker 1>labor supply. But I think there is a natural indigestion,

0:16:57.200 --> 0:16:59.640
<v Speaker 1>and I think that indigestion should fade as we move

0:16:59.680 --> 0:17:03.520
<v Speaker 1>into a fourth quarter, but it doesn't. If it doesn't fade,

0:17:03.520 --> 0:17:05.919
<v Speaker 1>then you are seeing a more restricted background. You are

0:17:05.960 --> 0:17:08.960
<v Speaker 1>going to see earnings continue at the sort of relatively

0:17:09.000 --> 0:17:11.960
<v Speaker 1>elevated monthly pace that we see at the moment, and

0:17:12.040 --> 0:17:15.040
<v Speaker 1>that's something the FED has to take count of. Effectively,

0:17:15.040 --> 0:17:17.520
<v Speaker 1>what you're suggesting or what it would conclude is that

0:17:17.520 --> 0:17:20.400
<v Speaker 1>you're seeing a bigger supply shop than this pandemic. Now,

0:17:20.440 --> 0:17:22.880
<v Speaker 1>that might be because you know, the workers that we're

0:17:22.880 --> 0:17:25.639
<v Speaker 1>looking for post pandemic are difference to the ones that

0:17:25.640 --> 0:17:28.720
<v Speaker 1>were employed pre pandemic, and they's a skills mismatch. There

0:17:28.720 --> 0:17:32.080
<v Speaker 1>could be all sorts of issues. We don't think that's

0:17:32.160 --> 0:17:34.280
<v Speaker 1>what's going to happen, but that's what we're going to

0:17:34.320 --> 0:17:35.880
<v Speaker 1>see over the next couple of months, and the FED

0:17:35.920 --> 0:17:38.320
<v Speaker 1>will have to react if it if it changes that

0:17:38.520 --> 0:17:41.480
<v Speaker 1>that transitory outlook. David, you and everybody else's lawing a

0:17:41.560 --> 0:17:44.520
<v Speaker 1>GDP estimates. You've got five point seven percent now and

0:17:44.600 --> 0:17:47.719
<v Speaker 1>in the next year four point Is that a linear

0:17:47.760 --> 0:17:54.000
<v Speaker 1>extrapolation down of potential GDP UM? No, because I think

0:17:54.000 --> 0:17:57.399
<v Speaker 1>the potential GDP adjustment that's going to come through UM

0:17:57.760 --> 0:18:00.199
<v Speaker 1>is a long term figure, right, So it is a

0:18:00.240 --> 0:18:02.920
<v Speaker 1>linear extrapolation of the supply shock that we see coming

0:18:02.920 --> 0:18:05.880
<v Speaker 1>through in the quarter. We do think that that that's

0:18:05.880 --> 0:18:08.119
<v Speaker 1>been an impact, but I don't think it's something that

0:18:08.160 --> 0:18:11.640
<v Speaker 1>we should therefore extrapolate going forever forwards. We would still

0:18:11.640 --> 0:18:14.760
<v Speaker 1>see us GDP potential growth in the fullness of time

0:18:14.800 --> 0:18:16.800
<v Speaker 1>and somewhere around two per cent, So I don't think

0:18:16.840 --> 0:18:19.280
<v Speaker 1>that that's too much concerned. But in terms of the

0:18:19.320 --> 0:18:22.399
<v Speaker 1>supply demand imbalance, which is critical for the sort of

0:18:22.440 --> 0:18:24.960
<v Speaker 1>inflation pressures, then yeah, I mean, I think it is

0:18:25.000 --> 0:18:27.720
<v Speaker 1>that supply has reduced rather than into the drop off

0:18:27.720 --> 0:18:30.520
<v Speaker 1>in the land. David the investment manager after investment manager

0:18:30.520 --> 0:18:32.320
<v Speaker 1>has come on this show and said that right now

0:18:32.600 --> 0:18:34.600
<v Speaker 1>the dynamism of the U S economy has been pretty

0:18:34.640 --> 0:18:36.840
<v Speaker 1>much priced in and it's time to turn to to

0:18:37.000 --> 0:18:40.399
<v Speaker 1>Europe and potentially even to Asia for equity exposure. Do

0:18:40.400 --> 0:18:45.080
<v Speaker 1>you agree, Well, I think the US, the US rebound

0:18:45.080 --> 0:18:47.639
<v Speaker 1>has been remarkable. It's got to the point where we

0:18:47.720 --> 0:18:50.360
<v Speaker 1>are closing the apple gap. We're looking at a very

0:18:50.359 --> 0:18:53.600
<v Speaker 1>strong growth for the year next year. Um that's going

0:18:53.640 --> 0:18:57.400
<v Speaker 1>to continue this this excess demand, and I think there's

0:18:57.400 --> 0:18:59.720
<v Speaker 1>still strengthen the US marketing. Now. You know, we can

0:18:59.720 --> 0:19:02.520
<v Speaker 1>talk for all your life about whether we see corrections

0:19:02.560 --> 0:19:05.600
<v Speaker 1>coming up over the next little while, but no, I

0:19:05.640 --> 0:19:08.080
<v Speaker 1>think you know, in general, the US sector arek's going

0:19:08.119 --> 0:19:10.800
<v Speaker 1>to remain relatively well underpinned. But in terms of should

0:19:10.840 --> 0:19:13.639
<v Speaker 1>we switch from a sort of growth model which is

0:19:13.680 --> 0:19:17.200
<v Speaker 1>obviously something the US, you know, really exemplifies, or a

0:19:17.280 --> 0:19:20.840
<v Speaker 1>more value driven act performance, which is perhaps something where

0:19:20.880 --> 0:19:22.800
<v Speaker 1>Europe will do better. Then I think as we start

0:19:22.880 --> 0:19:25.120
<v Speaker 1>to see really pick up towards here and we should

0:19:25.160 --> 0:19:27.200
<v Speaker 1>start to move more into that that value area. So

0:19:27.200 --> 0:19:28.800
<v Speaker 1>I think there is scope certainly for more of a

0:19:28.840 --> 0:19:31.320
<v Speaker 1>pickup to come through from Europe. But let's bring things

0:19:31.400 --> 0:19:33.280
<v Speaker 1>up with the FED timeline if we can. In the

0:19:33.359 --> 0:19:35.199
<v Speaker 1>time we have left, we pushed against the clock here.

0:19:35.440 --> 0:19:37.520
<v Speaker 1>What are you looking for into the September, the twenty

0:19:37.600 --> 0:19:40.560
<v Speaker 1>two meeting and beyond December gets really interesting. The fift

0:19:40.840 --> 0:19:43.040
<v Speaker 1>is the FED, the sixteenth is the e C big

0:19:44.119 --> 0:19:46.320
<v Speaker 1>So I think as you look at September they clear

0:19:46.359 --> 0:19:48.720
<v Speaker 1>the decks and suggest that at any point they could

0:19:48.760 --> 0:19:51.480
<v Speaker 1>announce paper. They won't do it in September. I don't

0:19:51.560 --> 0:19:53.600
<v Speaker 1>think they won't do it at the end of October.

0:19:53.680 --> 0:19:56.320
<v Speaker 1>I think they'll announced in December and papering will start

0:19:56.400 --> 0:19:59.040
<v Speaker 1>in January. And there's a debate about whether it comes

0:19:59.080 --> 0:20:01.320
<v Speaker 1>a little bit bigger than Yeah, you're right with with

0:20:01.480 --> 0:20:05.840
<v Speaker 1>the FED lightly pronounced paper in December, with bTB clearly

0:20:05.880 --> 0:20:08.240
<v Speaker 1>lining up a big set of policy moves at that time.

0:20:08.480 --> 0:20:10.119
<v Speaker 1>December is going to the year end. It's gonna be

0:20:10.160 --> 0:20:12.560
<v Speaker 1>an interesting oneth A Monstrobos the Outlook, David, thank you.

0:20:12.800 --> 0:20:14.919
<v Speaker 1>Going to hear from you as always each other weekend.

0:20:14.960 --> 0:20:18.360
<v Speaker 1>Sir David Page acts for Investment Manager's head of macro Research.

0:20:18.680 --> 0:20:22.400
<v Speaker 1>This is the Bloomberg Surveillance Podcast. Thanks for listening. Join

0:20:22.560 --> 0:20:25.520
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0:20:25.840 --> 0:20:29.800
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