WEBVTT - Surveillance: Virus Woes Hit Markets

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<v Speaker 1>Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene, along

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<v Speaker 1>with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring

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<v Speaker 1>you insight from the best and economics, finance, investment and

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<v Speaker 1>international relations. Find Bloomberg Surveillance and Apple Podcast, SoundCloud, Bloomberg

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<v Speaker 1>dot Com and of course on the Bloomberg terminal. Joining

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<v Speaker 1>us now on this equity market is Nadia Level Senior

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<v Speaker 1>Equity Strategistic UPS Global WAFTH Management. Nadia. I've been taking

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<v Speaker 1>this interview up over the last hour or so. You

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<v Speaker 1>were a team out with your rounte look five thousand

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<v Speaker 1>next year, but not year end in June of next year,

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<v Speaker 1>and then only an extra one hundred points from there

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<v Speaker 1>over the next six months. Can you want me through

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<v Speaker 1>the trajectory of the next twelve months that you're looking

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<v Speaker 1>to play out? Absolutely, you know, we believe that will

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<v Speaker 1>really be a year of discovery for both markets and individuals.

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<v Speaker 1>As we know the last two as have been somewhat unusual.

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<v Speaker 1>But next year we think that financial markets we'll discover

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<v Speaker 1>what normal looks like from a growth and an inflation standpoint.

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<v Speaker 1>We really think it will be a year of two

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<v Speaker 1>half so that's why you see the spread between our

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<v Speaker 1>price starters from mid year and the year end. The

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<v Speaker 1>first have been elevated economic growth, so we're looking for

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<v Speaker 1>growth in the range of four and high inflation. But

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<v Speaker 1>as the year really progresses and things normalize, we're looking

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<v Speaker 1>for the second half to be laurer growth, still healthy

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<v Speaker 1>and above trend, and more subdued inflation. So we think

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<v Speaker 1>in that environment the SMP can reach five thousand by

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<v Speaker 1>the time we get to June of next year. Nadia,

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<v Speaker 1>are you looking right now at what's going on in

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<v Speaker 1>Europe as a blip or a potential risk scenario that

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<v Speaker 1>could move over to the US should this pandemic start

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<v Speaker 1>to pick up again. Absolutely, we always watch a COVID

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<v Speaker 1>cases very closely. Yes, the rising cases overseas is concerned

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<v Speaker 1>and that could translate into the US. We've seen this

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<v Speaker 1>pattern played out before. That's why we don't think that

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<v Speaker 1>we're out of the woods, and that's why we continue

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<v Speaker 1>to believe that the FED will be patient. There are

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<v Speaker 1>areas of the economy that has recovered from COVID, but

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<v Speaker 1>there's still areas that are still on the men, particularly

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<v Speaker 1>on the service side, and so we don't think that

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<v Speaker 1>the FED will be overly aggressive as particularly as COVID

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<v Speaker 1>cases haven't fully resolved yet. How important is an inflation

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<v Speaker 1>call for you, Nadia. We had a Bloomberg Business Week

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<v Speaker 1>cover story on this by Katie Greifeld, pointing out that

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<v Speaker 1>if you make the wrong call here as a strategist,

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<v Speaker 1>it's very bad. If you make the right call, you

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<v Speaker 1>are potentially a hero for decades. Absolutely, you know, the

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<v Speaker 1>inflation numbers is something we're watching closely, but we do

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<v Speaker 1>think that inflations will become more subdued in next year.

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<v Speaker 1>As we know, much of the spike in inflation is

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<v Speaker 1>being driven by the more flexible component of an inflation basket,

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<v Speaker 1>so things that replace more quickly food, energy, auto hotels.

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<v Speaker 1>If you look at the core flexible CPI, it's up

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<v Speaker 1>nearly but while inflation is brought in it out to

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<v Speaker 1>some of the more sticky areas. We do think that

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<v Speaker 1>the more flexible elements will normalize in twenty two and

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<v Speaker 1>so we're looking for inflation to get slightly onto two

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<v Speaker 1>percent by the time we get to end of December.

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<v Speaker 1>There's one thing missing from this call, Naddy, that I

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<v Speaker 1>wonder if clients have picked up on as well. No

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<v Speaker 1>rate hanks until twenty three inflation to subside down towards

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<v Speaker 1>one point eight percent by the end of next year.

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<v Speaker 1>Got all that very bullish at the index level five

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<v Speaker 1>k by the middle of next year. I look through

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<v Speaker 1>the preferred sectors energy, financials, discretion, we healthcare. There's one

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<v Speaker 1>thing that's missing when you talk me through that macrobacter

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<v Speaker 1>up inflation, the FAED patient, Where's investment, Where's the I

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<v Speaker 1>T story? Where's the information technology story? In your recorditly

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<v Speaker 1>market call. Yes, we're mutual on tech at the moment,

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<v Speaker 1>but again with COREE cases rises, you know, we know

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<v Speaker 1>we do typically see volatility and those more reinflation trades

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<v Speaker 1>as well as a reopening trade, and so there is

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<v Speaker 1>room for tacking the portfolio over the long term and

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<v Speaker 1>so on pullbacks on TAG meaningful pullbacks on tech. We

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<v Speaker 1>always advise clients to add to longer term position, but

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<v Speaker 1>headed into two we just think that there's better growth

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<v Speaker 1>opportunities in the more cyclical errors of the market, and

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<v Speaker 1>so that's why we have a position that way. But

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<v Speaker 1>if we do see a sustainable rise in the COVID cases,

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<v Speaker 1>we do know that people take shelter in text so

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<v Speaker 1>that is an opportunity now the really thoughtful stuff as always,

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<v Speaker 1>and good to catch up. Thanks for sharing your out

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<v Speaker 1>look with us now your level there of ups. Thank

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<v Speaker 1>you joining us now is Jimmy Sullivan, chief US market

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<v Speaker 1>strategist macro strategist at TV Securities. Jim, arguably with the

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<v Speaker 1>biggest goal that we've been talking about over the last week,

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<v Speaker 1>we caught up with the colleague premission about it waiting

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<v Speaker 1>until December three two high interest rates. You're at the

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<v Speaker 1>very far end of the range of the people we

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<v Speaker 1>talked to right now, Jim. Why can't they wait that long? Jonathan,

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<v Speaker 1>good morning. Well, I mean, obviously it's hard to be

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<v Speaker 1>very specific on exact timing, but our point broadly is

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<v Speaker 1>that momentum will be down over the next year. And obviously,

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<v Speaker 1>if you simply extrapolate where we are now, growth looks

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<v Speaker 1>very strong and employment is falling, inflation is way way

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<v Speaker 1>too strong, and if you simply extrapolate, and of course

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<v Speaker 1>the FED would have to tighten. But I mean, the key,

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<v Speaker 1>key issue is what momentum is going to look like

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<v Speaker 1>over the next year. And we do think despite the

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<v Speaker 1>budget bill being worked on in Congress and will probably

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<v Speaker 1>ultimately be enacted that there will be significant physical dragon two,

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<v Speaker 1>So the budget deficit will go from basically around twelve

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<v Speaker 1>of GDP and physical one two around five percent in

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<v Speaker 1>physical two. There are some offsets, but we think the

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<v Speaker 1>net of this is going to be pretty significant down

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<v Speaker 1>or momentum. So I think it will feel quite different

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<v Speaker 1>as we get towards the middle of next year in

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<v Speaker 1>terms of momentum and growth as well as inflation, and

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<v Speaker 1>so we'll see where we stand at that point. Then.

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<v Speaker 1>Obviously the FED has bought themselves some time with tapering.

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<v Speaker 1>I mean they've got a seven month tapering, so that

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<v Speaker 1>won't wind down until June. I mean we would say

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<v Speaker 1>the bar for accelerating that is extremely high. So we'll

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<v Speaker 1>see where we stand. Obviously we get towards the middle

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<v Speaker 1>of next year, but we think momentum is going to

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<v Speaker 1>be down between now and that. This is really interesting

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<v Speaker 1>to me that a lot of people have come on

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<v Speaker 1>and they've said it doesn't really matter how much inflation

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<v Speaker 1>does come down next year. If it starts coming down,

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<v Speaker 1>it will edifies the FEDS. It will edify the Fed's position.

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<v Speaker 1>Do you think that that's true or does it need

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<v Speaker 1>to drop a certain amount and by a certain date

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<v Speaker 1>for it to actually support where the FEDS approaches actually

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<v Speaker 1>right now, I think I mean meaningful slowing. I mean,

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<v Speaker 1>the the year of year numbers are still going to

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<v Speaker 1>be quite strong, of course, because you're not going to

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<v Speaker 1>drop out all these high numbers for a while until

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<v Speaker 1>the recent strong month of the month numbers drop out

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<v Speaker 1>them the twelve month change numbers are elevated. But we'll

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<v Speaker 1>see what momentum is like on a monthly basis. And

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<v Speaker 1>I mean, do you have to get to two percent

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<v Speaker 1>year of a year, Absolutely not to be to be

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<v Speaker 1>just hold off and tightening. But that brings in the

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<v Speaker 1>other part of the mandate if you get enough slowing

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<v Speaker 1>on inflation and the focus turns back I think to

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<v Speaker 1>where they stand on the mandate unemployment. And there's a

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<v Speaker 1>lot of debate right now about what is maximum employment.

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<v Speaker 1>Obviously going number pretty strong, that presipation rate numbers have

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<v Speaker 1>been disappointing, but yet payrolls are down four million plus

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<v Speaker 1>from pre COVID level. So I mean this is going

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<v Speaker 1>to be an important debate over the next year. What

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<v Speaker 1>maximum employment. Yeah, I was gonna ask you about that too, Jim.

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<v Speaker 1>I mean, maybe, um, there have been such structural changes

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<v Speaker 1>that this is just the new normal. You know, if

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<v Speaker 1>you can't get employees through the door, even if you're

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<v Speaker 1>wazing rages, raising wages um and there are so many

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<v Speaker 1>jobs out there that anyone could get one, how are

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<v Speaker 1>we not at maximum employment already? Yeah? Well, I mean

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<v Speaker 1>if you again, if you simply extrapolate current numbers, including

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<v Speaker 1>jolts numbers, job openings, where the perticupation rate is, etcetera,

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<v Speaker 1>with wage numbers are doing, then you'd say, on the surface, sure,

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<v Speaker 1>it looks like maximumployment, but everything is so distorted right

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<v Speaker 1>now by COVID. I mean, we had the delta wave

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<v Speaker 1>over the last several months, which clearly contributed to preventing

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<v Speaker 1>the participation rate from starting to improve again despite the

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<v Speaker 1>expiration of unemployment benefits, etcetera. So I mean it's it's

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<v Speaker 1>too soon to really just take these numbers literally, given

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<v Speaker 1>that we're still in the midst of the pandemic, and

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<v Speaker 1>so we'll see where we are in a year's time.

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<v Speaker 1>I mean, I think most FEDE officials would say they

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<v Speaker 1>would not be satisfied that this is the new normal

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<v Speaker 1>in terms of the level of employment and maximum employment.

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<v Speaker 1>I think they want to get these people back. It

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<v Speaker 1>might take time and there will be lags, but they

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<v Speaker 1>do expect most of these people to come back, not

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<v Speaker 1>all of them, and certainly there are most of them

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<v Speaker 1>were retired. I thought most of them just have done

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<v Speaker 1>so well on the market that they stepped out and

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<v Speaker 1>bid adea and well, I mean, then the nature of

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<v Speaker 1>those data is that, I mean, people retire and then

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<v Speaker 1>they unretired. I mean, so people do go back and

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<v Speaker 1>forth in those numbers, and a lot of what we've

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<v Speaker 1>seen is people not coming back into the labor force

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<v Speaker 1>having retired previously. So again, I think it's too soon

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<v Speaker 1>to just simply assume that the participation rate is is

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<v Speaker 1>going to stay where it is, and I think we

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<v Speaker 1>would expect to see recovery over the next year. It's

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<v Speaker 1>not all gonna happen in one month. And certainly most

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<v Speaker 1>FED officials, I mean, obviously, particularly if it's it's brain artists,

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<v Speaker 1>the chair we would say, but even even with pale

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<v Speaker 1>as well, would be hope full and would expect that

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<v Speaker 1>that most of these people can come back with time. Jim,

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<v Speaker 1>just quickly. Lisa has been on top of this one

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<v Speaker 1>through most of this morning. Just how much daylight is

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<v Speaker 1>there between Cham and poal A Governor Brian had you've

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<v Speaker 1>been waiting for the same decision we've been waiting for

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<v Speaker 1>fed watching yourself. How much daylight is there between the two?

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<v Speaker 1>And I mean on monitory policy. Obviously there's talk about

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<v Speaker 1>regulatory policies being a bit more clearly clearly different, but

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<v Speaker 1>on monitory policy not necessarily huge. But but yes, I mean,

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<v Speaker 1>I would say most people would say that Brainard is

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<v Speaker 1>likely to be more dovish. She's more likely to have

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<v Speaker 1>a dovish interpretation of maximum employment, we would say. But again,

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<v Speaker 1>I mean Powell is pretty dubbish as well. Jim A

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<v Speaker 1>Sunivan it's eight Jim, You're confusing it, so thank you sir.

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<v Speaker 1>As always, we spoke with Dr Andrew Pakosh earlier this

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<v Speaker 1>morning on Bloomberg Surveillance and we were talking a lot

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<v Speaker 1>about the situation over in Europe and since then in

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<v Speaker 1>the fast moving newsplot that is the pandemic, we got

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<v Speaker 1>the approval by the FDA of COVID nineteen booster shots

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<v Speaker 1>from MODERNA and Pistor and Bond Tech. The question I

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<v Speaker 1>have really is how much more protection do you get

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<v Speaker 1>from the booster and how much can this dave off

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<v Speaker 1>something from happening in the United States from what's happening,

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<v Speaker 1>say in Germany and Austria. Dr Andrew Pekosh is joining

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<v Speaker 1>us again and we really appreciate it. Johns. Hopkins University,

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<v Speaker 1>Bloomberg School of Public Health, professor and virologist. What's your sense,

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<v Speaker 1>Dr Pakosh, of how much we can prevent another surge

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<v Speaker 1>in viral cases as a result of more people getting boosters. Well,

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<v Speaker 1>you know, boosters will do two things. Um. One is

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<v Speaker 1>it will almost immediately increase your protection against infection, and

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<v Speaker 1>some of the data suggests that will get back up

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<v Speaker 1>to that level that we saw in the early studies.

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<v Speaker 1>The second thing that is starting to come out, though,

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<v Speaker 1>is that that booster, particularly if you get it six

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<v Speaker 1>months after your first doses, seems to be able to

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<v Speaker 1>induce so much longer immune response and therefore you might

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<v Speaker 1>be protected for six months, a year, maybe more um

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<v Speaker 1>after the booster. So it's doing those two things, but

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<v Speaker 1>at the end of the day, it's targeting people who

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<v Speaker 1>already being protected from infection and from severe infection. So

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<v Speaker 1>it's going to move the needle a little bit, but

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<v Speaker 1>but it's not going to be a game changer in

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<v Speaker 1>terms of protecting us from surges of COVID nineteen because

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<v Speaker 1>that's driven by unvaccinated people. And Dr Peckard's going to

0:11:31.559 --> 0:11:34.360
<v Speaker 1>that point the unvaccinated people. You know, I'm just not

0:11:34.480 --> 0:11:37.240
<v Speaker 1>sure what more can be done. I'm just speaking here

0:11:37.280 --> 0:11:40.120
<v Speaker 1>in the US for those folks who choose not to

0:11:40.160 --> 0:11:44.840
<v Speaker 1>get vaccinated. It feels like this is our future, this

0:11:44.920 --> 0:11:47.040
<v Speaker 1>is just the way it's going to be. We've i mean,

0:11:47.080 --> 0:11:50.160
<v Speaker 1>the arguments have been made time and time again, and

0:11:50.200 --> 0:11:53.400
<v Speaker 1>the decisions seemingly have been made. And maybe some mandates

0:11:53.400 --> 0:11:55.480
<v Speaker 1>can move the needle a little bit, whether it's a

0:11:55.520 --> 0:11:58.959
<v Speaker 1>workplace mandate or a government mandate. But is this kind

0:11:59.000 --> 0:12:02.040
<v Speaker 1>of the new normal? Well, what we need to realize

0:12:02.120 --> 0:12:05.800
<v Speaker 1>is that individuals don't get vaccinated, you know, really shouldn't

0:12:05.800 --> 0:12:07.880
<v Speaker 1>have free reign to be able to do anything they

0:12:07.920 --> 0:12:10.400
<v Speaker 1>want because of the threat that they post to the

0:12:10.440 --> 0:12:13.760
<v Speaker 1>rest of the population. Now, this could be mitigated in

0:12:13.800 --> 0:12:17.000
<v Speaker 1>some ways. Uh, twice a week testing could be one

0:12:17.040 --> 0:12:21.640
<v Speaker 1>way to to to to target those populations. Um Limiting

0:12:21.679 --> 0:12:24.480
<v Speaker 1>them from certain activities is another way to do it.

0:12:24.960 --> 0:12:28.520
<v Speaker 1>So we're moving to the stage now where it maybe

0:12:28.520 --> 0:12:31.480
<v Speaker 1>that vaccine mandates alone won't be able to do this,

0:12:31.720 --> 0:12:34.199
<v Speaker 1>but putting in some of those other restrictions may be

0:12:34.320 --> 0:12:37.119
<v Speaker 1>a way to get us through these surges and minimize

0:12:37.160 --> 0:12:40.840
<v Speaker 1>those uh, those massive uh pushes of cases into our

0:12:40.880 --> 0:12:44.600
<v Speaker 1>hospitals which stress our medical care system. Dr Pekosh. Theoretically,

0:12:44.800 --> 0:12:47.199
<v Speaker 1>let's say there is a family, and let's say it's

0:12:47.240 --> 0:12:51.080
<v Speaker 1>almost Thanksgiving and one member of the family is not vaccinated.

0:12:51.800 --> 0:12:53.880
<v Speaker 1>Where is the biggest risk here? Is it for the

0:12:53.920 --> 0:12:57.880
<v Speaker 1>person who's not vaccinated being exposed to people who are

0:12:57.960 --> 0:13:00.920
<v Speaker 1>all vaccinated but still could get the virus. Or is

0:13:00.960 --> 0:13:03.800
<v Speaker 1>it people who are vaccinated getting the virus from the

0:13:03.800 --> 0:13:09.079
<v Speaker 1>person who's unvaccinated. So so so, theoretically, if you're vaccinated

0:13:09.679 --> 0:13:12.200
<v Speaker 1>and you're exposed, you come into contact with someone who's

0:13:12.200 --> 0:13:14.920
<v Speaker 1>infected and not exposed, you do have a higher risk

0:13:14.960 --> 0:13:18.320
<v Speaker 1>of getting the infection, but your risk of getting into

0:13:18.360 --> 0:13:22.480
<v Speaker 1>the hospital after that is much much reduced because of

0:13:22.480 --> 0:13:26.400
<v Speaker 1>the protection of vaccine gives you. Now, this does change

0:13:26.400 --> 0:13:28.360
<v Speaker 1>a little bit if you talk about things like people

0:13:28.400 --> 0:13:32.040
<v Speaker 1>with pre existing community conditions that predispose you to more

0:13:32.040 --> 0:13:35.120
<v Speaker 1>severe disease, or even the elderly, in which case we

0:13:35.200 --> 0:13:37.199
<v Speaker 1>know that the vaccines work, but they don't work as

0:13:37.200 --> 0:13:39.719
<v Speaker 1>well as they do in the healthy populations, so it's

0:13:39.760 --> 0:13:44.480
<v Speaker 1>also about those more vulnerable populations and the increasing the

0:13:44.520 --> 0:13:49.440
<v Speaker 1>exposure of those individuals to the virus if you are unvaccinated. So,

0:13:49.720 --> 0:13:53.080
<v Speaker 1>Dr pecos one thing that we haven't talked about recently,

0:13:53.080 --> 0:13:57.000
<v Speaker 1>I don't think is the concept of herd immunity. Is

0:13:57.040 --> 0:14:01.800
<v Speaker 1>that something that given the level of unvaccinated population, that's

0:14:01.880 --> 0:14:05.679
<v Speaker 1>really not really on the table um it's it's not

0:14:05.760 --> 0:14:09.280
<v Speaker 1>on the table anymore from a practical state because with

0:14:09.400 --> 0:14:12.640
<v Speaker 1>the emergence of the delta variant, some of the estimates

0:14:12.640 --> 0:14:15.120
<v Speaker 1>of what we need for her immunity are now in

0:14:15.160 --> 0:14:20.840
<v Speaker 1>the or sometimes higher part of the population getting vaccinated,

0:14:21.440 --> 0:14:24.400
<v Speaker 1>and that just doesn't seem realistic given what we see

0:14:24.480 --> 0:14:29.640
<v Speaker 1>right now. We can, however, control of severe cases with vaccines.

0:14:30.320 --> 0:14:34.200
<v Speaker 1>The the soon to be approved anti viral treatments will

0:14:34.200 --> 0:14:38.000
<v Speaker 1>give us another important tool that will help us reduce

0:14:38.040 --> 0:14:42.120
<v Speaker 1>the disease severity. And so we have the tools to

0:14:41.800 --> 0:14:45.920
<v Speaker 1>to really minimize the difficult effects of this virus on

0:14:45.960 --> 0:14:48.200
<v Speaker 1>the population. We just have to be more effective at

0:14:48.280 --> 0:14:51.320
<v Speaker 1>using them. Before we let you go, Dr Pekash, going

0:14:51.360 --> 0:14:53.560
<v Speaker 1>back to what's going on in Europe with the Austria

0:14:53.560 --> 0:14:56.200
<v Speaker 1>lockdown and the potential for Germany to do the same.

0:14:56.720 --> 0:15:00.080
<v Speaker 1>Is there any way that you could see US lockdowns

0:15:00.120 --> 0:15:02.360
<v Speaker 1>at some point in the future. Considering that the fact

0:15:02.360 --> 0:15:05.520
<v Speaker 1>that the vaccination rate here is similar to what we

0:15:05.560 --> 0:15:08.840
<v Speaker 1>see in those nations, Well, it's interesting because while the

0:15:08.880 --> 0:15:12.520
<v Speaker 1>overall vaccination rate is similar, we have a lot more

0:15:12.640 --> 0:15:15.360
<v Speaker 1>variation from state to state in terms of how many

0:15:15.360 --> 0:15:19.240
<v Speaker 1>individuals are vaccinated. So in my state of Maryland here

0:15:19.600 --> 0:15:21.680
<v Speaker 1>I feel a little bit more confident than I would

0:15:21.720 --> 0:15:23.920
<v Speaker 1>if I was in another state in terms of how

0:15:24.000 --> 0:15:27.360
<v Speaker 1>much protection is being afforded by the vaccine. It doesn't

0:15:27.360 --> 0:15:30.200
<v Speaker 1>appear to me that there's political will to go through

0:15:30.240 --> 0:15:33.920
<v Speaker 1>lockdowns on a massive nationwide level, but I wouldn't be

0:15:33.960 --> 0:15:36.840
<v Speaker 1>surprised if some of the states that have been good

0:15:36.880 --> 0:15:39.960
<v Speaker 1>about their public health interventions to control COVID nineteen do

0:15:40.040 --> 0:15:44.280
<v Speaker 1>consider some additional um measures if cases do surge again

0:15:44.360 --> 0:15:47.280
<v Speaker 1>this winter. Andrew Pekosh, thank you so much for being

0:15:47.280 --> 0:15:50.680
<v Speaker 1>with us. JOHNS. Hopkins, University of Bloomberg School of Public Health,

0:15:50.680 --> 0:16:00.560
<v Speaker 1>professor and virologists joining us today you can just joined

0:16:00.640 --> 0:16:03.000
<v Speaker 1>us now. Chief Investment Officer at Dow Tech Bank can

0:16:03.040 --> 0:16:05.520
<v Speaker 1>trust you go this econity market, you can't hold it

0:16:05.560 --> 0:16:07.640
<v Speaker 1>down with down a tenth on the SMP and now's

0:16:07.680 --> 0:16:09.440
<v Speaker 1>back at all time highs. And that's like one dred

0:16:09.480 --> 0:16:12.720
<v Speaker 1>futures up another fifty three this morning. Restrictions back in

0:16:12.760 --> 0:16:15.600
<v Speaker 1>Europe struggle the shoulders over here state side, Hugo. What

0:16:15.600 --> 0:16:18.680
<v Speaker 1>do you make of all of this? Well, you've got

0:16:18.680 --> 0:16:22.360
<v Speaker 1>a trifector of tail winds. It's place. You still have

0:16:23.040 --> 0:16:26.400
<v Speaker 1>military support, you still have incrementalism from central banks that

0:16:26.920 --> 0:16:29.920
<v Speaker 1>reining things in, but very very slowly. At Lisa highlighted,

0:16:30.360 --> 0:16:33.720
<v Speaker 1>you've got economic tail winds as well. So you have

0:16:34.560 --> 0:16:38.760
<v Speaker 1>the US keyboard. GDP estimates are actually being ticked up

0:16:38.760 --> 0:16:41.400
<v Speaker 1>a little bit. You've had excellent QU three results from

0:16:41.840 --> 0:16:46.680
<v Speaker 1>large waves of of of US courts as they reported.

0:16:47.000 --> 0:16:51.320
<v Speaker 1>So there's um, there's you know, the final Pieces've got

0:16:51.320 --> 0:16:54.440
<v Speaker 1>central banks, you've got cycled, and then you've just got

0:16:54.440 --> 0:16:57.840
<v Speaker 1>this this wall of liquidity sitting there too. The bond market,

0:16:57.880 --> 0:16:59.920
<v Speaker 1>even though inflation this is a big bow. And the

0:17:00.040 --> 0:17:04.080
<v Speaker 1>bond market, given though inflation hit six point two last week,

0:17:04.840 --> 0:17:07.320
<v Speaker 1>you know, the ten ure years sort at one point,

0:17:07.359 --> 0:17:10.960
<v Speaker 1>it's like it tells you all you need to know.

0:17:11.480 --> 0:17:13.359
<v Speaker 1>But Hugo, that's exactly where I wanted to go, this

0:17:13.440 --> 0:17:16.360
<v Speaker 1>sort of discomfort here with high inflation reads and very

0:17:16.440 --> 0:17:19.159
<v Speaker 1>low bond yields, and you have some people like Wharton

0:17:19.200 --> 0:17:22.679
<v Speaker 1>professor Jeremy Siegel coming out yesterday and Bloomberg Television and

0:17:22.720 --> 0:17:25.399
<v Speaker 1>saying people are not prepared for how fast, how quickly

0:17:25.400 --> 0:17:27.199
<v Speaker 1>the Federal Reserve will have to high rates will have

0:17:27.240 --> 0:17:31.240
<v Speaker 1>to normalize once inflation shows its persistency. What do you

0:17:31.280 --> 0:17:35.359
<v Speaker 1>make of that? Well, I mean there's a lot of

0:17:35.400 --> 0:17:37.800
<v Speaker 1>work being done there by what they have to do,

0:17:38.560 --> 0:17:42.040
<v Speaker 1>you know, if they haven't budged when six point two

0:17:42.119 --> 0:17:45.720
<v Speaker 1>is is the inflation print, and when core inflation is

0:17:45.800 --> 0:17:49.320
<v Speaker 1>north of three and still looking persistent, and you know

0:17:49.680 --> 0:17:52.639
<v Speaker 1>in our estimates we're going to see those core numbers

0:17:52.720 --> 0:17:55.560
<v Speaker 1>continue rising. You know, you can see what wages are doing,

0:17:55.600 --> 0:17:57.640
<v Speaker 1>you can see what rent is doing. They're the core

0:17:57.680 --> 0:18:01.080
<v Speaker 1>components of core inflation. So you know, we know that

0:18:01.160 --> 0:18:02.680
<v Speaker 1>numb was the core. Numb is going to be high

0:18:02.720 --> 0:18:05.600
<v Speaker 1>from periods time, and yet there's still holding pat still

0:18:06.200 --> 0:18:11.240
<v Speaker 1>being incremental. The communication that you saw from the fair,

0:18:11.400 --> 0:18:14.479
<v Speaker 1>you seem from the ECB tells you that they're going

0:18:14.520 --> 0:18:19.240
<v Speaker 1>to do absolutely everything to try not try to ignore it,

0:18:19.280 --> 0:18:23.040
<v Speaker 1>but to to avoid some sort of tape attention. They

0:18:23.040 --> 0:18:25.119
<v Speaker 1>don't think their work is done in terms of fixing

0:18:25.119 --> 0:18:29.520
<v Speaker 1>the economy, So why would they Why would they perform

0:18:29.640 --> 0:18:33.399
<v Speaker 1>such an aggressive utah, we don't they do so the market,

0:18:33.440 --> 0:18:36.200
<v Speaker 1>I mean, the markets already priced in two or three

0:18:36.280 --> 0:18:40.400
<v Speaker 1>hikes for the US, four or five hikes for the UK.

0:18:41.080 --> 0:18:44.560
<v Speaker 1>Why does the market actually think these super doves, I

0:18:44.560 --> 0:18:47.159
<v Speaker 1>mean when you compare them to somebody like Paul Volker, right,

0:18:47.280 --> 0:18:51.680
<v Speaker 1>these are incredibly dovish FED governors. Why does the mr

0:18:51.760 --> 0:18:55.399
<v Speaker 1>market think they would raise rates that much? Well? No,

0:18:55.520 --> 0:19:00.200
<v Speaker 1>I think I think they can raise rates that much. Um. Look,

0:19:00.480 --> 0:19:03.360
<v Speaker 1>the market is always ahead of the Fed. You can

0:19:03.400 --> 0:19:06.119
<v Speaker 1>see that whenever you're looking at the at the forward

0:19:06.240 --> 0:19:09.879
<v Speaker 1>rates implied and and and against the dot log. You

0:19:09.920 --> 0:19:12.800
<v Speaker 1>can see on the way down the famous two hawks

0:19:13.080 --> 0:19:16.080
<v Speaker 1>expecting mean version and now on the way up there

0:19:16.200 --> 0:19:19.679
<v Speaker 1>there what they're communicating will be behind the curve. The

0:19:19.760 --> 0:19:23.160
<v Speaker 1>market can control o three rate hikes, it's already prized

0:19:23.160 --> 0:19:24.719
<v Speaker 1>for them, and that the eggery market has to move

0:19:24.760 --> 0:19:29.840
<v Speaker 1>them much. But three rate hikes is always Remember where

0:19:29.840 --> 0:19:33.040
<v Speaker 1>we're coming from, we're coming from zero, so three rate

0:19:33.119 --> 0:19:36.000
<v Speaker 1>heights is just taking us back to like seventy five

0:19:36.280 --> 0:19:39.760
<v Speaker 1>seventy five to one percent, all right, And the question

0:19:39.760 --> 0:19:42.320
<v Speaker 1>really is can the economy handle that? And I think

0:19:42.320 --> 0:19:46.639
<v Speaker 1>what people are really forgetting here as this economy is

0:19:46.680 --> 0:19:51.400
<v Speaker 1>not being held back by demand rates. They that affects demand,

0:19:51.880 --> 0:19:55.080
<v Speaker 1>you know, it's it's it's it's some financial conditions, credit

0:19:55.080 --> 0:19:57.439
<v Speaker 1>conditions that affects demand. Right now, the economy has been

0:19:57.440 --> 0:19:59.480
<v Speaker 1>held back to twice as well. So if you raise

0:19:59.640 --> 0:20:02.040
<v Speaker 1>rates and you're you're tweaking to that's not really what's

0:20:02.040 --> 0:20:04.760
<v Speaker 1>gonna what was gonna affect jobs and great, so you've

0:20:04.800 --> 0:20:09.200
<v Speaker 1>got some some freedom to to to see raps rise

0:20:09.600 --> 0:20:12.600
<v Speaker 1>without an effect on the actual underlying economy, and the

0:20:12.640 --> 0:20:16.119
<v Speaker 1>market's very cultable. Hugo, it's gonna catch up. I always

0:20:16.119 --> 0:20:17.879
<v Speaker 1>dislike you at the end of the interview. Hugo from

0:20:17.920 --> 0:20:21.119
<v Speaker 1>the Bahamas, Hugo Rogers from the Behalf. It just it

0:20:21.200 --> 0:20:23.640
<v Speaker 1>winds me up, Hugo. Hugo Rogers of down Tech Bank,

0:20:25.920 --> 0:20:28.800
<v Speaker 1>You too, sir, got to see your buddy. This is

0:20:28.840 --> 0:20:32.840
<v Speaker 1>the Bloomberg Surveillance Podcast. Thanks for listening. Join us live

0:20:32.960 --> 0:20:36.720
<v Speaker 1>weekdays from seven to ten am Eastern. I'm Bloomberg Radio

0:20:36.960 --> 0:20:40.560
<v Speaker 1>and on Bloomberg Television each day from six to nine

0:20:40.640 --> 0:20:45.040
<v Speaker 1>am for insight from the best in economics, finance, investment,

0:20:45.200 --> 0:20:50.199
<v Speaker 1>and international relations. And subscribe to the Surveillance podcast on

0:20:50.320 --> 0:20:54.119
<v Speaker 1>Apple podcast, SoundCloud, Bloomberg dot com, and of course, on

0:20:54.240 --> 0:20:58.320
<v Speaker 1>the terminal, I'm Tom Keen, and this is Bloomberg