WEBVTT - Bloomberg Surveillance TV: February 4th, 2026 0:00:02.360 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.840 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.280 Terminal and the Bloomberg Business app. So here's the latest 0:00:37.320 --> 0:00:40.279 this morning. The president leaning into the campaign promises he's 0:00:40.320 --> 0:00:43.400 capped as new polling shows a dip in his approval rating, 0:00:43.479 --> 0:00:45.680 and Libby Cantrell and Pimco joined us now from what 0:00:45.760 --> 0:00:46.920 Liby good mornic good morning? 0:00:47.120 --> 0:00:48.639 Is the hotel in Texas? 0:00:49.680 --> 0:00:52.920 I mean, look, I think for good reason the GOP 0:00:53.040 --> 0:00:56.080 is paying attention to it. Obviously, this is a red state, 0:00:56.160 --> 0:00:59.160 a ruby red Senate district. The state Senate district that 0:00:59.320 --> 0:01:02.400 flipped to to Democrats went from thirty one kind of 0:01:02.400 --> 0:01:04.720 a swing of thirty one points from the twenty twenty 0:01:04.720 --> 0:01:07.240 four election. It is still early days, but there are 0:01:07.280 --> 0:01:10.360 other metrics in addition to these off cycle elections that 0:01:10.440 --> 0:01:13.760 I think are warning signs for Republicans. The approval rating 0:01:13.920 --> 0:01:16.920 is one of them. The generic ballots or generally, how 0:01:16.959 --> 0:01:19.880 do the how does the population feel about Democrats over 0:01:19.920 --> 0:01:24.400 Republicans or favoring Democrats right now by five points on average, 0:01:24.760 --> 0:01:27.840 and then enthusiasm Democrats seem to be more enthusiastic. Those 0:01:27.880 --> 0:01:31.000 are all we have a little mini midterm election model 0:01:31.000 --> 0:01:35.680 that we built at PIMCO, and those all are statistically significant. 0:01:35.720 --> 0:01:39.520 So in addition to Texas, the data is also pointing 0:01:39.560 --> 0:01:43.640 to signs that, you know, like history, the Republicans are 0:01:43.680 --> 0:01:46.080 probably poised to lose seats in November. 0:01:46.120 --> 0:01:47.240 However, it is really early days. 0:01:47.240 --> 0:01:49.520 It's still only even though it was a very long January, 0:01:49.960 --> 0:01:52.040 it's only still nine months away, so a lot. 0:01:51.920 --> 0:01:53.800 As we can. Republicans strategers said the same thing to 0:01:53.840 --> 0:01:56.520 me last night, Amory, it's early days, you know, don't 0:01:56.520 --> 0:01:58.200 look at Texas. We have to November. We have the 0:01:58.240 --> 0:02:00.600 one big beautiful bill coming out. What the President going 0:02:00.640 --> 0:02:02.640 to be focused on before November? 0:02:02.680 --> 0:02:05.240 When I think Republicans do want show, not tell, right, 0:02:05.600 --> 0:02:08.040 President Trump wants to tell folks obviously, and this is. 0:02:08.040 --> 0:02:09.600 Sort of what Joe Biden did as well. 0:02:10.000 --> 0:02:12.560 Understandably, he's proud of the things that he's accomplished in 0:02:12.600 --> 0:02:14.919 twenty twenty five. I think Republicans on the hill, though, 0:02:14.960 --> 0:02:16.919 do you want to pivot to showing and they're hoping 0:02:16.960 --> 0:02:19.880 that these very large refunds that the househouseholds are going 0:02:19.919 --> 0:02:23.480 to be getting, the fact that withholding tables are decreased, 0:02:23.520 --> 0:02:26.080 and so big people are getting bigger paychecks. All of 0:02:26.080 --> 0:02:28.640 this will you know, sort of booy sentiment. Now what 0:02:28.919 --> 0:02:31.840 President Trump has talked about the sort of affordability agenda, 0:02:31.840 --> 0:02:33.840 and I think again Republicans want him to pivot from 0:02:34.200 --> 0:02:39.160 immigration back to the affordability agenda. Things like capping credit cards, 0:02:39.480 --> 0:02:43.919 preventing institutional investors from buying single family homes. Those things 0:02:44.040 --> 0:02:46.440 all need Congress, and I don't think we're going to 0:02:46.440 --> 0:02:48.960 see Congress do anything honestly, on the fiscal side. 0:02:48.960 --> 0:02:51.040 It's weird because Wall Street acts like some of this 0:02:51.160 --> 0:02:53.280 is done, yeah, and I think, yeah, well yeah, I'm 0:02:53.280 --> 0:02:53.600 not sure. 0:02:53.680 --> 0:02:55.160 I mean, so this is the president, you know, and 0:02:55.280 --> 0:02:57.040 might frustrate him understand them, I think, and to frustrate 0:02:57.080 --> 0:02:59.760 other presidents as well. He only has limited authority in 0:03:00.040 --> 0:03:02.640 terms of moving the needle. Right, the executive branch executes 0:03:02.680 --> 0:03:05.400 existing law. It is the Congress that creates the laws, 0:03:05.480 --> 0:03:09.200 and there is no law that gives the president authority 0:03:09.200 --> 0:03:11.320 to do either of those things. What he can do 0:03:11.760 --> 0:03:14.079 and Mary, which we've talked about before, is he can 0:03:14.200 --> 0:03:18.200 direct Fanny and Freddy to buy more agency mortgage backed securities. 0:03:18.400 --> 0:03:21.280 They have been doing that for several months. In the 0:03:21.400 --> 0:03:23.920 end of twenty twenty five. We think they will continue 0:03:23.960 --> 0:03:26.079 to lean into that. I think they read through for 0:03:26.160 --> 0:03:28.680 maybe for investors. Not only is that good for sort 0:03:28.680 --> 0:03:32.440 of mortgage spreads, mortgage rates, and potentially helping the economy 0:03:32.440 --> 0:03:35.320 at least, you know, marginally, it also does decrease the 0:03:35.440 --> 0:03:39.320 chances that the GSS go public. I think the President 0:03:39.400 --> 0:03:42.640 understands he actually would much rather control the GSCs than 0:03:43.120 --> 0:03:44.160 to issue them to the public. 0:03:44.160 --> 0:03:45.600 Well, how much more do you see them actually buying? 0:03:45.640 --> 0:03:47.520 I mean, how much can this be accelerated and become 0:03:47.600 --> 0:03:49.440 a main story, particularly at the long end of the 0:03:49.480 --> 0:03:49.920 Yeld curve. 0:03:50.080 --> 0:03:53.800 Yeah, so it it's a good question. Right now, FHIFA 0:03:53.840 --> 0:03:57.200 and Treasury have capped how much the GSS can hold 0:03:57.200 --> 0:03:59.720 on their balance sheets, to four hundred and fifty billion 0:03:59.720 --> 0:04:02.320 dollars collectively between Fanny and Freddy. Right now they have 0:04:02.320 --> 0:04:05.520 about two hundred and fifty billion as of last filing, so. 0:04:05.440 --> 0:04:06.320 They can still go up. 0:04:06.360 --> 0:04:08.360 I mean the President has directed that two hundred billion 0:04:08.400 --> 0:04:11.760 dollar gap to be filled. Now, interestingly, that four hundred 0:04:11.760 --> 0:04:13.960 and fifty billion dollars, that is not a statutory limit, 0:04:14.000 --> 0:04:16.839 I meaning the Congress doesn't have to get involved. FHFA 0:04:16.920 --> 0:04:19.480 and Treasury. FHFA, the regulator of Fanny and Freddy, can 0:04:19.480 --> 0:04:21.880 simply change that. So there's actually I think a lot 0:04:21.920 --> 0:04:25.600 of runway here. If you go back to the financial crisis, 0:04:25.960 --> 0:04:27.960 Fanny and Freddie owned up to one and a half 0:04:28.040 --> 0:04:30.200 trillion dollars of mortgages. So are they going to go 0:04:30.240 --> 0:04:33.400 back there? Probably not, but you know it is there 0:04:33.440 --> 0:04:35.400 is still more runway. And I think the question though, 0:04:35.920 --> 0:04:38.200 is on worsh in the balance you know, the FED 0:04:38.279 --> 0:04:40.880 chair nominee worsh on the balance sheet, because of course 0:04:41.080 --> 0:04:44.680 they're letting kind of mortgages run off, effectively selling mortgages, 0:04:45.440 --> 0:04:47.400 and of course the other side of the administration is 0:04:47.400 --> 0:04:49.720 buying mortgages to bring down. Right, So we'll see there's 0:04:49.720 --> 0:04:51.359 a little bit of tension there, as there always is 0:04:51.440 --> 0:04:54.240 between the fiscal policy makers and the monetary policy makers. 0:04:54.360 --> 0:04:55.960 We'll sort of see if he's asked that in his 0:04:56.560 --> 0:04:57.359 confirmation hearing. 0:04:57.400 --> 0:04:59.039 I'm really glad that we haven't talked about a government 0:04:59.080 --> 0:05:01.799 shutdown so far. Today evidently had ended and now we're fine, 0:05:01.920 --> 0:05:05.479 except that potentially not so much in about nine days, 0:05:05.480 --> 0:05:07.720 when TSA might get defunded and then we won't be 0:05:07.760 --> 0:05:10.400 able to fly. And I'm just wondering, how likely is 0:05:10.440 --> 0:05:12.560 that that TSA and the Coast Guard are going to 0:05:12.560 --> 0:05:14.599 be what gets defunded in nine days, and so that 0:05:14.640 --> 0:05:16.000 all of a sudden the airports are going to be 0:05:16.040 --> 0:05:19.800 absolutely terrific or in a terrible way in the next 0:05:19.800 --> 0:05:20.320 couple of weeks. 0:05:20.400 --> 0:05:23.279 It just bothered you, so no, no, I know, I 0:05:23.320 --> 0:05:25.479 understand obviously, this is that one of the ways that 0:05:25.520 --> 0:05:28.839 people consume government services right is through the airports. I think, 0:05:28.920 --> 0:05:31.039 happily we are not going to be talking about a 0:05:31.160 --> 0:05:36.160 macro impactful shutdown until potentially September when Congress that has 0:05:36.200 --> 0:05:38.280 to fun the FY twenty seven bill. 0:05:38.440 --> 0:05:40.400 I think that's unlikely. Though we see a shutdown. 0:05:40.440 --> 0:05:42.240 Usually folks don't like to shut down the government, right 0:05:42.240 --> 0:05:44.880 before the midterms. But you're right that this one thing 0:05:44.920 --> 0:05:49.160 that has not been funded. Funding for DHS does include TSA. 0:05:49.520 --> 0:05:52.680 There's obviously this negotiation going on around ice limitations and 0:05:52.760 --> 0:05:54.640 what have You will sort of see how that plays out. 0:05:54.760 --> 0:05:58.000 But we could see that shutdown. I think more likely, though, 0:05:58.080 --> 0:06:01.400 you might just see another cr to sort of build time. 0:06:01.520 --> 0:06:04.240 I think that you know, shutdowns, you do quite well 0:06:04.240 --> 0:06:06.440 politically on either side of the aisle, and I think 0:06:06.520 --> 0:06:10.000 both parties have a vested interest and not seeing the 0:06:10.400 --> 0:06:11.000 government shutter. 0:06:11.600 --> 0:06:15.120 Stay with us more Bloomberg surveillance coming up after this, 0:06:24.560 --> 0:06:27.640 South Korea's top diplomat meeting with Secretary of Saint Marco 0:06:27.760 --> 0:06:30.479 Rubio as the country races to avoid a tariff hike. 0:06:30.680 --> 0:06:33.640 Jean Saroka, the executive director of the Port of Los Angeles, writing, 0:06:33.680 --> 0:06:36.480 tariffs continue to keep everyone on edge. I expect more 0:06:36.560 --> 0:06:39.320 uncertainty ahead on the trade front. Jean joins us now 0:06:39.320 --> 0:06:41.040 for more. Jane, Welcome to New York. Good morning, good 0:06:41.080 --> 0:06:42.560 to see you. I'm going to see you, sir. Let's 0:06:42.560 --> 0:06:45.040 get into the numbers. Talk about tough comps. I think 0:06:45.080 --> 0:06:47.160 that's an understatement to say that you've got tough comps 0:06:47.240 --> 0:06:48.680 relative to last year? 0:06:48.680 --> 0:06:49.960 How much have things slowed down? 0:06:50.600 --> 0:06:53.760 January over eight hundred thousand container units off by a 0:06:53.760 --> 0:06:56.560 little bit more than ten percent. February looks to be 0:06:56.560 --> 0:06:59.200 about the same. We've got a mid quarter lunar New 0:06:59.279 --> 0:07:02.800 year March, we'll see a traditional drop off. If you 0:07:02.839 --> 0:07:05.200 look at Q one versus last year, we'll probably be 0:07:05.279 --> 0:07:06.640 down in double digit fashion. 0:07:06.960 --> 0:07:10.080 How much is a reflection of consumers not buying and 0:07:10.080 --> 0:07:12.720 how much this is a reflection of a lot of 0:07:12.720 --> 0:07:14.960 different industry is not wanting to import because of the. 0:07:14.920 --> 0:07:18.119 Tariffs, Lisa, Probably a combination of both. And here's why. 0:07:18.560 --> 0:07:20.640 Last year and even going back to the campaign trail, 0:07:20.680 --> 0:07:22.440 as we've discussed, you saw a lot of run ups 0:07:22.440 --> 0:07:24.920 to try to build inventories ahead of tariffs and work 0:07:25.040 --> 0:07:29.160 unit prices down. Secondly, while retailers are doing okay, holiday 0:07:29.200 --> 0:07:32.040 sales not bad, Matt Chay says, we crossed a trillion 0:07:32.120 --> 0:07:36.480 dollars according to the National Retail Federation. That's also inflation induced. 0:07:36.480 --> 0:07:39.119 So the number of units moving at the retail level 0:07:39.360 --> 0:07:41.720 a little bit lower, prices have gone up. 0:07:42.080 --> 0:07:44.239 How much has there been a complete shift in terms 0:07:44.240 --> 0:07:47.360 of where things are being sourced? That do come to 0:07:47.400 --> 0:07:49.760 the port I'm just curious if there is sort of 0:07:49.880 --> 0:07:54.680 a sense of favoring, say paces in South America over 0:07:54.760 --> 0:07:56.960 say Southeast Asia. Have you seen that shift in a 0:07:56.960 --> 0:07:57.720 material way. 0:07:57.880 --> 0:08:01.920 It's noticeable, and companies are still looking. CEOs and executives 0:08:01.960 --> 0:08:04.480 are telling me that their staff is spending a lot 0:08:04.560 --> 0:08:07.680 more time both on simulation of what would happen next, 0:08:07.720 --> 0:08:09.880 based on policy, where do I source from, how do 0:08:09.920 --> 0:08:12.280 I get contracts in place? And just trying to keep 0:08:12.360 --> 0:08:15.560 up with all this information. So for US, China was 0:08:15.640 --> 0:08:18.800 sixty percent of our portfolio back in twenty eighteen. This 0:08:18.920 --> 0:08:21.920 year it'll drop below forty percent. Yet we're still growing 0:08:22.000 --> 0:08:24.800 because we've been chasing the freight. But trying to keep 0:08:24.840 --> 0:08:27.640 your eye on what's next is going to be very interesting. 0:08:27.880 --> 0:08:31.559 Tree deal with India yesterday, maybe some possibilities there. 0:08:31.680 --> 0:08:34.520 Well, this is interesting because I didn't get a direct 0:08:34.559 --> 0:08:37.840 answer from Ambassador Career in Davos about this. The transshipment, 0:08:37.920 --> 0:08:40.680 how do you track it? Because China is still sending 0:08:40.679 --> 0:08:43.439 to the hind stage, just not directly from Beijing. There 0:08:43.480 --> 0:08:44.320 is a middle sting. 0:08:44.400 --> 0:08:45.480 Yeah, yeah, a couple things. 0:08:45.920 --> 0:08:49.360 Traditionally, supply chains at Asia were country to country, so 0:08:49.480 --> 0:08:52.360 the buttons and plackets on a shirt made in China. 0:08:52.520 --> 0:08:54.600 Go down to Vietnam, you make the whole shirt, sell 0:08:54.640 --> 0:08:57.560 it to Macy's here on thirty fourth Street. Some bad 0:08:57.600 --> 0:09:00.439 actors out there are trying to circumvent tariffs go lower 0:09:00.480 --> 0:09:04.200 cost countries by transhipping. But China has announced in the 0:09:04.200 --> 0:09:07.560 fifteenth five year Plan is not only exporting goods, they're 0:09:07.559 --> 0:09:13.160 now manufacturing expertise exporters as well, so they're investing in 0:09:13.320 --> 0:09:17.440 plants along the Pacific Rim and other locations around the world. 0:09:17.520 --> 0:09:19.200 Do you think this administration will go after that? 0:09:19.559 --> 0:09:20.360 Yeah? Probably so. 0:09:20.760 --> 0:09:22.200 How challenging is that it's. 0:09:22.080 --> 0:09:26.040 Really challenging because it's tough to get hard data on 0:09:26.160 --> 0:09:30.040 where this supply chain starts and who's funding it and 0:09:30.040 --> 0:09:30.840 who's funding it. 0:09:31.080 --> 0:09:33.880 We've told lots with you about how much improved systems 0:09:33.880 --> 0:09:37.120 and processing through the pandemic. How much have things slowed 0:09:37.160 --> 0:09:39.120 down because of the tariffs. Can you give us an 0:09:39.120 --> 0:09:41.840 idea of what that looks like now relative to where 0:09:41.880 --> 0:09:43.080 it was the year before. 0:09:43.240 --> 0:09:47.320 Well historically, compared to the numbers of containers we're moving 0:09:47.360 --> 0:09:49.840 right now, we look pretty decent, but it's been super 0:09:49.960 --> 0:09:53.040 choppy from COVID to a little bit of downturn based 0:09:53.080 --> 0:09:55.640 on high inventories and then all this tariff build up. 0:09:55.880 --> 0:09:58.800 It just looks different. But last year was our third 0:09:58.920 --> 0:10:01.720 busiest on record in one hundred and eighteen years and 0:10:01.760 --> 0:10:04.240 we didn't have one ship backed up. We're doing things 0:10:04.280 --> 0:10:07.960 a little bit smarter, working together and information technology please 0:10:08.000 --> 0:10:09.320 a huge role here, John. 0:10:09.240 --> 0:10:11.679 That's super impressive. We can still see in the data though, 0:10:11.800 --> 0:10:14.319 that are still problems. ICM Manufacturing came out in the 0:10:14.400 --> 0:10:16.200 last couple of days and if you go through the 0:10:16.200 --> 0:10:17.959 commentary Gene and thew ME. Just to go through the 0:10:18.000 --> 0:10:21.600 commentary here trade TARFF uncertainty is creating volatility in the 0:10:21.600 --> 0:10:24.840 supply chain. It's making long term planning point list. This 0:10:24.920 --> 0:10:28.240 comes from a range of industries within manufacturing that continues 0:10:28.280 --> 0:10:31.520 to be uncertainty and added costs through our global operations 0:10:31.559 --> 0:10:33.160 at LEASTA. Just going through the details, it was a 0:10:33.160 --> 0:10:35.360 great number, by the way, decent print, But you go 0:10:35.400 --> 0:10:37.840 through the details and the commentary coming from various industries, 0:10:38.200 --> 0:10:38.760 it's not good. 0:10:38.800 --> 0:10:39.959 It's not good reading at all. 0:10:40.040 --> 0:10:40.199 Well. 0:10:40.240 --> 0:10:42.520 It creates this level of uncertainty and when you talk 0:10:42.600 --> 0:10:45.600 to different CEOs, they say, we didn't price in a 0:10:45.600 --> 0:10:48.439 lot of the tariffs last year because we had inventories 0:10:48.440 --> 0:10:52.560 that we were pushing through. We don't have those inventories anymore, 0:10:52.640 --> 0:10:54.880 so now we have to pass along the price increases 0:10:55.160 --> 0:10:56.679 and how can they do that at a time where 0:10:56.720 --> 0:10:58.840 the consumer is looking for value? 0:10:59.000 --> 0:11:01.480 So last year we talked about this concept, this phrase 0:11:01.520 --> 0:11:03.760 that Gym's out from Polo mentioned, and it was macro 0:11:03.880 --> 0:11:06.160 paralysis that for a lot of companies that were just 0:11:06.200 --> 0:11:08.640 sat still, they couldn't make decisions, didn't know what to do. 0:11:08.760 --> 0:11:10.840 Do you see any of that? I do. Yeah. 0:11:10.960 --> 0:11:13.600 We talked some time ago about people hitting the pause 0:11:13.640 --> 0:11:17.040 button and their finger is still on it. Hiring is flat, 0:11:17.160 --> 0:11:21.480 new jobs non existent, and realistically speaking, companies are not 0:11:21.640 --> 0:11:25.760 looking at longer term horizons for planning purposes. And capital 0:11:25.760 --> 0:11:28.120 investment also very soft. 0:11:28.360 --> 0:11:29.600 Then how do you plan for that? 0:11:30.240 --> 0:11:34.520 We have to invest through budget cycles, economic cycles, and 0:11:34.679 --> 0:11:38.200 even election cycles. We've got about ten billion dollars worth 0:11:38.240 --> 0:11:41.400 of projects on the capital side right now. New terminals 0:11:41.400 --> 0:11:43.480 for the first time in a generation. We need a 0:11:43.520 --> 0:11:48.360 new bridge crossing onto Terminal Island and outlining more rail 0:11:48.440 --> 0:11:52.199 capacity as well as road connectors to keep this cargo flowing. 0:11:52.400 --> 0:11:54.840 We'll see this, there'll be ups and downs, but long 0:11:54.920 --> 0:11:56.720 term growth will take place. 0:11:56.480 --> 0:11:59.040 If companies don't have inventory anymore and they don't want 0:11:59.040 --> 0:12:00.679 to build too much in victory because they don't know 0:12:00.679 --> 0:12:02.960 how things are going to change. How much are people 0:12:03.000 --> 0:12:06.320 looking for much faster shipments and smaller shipments each time. 0:12:06.800 --> 0:12:09.560 That's exactly what's focusing right now and what we saw 0:12:09.640 --> 0:12:12.480 last year when the trade policy was softened and tariffs 0:12:12.559 --> 0:12:17.000 came down during negotiations, importers had windows of opportunity to 0:12:17.040 --> 0:12:19.360 get their cargo here and the fastest way was through 0:12:19.400 --> 0:12:22.800 the Southern California Gateway. So while overall imports were down 0:12:22.840 --> 0:12:25.280 in the country, we were up simply because of that 0:12:25.520 --> 0:12:28.400 certainty and the fast pace that we gd a cargo 0:12:28.520 --> 0:12:30.200 from Asia into the country. 0:12:30.720 --> 0:12:43.920 Stay with us Mulplenberg. Savannan's coming up after this downside 0:12:43.960 --> 0:12:46.559 surprise twenty two K. They expected number and US to 0:12:46.600 --> 0:12:48.839 have a forty five thousand with us around the table. 0:12:48.920 --> 0:12:51.839 James Echohoff of BNP parent bunch, James, good to see you. 0:12:51.840 --> 0:12:52.600 Great to be backing. 0:12:52.679 --> 0:12:55.600 We've seen some signs not here but elsewhether the labor 0:12:55.640 --> 0:12:57.839 market was firming up a bit coming against the new year. 0:12:57.840 --> 0:13:00.160 Would you put more way on that than this look. 0:13:00.160 --> 0:13:02.080 We think the economy is at a great place this year, 0:13:02.160 --> 0:13:03.679 but we're very optimistic about the. 0:13:03.600 --> 0:13:04.360 Outlook with that. 0:13:04.400 --> 0:13:07.520 We're looking for very strong growth that's driven by stimulative 0:13:07.520 --> 0:13:11.480 fiscal policy, stimulative monetary policy, stimulative markets, and the early 0:13:11.640 --> 0:13:14.400 signs of AI beginning to impact the economy. 0:13:14.600 --> 0:13:16.959 We think there's a likelihood that some of that is. 0:13:16.880 --> 0:13:18.960 Going to slash into the labor market, and it's support well, 0:13:18.960 --> 0:13:20.720 we think has already been a pretty bersilient. 0:13:20.440 --> 0:13:23.560 You've got an accounts for twenty six absolutely just explain 0:13:23.640 --> 0:13:24.240 that for us. 0:13:24.559 --> 0:13:25.800 We think the Fed is. 0:13:25.760 --> 0:13:27.560 Going to react to the data, that it's going to 0:13:27.600 --> 0:13:30.880 follow the economic outlook and its standard policy framework, regardless 0:13:30.880 --> 0:13:32.280 of who leads it or for the course of the year. 0:13:32.720 --> 0:13:35.319 So we think that Powell, I think is delivered the 0:13:35.360 --> 0:13:37.600 easing he wants to deliver. We had earlier thought there 0:13:37.640 --> 0:13:39.760 might be room for one last one, but the data 0:13:39.800 --> 0:13:41.480 is just held up just so well. 0:13:41.360 --> 0:13:42.839 That we've recently taken that out. 0:13:43.040 --> 0:13:45.200 Beyond that, we think the data will tell the story, 0:13:45.640 --> 0:13:48.000 and that the story of a strong economy and with 0:13:48.080 --> 0:13:50.040 a stable labor market and with inflation that's a bit 0:13:50.080 --> 0:13:50.960 higher than what then we think the. 0:13:50.960 --> 0:13:52.320 FED is looking for Well, we're not going to get 0:13:52.360 --> 0:13:53.800 the data on Friday, so we're not going to have 0:13:53.800 --> 0:13:56.400 the data that actually proves that out. Yet, the data 0:13:56.400 --> 0:13:58.880 that we are getting, this ADP number of twenty two thousand, 0:13:58.880 --> 0:13:59.200 I mean. 0:13:59.080 --> 0:13:59.960 It's pretty low. 0:14:00.000 --> 0:14:01.800 Well, how do you look at this and explain to 0:14:01.800 --> 0:14:03.240 people this is actually very good. 0:14:03.559 --> 0:14:05.120 Well, this is the debate at the FED, and we 0:14:05.160 --> 0:14:07.800 saw your Governor Waller dissent saying, look, zero job's growth 0:14:07.800 --> 0:14:09.960 of a las year after we see expected revisions in 0:14:10.000 --> 0:14:12.840 his estimation, that that's not a healthy labor market. And 0:14:12.880 --> 0:14:15.960 you have others, including Shairpal saying, look, immigration policy has 0:14:16.040 --> 0:14:18.240 changed a lot. There are a lot fewer people coming 0:14:18.240 --> 0:14:20.200 to the country, a lot of people have left. 0:14:20.560 --> 0:14:24.040 This may well be a full employment pace of job gains. 0:14:24.200 --> 0:14:26.040 So our view is that the pace we'll see over 0:14:26.080 --> 0:14:28.480 the coming year is something on the lines of fifty k. 0:14:28.560 --> 0:14:29.920 So this is a little bit low the one that 0:14:29.960 --> 0:14:33.120 we just off from ADP, but that ultimately is the 0:14:33.160 --> 0:14:36.160 pace that can ourgue close to that pace that maintains 0:14:36.200 --> 0:14:38.239 the labor market at this current level of unemployment. 0:14:38.320 --> 0:14:40.080 One of the reasons why a number of people have 0:14:40.160 --> 0:14:42.440 priced in at least two rate cuts for this year 0:14:42.520 --> 0:14:44.000 is not because I think the economy is going to 0:14:44.000 --> 0:14:46.120 fall off a cliff, but because they believe that any 0:14:46.160 --> 0:14:47.960 kind of growth is going to come with disinflation. We 0:14:47.960 --> 0:14:50.920 saw PEPSI, for example, cutting prices by ten to fifteen 0:14:50.960 --> 0:14:53.960 percent in response to some of their efficiencies to try 0:14:53.960 --> 0:14:56.480 to increase their customer volume. 0:14:56.720 --> 0:14:59.600 How much do you see this as. 0:14:59.520 --> 0:15:01.880 Likely a good backdrop for the FED to be cutting 0:15:02.040 --> 0:15:04.280 because if you don't see any cuts, you don't buy 0:15:04.280 --> 0:15:05.840 that disinflation story. Is that right? 0:15:06.040 --> 0:15:07.920 Our view is that the AI boom is coming and 0:15:07.920 --> 0:15:10.080 we're going to see a boost in productivity, but that 0:15:10.120 --> 0:15:13.120 will also come with it a cyclical boom as well, 0:15:13.240 --> 0:15:15.520 And part of that is because of the neutral rate 0:15:15.560 --> 0:15:17.840 of rising over time, and part of that is because 0:15:17.840 --> 0:15:19.720 of the existing level of stimulus that we're seeing from 0:15:19.720 --> 0:15:22.880 fiscal monetary policy and from financial markets. So in addition 0:15:22.920 --> 0:15:25.280 to seeing the boost, the disinflationary boost to growth that 0:15:25.320 --> 0:15:27.720 you're referm to, we'll see a cyclical boost as well. 0:15:27.880 --> 0:15:29.840 This is a similar story to the nineties, where the 0:15:30.120 --> 0:15:33.680 green Span is widely heralded for not hiking during that period. 0:15:33.680 --> 0:15:35.360 It wasn't that he cut into that. It was that 0:15:35.400 --> 0:15:36.800 he delayed hikes to allow. 0:15:36.640 --> 0:15:38.840 The productivity boom to play out, and we think that 0:15:38.840 --> 0:15:41.400 that's a likely prospect ahead. Is that the federal standpad 0:15:41.800 --> 0:15:44.120 while it sees strong growth and while it sees some 0:15:44.320 --> 0:15:45.640 residual inflation pressure. 0:15:45.760 --> 0:15:50.479 Well, you seeing the AI boom and productivity being inflationary 0:15:50.560 --> 0:15:51.840 or disinflationary. 0:15:52.120 --> 0:15:55.280 See productivity on its own being disinflationary. But it will 0:15:55.320 --> 0:15:58.120 come with more So we'll see some growth from AI 0:15:58.480 --> 0:16:00.520 and then we'll see even more growth. We think we're 0:16:00.560 --> 0:16:02.720 set up for a very strong year of growth and 0:16:02.760 --> 0:16:05.040 that that will come with it labor market strength and 0:16:05.080 --> 0:16:06.400 with a bit more inflation. 0:16:06.000 --> 0:16:08.960 When it comes to the AI build out, data centers, etc. 0:16:09.280 --> 0:16:13.360 That is, to do you think inflationary electricity needed the 0:16:13.400 --> 0:16:14.320 cost of building. 0:16:15.080 --> 0:16:17.760 We think it's a moderate impact on the inflationary outlook. 0:16:18.000 --> 0:16:21.520 Tech capex as a contribution to GDP isn't historically that high. 0:16:21.600 --> 0:16:24.120 It just become a bit more concentrated. So we think 0:16:24.160 --> 0:16:27.240 that that's ultimately a fairly modest impact on our growth 0:16:27.280 --> 0:16:30.080 in our inflation forecast. What we think is mattered more 0:16:30.400 --> 0:16:33.600 has been the overall booming business sentiment that has come 0:16:33.600 --> 0:16:36.640 from AI. We saw eism earlier this week as a blowout. 0:16:36.880 --> 0:16:39.280 We think that part of that is optimism from AI. 0:16:39.720 --> 0:16:42.040 It's filtering through to the rest of the economy and 0:16:42.080 --> 0:16:44.800 supporting activity that has a sick look proportent to it, 0:16:44.840 --> 0:16:46.960 and we think that will help drive growth, help drive 0:16:47.040 --> 0:16:47.480 labor market. 0:16:47.480 --> 0:16:49.760 This I'm a trained by the rate on Kevin Wosh, 0:16:49.800 --> 0:16:51.200 so let's develop that a little bit more. 0:16:51.280 --> 0:16:52.800 Governor Myron sent this this week. 0:16:52.880 --> 0:16:54.520 I'm probably looking for a little bit more than a 0:16:54.520 --> 0:16:57.240 point of interest rate counts over the course of the year. 0:16:57.640 --> 0:17:01.880 Why would chair Wash be that much different to Governor Myron. 0:17:02.320 --> 0:17:04.520 So when I think about this, I often go back 0:17:04.520 --> 0:17:08.000 to James Carvel's comment from the nineties when he's reincarnated, 0:17:08.040 --> 0:17:09.880 he wants to come back as the bond market because 0:17:09.880 --> 0:17:13.560 he can intimidate everybody. Ultimately, we think FED chairs face 0:17:13.640 --> 0:17:17.639 fairly strong incentives to deliver pro growth, pro market outcomes. 0:17:17.960 --> 0:17:20.280 Kevin Warsh is well known for being a very well 0:17:20.359 --> 0:17:23.439 networked person among financial circles, and we think he will 0:17:23.480 --> 0:17:25.360 follow the same asset price signals as as our FRED 0:17:25.400 --> 0:17:27.639 chairs do and that will leave him, in our view, 0:17:28.040 --> 0:17:31.560 following a fairly standard reaction function. We think he will 0:17:31.600 --> 0:17:33.520 want to do that because that is what achieves the 0:17:33.520 --> 0:17:35.840 best economic result, and we think he will face pressure 0:17:35.840 --> 0:17:37.199 from the rest of the poblacy to do that as well. 0:17:37.240 --> 0:17:39.080 At least it's not convinced. I can just say on 0:17:39.160 --> 0:17:41.240 the ConA my eye, the Palmi wasn't convinced. 0:17:41.440 --> 0:17:43.040 Well, No, I just think that if he talks to 0:17:43.080 --> 0:17:44.600 people in the market, there are a lot of people 0:17:44.640 --> 0:17:47.199 who actually agree with the FED potentially cutting rates at 0:17:47.240 --> 0:17:49.600 least two times. I mean, the Wall Street isn't exactly 0:17:50.119 --> 0:17:52.720 unified in what they think, and more people come on 0:17:52.720 --> 0:17:54.680