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Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg weekly

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Speaker 1: market podcast. I'm Sarah Ponzac, a reporter on the Cross

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Speaker 1: Asset Team, and I'm Mike Reagan, a senior editor on

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Speaker 1: the Markets teams. Our first episode of It's Pretty Crazy.

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Speaker 1: I know. Do you have any New Year's resolutions? Sarah,

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Speaker 1: I can put you on the spot, Like, yeah, you're

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Speaker 1: really putting me on the spot. I can't say I've

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Speaker 1: ever been a New Year's resolution type person, really big

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Speaker 1: about just trying to better yourself through the year. Um

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Speaker 1: do you Well, I've got a teenage daughter who's going

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Speaker 1: to be getting her driver's learning permit? Are you going

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Speaker 1: to be teaching her very soon in the new year? So?

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Speaker 1: Uh well, Luckily in New Jersey they forced them to

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Speaker 1: take driver's ED so I don't have to do most

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Speaker 1: of the teaching. But uh I think my resolution is

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Speaker 1: going to be not to have a heart attack at

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Speaker 1: any time during the new year. That's a good one.

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Speaker 1: Good luck with that. No drivers that in Florida, Yeah

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Speaker 1: you can get away with it. But happy New Year

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Speaker 1: to everyone who's listening. Right, And luckily we have a

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Speaker 1: guest who's going to predict exactly what's going to happen

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Speaker 1: in the new year to a correct rate of predictions.

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Speaker 1: I assume is all right, Chris Harvey, head of equity

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Speaker 1: strategy at Wells Fargo. Absolutely, we've got it down to

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Speaker 1: a ti. Whatever you want to know, we've got the answer.

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Speaker 1: The shell answer man right now. I do I feel

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Speaker 1: sorry for you guys because you have to make these predictions.

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Speaker 1: Is this like how much do you sweat these things?

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Speaker 1: Sometimes a lot, sometimes very little. And sometimes the funny

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Speaker 1: thing is when things work, then people ask you, so

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Speaker 1: what's next? And you said to yourself, well, I'm not

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Speaker 1: really sure. But that's never a good answer. They demand

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Speaker 1: exactly what's going to happen. I've got to say I

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Speaker 1: was looking over your predictions from the past year, and

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Speaker 1: you guys really did do a good job at calling

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Speaker 1: what was is a very unusual, unexpected year. I must say, sorry,

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Speaker 1: you're not supposed to look at last year's predictions that

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Speaker 1: they don't like that, but they were right. If they

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Speaker 1: were wrong, maybe I wouldn't or maybe I would have

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Speaker 1: saved it to the end of the podcast. But let's

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Speaker 1: let's get into this year's I uh, some some I

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Speaker 1: poppers here one I think is very provocative. Expect of

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Speaker 1: potential five to ten percent pullback in the first half

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Speaker 1: of five percent pullbacks, Theoretically you should not be that uncommon,

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Speaker 1: but we just have gotten used to not seeing them.

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Speaker 1: What's what's the gist of why you think that could happen.

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Speaker 1: So as we look in the market, there's a lot

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Speaker 1: of things to like. Rates are lower, credit spreads are tighter,

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Speaker 1: the fete has been a combinative um. We've got some

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Speaker 1: sort of resolution with trade and tariff, and sentiment has improved,

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Speaker 1: and it improved greatly. And that's what we don't like.

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Speaker 1: When everything starts turning positive, expectations go higher, it's usually

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Speaker 1: not a great time for equity markets. And with a

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Speaker 1: vix in and round twelve, you can see things change quickly.

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Speaker 1: I'll quickly go back to fourth quarter of two thousand

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Speaker 1: and eighteen, when the wheels were falling off the card,

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Speaker 1: the world was going to end. It was a fantastic

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Speaker 1: time to get involved. You had returns that were well

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Speaker 1: into the double digits um and you had great opportunity

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Speaker 1: to invest here. Typically, when people are a little bit

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Speaker 1: more what we would say greedy as as opposed to fearful,

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Speaker 1: it's not always a great time, and so with expectations

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Speaker 1: so much higher, we're just worried that things can change

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Speaker 1: and change rather quickly. It's that old Buffett trope, you

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Speaker 1: know what, it's fearful when everyone's greedy, and greedy when

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Speaker 1: everyone's fearfully and you know, it seems to play out

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Speaker 1: again and again. It's one of those cliches that keeps

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Speaker 1: coming back for a reason. Um. I think the phrases

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Speaker 1: buying when you can, not when you have to, and

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Speaker 1: so when you can, not when you have to, and

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Speaker 1: I think that applies here, so also fitting into that

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Speaker 1: correction called potentially coming within the beginning of I also

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Speaker 1: saw you mentioned and liquidity and the Fed's balance sheet.

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Speaker 1: I saw a statistic recently. But if the Fed's balance

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Speaker 1: sheet continues to grow at the pace we've been seeing

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Speaker 1: it grow at, it will be at a new record

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Speaker 1: by May. Is it going to be very difficult once

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Speaker 1: again for the Fed to try to wean investors off

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Speaker 1: of this liquidity. I think that's a great question. And

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Speaker 1: we've been saying at what point does the FED stop intervening?

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Speaker 1: And you're right about the the massive amount of liquid

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Speaker 1: in the marketplace, Whether it's um from the FED or

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Speaker 1: whether it's from the credit market. If we look at

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Speaker 1: half by the end of it or by the end

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Speaker 1: of I think first quarter will have the balance sheet

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Speaker 1: grown by a half a trillion dollars. Interestingly, what what

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Speaker 1: does that do? Well? That that shortens the duration of

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Speaker 1: the balance sheet, which is good because what we've seen

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Speaker 1: is the curve is starting to steepen. That's a very

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Speaker 1: positive economic signal. But at some point we have to

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Speaker 1: let the economy, we will have to let the markets

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Speaker 1: stand on their own, and we need we need for

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Speaker 1: more diversification, or we need things to be really priced

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Speaker 1: more appropriately. And that's the issue where also having it

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Speaker 1: is everything is fantastic, everything's great. We need a lot

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Speaker 1: more differentiation. Another thing that caught my eye in a

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Speaker 1: recent note of yours downgrading semiconductor stocks, and I can't say,

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Speaker 1: I can't tell you how many TV hits I've done

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Speaker 1: this year where someone's been like, why are semi conductor

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Speaker 1: stocks so still and so well? And you know, the

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Speaker 1: sort of stock answer has been, well, it's the next

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Speaker 1: big thing. If five G Internet of things that the

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Speaker 1: cloud is still has to be built out. But I've

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Speaker 1: always you know, wanted to add sort of that Trumpian

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Speaker 1: uh catchphrase. Well we'll see what happens, you know, because

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Speaker 1: it does seem I mean, earnings for semis this year

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Speaker 1: we're pretty abysmal um and there it's crazy to see

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Speaker 1: this rally. And then what's is your main rationale for

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Speaker 1: forgetting a little cautious on semmings. So in two thousand nineteen,

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Speaker 1: we wanted to add cicklicality to the portfolio. We want

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Speaker 1: to do it in a stepwise fashion. So we came

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Speaker 1: into the year overweight capped goods, we upgraded the semis,

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Speaker 1: and then ultimately we we went overweight the banks. Everything

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Speaker 1: worked quite well, actually I think too well, and so

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Speaker 1: we on greaded the semis for three reasons. It was macro,

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Speaker 1: it was sentiment, and it was relative performance and working backwards.

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Speaker 1: Relative performance has been fantastic. It really has been a

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Speaker 1: fantastic year. The semi some of the semi in dcs

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Speaker 1: are up. The second thing is sentiment. To your point,

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Speaker 1: sentiment is turned dramatically. You had everyone saying that the

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Speaker 1: cycle or the bottom of the cycle won't be for

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Speaker 1: another twelve or twenty four months. Turns out it was

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Speaker 1: a lot sooner. Maybe we have a different calendar than

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Speaker 1: most people. And the last thing is from a macro

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Speaker 1: point of view, as we go into and look into

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Speaker 1: from a portfolio point of view, we want to start

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Speaker 1: laying off a little bit of risk. We think that

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Speaker 1: the cyclicality that we told you to buy, we want

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Speaker 1: to start harvesting at this point in time. And the

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Speaker 1: move is just exceptional at this juncture. And does it

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Speaker 1: all relate to the trade situation at all? I know

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Speaker 1: something else you've written is that phase two could be elusive.

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Speaker 1: I mean, I'll put out phase one still is kind

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Speaker 1: of elusive there, but um will uh sort of dumbling

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Speaker 1: blocks on the way to phase two be as big

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Speaker 1: of a deal as uh stumbling blocks in phase one,

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Speaker 1: and and the semis play a role in in that

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Speaker 1: at all. So so the first thing I would say

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Speaker 1: is if this was your first day and the job

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Speaker 1: and people said, hey, what a trade in tariff to

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Speaker 1: the semi conductors, you would have said it really helped them,

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Speaker 1: which is which is odd. So now that we've had

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Speaker 1: the semi we have some sort of certainty, and I

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Speaker 1: agree with you, we're not certain what phase one actually is.

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Speaker 1: Our our view on Phase two is you're not going

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Speaker 1: to see a Phase two anytime soon, and so we

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Speaker 1: will get a lot of bumps and we will get

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Speaker 1: a lot of fits and starts with regard to it.

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Speaker 1: If you look at what the Chinese are doing or

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Speaker 1: what they're not doing, there's no behavioral change. They don't

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Speaker 1: want it. They they've shown you no indication that they

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Speaker 1: want to change. And at the end of the day,

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Speaker 1: I think Phase one was, Okay, we'll get something on

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Speaker 1: the table, something moderate or small, you claim victory, will

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Speaker 1: claim victory, and then we'll move on. And that's where

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Speaker 1: we are right now. With that said, do you think

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Speaker 1: the improvement that we have had with the quote unquote

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Speaker 1: elusive Phase one t a deal right now was enough

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Speaker 1: to really lift CEO confidence again potentially lead to an

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Speaker 1: uptick and CAPEX spending Because if now all of a

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Speaker 1: sudden we're talking about phase two, what's the enforcement mechanism

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Speaker 1: may be going to be. Is it possible tariffs go

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Speaker 1: back into effect again? In a way? Are we just

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Speaker 1: in this circle where what we did see in where

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Speaker 1: we saw a bit of a pause on business spending

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Speaker 1: plans just continue through. So a couple of thoughts and

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Speaker 1: I'll be a little bit all over the place. So

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Speaker 1: we don't think trade and tariff did that much to

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Speaker 1: the economy. It did slow things down, But what it

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Speaker 1: really did when we look at earnings, when we look

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Speaker 1: at stocks, the word the phrase we heard time and

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Speaker 1: time again uncertainty, uncertainty, uncertainty. So now we have some

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Speaker 1: sort of certainty that does help planning, That does help people, um,

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Speaker 1: maybe be a little bit more aggressive in their investment pattern.

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Speaker 1: So at the margin, I think it is better, But

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Speaker 1: is it a ton better? No, not really. There's not

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Speaker 1: a ton of pent up demand. It wasn't as if

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Speaker 1: we just went through some major recession. We didn't. We

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Speaker 1: had a moderate slow down, And so what we should

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Speaker 1: see on the flip side is something to improve on

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Speaker 1: a moderate fashion. Nothing more than that. Here's a line

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Speaker 1: I love in your outlook. Banks possibly to become the

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Speaker 1: new low volatility trade. Boy, if you had said that

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Speaker 1: a ten years ago, I'd I'd like to see the reaction.

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Speaker 1: But I mean, is this, you know, a function of

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Speaker 1: just the capital return story at banks? That, um, why

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Speaker 1: would they crash when you know, you know the dividends

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Speaker 1: are coming, you know the buybacks are coming. The Feds

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Speaker 1: kind of, you know, easing off a little bit on

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Speaker 1: those stress tests. You know that those capital plans are

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Speaker 1: getting maybe a little bit easier of a look, so

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Speaker 1: I hate to use this phrase, but this late in

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Speaker 1: the cycle because we've been this late in the cycle

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Speaker 1: for a very long time. Typically, banks balance sheets are

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Speaker 1: upside down backwards and and can be rather toxic. Additional,

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Speaker 1: in addition, they don't always do all that smart emin

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Speaker 1: a activity. They've been regulated out a lot of these issues,

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Speaker 1: and so banks balance sheees are actually quite good, one

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Speaker 1: of the things that we saw in third quarter. So

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Speaker 1: we upgraded banks in September of nineteen UM. A lot

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Speaker 1: of people said, hey, Chris, we like a lot of

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Speaker 1: your calls, but this you want to rethink this. People

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Speaker 1: are still shell shocked about the financial stocks. I feel like,

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Speaker 1: I mean, look, it is just December that the S

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Speaker 1: and P Financials finally reclaimed that seven records. That's remarkable

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Speaker 1: to me, and and the bank industry group still has it,

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Speaker 1: which is also pretty remarkable. But the pushback at that

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Speaker 1: point in time is Chris, credit costs are going to

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Speaker 1: go up. Chris, you really don't understand anything about about

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Speaker 1: an interest margins or the curve, it's just going to

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Speaker 1: be horrific. And what I said is you're you're really

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Speaker 1: not appreciating what's changed, how the fundamentals have changed, how

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Speaker 1: lower risk, how much more diversified they are. And then

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Speaker 1: we got third quarter numbers and everyone's like, oh, maybe

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Speaker 1: you are right, and so now you're starting. The run

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Speaker 1: up that we've seen has been very aggressive. And we

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Speaker 1: do like banks. We like them strategically longer term and

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Speaker 1: and to your point, we can also see multiple expansion

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Speaker 1: as people realize these are lower risk profile type companies.

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Speaker 1: And we talk about banks and banks being low voless

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Speaker 1: really the larger cap banks not so much the regional

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Speaker 1: and the smaller cap banks, and so we expect longer term.

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Speaker 1: But boy, you're right, they've had a heck of a

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Speaker 1: run over the last couple of months. But I mean,

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Speaker 1: you think about how long were they trading below A

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Speaker 1: lot of big banks were trading below book value for

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Speaker 1: Pize's sake. I mean, that's it's remarkable. They were hated

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Speaker 1: and when we we did the upgrade, there was a

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Speaker 1: lot of pushback. A lot of fundamental players just said

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Speaker 1: this isn't gonna work. And and even if You're right,

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Speaker 1: the market is not going to price it correctly, or

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Speaker 1: it's not going to price the belief that they are

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Speaker 1: are lower risk profile. What we said is we're seeing

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Speaker 1: a lot of money going to these quant funds. We're

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Speaker 1: seeing a lot of money going too low volatility funds.

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Speaker 1: They will be your your marginal driver return or your

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Speaker 1: marginal driver price. And so far that that's been more

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Speaker 1: right than row Is it partially sort of the moving

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Speaker 1: target of regulations? Who I mean banks obviously, like you said,

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Speaker 1: they've kind of been whipped in the shape after the crisis.

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Speaker 1: Now it seems like all the scorn in Washington is

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Speaker 1: going in the other direction towards uh, you know, the

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Speaker 1: big fang stocks that your your social media and your

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Speaker 1: internet stocks. Is that part of the story there? So

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Speaker 1: on regulation, one of the things we were saying, One

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Speaker 1: of the things in our recent note has been that

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Speaker 1: we think that tech will be the new healthcare. It

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Speaker 1: is scar I mean, just considering how how important tech

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Speaker 1: has been to the rally and the underperformance that we've

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Speaker 1: seen recently in healthcare due to talks of regulation and

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Speaker 1: heading into the election, and now I don't want to

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Speaker 1: say it's doom and gloom. But you're going to have

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Speaker 1: some bipartisanship, which is very unusual in Washington because both

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Speaker 1: sides and you can see it already are talking about

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Speaker 1: tech in issues, whether it's privacy or what have you.

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Speaker 1: We have the California Consumer Privacy Act coming too effect

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Speaker 1: next year and it's going to be on the forefront,

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Speaker 1: and we do worry that it's going to put a

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Speaker 1: fair amount of volatility into the names. And people are

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Speaker 1: always an election you're looking at health care. But again,

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Speaker 1: what I don't think what may surprise people is the

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Speaker 1: amount of rhetoric in and around some of these tech companies,

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Speaker 1: which in some cases isn't fair, in some cases may

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Speaker 1: be fair. When you say tech, do you actually mean

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Speaker 1: tech as in it would be classified by the gig

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Speaker 1: sectors or more so, you can think of it broader

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Speaker 1: as faying and the internet companies as well. So, um,

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Speaker 1: when we talk about tech, it is the broader indicries.

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Speaker 1: But obviously there are going to be certain companies and

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Speaker 1: certain subsectors that are more in the focus of the regulators,

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Speaker 1: whether it's on the Internet side, the ones that have

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Speaker 1: a little bit more pricing or a little bit more

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Speaker 1: information on your background as opposed to say a semiconductor. Um.

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Speaker 1: So the things that we worry about are more the

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Speaker 1: hardware and some of your portals, if you will. But overall,

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Speaker 1: if it affects one area, it should affect all areas

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Speaker 1: to some degree. Is there a chance of healthcare being

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Speaker 1: the new healthcare? To watch these democratic debates and I

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Speaker 1: guess the difference is that risk is to a large

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Speaker 1: degree priced in already. Um It that again great, great question.

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Speaker 1: So bigger picture, what we think is political risk. We

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Speaker 1: don't think it's really priced in at this juncture because

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Speaker 1: if you think about its sentiment is so good, everything

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Speaker 1: is so great. Um. If we look at the price

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Speaker 1: action in some of the healthcare spaces with the HMOs

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Speaker 1: or some of the providers, you saw this big sell

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Speaker 1: off um when we had Medicare for all first bandied about.

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Speaker 1: Now there's been a massive snap back in it, and

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Speaker 1: that's not going to go away. At some point the

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Speaker 1: Democrats are going to get some momentum. This will come

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Speaker 1: back to some degree, and I do think you're right.

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Speaker 1: Healthcare will be healthcare and there will be some pressure

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Speaker 1: on it. But ultimately with the valuations look pretty attractive

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Speaker 1: to us, and you probably want to get aggressive on

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Speaker 1: those sell offs. I want to get back to the

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Speaker 1: low all trade, which you had mentioned before. Where do

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Speaker 1: you guys actually stand on that broader low all trade,

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Speaker 1: because we just saw it grow in such popularity this

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Speaker 1: year and now we hear a couple of people coming

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Speaker 1: out saying, look, this has gone too far. We're going

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Speaker 1: to see you oursel and you pounded the table a

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Speaker 1: while is back on the trade. So where do you

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Speaker 1: guys stand now? So again, bigger picture, we've liked low

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Speaker 1: volatility low volatility sector for and we've been writing about

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Speaker 1: it for the last ten years. We got very aggressive

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Speaker 1: in the summer of two thousand it was two thousand

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Speaker 1: eight um but in the summer of two thousand nineteen,

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Speaker 1: what we were saying is it's now pricing in a recession,

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Speaker 1: and from a tactical point of view, we wanted to

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Speaker 1: fade that. We want to fade a lot of your

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Speaker 1: bond proxies, especially when the tenures in and around one

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Speaker 1: and a half percent. At some point we'll want to

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Speaker 1: come back to that, but we're not ready. One of

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Speaker 1: the things that we always talk about is the volatility

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Speaker 1: of low ball and how people are whether whether they're

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Speaker 1: discriminating or not discriminating across that volatility access Right now,

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Speaker 1: they don't really care. We're starting to see opportunities, were

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Speaker 1: starting to see low ball roll over, We're starting to

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Speaker 1: see your bond proxies pull back, the tactical opportunities opening up.

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Speaker 1: But just not yet. We need to see people we

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Speaker 1: see need to see a little bit more optimism, a

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Speaker 1: little bit more speculation at that point in time will

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Speaker 1: come back to it from a tactical, tactical point of view.

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Speaker 1: What the issue that we have longer term is this space,

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Speaker 1: whether it's some of the e t f s, some

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Speaker 1: of the quant funds UM and even some of the

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Speaker 1: fundamental funds UM are a lot more a u M

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Speaker 1: is going into this space, and the opportunities are less

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Speaker 1: and less, and the valuations are higher and higher. So

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Speaker 1: it's not what it used to be UM from five

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Speaker 1: or five plus years ago. So if you boil it

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Speaker 1: all down to a headline, uh, you're looking at an

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Speaker 1: SMP five hundred target your end of thirty eight, about

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Speaker 1: a six percent gain. I always like to ask sort

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Speaker 1: of what your confidence level is in that, and more importantly,

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Speaker 1: you know, uh, everyone sort of has upside surprise in mind,

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Speaker 1: and a downside surprise, which which risk is is greater

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Speaker 1: and upside or downside to that um um, so a

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Speaker 1: couple of things there, because because you asked and said

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Speaker 1: said a lot um. One of the things we have

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Speaker 1: the most confidence in and one of the things that

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Speaker 1: we expect to see next year is we expect to

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Speaker 1: see a lot more spikes and volatility, a lot more

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Speaker 1: training opportunities open, opening up the buying hold. I don't

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Speaker 1: think is going to be your friend next year, and

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Speaker 1: so ultimately we think we get to some sort of

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Speaker 1: mid single digit return. But by the end of the year,

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Speaker 1: you're gonna need a drink because it's it's gonna be

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Speaker 1: a long road, and there's gonna be times where people

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Speaker 1: say where we here they are word again, where we

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Speaker 1: hear recession um switching gears a little bit. What worries

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Speaker 1: us most is we don't think the volatility in the

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Speaker 1: rates market is over at this point in time, and

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Speaker 1: we can make an equally plausible issue that rates go

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Speaker 1: too high as well as too low, and so that

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Speaker 1: continues to trouble us, if you will. And it's just

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Speaker 1: really difficult to handicap because you can trying to figure

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Speaker 1: out the winners and losers. You know, the the index

359
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Speaker 1: might be somewhat steady, but the the winners and losers

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Speaker 1: inside will be flipping and flopping around. It possible. And

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Speaker 1: then the other thing is that getting back to liquidity.

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Speaker 1: At some point the FED will stop growing their balance sheet.

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Speaker 1: We saw that in at the end of two thousand fourteen.

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Speaker 1: Two thousand fifteen was not a great year, and so

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Speaker 1: it looks like they've been helping to push price, push risk. Yes,

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Speaker 1: trade and tariff has done its fair share, but if

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Speaker 1: you look at what's happened to the shape of the

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Speaker 1: yeld curve, interest rates and risk product, it's been very

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Speaker 1: aggressive as a FED has put more liquid into the system.

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Speaker 1: Is that balance sheet risks sort of? I would imagine

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Speaker 1: that could be frontloaded towards the beginning of the year,

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Speaker 1: just because you know, they want to get past the

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Speaker 1: term in the repo market. And I think I think

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Speaker 1: that's fair and I think that's right as well. But

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Speaker 1: the one thing that when I ask people, so where

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Speaker 1: do you think they end? How big a balance sheet

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Speaker 1: do you think they get to? And right now it

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Speaker 1: looks like they're going to add about a half a

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Speaker 1: trillion dollars, but that might not be the end of it.

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Speaker 1: That's what we think, but it's not clear they're not

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Speaker 1: saying okay, that's that's the level. We're done here. You

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Speaker 1: could see more um. Hopefully they end and and we

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Speaker 1: can have the kappa markets start to stand on their own.

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Speaker 1: But we'll see. So within your risks that you lay

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Speaker 1: at in your look of first on, there is interest

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Speaker 1: rate risks and volatility. At what point would it be

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Speaker 1: an issue? Say we actually do see ten your yield

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Speaker 1: moving to the upside, at what point do you think

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Speaker 1: would actually cause an issue? Then? For the stock market,

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Speaker 1: one of the things that we think about, yes, how

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Speaker 1: will they get UM up safe? Let's just choose a

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Speaker 1: figure up fifty basis points and and taking a step

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Speaker 1: back to if you look at the equity market in

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Speaker 1: two thousand nineteen, we could say majority or more than

395
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Speaker 1: majority of the return was because of multiple expansion, and

396
00:19:31,760 --> 00:19:34,879
Speaker 1: that multiple expansion was predicated on lower rates and tighter

397
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Speaker 1: credit spreads, and so at some point and maybe it's

398
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Speaker 1: it depends on the level, and it depends on the speed.

399
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Speaker 1: If it happens very quickly, then then the levels lower.

400
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Speaker 1: If it takes time, then it's probably fifty basis points

401
00:19:46,920 --> 00:19:50,040
Speaker 1: or maybe more my guess. But one of the things

402
00:19:50,080 --> 00:19:51,679
Speaker 1: we keep looking at, and one of the things that

403
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Speaker 1: we know is that when we talk to investors, when

404
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Speaker 1: we look at the capital markets over in Europe, people

405
00:19:57,200 --> 00:20:00,840
Speaker 1: now realize or believe that negative just rates are found

406
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Speaker 1: experiment and if all of a sudden German tenures are

407
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Speaker 1: north of zero percent, which is a little difficult to

408
00:20:07,480 --> 00:20:09,480
Speaker 1: see at this point in time, you would expect some

409
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Speaker 1: sort of backup in US rates. And then the question

410
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Speaker 1: is you don't really know where the top is. Just

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Speaker 1: like in August, I had a number of race players

412
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Speaker 1: who are telling me the tenure is going to be

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Speaker 1: a three percent. Now they're saying three basis points, and

414
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Speaker 1: the swings that you're gonna have are gonna be quite great,

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Speaker 1: and so it's gonna play with multiples. So to see

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Speaker 1: these credit spreads at at these razor thin margins, um,

417
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Speaker 1: what would it take for them to finally widen out again?

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Speaker 1: Would it be sort of a credit event that would

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Speaker 1: cause it? Do you think we're some sort of deterioration

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Speaker 1: in the data? I mean, what what what we look

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Speaker 1: out for there? Um? So our credit team does think

422
00:20:45,119 --> 00:20:47,639
Speaker 1: you're going to see about a twenty basis point widening

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Speaker 1: and i G spreads Uh. Partly that they say, some

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Speaker 1: of that is technical, some of that is just things

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Speaker 1: are priced exceptionally well. We'll have some idiosyncratic risk that

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Speaker 1: may push things down. And it looks like we've just

427
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Speaker 1: peeked on fundamentals at this point in time. We're not

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Speaker 1: negative on the economy next year, but the economy is

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Speaker 1: not going to be great. We're three yards in a

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Speaker 1: cloud of dust. Right if choose choose a number, you're

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Speaker 1: a two and change plush in minus twenty five basis

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Speaker 1: points for a long long time. We're a low growth

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Speaker 1: but roadbust environment and we have to get comfortable with that. Yeah.

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Speaker 1: So a trade deal, even a phase eight or nine, whatever,

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Speaker 1: we finally get to it, it doesn't get us past

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Speaker 1: sort of trend GDP growth. No, not really. It takes

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Speaker 1: a ton to get the three percent as we saw

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Speaker 1: with tax reform. We got there for a period of time,

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Speaker 1: but we can't get there for a sustained period of time.

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Speaker 1: We have bridges, we have roads, we have infrastructure and telecom.

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Speaker 1: We have an aging population, we have little to no

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Speaker 1: population growth or mature economy. You don't grow at three

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Speaker 1: percent for the next day for a sustained period of time.

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Speaker 1: I think we'd all hope that we don't have to

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Speaker 1: get to a phase eight or not. We're still dealing

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Speaker 1: with that. I don't think we've been told yet, so

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Speaker 1: maybe eight or nine is or something in our worst nightmares.

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Speaker 1: If we get to phase one and a half next year,

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Speaker 1: I'll be happy. I think we all will. I think

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Speaker 1: we all will. It's just a phase, sir. Yeah, they're

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Speaker 1: going to their phases all right. Well, Chris, thank you

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Speaker 1: so much being our first guest for Happy New Year.

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Speaker 1: Thank you, Happy New Year. To YouTube What Goes Out.

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Speaker 1: We'll be back next week. Until then, you can find

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Speaker 1: us on the Bloomberg Terminal website and app, or wherever

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00:22:31,520 --> 00:22:34,080
Speaker 1: you get your podcasts. We'd love it if you took

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00:22:34,080 --> 00:22:36,040
Speaker 1: the time to rate and review the show on Apple

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00:22:36,080 --> 00:22:39,239
Speaker 1: Podcasts so more listeners can find us. And you can

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Speaker 1: find us on Twitter, follow me at at Therapontech, Mike

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00:22:43,320 --> 00:22:46,760
Speaker 1: is at Reaganonymous, and you can also follow Bloomberg Podcasts

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00:22:46,920 --> 00:22:51,000
Speaker 1: at podcasts. What Goes Up is produced by Tofur Foreheads.

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Speaker 1: The head of Bloomberg podcast is Francesca Levie, thanks for listening,

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Speaker 1: See you next time. Just