Speaker 1: Hello, and welcome to What Goes Up, a Bloomberg weekly
Speaker 1: market podcast. I'm Sarah Ponzac, a reporter on the Cross
Speaker 1: Asset Team, and I'm Mike Reagan, a senior editor on
Speaker 1: the Markets teams. Our first episode of It's Pretty Crazy.
Speaker 1: I know. Do you have any New Year's resolutions? Sarah,
Speaker 1: I can put you on the spot, Like, yeah, you're
Speaker 1: really putting me on the spot. I can't say I've
Speaker 1: ever been a New Year's resolution type person, really big
Speaker 1: about just trying to better yourself through the year. Um
Speaker 1: do you Well, I've got a teenage daughter who's going
Speaker 1: to be getting her driver's learning permit? Are you going
Speaker 1: to be teaching her very soon in the new year? So?
Speaker 1: Uh well, Luckily in New Jersey they forced them to
Speaker 1: take driver's ED so I don't have to do most
Speaker 1: of the teaching. But uh I think my resolution is
Speaker 1: going to be not to have a heart attack at
Speaker 1: any time during the new year. That's a good one.
Speaker 1: Good luck with that. No drivers that in Florida, Yeah
Speaker 1: you can get away with it. But happy New Year
Speaker 1: to everyone who's listening. Right, And luckily we have a
Speaker 1: guest who's going to predict exactly what's going to happen
Speaker 1: in the new year to a correct rate of predictions.
Speaker 1: I assume is all right, Chris Harvey, head of equity
Speaker 1: strategy at Wells Fargo. Absolutely, we've got it down to
Speaker 1: a ti. Whatever you want to know, we've got the answer.
Speaker 1: The shell answer man right now. I do I feel
Speaker 1: sorry for you guys because you have to make these predictions.
Speaker 1: Is this like how much do you sweat these things?
Speaker 1: Sometimes a lot, sometimes very little. And sometimes the funny
Speaker 1: thing is when things work, then people ask you, so
Speaker 1: what's next? And you said to yourself, well, I'm not
Speaker 1: really sure. But that's never a good answer. They demand
Speaker 1: exactly what's going to happen. I've got to say I
Speaker 1: was looking over your predictions from the past year, and
Speaker 1: you guys really did do a good job at calling
Speaker 1: what was is a very unusual, unexpected year. I must say, sorry,
Speaker 1: you're not supposed to look at last year's predictions that
Speaker 1: they don't like that, but they were right. If they
Speaker 1: were wrong, maybe I wouldn't or maybe I would have
Speaker 1: saved it to the end of the podcast. But let's
Speaker 1: let's get into this year's I uh, some some I
Speaker 1: poppers here one I think is very provocative. Expect of
Speaker 1: potential five to ten percent pullback in the first half
Speaker 1: of five percent pullbacks, Theoretically you should not be that uncommon,
Speaker 1: but we just have gotten used to not seeing them.
Speaker 1: What's what's the gist of why you think that could happen.
Speaker 1: So as we look in the market, there's a lot
Speaker 1: of things to like. Rates are lower, credit spreads are tighter,
Speaker 1: the fete has been a combinative um. We've got some
Speaker 1: sort of resolution with trade and tariff, and sentiment has improved,
Speaker 1: and it improved greatly. And that's what we don't like.
Speaker 1: When everything starts turning positive, expectations go higher, it's usually
Speaker 1: not a great time for equity markets. And with a
Speaker 1: vix in and round twelve, you can see things change quickly.
Speaker 1: I'll quickly go back to fourth quarter of two thousand
Speaker 1: and eighteen, when the wheels were falling off the card,
Speaker 1: the world was going to end. It was a fantastic
Speaker 1: time to get involved. You had returns that were well
Speaker 1: into the double digits um and you had great opportunity
Speaker 1: to invest here. Typically, when people are a little bit
Speaker 1: more what we would say greedy as as opposed to fearful,
Speaker 1: it's not always a great time, and so with expectations
Speaker 1: so much higher, we're just worried that things can change
Speaker 1: and change rather quickly. It's that old Buffett trope, you
Speaker 1: know what, it's fearful when everyone's greedy, and greedy when
Speaker 1: everyone's fearfully and you know, it seems to play out
Speaker 1: again and again. It's one of those cliches that keeps
Speaker 1: coming back for a reason. Um. I think the phrases
Speaker 1: buying when you can, not when you have to, and
Speaker 1: so when you can, not when you have to, and
Speaker 1: I think that applies here, so also fitting into that
Speaker 1: correction called potentially coming within the beginning of I also
Speaker 1: saw you mentioned and liquidity and the Fed's balance sheet.
Speaker 1: I saw a statistic recently. But if the Fed's balance
Speaker 1: sheet continues to grow at the pace we've been seeing
Speaker 1: it grow at, it will be at a new record
Speaker 1: by May. Is it going to be very difficult once
Speaker 1: again for the Fed to try to wean investors off
Speaker 1: of this liquidity. I think that's a great question. And
Speaker 1: we've been saying at what point does the FED stop intervening?
Speaker 1: And you're right about the the massive amount of liquid
Speaker 1: in the marketplace, Whether it's um from the FED or
Speaker 1: whether it's from the credit market. If we look at
Speaker 1: half by the end of it or by the end
Speaker 1: of I think first quarter will have the balance sheet
Speaker 1: grown by a half a trillion dollars. Interestingly, what what
Speaker 1: does that do? Well? That that shortens the duration of
Speaker 1: the balance sheet, which is good because what we've seen
Speaker 1: is the curve is starting to steepen. That's a very
Speaker 1: positive economic signal. But at some point we have to
Speaker 1: let the economy, we will have to let the markets
Speaker 1: stand on their own, and we need we need for
Speaker 1: more diversification, or we need things to be really priced
Speaker 1: more appropriately. And that's the issue where also having it
Speaker 1: is everything is fantastic, everything's great. We need a lot
Speaker 1: more differentiation. Another thing that caught my eye in a
Speaker 1: recent note of yours downgrading semiconductor stocks, and I can't say,
Speaker 1: I can't tell you how many TV hits I've done
Speaker 1: this year where someone's been like, why are semi conductor
Speaker 1: stocks so still and so well? And you know, the
Speaker 1: sort of stock answer has been, well, it's the next
Speaker 1: big thing. If five G Internet of things that the
Speaker 1: cloud is still has to be built out. But I've
Speaker 1: always you know, wanted to add sort of that Trumpian
Speaker 1: uh catchphrase. Well we'll see what happens, you know, because
Speaker 1: it does seem I mean, earnings for semis this year
Speaker 1: we're pretty abysmal um and there it's crazy to see
Speaker 1: this rally. And then what's is your main rationale for
Speaker 1: forgetting a little cautious on semmings. So in two thousand nineteen,
Speaker 1: we wanted to add cicklicality to the portfolio. We want
Speaker 1: to do it in a stepwise fashion. So we came
Speaker 1: into the year overweight capped goods, we upgraded the semis,
Speaker 1: and then ultimately we we went overweight the banks. Everything
Speaker 1: worked quite well, actually I think too well, and so
Speaker 1: we on greaded the semis for three reasons. It was macro,
Speaker 1: it was sentiment, and it was relative performance and working backwards.
Speaker 1: Relative performance has been fantastic. It really has been a
Speaker 1: fantastic year. The semi some of the semi in dcs
Speaker 1: are up. The second thing is sentiment. To your point,
Speaker 1: sentiment is turned dramatically. You had everyone saying that the
Speaker 1: cycle or the bottom of the cycle won't be for
Speaker 1: another twelve or twenty four months. Turns out it was
Speaker 1: a lot sooner. Maybe we have a different calendar than
Speaker 1: most people. And the last thing is from a macro
Speaker 1: point of view, as we go into and look into
Speaker 1: from a portfolio point of view, we want to start
Speaker 1: laying off a little bit of risk. We think that
Speaker 1: the cyclicality that we told you to buy, we want
Speaker 1: to start harvesting at this point in time. And the
Speaker 1: move is just exceptional at this juncture. And does it
Speaker 1: all relate to the trade situation at all? I know
Speaker 1: something else you've written is that phase two could be elusive.
Speaker 1: I mean, I'll put out phase one still is kind
Speaker 1: of elusive there, but um will uh sort of dumbling
Speaker 1: blocks on the way to phase two be as big
Speaker 1: of a deal as uh stumbling blocks in phase one,
Speaker 1: and and the semis play a role in in that
Speaker 1: at all. So so the first thing I would say
Speaker 1: is if this was your first day and the job
Speaker 1: and people said, hey, what a trade in tariff to
Speaker 1: the semi conductors, you would have said it really helped them,
Speaker 1: which is which is odd. So now that we've had
Speaker 1: the semi we have some sort of certainty, and I
Speaker 1: agree with you, we're not certain what phase one actually is.
Speaker 1: Our our view on Phase two is you're not going
Speaker 1: to see a Phase two anytime soon, and so we
Speaker 1: will get a lot of bumps and we will get
Speaker 1: a lot of fits and starts with regard to it.
Speaker 1: If you look at what the Chinese are doing or
Speaker 1: what they're not doing, there's no behavioral change. They don't
Speaker 1: want it. They they've shown you no indication that they
Speaker 1: want to change. And at the end of the day,
Speaker 1: I think Phase one was, Okay, we'll get something on
Speaker 1: the table, something moderate or small, you claim victory, will
Speaker 1: claim victory, and then we'll move on. And that's where
Speaker 1: we are right now. With that said, do you think
Speaker 1: the improvement that we have had with the quote unquote
Speaker 1: elusive Phase one t a deal right now was enough
Speaker 1: to really lift CEO confidence again potentially lead to an
Speaker 1: uptick and CAPEX spending Because if now all of a
Speaker 1: sudden we're talking about phase two, what's the enforcement mechanism
Speaker 1: may be going to be. Is it possible tariffs go
Speaker 1: back into effect again? In a way? Are we just
Speaker 1: in this circle where what we did see in where
Speaker 1: we saw a bit of a pause on business spending
Speaker 1: plans just continue through. So a couple of thoughts and
Speaker 1: I'll be a little bit all over the place. So
Speaker 1: we don't think trade and tariff did that much to
Speaker 1: the economy. It did slow things down, But what it
Speaker 1: really did when we look at earnings, when we look
Speaker 1: at stocks, the word the phrase we heard time and
Speaker 1: time again uncertainty, uncertainty, uncertainty. So now we have some
Speaker 1: sort of certainty that does help planning, That does help people, um,
Speaker 1: maybe be a little bit more aggressive in their investment pattern.
Speaker 1: So at the margin, I think it is better, But
Speaker 1: is it a ton better? No, not really. There's not
Speaker 1: a ton of pent up demand. It wasn't as if
Speaker 1: we just went through some major recession. We didn't. We
Speaker 1: had a moderate slow down, And so what we should
Speaker 1: see on the flip side is something to improve on
Speaker 1: a moderate fashion. Nothing more than that. Here's a line
Speaker 1: I love in your outlook. Banks possibly to become the
Speaker 1: new low volatility trade. Boy, if you had said that
Speaker 1: a ten years ago, I'd I'd like to see the reaction.
Speaker 1: But I mean, is this, you know, a function of
Speaker 1: just the capital return story at banks? That, um, why
Speaker 1: would they crash when you know, you know the dividends
Speaker 1: are coming, you know the buybacks are coming. The Feds
Speaker 1: kind of, you know, easing off a little bit on
Speaker 1: those stress tests. You know that those capital plans are
Speaker 1: getting maybe a little bit easier of a look, so
Speaker 1: I hate to use this phrase, but this late in
Speaker 1: the cycle because we've been this late in the cycle
Speaker 1: for a very long time. Typically, banks balance sheets are
Speaker 1: upside down backwards and and can be rather toxic. Additional,
Speaker 1: in addition, they don't always do all that smart emin
Speaker 1: a activity. They've been regulated out a lot of these issues,
Speaker 1: and so banks balance sheees are actually quite good, one
Speaker 1: of the things that we saw in third quarter. So
Speaker 1: we upgraded banks in September of nineteen UM. A lot
Speaker 1: of people said, hey, Chris, we like a lot of
Speaker 1: your calls, but this you want to rethink this. People
Speaker 1: are still shell shocked about the financial stocks. I feel like,
Speaker 1: I mean, look, it is just December that the S
Speaker 1: and P Financials finally reclaimed that seven records. That's remarkable
Speaker 1: to me, and and the bank industry group still has it,
Speaker 1: which is also pretty remarkable. But the pushback at that
Speaker 1: point in time is Chris, credit costs are going to
Speaker 1: go up. Chris, you really don't understand anything about about
Speaker 1: an interest margins or the curve, it's just going to
Speaker 1: be horrific. And what I said is you're you're really
Speaker 1: not appreciating what's changed, how the fundamentals have changed, how
Speaker 1: lower risk, how much more diversified they are. And then
Speaker 1: we got third quarter numbers and everyone's like, oh, maybe
Speaker 1: you are right, and so now you're starting. The run
Speaker 1: up that we've seen has been very aggressive. And we
Speaker 1: do like banks. We like them strategically longer term and
Speaker 1: and to your point, we can also see multiple expansion
Speaker 1: as people realize these are lower risk profile type companies.
Speaker 1: And we talk about banks and banks being low voless
Speaker 1: really the larger cap banks not so much the regional
Speaker 1: and the smaller cap banks, and so we expect longer term.
Speaker 1: But boy, you're right, they've had a heck of a
Speaker 1: run over the last couple of months. But I mean,
Speaker 1: you think about how long were they trading below A
Speaker 1: lot of big banks were trading below book value for
Speaker 1: Pize's sake. I mean, that's it's remarkable. They were hated
Speaker 1: and when we we did the upgrade, there was a
Speaker 1: lot of pushback. A lot of fundamental players just said
Speaker 1: this isn't gonna work. And and even if You're right,
Speaker 1: the market is not going to price it correctly, or
Speaker 1: it's not going to price the belief that they are
Speaker 1: are lower risk profile. What we said is we're seeing
Speaker 1: a lot of money going to these quant funds. We're
Speaker 1: seeing a lot of money going too low volatility funds.
Speaker 1: They will be your your marginal driver return or your
Speaker 1: marginal driver price. And so far that that's been more
Speaker 1: right than row Is it partially sort of the moving
Speaker 1: target of regulations? Who I mean banks obviously, like you said,
Speaker 1: they've kind of been whipped in the shape after the crisis.
Speaker 1: Now it seems like all the scorn in Washington is
Speaker 1: going in the other direction towards uh, you know, the
Speaker 1: big fang stocks that your your social media and your
Speaker 1: internet stocks. Is that part of the story there? So
Speaker 1: on regulation, one of the things we were saying, One
Speaker 1: of the things in our recent note has been that
Speaker 1: we think that tech will be the new healthcare. It
Speaker 1: is scar I mean, just considering how how important tech
Speaker 1: has been to the rally and the underperformance that we've
Speaker 1: seen recently in healthcare due to talks of regulation and
Speaker 1: heading into the election, and now I don't want to
Speaker 1: say it's doom and gloom. But you're going to have
Speaker 1: some bipartisanship, which is very unusual in Washington because both
Speaker 1: sides and you can see it already are talking about
Speaker 1: tech in issues, whether it's privacy or what have you.
Speaker 1: We have the California Consumer Privacy Act coming too effect
Speaker 1: next year and it's going to be on the forefront,
Speaker 1: and we do worry that it's going to put a
Speaker 1: fair amount of volatility into the names. And people are
Speaker 1: always an election you're looking at health care. But again,
Speaker 1: what I don't think what may surprise people is the
Speaker 1: amount of rhetoric in and around some of these tech companies,
Speaker 1: which in some cases isn't fair, in some cases may
Speaker 1: be fair. When you say tech, do you actually mean
Speaker 1: tech as in it would be classified by the gig
Speaker 1: sectors or more so, you can think of it broader
Speaker 1: as faying and the internet companies as well. So, um,
Speaker 1: when we talk about tech, it is the broader indicries.
Speaker 1: But obviously there are going to be certain companies and
Speaker 1: certain subsectors that are more in the focus of the regulators,
Speaker 1: whether it's on the Internet side, the ones that have
Speaker 1: a little bit more pricing or a little bit more
Speaker 1: information on your background as opposed to say a semiconductor. Um.
Speaker 1: So the things that we worry about are more the
Speaker 1: hardware and some of your portals, if you will. But overall,
Speaker 1: if it affects one area, it should affect all areas
Speaker 1: to some degree. Is there a chance of healthcare being
Speaker 1: the new healthcare? To watch these democratic debates and I
Speaker 1: guess the difference is that risk is to a large
Speaker 1: degree priced in already. Um It that again great, great question.
Speaker 1: So bigger picture, what we think is political risk. We
Speaker 1: don't think it's really priced in at this juncture because
Speaker 1: if you think about its sentiment is so good, everything
Speaker 1: is so great. Um. If we look at the price
Speaker 1: action in some of the healthcare spaces with the HMOs
Speaker 1: or some of the providers, you saw this big sell
Speaker 1: off um when we had Medicare for all first bandied about.
Speaker 1: Now there's been a massive snap back in it, and
Speaker 1: that's not going to go away. At some point the
Speaker 1: Democrats are going to get some momentum. This will come
Speaker 1: back to some degree, and I do think you're right.
Speaker 1: Healthcare will be healthcare and there will be some pressure
Speaker 1: on it. But ultimately with the valuations look pretty attractive
Speaker 1: to us, and you probably want to get aggressive on
Speaker 1: those sell offs. I want to get back to the
Speaker 1: low all trade, which you had mentioned before. Where do
Speaker 1: you guys actually stand on that broader low all trade,
Speaker 1: because we just saw it grow in such popularity this
Speaker 1: year and now we hear a couple of people coming
Speaker 1: out saying, look, this has gone too far. We're going
Speaker 1: to see you oursel and you pounded the table a
Speaker 1: while is back on the trade. So where do you
Speaker 1: guys stand now? So again, bigger picture, we've liked low
Speaker 1: volatility low volatility sector for and we've been writing about
Speaker 1: it for the last ten years. We got very aggressive
Speaker 1: in the summer of two thousand it was two thousand
Speaker 1: eight um but in the summer of two thousand nineteen,
Speaker 1: what we were saying is it's now pricing in a recession,
Speaker 1: and from a tactical point of view, we wanted to
Speaker 1: fade that. We want to fade a lot of your
Speaker 1: bond proxies, especially when the tenures in and around one
Speaker 1: and a half percent. At some point we'll want to
Speaker 1: come back to that, but we're not ready. One of
Speaker 1: the things that we always talk about is the volatility
Speaker 1: of low ball and how people are whether whether they're
Speaker 1: discriminating or not discriminating across that volatility access Right now,
Speaker 1: they don't really care. We're starting to see opportunities, were
Speaker 1: starting to see low ball roll over, We're starting to
Speaker 1: see your bond proxies pull back, the tactical opportunities opening up.
Speaker 1: But just not yet. We need to see people we
Speaker 1: see need to see a little bit more optimism, a
Speaker 1: little bit more speculation at that point in time will
Speaker 1: come back to it from a tactical, tactical point of view.
Speaker 1: What the issue that we have longer term is this space,
Speaker 1: whether it's some of the e t f s, some
Speaker 1: of the quant funds UM and even some of the
Speaker 1: fundamental funds UM are a lot more a u M
Speaker 1: is going into this space, and the opportunities are less
Speaker 1: and less, and the valuations are higher and higher. So
Speaker 1: it's not what it used to be UM from five
Speaker 1: or five plus years ago. So if you boil it
Speaker 1: all down to a headline, uh, you're looking at an
Speaker 1: SMP five hundred target your end of thirty eight, about
Speaker 1: a six percent gain. I always like to ask sort
Speaker 1: of what your confidence level is in that, and more importantly,
Speaker 1: you know, uh, everyone sort of has upside surprise in mind,
Speaker 1: and a downside surprise, which which risk is is greater
Speaker 1: and upside or downside to that um um, so a
Speaker 1: couple of things there, because because you asked and said
Speaker 1: said a lot um. One of the things we have
Speaker 1: the most confidence in and one of the things that
Speaker 1: we expect to see next year is we expect to
Speaker 1: see a lot more spikes and volatility, a lot more
Speaker 1: training opportunities open, opening up the buying hold. I don't
Speaker 1: think is going to be your friend next year, and
Speaker 1: so ultimately we think we get to some sort of
Speaker 1: mid single digit return. But by the end of the year,
Speaker 1: you're gonna need a drink because it's it's gonna be
Speaker 1: a long road, and there's gonna be times where people
Speaker 1: say where we here they are word again, where we
Speaker 1: hear recession um switching gears a little bit. What worries
Speaker 1: us most is we don't think the volatility in the
Speaker 1: rates market is over at this point in time, and
Speaker 1: we can make an equally plausible issue that rates go
Speaker 1: too high as well as too low, and so that
Speaker 1: continues to trouble us, if you will. And it's just
Speaker 1: really difficult to handicap because you can trying to figure
Speaker 1: out the winners and losers. You know, the the index
Speaker 1: might be somewhat steady, but the the winners and losers
Speaker 1: inside will be flipping and flopping around. It possible. And
Speaker 1: then the other thing is that getting back to liquidity.
Speaker 1: At some point the FED will stop growing their balance sheet.
Speaker 1: We saw that in at the end of two thousand fourteen.
Speaker 1: Two thousand fifteen was not a great year, and so
Speaker 1: it looks like they've been helping to push price, push risk. Yes,
Speaker 1: trade and tariff has done its fair share, but if
Speaker 1: you look at what's happened to the shape of the
Speaker 1: yeld curve, interest rates and risk product, it's been very
Speaker 1: aggressive as a FED has put more liquid into the system.
Speaker 1: Is that balance sheet risks sort of? I would imagine
Speaker 1: that could be frontloaded towards the beginning of the year,
Speaker 1: just because you know, they want to get past the
Speaker 1: term in the repo market. And I think I think
Speaker 1: that's fair and I think that's right as well. But
Speaker 1: the one thing that when I ask people, so where
Speaker 1: do you think they end? How big a balance sheet
Speaker 1: do you think they get to? And right now it
Speaker 1: looks like they're going to add about a half a
Speaker 1: trillion dollars, but that might not be the end of it.
Speaker 1: That's what we think, but it's not clear they're not
Speaker 1: saying okay, that's that's the level. We're done here. You
Speaker 1: could see more um. Hopefully they end and and we
Speaker 1: can have the kappa markets start to stand on their own.
Speaker 1: But we'll see. So within your risks that you lay
Speaker 1: at in your look of first on, there is interest
Speaker 1: rate risks and volatility. At what point would it be
Speaker 1: an issue? Say we actually do see ten your yield
Speaker 1: moving to the upside, at what point do you think
Speaker 1: would actually cause an issue? Then? For the stock market,
Speaker 1: one of the things that we think about, yes, how
Speaker 1: will they get UM up safe? Let's just choose a
Speaker 1: figure up fifty basis points and and taking a step
Speaker 1: back to if you look at the equity market in
Speaker 1: two thousand nineteen, we could say majority or more than
Speaker 1: majority of the return was because of multiple expansion, and
Speaker 1: that multiple expansion was predicated on lower rates and tighter
Speaker 1: credit spreads, and so at some point and maybe it's
Speaker 1: it depends on the level, and it depends on the speed.
Speaker 1: If it happens very quickly, then then the levels lower.
Speaker 1: If it takes time, then it's probably fifty basis points
Speaker 1: or maybe more my guess. But one of the things
Speaker 1: we keep looking at, and one of the things that
Speaker 1: we know is that when we talk to investors, when
Speaker 1: we look at the capital markets over in Europe, people
Speaker 1: now realize or believe that negative just rates are found
Speaker 1: experiment and if all of a sudden German tenures are
Speaker 1: north of zero percent, which is a little difficult to
Speaker 1: see at this point in time, you would expect some
Speaker 1: sort of backup in US rates. And then the question
Speaker 1: is you don't really know where the top is. Just
Speaker 1: like in August, I had a number of race players
Speaker 1: who are telling me the tenure is going to be
Speaker 1: a three percent. Now they're saying three basis points, and
Speaker 1: the swings that you're gonna have are gonna be quite great,
Speaker 1: and so it's gonna play with multiples. So to see
Speaker 1: these credit spreads at at these razor thin margins, um,
Speaker 1: what would it take for them to finally widen out again?
Speaker 1: Would it be sort of a credit event that would
Speaker 1: cause it? Do you think we're some sort of deterioration
Speaker 1: in the data? I mean, what what what we look
Speaker 1: out for there? Um? So our credit team does think
Speaker 1: you're going to see about a twenty basis point widening
Speaker 1: and i G spreads Uh. Partly that they say, some
Speaker 1: of that is technical, some of that is just things
Speaker 1: are priced exceptionally well. We'll have some idiosyncratic risk that
Speaker 1: may push things down. And it looks like we've just
Speaker 1: peeked on fundamentals at this point in time. We're not
Speaker 1: negative on the economy next year, but the economy is
Speaker 1: not going to be great. We're three yards in a
Speaker 1: cloud of dust. Right if choose choose a number, you're
Speaker 1: a two and change plush in minus twenty five basis
Speaker 1: points for a long long time. We're a low growth
Speaker 1: but roadbust environment and we have to get comfortable with that. Yeah.
Speaker 1: So a trade deal, even a phase eight or nine, whatever,
Speaker 1: we finally get to it, it doesn't get us past
Speaker 1: sort of trend GDP growth. No, not really. It takes
Speaker 1: a ton to get the three percent as we saw
Speaker 1: with tax reform. We got there for a period of time,
Speaker 1: but we can't get there for a sustained period of time.
Speaker 1: We have bridges, we have roads, we have infrastructure and telecom.
Speaker 1: We have an aging population, we have little to no
Speaker 1: population growth or mature economy. You don't grow at three
Speaker 1: percent for the next day for a sustained period of time.
Speaker 1: I think we'd all hope that we don't have to
Speaker 1: get to a phase eight or not. We're still dealing
Speaker 1: with that. I don't think we've been told yet, so
Speaker 1: maybe eight or nine is or something in our worst nightmares.
Speaker 1: If we get to phase one and a half next year,
Speaker 1: I'll be happy. I think we all will. I think
Speaker 1: we all will. It's just a phase, sir. Yeah, they're
Speaker 1: going to their phases all right. Well, Chris, thank you
Speaker 1: so much being our first guest for Happy New Year.
Speaker 1: Thank you, Happy New Year. To YouTube What Goes Out.
Speaker 1: We'll be back next week. Until then, you can find
Speaker 1: us on the Bloomberg Terminal website and app, or wherever
Speaker 1: you get your podcasts. We'd love it if you took
Speaker 1: the time to rate and review the show on Apple
Speaker 1: Podcasts so more listeners can find us. And you can
Speaker 1: find us on Twitter, follow me at at Therapontech, Mike
Speaker 1: is at Reaganonymous, and you can also follow Bloomberg Podcasts
Speaker 1: at podcasts. What Goes Up is produced by Tofur Foreheads.
Speaker 1: The head of Bloomberg podcast is Francesca Levie, thanks for listening,
Speaker 1: See you next time. Just