WEBVTT - Surveillance: Fed Cuts with Ausenbaugh 0:00:05.080 --> 0:00:07.200 This is the Bloomberg Surveillance Podcast. 0:00:07.680 --> 0:00:10.799 I'm Lisa Abramoids along with Tom Keen and Jonathan Ferrell, 0:00:11.160 --> 0:00:15.280 join us each day for insight from the best in economics, geopolitics, 0:00:15.320 --> 0:00:19.480 finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:19.600 --> 0:00:22.840 Spotify and anywhere you get your podcasts, and always on 0:00:22.880 --> 0:00:26.440 Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business App. 0:00:26.800 --> 0:00:29.080 I was distracted. The average heighte of a cruise passenger 0:00:29.200 --> 0:00:32.959 is forty seven years old. Hi, fool, didn't know that? 0:00:33.040 --> 0:00:33.639 Well, there you go. 0:00:33.800 --> 0:00:34.400 Didn't know that? 0:00:34.440 --> 0:00:36.640 Would you like to Nope? 0:00:36.760 --> 0:00:39.800 At least as some badges now investment strategists that Jpre 0:00:39.880 --> 0:00:42.160 Morgan glob wal have that listened to me about cruises. 0:00:42.200 --> 0:00:44.120 The stocks are doing great. At least, it's good to see. 0:00:43.920 --> 0:00:45.000 You, great to see you. 0:00:45.280 --> 0:00:47.680 Vibe shift, Let's talk about the vibe shift. We're not 0:00:47.720 --> 0:00:49.720 talking about recessions. What are we talking about. 0:00:50.159 --> 0:00:52.480 Look, we can sede at this point that we came 0:00:52.640 --> 0:00:56.120 into this year probably too pessimistic on the macro front. 0:00:56.520 --> 0:00:59.960 What we're seeing is this resurgence, or rather perseverance of 0:01:00.040 --> 0:01:02.640 the resilience in the US economic backdrop, and I think 0:01:02.640 --> 0:01:05.480 that's been driven by a handful of different dynamics, But 0:01:05.880 --> 0:01:07.360 it seems like a lot of people are kind of 0:01:07.360 --> 0:01:09.760 coming around, facing the music and trying to figure out 0:01:09.800 --> 0:01:10.600 where we go from here. 0:01:10.720 --> 0:01:13.479 Equity market rallies usually do that. People start to jump 0:01:13.520 --> 0:01:15.760 on board and now they're thinking about where else they 0:01:15.800 --> 0:01:17.760 need to be, what's missed out, what's lagged, and they're 0:01:17.800 --> 0:01:19.520 shifting towards the stike of the course. Banks had a 0:01:19.520 --> 0:01:21.800 great month in July. Do you see reason for that 0:01:21.880 --> 0:01:22.640 to continue? 0:01:22.840 --> 0:01:25.280 We do, actually, so I think it's really important to 0:01:25.280 --> 0:01:28.120 think about the anatomy of the year today equity market rally. 0:01:28.319 --> 0:01:31.240 Everyone at this point knows that it has been predominantly 0:01:31.319 --> 0:01:34.600 driven by the megacap complex that you know, kind of 0:01:35.200 --> 0:01:38.279 has been flying on the wings of artificial intelligence hopes. 0:01:38.319 --> 0:01:40.120 But we do think that this rally can start to 0:01:40.120 --> 0:01:43.000 broaden out. And that's a big reason why we've been 0:01:43.080 --> 0:01:45.560 encouraging investors to focus on the other four hundred and 0:01:45.680 --> 0:01:47.800 ninety three names in the S and P five hundred, 0:01:47.920 --> 0:01:51.480 which taken together are actually still trading at evaluation below 0:01:51.520 --> 0:01:52.640 their ten year average. 0:01:52.800 --> 0:01:55.120 What money are they going to use to buy these stocks? 0:01:55.160 --> 0:01:57.000 In other words, do you start to recommend that people 0:01:57.040 --> 0:01:59.880 take money out of money markets and put them into, 0:02:00.000 --> 0:02:02.800 so you know, the other sectors of the equity markets, 0:02:03.280 --> 0:02:05.600 or are you saying to people that you have to 0:02:05.600 --> 0:02:06.200 have a balance. 0:02:06.240 --> 0:02:07.160 I mean, how does this. 0:02:07.160 --> 0:02:09.360 Sort of come to for if you don't want people 0:02:09.400 --> 0:02:11.360 to necessarily cash out of big tech? 0:02:11.720 --> 0:02:15.360 Look, cash is a great place to start. We think 0:02:15.400 --> 0:02:17.280 we know that a lot of our clients are still 0:02:17.360 --> 0:02:21.400 heavily overweight excess cash based on the anonymioused client data 0:02:21.440 --> 0:02:24.840 that we look through for our mid year outlook exercise. 0:02:25.120 --> 0:02:27.560 So even in light of this shift in our macro 0:02:27.680 --> 0:02:30.600 view that the FED could possibly pull off a soft landing, 0:02:30.919 --> 0:02:33.560 we do still think that reinvestment risk is here. Come 0:02:33.600 --> 0:02:35.640 first quarter of next year, we think the FED could 0:02:35.639 --> 0:02:38.200 be in a place to start gradually cutting interest rates, 0:02:38.360 --> 0:02:40.960 and we would much prefer that investors take that excess 0:02:41.000 --> 0:02:44.880 cash exten duration or start rebuilding that equity portfolio that 0:02:44.919 --> 0:02:46.400 they want to carry through the next cycle. 0:02:46.560 --> 0:02:49.120 Does it bother you that you're looking at earnings yield 0:02:49.440 --> 0:02:51.240 on the S and P five hundred that are the 0:02:51.320 --> 0:02:53.520 lowest relative to what you're getting on a ten year 0:02:53.560 --> 0:02:55.840 treasury Going back to two thousand and one. Does that 0:02:55.919 --> 0:02:58.320 raise some alarm bells that maybe valuations are at a 0:02:58.360 --> 0:03:01.000 whack and that bonds look better than some people are 0:03:01.040 --> 0:03:01.639 making them out. 0:03:02.120 --> 0:03:04.959 Look, we continue to love core bonds. It's one of 0:03:04.960 --> 0:03:07.560 our highest conviction ideas, and it does bother me a 0:03:07.560 --> 0:03:09.880 little bit, but we certainly take it into account when 0:03:09.880 --> 0:03:13.680 we think through portfolio construction. I think investors more than 0:03:13.720 --> 0:03:16.400 ever need to be mindful of goals based or outcome 0:03:16.480 --> 0:03:19.519 oriented approach. And if that means then the choosing core 0:03:19.560 --> 0:03:22.480 fixed income with yields at these current elevated levels is 0:03:22.600 --> 0:03:25.040 enough to get you to your long term goals, then 0:03:25.080 --> 0:03:28.640 by all means, but long term ten year plus time horizon, 0:03:28.680 --> 0:03:31.440 we still see the potential for stocks to act as 0:03:31.440 --> 0:03:34.760 that engine of capital appreciation in portfolios, so we don't 0:03:34.760 --> 0:03:36.200 want to sleep on the opportunity. 0:03:36.320 --> 0:03:39.520 We started this conversation by talking about resilience, and about 0:03:39.520 --> 0:03:41.600 four minutes into it you were talking about right cuts. 0:03:42.000 --> 0:03:44.760 What are the factors behind resilience of the year so 0:03:44.880 --> 0:03:47.560 far that you think are going to fade sufficiently enough 0:03:47.600 --> 0:03:50.320 that the Fed's cutting rates in early twenty twenty four. 0:03:50.480 --> 0:03:52.480 Can you identify the factors first and then just walk 0:03:52.560 --> 0:03:54.200 us through where you're seeing signs of weakness that you 0:03:54.280 --> 0:03:57.040 think will continue coming through that eventually are going to 0:03:57.120 --> 0:03:58.560 lead this fed to cut rates. 0:03:58.800 --> 0:03:59.120 Sure. 0:03:59.320 --> 0:04:02.280 So in terms of what's been driving the resilience, start 0:04:02.280 --> 0:04:05.320 first with the consumer. I think excess savings perhaps weren't 0:04:05.400 --> 0:04:08.360 drawn down as quickly as everyone thought they might have been, 0:04:08.720 --> 0:04:11.160 but we do see that kind of tapering to an 0:04:11.240 --> 0:04:13.760 end over the course of this year. You also have 0:04:13.800 --> 0:04:16.880 to consider the businesses and consumers. Both have been relatively 0:04:17.080 --> 0:04:20.359 insulated from interest rate pressures given that they locked in 0:04:20.480 --> 0:04:23.719 lower levels of financing. And you've got these tailwinds coming 0:04:23.760 --> 0:04:26.560 from the fiscal spending front related to the you know, 0:04:26.640 --> 0:04:30.839 more than two trillion dollars worth of infrastructure investment that's 0:04:30.920 --> 0:04:33.080 kind of you know, earmarked to be doled out over 0:04:33.120 --> 0:04:35.600 the course of the next ten years. So those are 0:04:35.640 --> 0:04:37.800 the reasons for resilience. And you add to that what 0:04:37.880 --> 0:04:40.159 we've been seeing in the labor market, which is pretty 0:04:40.160 --> 0:04:43.479 favorable trends when it comes to labor force participation, but 0:04:43.560 --> 0:04:46.000 to the extent that growth continues to slow and we 0:04:46.040 --> 0:04:48.920 are still calling for you know, flat to slightly negative 0:04:48.960 --> 0:04:51.000 growth in the first and second quarters of next year, 0:04:51.360 --> 0:04:54.440 maybe you do see a modest rise in the unemployment rate, 0:04:54.680 --> 0:04:58.120 and that I think continues to urge investors to heed 0:04:58.160 --> 0:05:00.560 some caution and not get two over the skis when 0:05:00.560 --> 0:05:01.479 it comes to adding risk. 0:05:01.640 --> 0:05:04.360 How much does that really hinge? An oil price is 0:05:04.400 --> 0:05:08.160 staying where they are, an inflation continuing to steadily come down. 0:05:08.360 --> 0:05:10.960 Look, I think oil prices are definitely kind of one 0:05:11.000 --> 0:05:14.760 of the you know, variables or X factors here. We'll 0:05:14.800 --> 0:05:17.839 be curious to see if prices do continue to consolidate higher. 0:05:17.839 --> 0:05:20.680 We're doing the work right now on our oil price outlook, 0:05:20.839 --> 0:05:23.520 but that could potentially change the outlook for the FED. 0:05:23.839 --> 0:05:26.400 And we know, just looking at the past year of data, 0:05:26.520 --> 0:05:29.280 right a year ago, when oil prices had exploded higher, 0:05:29.440 --> 0:05:32.200 that's when you had consumer confidence hitting all time lows. 0:05:32.480 --> 0:05:34.280 And so to the extent that we see that kind 0:05:34.279 --> 0:05:36.880 of rear its ugly head again, it could potentially weigh 0:05:36.920 --> 0:05:39.240 on the outlook and you know, bring a resurgence of 0:05:39.400 --> 0:05:40.760 bearish sentiment. 0:05:40.720 --> 0:05:43.160 Bring crude eighty five. At least this was great. Thanks 0:05:43.200 --> 0:05:44.920 for joining us and thanks for coming in of course, 0:05:44.920 --> 0:05:47.239 thank you. At least Austin, by that of JP Morgan 0:05:47.279 --> 0:06:01.400 Global Wealth Management, I could join us now seeing research 0:06:01.400 --> 0:06:03.560 ouna list at TD count Helene, let's talk about these 0:06:03.600 --> 0:06:06.279 airlines and the distinction that Lisa draws between the performance 0:06:06.320 --> 0:06:09.600 of the domestic focused airlines and international what's happening in 0:06:09.640 --> 0:06:11.360 the two markets at the moment, Helene. 0:06:12.240 --> 0:06:15.640 Well, Lisa hit it on ahead. We are seeing very 0:06:15.800 --> 0:06:19.080 good demand on the North Atlantic especially, and we're seeing 0:06:19.160 --> 0:06:22.520 less good demand in the US domestic market. And what 0:06:22.640 --> 0:06:26.520 we have been thinking is that twenty twenty one and 0:06:26.600 --> 0:06:29.480 twenty twenty two we're all about US domestic because there 0:06:29.520 --> 0:06:33.200 really wasn't a lot of places to go internationally. And 0:06:33.560 --> 0:06:37.320 now that the international markets are open again, people are 0:06:37.360 --> 0:06:41.120 traveling again, and we think this summer is all about 0:06:41.160 --> 0:06:45.360 Europe and next summer will be all about Asia, especially 0:06:45.400 --> 0:06:48.279 because the US passport is not going to get you 0:06:48.320 --> 0:06:50.960 as far as it gets you now, beginning in twenty 0:06:51.000 --> 0:06:53.159 twenty four, you're going to need a visa to go 0:06:53.200 --> 0:06:55.840 to Europe. You're going to need a visa to go 0:06:55.880 --> 0:06:59.280 to the UK. You can do it online, but it's 0:06:59.320 --> 0:07:01.880 going to cost you. And so I think you'll see 0:07:01.880 --> 0:07:05.440 that shift away from European countries to Asian countries. 0:07:05.600 --> 0:07:08.200 We've got a playbook with regards to that heline when 0:07:08.200 --> 0:07:12.200 we introduce the Esta visa for Europeans and others to 0:07:12.200 --> 0:07:13.960 come to the United States, do is it really hit 0:07:14.000 --> 0:07:16.760 travel in that way, given how easy it is to 0:07:16.800 --> 0:07:19.000 actually complete the thing. I remember many years ago I 0:07:19.040 --> 0:07:20.560 used to have to do that when I came to 0:07:20.600 --> 0:07:23.040 New York, when it actually moved the dial on visitors 0:07:23.040 --> 0:07:23.760 to Europe. 0:07:24.520 --> 0:07:27.240 Yeah, I think I think it'll be a combination of that. 0:07:27.600 --> 0:07:31.400 And I think fares have been really, really high this summer. 0:07:31.440 --> 0:07:33.880 It's turned a lot of people off if you didn't 0:07:33.920 --> 0:07:38.680 book really early. And then and I think as Asia reopens, 0:07:39.000 --> 0:07:41.280 it's kind of you know, we did Europe, Now let's 0:07:41.320 --> 0:07:44.240 go someplace new. And I think that's the trend you're 0:07:44.280 --> 0:07:47.840 going to see probably beginning after a Labor Day this 0:07:47.960 --> 0:07:51.559 year and then going into twenty twenty four and five, 0:07:51.640 --> 0:07:55.080 and it'll probably be twenty five before we get whatever 0:07:55.280 --> 0:07:58.320 normal is going to be. You know, that single digit 0:07:58.440 --> 0:08:04.040 growth that's probably sustainable. The ten to twenty percent growth 0:08:04.080 --> 0:08:06.040 we're seeing in the industry and we've seen in the 0:08:06.120 --> 0:08:09.440 last couple of years is just not sustainable for a 0:08:09.440 --> 0:08:10.720 whole variety of reasons. 0:08:11.160 --> 0:08:14.080 I have to say we've done Europe, now let's do Asia. 0:08:14.120 --> 0:08:16.200 It makes it seem like we're all just living in 0:08:16.240 --> 0:08:18.920 this hard mentality of post pandemic reality. 0:08:18.920 --> 0:08:19.200 Helene. 0:08:19.240 --> 0:08:21.960 I'm looking right now also at visas to go to Europe, 0:08:22.000 --> 0:08:24.520 and they range from it looks like seven euros to 0:08:25.080 --> 0:08:26.880 forty euros depending. 0:08:26.560 --> 0:08:27.720 On where you're going. 0:08:27.800 --> 0:08:30.280 Although I could be getting this somewhat wrong, Helene. How 0:08:30.320 --> 0:08:33.600 much is this driven by business versus personal travel? How 0:08:33.600 --> 0:08:37.280 long can individuals and families continue to pay prices that 0:08:37.360 --> 0:08:40.160 seem pretty sticky and. 0:08:40.600 --> 0:08:43.400 Unresponsive to demand pressure it Anyway. 0:08:44.240 --> 0:08:47.040 I've been trying to figure that question out too, because 0:08:47.080 --> 0:08:49.680 the answer to that too, because it seems to me 0:08:49.880 --> 0:08:51.360 when I go on a plane and I make a 0:08:51.440 --> 0:08:54.040 right turn, all these families are making the left turn, 0:08:54.200 --> 0:08:56.640 and I'm trying to figure out, Gee, I've paid a 0:08:56.640 --> 0:08:58.440 lot of money for my ticket. I booked it two 0:08:58.480 --> 0:09:02.760 months ago or ten weeks ago, and how come you're 0:09:02.840 --> 0:09:06.400 going there and I'm not. And I think that there's 0:09:06.480 --> 0:09:09.040 going to be pushback. I mean, I do think that 0:09:09.080 --> 0:09:12.240 people will just say, Okay, we you know, we bought 0:09:12.240 --> 0:09:15.040 all our stuff during the pandemic, and then we did 0:09:15.080 --> 0:09:18.000 all our traveling after the pandemic, and now We're just 0:09:18.040 --> 0:09:21.440 going to get back to kind of a normal lifestyle 0:09:21.800 --> 0:09:25.280 of working because I think over time, as we get 0:09:25.280 --> 0:09:28.120 further and further away from the pandemic, companies are going 0:09:28.160 --> 0:09:31.839 to require people, even in a hybrid environment, to come 0:09:31.880 --> 0:09:34.000 to the office more off and then they've been. 0:09:33.840 --> 0:09:39.000 Going and that won't lend itself to traveling Thursday to 0:09:39.080 --> 0:09:43.560 Tuesday or Thursday to Monday, and then business travel will shift, right, 0:09:44.040 --> 0:09:45.319 You'll see that shift and mix. 0:09:45.400 --> 0:09:47.760 You're laughing at me, Well, no, I'm not laughing at you. 0:09:47.880 --> 0:09:49.960 Just the image that you paint of everybody who's not 0:09:50.080 --> 0:09:53.120 working going with their families, paying through the nose to do. 0:09:53.040 --> 0:09:55.720 Your going to give us a commentary on newborn babies 0:09:55.720 --> 0:09:57.480 and business class and whether they should be allowed in 0:09:57.520 --> 0:09:57.880 there or. 0:09:59.280 --> 0:10:01.959 To I'm just sitting here wondering, you know, how long 0:10:02.000 --> 0:10:05.320 can people keep networking and spending all their money. Have 0:10:05.360 --> 0:10:08.000 you seen any signs of pushback on the pricing, Helene, 0:10:08.080 --> 0:10:11.400 as of yet or is all of your anticipation of 0:10:11.440 --> 0:10:14.400 that simply an extrapolation of pure logic. 0:10:15.160 --> 0:10:17.360 Yeah, I think it's a combination of both. We have 0:10:17.480 --> 0:10:20.760 seen pushback on pricing. You've seen domestic prices come down 0:10:21.120 --> 0:10:24.320 pretty much on a year over year basis from really 0:10:24.440 --> 0:10:27.680 levels that again we're not sustainable, so you're still above 0:10:27.760 --> 0:10:32.440 twenty nineteen levels, but we're below twenty twenty two levels, 0:10:32.440 --> 0:10:34.840 so I think that's a positive. And then you know, 0:10:34.880 --> 0:10:38.800 when you think about shifting demand, airlines can shift demand 0:10:38.840 --> 0:10:42.959 by lowering ticket prices and people will respond to that. 0:10:43.120 --> 0:10:45.439 And then the last thing I would point out is 0:10:46.840 --> 0:10:50.520 in terms of visiting friends and relatives. You know, China 0:10:50.720 --> 0:10:54.959 was closed for years, right, three four years and it 0:10:55.280 --> 0:10:57.679 opened earlier this year, and you don't see a lot 0:10:57.720 --> 0:11:01.920 of business travel there, some business travel. You don't see 0:11:01.960 --> 0:11:03.920 a lot of leisure for sure, but what you do 0:11:04.040 --> 0:11:06.200 see is a lot of people who couldn't get home 0:11:06.240 --> 0:11:09.880 for a couple of years going home. So that's the trend. 0:11:10.240 --> 0:11:13.199 And then six eight months a year later, you start 0:11:13.240 --> 0:11:18.360 to see tourists pick up. But for sure, we're seeing 0:11:18.400 --> 0:11:24.160 pushback on pricing. And every Tuesday I get fair sale 0:11:24.280 --> 0:11:26.720 offerings from a lot of the airlines. You know, just 0:11:26.800 --> 0:11:31.679 sign up for the email alerts to monitor discounts, and 0:11:31.720 --> 0:11:34.200 the discounts are deeper than they were six months ago. 0:11:34.320 --> 0:11:37.760 So yes, we're seeing some pressure on price. 0:11:37.840 --> 0:11:40.400 Helene, I've got ten seconds. So just pick a name 0:11:40.520 --> 0:11:42.480 favorite airline right now? Which stock is it? 0:11:43.360 --> 0:11:47.720 Yeah, we're still on United. Okay, well we're domestic and 0:11:47.800 --> 0:11:48.800 higher international. 0:11:49.080 --> 0:11:52.000 Scott Kirby getting it done over night, Helene, Thank you, 0:11:52.120 --> 0:11:59.520 Helene Becker of TD Jordan Rochester joins US now G 0:11:59.679 --> 0:12:02.199 ten FX strategiest for at Namura Jordan. What for to 0:12:02.240 --> 0:12:03.719 catch up with you, sir, Let's start with the Bank 0:12:03.760 --> 0:12:06.200 of England later this week. Is it twenty five? Is 0:12:06.240 --> 0:12:06.760 it fifty? 0:12:07.160 --> 0:12:07.320 Is it? 0:12:07.360 --> 0:12:09.560 What the ECB and the Federal Reserve delivered over the 0:12:09.600 --> 0:12:11.400 last week, which is a lot of communication about a 0:12:11.400 --> 0:12:11.959 ton of nothing? 0:12:12.120 --> 0:12:13.760 What is it? 0:12:13.840 --> 0:12:15.880 A ton of nothing? Well, in terms of the Bank 0:12:15.920 --> 0:12:17.640 of Ingland, we think they'll do twenty five. And the 0:12:17.720 --> 0:12:20.360 problem John for Sterling is that there's about thirty two 0:12:20.400 --> 0:12:22.640 and a half basis points price for that meeting, and 0:12:22.679 --> 0:12:23.600 that's going to move Sterling. 0:12:23.640 --> 0:12:24.600 Now, it's not too much. 0:12:24.640 --> 0:12:26.439 It's not like a fifty to fifty chance of them 0:12:26.480 --> 0:12:29.360 going for a fifty basis point hike at this meeting 0:12:29.400 --> 0:12:31.679 priced in. But you saw with the RBA overnight when 0:12:31.679 --> 0:12:34.560 there's around eight basis points are so priced in for 0:12:34.760 --> 0:12:38.480 potential hiking they don't deliver, it can see a big 0:12:38.520 --> 0:12:40.800 move lower in the currency. So it could be the 0:12:40.800 --> 0:12:43.320 case that on Thursday we have banking and doing twenty five. 0:12:43.760 --> 0:12:46.000 It's too early for them to declare a victory lap, 0:12:46.160 --> 0:12:47.680 that's the thing. So we think there's gonna be another 0:12:47.679 --> 0:12:50.240 few more hikes to come, maybe seventy five basis points 0:12:50.240 --> 0:12:53.240 overall from where we are now today this year, and 0:12:53.240 --> 0:12:56.400 that's the reason why sterling has relatively traded quite well. 0:12:56.559 --> 0:12:58.679 It's become a carry trade, John, it's one of the 0:12:58.760 --> 0:13:01.679 highest carry currencies the G ten. But all the charts 0:13:01.720 --> 0:13:04.319 we follow that tell us where inflation's going say it's 0:13:04.360 --> 0:13:07.400 going to slow down quite noticeably. So the good sector, John, 0:13:07.720 --> 0:13:09.880 really go to slow down this inflation is here. The 0:13:09.920 --> 0:13:13.920 problem with the UK with services inflation are indicators suggested 0:13:14.120 --> 0:13:16.520 it should have gone down starting around a few months. 0:13:16.320 --> 0:13:17.200 Ago, and it didn't. 0:13:17.440 --> 0:13:19.680 But the good news is the last CPI print was 0:13:19.800 --> 0:13:23.400 possibly the peak of service inflation in the UK. That's 0:13:23.400 --> 0:13:25.520 why the banking might take note of that and say, 0:13:25.559 --> 0:13:28.560 actually there's some early signs that policy is working to 0:13:28.600 --> 0:13:29.600 slow down that sector. 0:13:29.760 --> 0:13:30.880 But it's just one data point. 0:13:30.920 --> 0:13:33.439 We need a few more CPR reports until that victuy 0:13:33.480 --> 0:13:34.360 lap can be declared. 0:13:34.480 --> 0:13:36.440 On this side of the Atlantic, we've had a similar 0:13:36.440 --> 0:13:40.079 conversation about whether the Federal Reserve is sufficiently restrictive. When 0:13:40.120 --> 0:13:42.200 you put everything together that you've just said, Jordan, can 0:13:42.240 --> 0:13:44.720 you draw that conclusion that the Bank of England is 0:13:44.760 --> 0:13:46.439 sufficiently restrictive? 0:13:47.679 --> 0:13:48.560 I think they are. John. 0:13:49.200 --> 0:13:52.360 We're seeing evidence in terms of PMI, input prices, supply 0:13:52.520 --> 0:13:56.840 side all saying it's restrictive. Demand is slowing down, retail sales. 0:13:57.160 --> 0:13:59.200 All these sort of indicators are nowhere near astrong as 0:13:59.520 --> 0:14:02.120 what they were last year. But a lot of the 0:14:02.120 --> 0:14:05.560 analysis that goes into it sometimes just proves wrong in 0:14:05.640 --> 0:14:08.320 terms of the hard data. So the pms have been 0:14:08.440 --> 0:14:11.080 very weak on the manufacturing sector, but the industrial production 0:14:11.320 --> 0:14:12.800 figures haven't been as weak. 0:14:12.960 --> 0:14:14.360 The soft versus hard debate. 0:14:14.600 --> 0:14:16.880 So if you're looking at hard data, you're looking at 0:14:17.360 --> 0:14:19.520 realized inflation, you'd you're. 0:14:19.400 --> 0:14:21.040 The Bank of England saying we need to do more. 0:14:21.200 --> 0:14:23.080 But if you're in my space, if you're looking at 0:14:23.080 --> 0:14:26.040 the forward looking indicators, they suggest, yeah, we are pretty 0:14:26.040 --> 0:14:27.720 close to being sufficiently restrictive. 0:14:27.960 --> 0:14:31.200 That's over in England where John was mentioning UK housing 0:14:31.200 --> 0:14:33.360 prices which dropped the most since two thousand and nine, 0:14:33.600 --> 0:14:35.280 as you do see these rate increases, and we will 0:14:35.320 --> 0:14:38.480 talk about that later. Over in Europe and the European Union, 0:14:38.480 --> 0:14:41.800 there is a question around whether they are sufficiently restrictive 0:14:41.840 --> 0:14:45.720 at a time when core inflation has exceeded headline CPI 0:14:45.880 --> 0:14:49.120 the most going back to twenty twenty one, and at 0:14:49.120 --> 0:14:50.960 a time when you're starting to hear a little bit 0:14:51.000 --> 0:14:54.320 more of a dubbish conversation from some of the members. 0:14:54.000 --> 0:14:57.280 There can you still get bullish and long. 0:14:57.080 --> 0:14:59.600 Euro versus dollar if you do have that kind of 0:14:59.600 --> 0:15:00.920 shift even among the hucks. 0:15:02.040 --> 0:15:04.160 Indeed, we've had a shift already, and that's kind of 0:15:04.160 --> 0:15:06.560 why euro dollar has really fallen from the one twelve 0:15:06.600 --> 0:15:08.520 handle to where we are today just below one ten. 0:15:08.880 --> 0:15:11.160 We've had various moments this year where it felt like 0:15:11.200 --> 0:15:13.960 euro dollar might break to the upside and to the downside, 0:15:14.120 --> 0:15:16.400 but the pain has been this range that we've had 0:15:16.440 --> 0:15:18.760 for most of twenty twenty three. We need a trend, 0:15:19.080 --> 0:15:21.600 and these false breakouts are just mutton dressed as lamb. 0:15:21.920 --> 0:15:24.080 We need to have some sign that either the US 0:15:24.080 --> 0:15:27.000 disinflation story is strong enough and we'll see that dollar weakness, 0:15:27.480 --> 0:15:30.280 or that the ECB perhaps doesn't need to cut rates 0:15:30.480 --> 0:15:33.040 at all next year, or if they do towards the 0:15:33.120 --> 0:15:35.840 n Q four. If we get that sort of story, 0:15:35.880 --> 0:15:38.560 then euro dollar can be supported from the rates angle. 0:15:38.800 --> 0:15:41.400 But the problem at the moment, Lisa, equities are rallying, 0:15:41.440 --> 0:15:43.200 which is a reason to buy euro and it's the 0:15:43.200 --> 0:15:45.160 reason why we are long euro. We're looking for one 0:15:45.280 --> 0:15:48.760 fourteen by the end of September. But oil prices are 0:15:48.760 --> 0:15:51.640 picking back up and the rates market in the EGb 0:15:51.800 --> 0:15:53.960 space have softened. In terms of what's price for the 0:15:53.960 --> 0:15:56.680 ECB by your end, we think they're done. We think 0:15:56.720 --> 0:16:00.320 that's possibly the last rate hype by the ECB. Little 0:16:00.360 --> 0:16:02.240 bit of market price and that's left for year end. 0:16:02.280 --> 0:16:04.200 Will be disappointed. It's not too much. 0:16:04.240 --> 0:16:06.360 We are pricing less than one rate height now, but 0:16:06.560 --> 0:16:09.040 that is a drag on the euro. But if equities 0:16:09.080 --> 0:16:11.280 go to five thousand in the SMP like your previous 0:16:11.600 --> 0:16:13.920 guests were talking about, then the only way is for 0:16:13.960 --> 0:16:15.240 dollar weakness in that environment. 0:16:15.240 --> 0:16:17.800 In my view, how disruptive could higher oil process be 0:16:18.000 --> 0:16:20.120 and natural gas for that matter, given some of the 0:16:20.160 --> 0:16:22.200 recent disruptions and cost sun carriers. 0:16:23.440 --> 0:16:25.760 The biggest headache I have right now is oil prices. 0:16:25.760 --> 0:16:28.440 I would say it upsets the apple cart for sure, 0:16:28.520 --> 0:16:30.520 because the story is about US disinflation. 0:16:30.680 --> 0:16:31.000 Energy. 0:16:31.000 --> 0:16:33.720 Before this oil price rally was down forty percent year 0:16:33.760 --> 0:16:35.760 and new in the US, and if it had stayed 0:16:35.760 --> 0:16:38.760 at those levels before we had this rally, it would 0:16:38.760 --> 0:16:42.320 have really dragged down USCPI. But now we've seen retail 0:16:42.400 --> 0:16:44.920 gasoline prices in the US pick up by five percent 0:16:45.160 --> 0:16:47.000 towards the end of July, and it could go further. 0:16:47.040 --> 0:16:50.000 If we break ninety dollars a barrel in oil, I 0:16:50.000 --> 0:16:53.800 think central bankers will be too cautious and they'll say, actually, 0:16:54.040 --> 0:16:56.840 we don't need to even discuss about cutting grapes at all. 0:16:56.880 --> 0:16:59.240 We need to stay higher for longer or even surprise 0:16:59.520 --> 0:17:01.760 with another hike this year. And we think both the 0:17:01.760 --> 0:17:03.360 FED and the ECB are done. But if we have 0:17:03.440 --> 0:17:05.520 oil go to ninety dollars, let's say it goes to 0:17:05.560 --> 0:17:08.760 one hundred, that's clearly a mixture of supply concerns, but 0:17:08.800 --> 0:17:11.480 it probably is due to demand picking backups in a 0:17:11.520 --> 0:17:14.199 surprising fashion that we'll see a few central banks have 0:17:14.320 --> 0:17:16.640 to turn hawkish in the second half of this year, 0:17:16.720 --> 0:17:18.560 which we don't really expect. We think that most center 0:17:18.640 --> 0:17:20.600 banks are close to the end of their cycle. But 0:17:20.880 --> 0:17:23.119 if we get to ninety to one hundred lisa, a 0:17:23.160 --> 0:17:24.879 lot of things will have to change in the narratives 0:17:24.880 --> 0:17:25.440 that are out there. 0:17:25.640 --> 0:17:27.679 Jordan, I've got thirty seconds. Is it too early for 0:17:27.800 --> 0:17:30.040 aston Villa predictions for next season? 0:17:31.160 --> 0:17:33.679 Well, look, I think we're now a top ten club 0:17:34.000 --> 0:17:37.000 that's whole ten day after last year. Okay, that's a 0:17:37.040 --> 0:17:39.560 massive improvement of where we were when we had Gerard. 0:17:39.359 --> 0:17:42.639 Jordan, Rochester Namura with a subtle dig as Steven Gerrard 0:17:53.160 --> 0:17:55.399 Regina Mayor joints as clobal head of Clients and Markets 0:17:55.400 --> 0:17:58.320 over at pmg Regina, Let's start there and talk about 0:17:58.320 --> 0:17:59.920 this run and greater catch up with you and working 0:18:00.200 --> 0:18:03.480 program as always. What's on depending that rally through July 0:18:03.520 --> 0:18:04.879 and can it continue through August? 0:18:06.320 --> 0:18:10.159 Well, demand continues to outpace supply and opiq plus with 0:18:10.240 --> 0:18:14.800 its strategic cuts and even the Saudi's voluntary one million 0:18:14.840 --> 0:18:18.080 barrel per day that they've indicated they will extend through 0:18:18.080 --> 0:18:22.040 September has created buoyancy in the crew markets like Brent 0:18:22.160 --> 0:18:27.000 above eighty five, WTI once again above above eighty and 0:18:27.040 --> 0:18:30.600 that demand is outpacing supply. There are some analysts that 0:18:30.680 --> 0:18:33.560 are saying, when we're able to go back and analyze 0:18:33.600 --> 0:18:37.359 the actual demand figures that July, given it was one 0:18:37.400 --> 0:18:39.600