Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
Speaker 1: with my co host of Bonnie Quinn. Every business day
Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
Speaker 1: along with essential market moving news. Find the Bloomberg Markets
Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
Speaker 1: and on Bloomberg dot com. Well, as we all know,
Speaker 1: it is f O m C Statement and News Conference day.
Speaker 1: We'll be hearing from FED here J Powell later on.
Speaker 1: It's not as if we haven't been hearing from FOOD members,
Speaker 1: but he can only add to the dialogue or the
Speaker 1: conversation that's being had across the country. Let's bring in
Speaker 1: somebody else who will be speculating about this, and that
Speaker 1: is Robert tip Managing director, chief investment strategist at p Jim, Robert,
Speaker 1: thanks for joining. So we'll get the statement to two pm.
Speaker 1: What will be different from the last statement I think
Speaker 1: the FED is going to take a breather here. I
Speaker 1: think they're gonna, you know, continue to emphasize that they're there,
Speaker 1: that they're bringing online all of the aggressive programs that
Speaker 1: they've announced. But I think they're at the bridge stage,
Speaker 1: you know, we've gone through the drop into the void,
Speaker 1: and they sprung into action and they instilled in the
Speaker 1: Market's really the first phase, which was the leap of faith.
Speaker 1: But now we're on the other side, we're getting evidence
Speaker 1: of recovery. And as you may have been made clear
Speaker 1: by the payroll number, I mean, obviously it's early days,
Speaker 1: but you'd expect the first stages could see some pretty
Speaker 1: rapid growth and so it's difficult for them to pour
Speaker 1: a lot of gas on and fire all remaining bullets
Speaker 1: as the economy is is um really accelerating. I think
Speaker 1: they're gonna plant some seeds here, uh and leave the
Speaker 1: door open and leave the impression that they definitely want
Speaker 1: to ensure this recovery and that they're not taking it
Speaker 1: for granted. But I think fresh steps here, I programs
Speaker 1: kind of shock and awe. I think it's gonna those
Speaker 1: are going to be limited. So, Robert, you mentioned that
Speaker 1: better unexpected jobs report we got last week. How are
Speaker 1: you thinking about the economic recovery for the remainder that
Speaker 1: you're going into next year? Now, how's that changed for
Speaker 1: you over the last several weeks. Sure, Well, I think
Speaker 1: the expectation was based on the way this is played
Speaker 1: out in other places that that you you know, should
Speaker 1: expect to see a rapid recovery in some ways in
Speaker 1: these early stages. I mean, we had a sudden stoppage
Speaker 1: and activity, everybody locking down and staying home. But you
Speaker 1: immediately saw sequential growth beginning weeks ago in auto sales
Speaker 1: in activity levels. And as that happens, you know you
Speaker 1: need service people on the ground coming back to work.
Speaker 1: So I think that this is a much more difficult stage.
Speaker 1: The leap of faith stage, there was a lot of police.
Speaker 1: There's a lot of value in the markets. Now you're
Speaker 1: looking at valuations and markets that are below average. Uh,
Speaker 1: and you're at the evidence stage. And so I think
Speaker 1: you're you're going to continue to get progress in markets,
Speaker 1: but you're going to get a lot more volatility, a
Speaker 1: lot more back and forth as people question whether this
Speaker 1: is going to be fast enough in terms of growth
Speaker 1: to get companies to the other side, how long it's
Speaker 1: going to be sustained, and so on. If we don't
Speaker 1: get more physical stimulus and unemployment benefits and the extra
Speaker 1: stimulus runs out in July, what happens, Robert? Yeah, I mean,
Speaker 1: I think you're going to have to get some more stimulus.
Speaker 1: They're going to have to keep that going to some
Speaker 1: extent um because you can't have uh, you know, a
Speaker 1: huge swap of the population, you know, without income, and
Speaker 1: there's a you know, when you look at the dead
Speaker 1: styles in terms of wealth, income, savings, and so on,
Speaker 1: there's very little wiggle room for uh, you know, broad
Speaker 1: spectrum of the population. And so I think that even
Speaker 1: if you're getting millions of jobs created every month, it's
Speaker 1: not going to be the majority of jobs getting recreated
Speaker 1: in the next few months. And so they're going to
Speaker 1: have to keep something going there. So, Robert, where do
Speaker 1: you see value in the fixed income markets? We've had
Speaker 1: again a nice rebound in risk assets. Where where do
Speaker 1: you see value? Yeah, let me answer that question and
Speaker 1: back and fill a little bit on the last one. So,
Speaker 1: you know, looking out over the long term, I think
Speaker 1: spread product is going to outperform. You're gonna have to
Speaker 1: be very selective though. You know, we're looking across pretty
Speaker 1: much all sectors, whether it's high quality structured product UH,
Speaker 1: European peripherals, hard currency and local emerging markets i g.
Speaker 1: High yield corporates. UH. There are good values in all
Speaker 1: of these areas UM. But as legislation is worked on,
Speaker 1: as we get closer to the election and we see
Speaker 1: more of Biden and the competition for leadership in that race,
Speaker 1: UH and all the other things geo politics, trade wars, UH.
Speaker 1: You know, you have UM investors in many cases that
Speaker 1: may have been chased into a rally that they didn't
Speaker 1: believe in. And you'll see, you know, more days like
Speaker 1: today where it's not just one way progress. You're gonna
Speaker 1: get backing and filling. I think over the long run though,
Speaker 1: that's where the value is going to be. Number one
Speaker 1: is in spread product. I think number two, there's gonna
Speaker 1: be a lot of opportunities on the interest rate side
Speaker 1: because I think whether the said UH really doubles up
Speaker 1: on their programs today or not, and I think that's unlikely.
Speaker 1: I think in the long run you're still looking at
Speaker 1: a shift of secular shift to lower rates and the
Speaker 1: long term forwards and markets. Frankly, right now, I don't
Speaker 1: really reflect that it's still some value even laft At
Speaker 1: back into the treasury curve, Robert, thank you, the back
Speaker 1: end of the treasury curve and spread products. Much appreciated
Speaker 1: your time today. It is Robert Tip, chief investment strategist
Speaker 1: at p JIM joining us there, and I do want
Speaker 1: to point out that the tenure yield today is at
Speaker 1: seventies seven basis points, just a little bit of move
Speaker 1: after we got that CPI data negative month over month,
Speaker 1: down by point one percent. At the two stands spread
Speaker 1: at fifty nine basis points right now, Remember when we
Speaker 1: were worried about that going negative. Surely fixed that one. Alright,
Speaker 1: Thanks once again to p Jim's Robert Tip. Always love
Speaker 1: chatting with him. It is time to check in with
Speaker 1: me work opinion. Now we're joined by opinion columnist Jonathan
Speaker 1: Bernstein on his latest column, to do with the elections
Speaker 1: coming up in a short five months from now. The
Speaker 1: column entitled be ready for a long election night this year. So, Jonathan,
Speaker 1: you say that administering the action would already be a
Speaker 1: challenge even if everyone acted in good face. But there
Speaker 1: are many more challenges this year, including that we could
Speaker 1: actually be looking at a whole week. Just explain if
Speaker 1: you can, what you mean by by that. Well, what's
Speaker 1: happened is as more and more voters are doing early voting,
Speaker 1: doing vote by mail, doing other forms of absentute voting,
Speaker 1: it just takes longer to count the ballots. And that's
Speaker 1: been a trend that's happening over the last several elections,
Speaker 1: and it's going to be accelerated this year because we're
Speaker 1: expecting way more vote by mail this year, and so
Speaker 1: there's going to be a lot of states that only
Speaker 1: can count you know, sixty or so of their ballots
Speaker 1: on election night, and so we need to expect that
Speaker 1: it's going to take days, maybe up to you know,
Speaker 1: ten days, fifteen days to get a final result from
Speaker 1: some states, including some of the battleground states. So is
Speaker 1: it the case that you know, we're not going to
Speaker 1: see uh, the election called on election night that no
Speaker 1: matter what, it's very likely that we won't have a
Speaker 1: conclusion to the election for again, up to maybe ten days.
Speaker 1: It depends on how close the election is. Of course, um,
Speaker 1: there are gonna there's a bunch of states that you know,
Speaker 1: basically are still going to be able to call the
Speaker 1: state that election night. But um in some of the
Speaker 1: other states, including Pennsylvania and Arizona, which are both major
Speaker 1: battleground states, expected to be this time if those states
Speaker 1: turn out to um be the margin of you know,
Speaker 1: victory we're not going to know, possibly for quite some time.
Speaker 1: And the thing is, there's nothing wrong with this. This
Speaker 1: is planned. This is how it needs to be to
Speaker 1: get everybody to vote and to have an accurate account.
Speaker 1: So one of the important things for everybody to do
Speaker 1: in a in a position to do so is to
Speaker 1: warn everyone in advance this is going to happen. This
Speaker 1: is okay, this is not fraud, this is not questionable.
Speaker 1: There's nothing wrong with this. This is the best way
Speaker 1: to let everybody vote and I get an accurate count.
Speaker 1: And yet, Jonathan, why do I have premonitions of all
Speaker 1: sorts of challenges and court cases on an attorneys general
Speaker 1: bring broad in. Well, there's no There's two things. One
Speaker 1: is legitimately, there's a close election. Both parties are going
Speaker 1: to fight for their rights, and that's you know, there's
Speaker 1: nothing wrong with that. Then, on top of that, we
Speaker 1: have a president United States who who alleged fraud without
Speaker 1: evidence in an election that he won. So we're sort
Speaker 1: of all expecting him to allege fraud no matter what happens,
Speaker 1: because that's what Donald Trump does. He claims fraud based
Speaker 1: on nothing. So you know it's it's gonna be a
Speaker 1: there's a good chance it's going to be a mess,
Speaker 1: especially if it's a close race. It's gonna be a mess.
Speaker 1: It's gonna look ugly. And the best we can do
Speaker 1: is warn everybody, Hey, this is what to expect. I mean, Paul,
Speaker 1: just you know, stop there for one second. I just
Speaker 1: think how strange it is that you're putting effort into
Speaker 1: explain to the public that fraud is not going to
Speaker 1: take place, but you have the president saying is taking place.
Speaker 1: How do you exact about that? It's interesting, you know, Jonathan,
Speaker 1: that's a great question. I mean, I think the issue
Speaker 1: is here, is the delay this election primarily driven by
Speaker 1: the write in votes, the mail in votes that are
Speaker 1: resulting from the pandemic, or is there anything else going
Speaker 1: on here? Well, a lot of states are just shifting
Speaker 1: more to mail in votes to begin with, and states
Speaker 1: have different rules so that some states you can the
Speaker 1: deadline is to get a um to give the ballot in,
Speaker 1: to give the ballot um you know, in the mail
Speaker 1: on election day, so it may take another day or
Speaker 1: two to be to arrive, and then they have to
Speaker 1: sort it and they have to come and it takes
Speaker 1: a lot longer to count um absentee votes and vote
Speaker 1: by mail because you have to certify it. You have
Speaker 1: to make sure it's a real bad You can't just
Speaker 1: you know, throw everything through the machine, so it takes longer.
Speaker 1: And then there's an additional complication, which is in the
Speaker 1: thing we have to let people know, which is that
Speaker 1: the people who tend to vote at the last minute
Speaker 1: tend to be more Democratic than Republican. So we need
Speaker 1: to expect in most states. It's not it's not consistent
Speaker 1: across all states, but it is true in both Pennsylvania
Speaker 1: and Arizona. We expect the election night count to be
Speaker 1: better for Republicans than the final result. And there's a
Speaker 1: good chance that Republicans may have to lead on election night,
Speaker 1: while experts who know you know, who know how this works,
Speaker 1: know that Democrats have a very good chance of overtaking that.
Speaker 1: How will this affect how we should read pulling on
Speaker 1: the way up to the election? Obviously pulling has not
Speaker 1: had a great record recently anyway, but you know, presumably
Speaker 1: there would be you know, different polls this year, a
Speaker 1: different types of of of collecting data and people reading
Speaker 1: them differently, and you would have thought, hopefully better than
Speaker 1: the last couple of elections. Will it make a difference.
Speaker 1: That's a great question. The pulling actually last time around
Speaker 1: was better than people thinking the national polls basically got
Speaker 1: it right, some of the state polls were wrong. Um,
Speaker 1: where there's no particular reason to think that absolutely voting
Speaker 1: vote by mail will really affect that. Posters have learned.
Speaker 1: You know, people now start voting in early October. Um,
Speaker 1: it's more of a one month election that then takes
Speaker 1: a week to count than a one day election that
Speaker 1: takes one night to count. Um. So so there's actually
Speaker 1: sort of slipped the JOm. Both sides and posters have
Speaker 1: gotten better, have gotten pretty good at knowing that's happening
Speaker 1: and adjusting for it. So we may have polling errors,
Speaker 1: but it shouldn't really affect the count that much. Johnathan Bernstein,
Speaker 1: thanks so much for joining us. Jonathan Bernstein, Bloomberg Opinion
Speaker 1: columnists covering all things political. I think, as you suggested, Vanni,
Speaker 1: this is going to get kind of ugly as we
Speaker 1: kind of get up to this election and trying to
Speaker 1: process the days after. Yeah, I mean we're definitely five
Speaker 1: months away. But yesterday alone you had Paul to to
Speaker 1: Jonesy and Bruce Richards already talking about starting to look
Speaker 1: towards the election, and so you know when you have
Speaker 1: major investor is like that doing it, you know the
Speaker 1: rest of the country is. But of course there's the
Speaker 1: conventions to get through first Pall Yeah, exactly, And Johnson
Speaker 1: said the key here's uh kind of education letting people
Speaker 1: know that this is going to happen. But Jonathan's columns
Speaker 1: the first time I kind of kind of came up
Speaker 1: to this issue. So there's a lot more education that
Speaker 1: needs to be had going forward, but it will be
Speaker 1: certainly an issue. Great Jared, thank you so much. We
Speaker 1: appreciate that. Market Drivers is brought to you by Commonwealth
Speaker 1: Financial Network for the sixth raight time. JD Power ranks
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Speaker 1: Visit Commonwealth dot com to learn more. Looking at the
Speaker 1: markets here, as Greig was just mentioning, we're kind of
Speaker 1: kind of a mixed SMP down slightly down, down a
Speaker 1: hundred and fifty points. But the NASTAC is hired to
Speaker 1: get a sense of what's really going on and how
Speaker 1: we should be thinking about these equity markets going forward.
Speaker 1: In the face of this global pandemic. We welcome our
Speaker 1: good friend Gina Martin Adams. She's an equity strategist for
Speaker 1: Bloomberg Intelli. Gina, thanks much for joining us here. Give
Speaker 1: us your sense here of kind of how you're viewing
Speaker 1: the markets here. After this nice bounce off the lows
Speaker 1: that we've seen any equity markets, how are you kind
Speaker 1: of taking a look at the next twelve months for
Speaker 1: the equity markets. Yeah, so when we think about where
Speaker 1: equity markets are, the bounce in our view has been
Speaker 1: entirely driven by policy infusion. Much lower rates for a
Speaker 1: longer period of time, a commitment by the Fed to
Speaker 1: at least double the size of the balance sheet and
Speaker 1: purchase many, many assets across the bond market spectrum has
Speaker 1: certainly elevated valuations and equities um. But we've now priced
Speaker 1: effectively priced that policy infusion in, so we're waiting for
Speaker 1: our next like higher And I do think that's why
Speaker 1: you're seeing the market sort of take a pause here,
Speaker 1: rotate back into some longer term winners. And I do
Speaker 1: think we're in for a period of maybe a rockier
Speaker 1: climb as we move into more of us show me
Speaker 1: market and by that I mean, we're going to have
Speaker 1: to see the economic data continue to improve of maybe
Speaker 1: a little upward revision momentum emerge in the earnings UH
Speaker 1: in the earnings expectations stream to really drive performance from here.
Speaker 1: So we've gone from policy driven market to what's likely
Speaker 1: to be more of an economically and earnings driven market
Speaker 1: over the next several months in our view. Yeah, just
Speaker 1: as you talk about that, we're seeing the fangs hire
Speaker 1: today which again shows the NASDA two thirds of percent,
Speaker 1: while the other indicries are lower, but Gina not by
Speaker 1: very much. And if you say we're going back to
Speaker 1: the fundamentals, you know, what does an improvement look like,
Speaker 1: Because we're looking at seriously negative numbers, particularly for earnings
Speaker 1: next quarter. We are, but the expectation is for that
Speaker 1: negativity to persist. And I think that's an important and
Speaker 1: important point to make. If you look at your average
Speaker 1: recovery following recession lows, you typically get a ten percent
Speaker 1: growth pace in EPs following those lows in the year
Speaker 1: after those lows, So ten percent is your average we're
Speaker 1: making in a five for some expectation in terms of
Speaker 1: our forecast for where the SMP five fundered is most
Speaker 1: likely to go the consensus expects only one and a
Speaker 1: half percent growth, So I think this is an important
Speaker 1: thing to keep in mind, is there's no implied expectation
Speaker 1: for recovery really in the earning stream. In terms of
Speaker 1: consensus expectations, I would argue the market is probably be
Speaker 1: pricing in about two percent growth following our our second
Speaker 1: quarter trough. So that's why we're so sensitive to what
Speaker 1: happens with the pace of economic growth and earnings recovery. Yes,
Speaker 1: the current economic numbers look bad, but they are getting
Speaker 1: less bad. As long as they continue to get less
Speaker 1: bad and start to migrate to potentially growth, we're more
Speaker 1: likely to see revision momentum revert higher or more likely
Speaker 1: to see earnings beat expectations, and that's going to keep
Speaker 1: the market most likely moving higher, albeit certainly not at
Speaker 1: the double digit pace of monthly growth that we've experienced
Speaker 1: most recently. It'll be it'll most likely be a rocky,
Speaker 1: rockier climb because it's driven more by improve the earnings
Speaker 1: expectations and improving economic outlook, which by its very nature
Speaker 1: is much more difficult and more difficult portion of the
Speaker 1: equity market climb than the pure valuation expansion driven portion
Speaker 1: that we've just been through. So you know, we've had
Speaker 1: the FED kind of come out, you know, since the
Speaker 1: beginning of this pandemic, could be quite aggressive, quite a
Speaker 1: forthright in kind of their views of how they need
Speaker 1: to stimulate the market and add to liquidity to the market.
Speaker 1: Fiscal stimulus is kind of taken a back seat here.
Speaker 1: Is that does the market need to see another big
Speaker 1: round of fiscal stimulus here or is that not a
Speaker 1: prerequisite for the support of this market right here? I
Speaker 1: think it will entirely depend upon the pace of economic recovery.
Speaker 1: I mean, I think we can all admit that we
Speaker 1: were very shocked by the pace of employment recovery recorded
Speaker 1: in the month of May, just on a couple of
Speaker 1: weeks of reopening. To see that kind of employment growth.
Speaker 1: There's a lot of skepticism as to whether it will continue.
Speaker 1: But if it does continue into June, I think the
Speaker 1: fiscal bodies are going to really start the question how
Speaker 1: much spending they need to do, how much stimulus they
Speaker 1: need to do. At the same time, you've got a
Speaker 1: lot of fear out there that we're going to have
Speaker 1: another reinfection wave, that we're going to experience some you know,
Speaker 1: sort of um greater shutdown come winter months, and so
Speaker 1: I think that they want to reserve some firepower in
Speaker 1: the event that we do see some sort of reinfection
Speaker 1: going forward. Not to mention, the fiscal budget is not
Speaker 1: exactly sanguine at this moment in time. We certainly accumulated
Speaker 1: a tremendous fiscal fiscal deficits, so I think they're going
Speaker 1: to be somewhat conservative, certainly follow the data. I think
Speaker 1: in certain cases there's enough political momentum, such as the
Speaker 1: extension of unemployment benefits, to probably get something through. But
Speaker 1: we're unlikely to see a massive Zooka package like we
Speaker 1: saw in the spring, simply because we do appear to
Speaker 1: be pushing past the worst of the worst, and as
Speaker 1: long as we're going to continue to see some incremental
Speaker 1: improvement in economic growth, your case for extraordinary fiscal expenditure
Speaker 1: um in that kind of environment, it is diminished somewhat,
Speaker 1: and the equity market is not necessarily counting on it.
Speaker 1: You know, with one and a half percent growth forecast
Speaker 1: for earnings over the next twelve months, the equity market
Speaker 1: is essentially just saying, hey, we're going to have incremental
Speaker 1: improvement in the economy. I would say another fiscal package
Speaker 1: is um likely to provide a big booth. Gina, very briefly,
Speaker 1: what do you make of the distressed equity investing that
Speaker 1: we're seeing right now? Her, it's jes a big j
Speaker 1: C penny. Yeah, I mean, I think it's just a
Speaker 1: risk tolerance move. I do think that what's happening in
Speaker 1: general is an improvement and risk tolerance investors are willing
Speaker 1: to go out the curve in terms of lower quality investments,
Speaker 1: higher volatility investments. That's very symptomatic of sort of recession loads,
Speaker 1: very consistent with experience as the past. UM. I wouldn't
Speaker 1: call it necessarily taking a flyer, but certainly finding those
Speaker 1: um those potential opportunities where we've seen extraordinary dislocation and
Speaker 1: maybe some mispricing in the market is definitely the risk
Speaker 1: appetite of the day, right, Gina. Thank you have to
Speaker 1: live there, Gina, Martin Addam when we're intelligence the chief
Speaker 1: equity strategists, Thank you for that. There's one CEO I
Speaker 1: probably not want to be during these times, and that
Speaker 1: is an insurance company CEO. They are on the hook
Speaker 1: for so much or at least they say they're not.
Speaker 1: But those who are claiming they are sometimes have a
Speaker 1: pretty good argument, or at least they think they do.
Speaker 1: Let's bring in somebody who knows both sides of the story,
Speaker 1: and that is Matt Pozzola, who covers all of the insurers,
Speaker 1: particularly the property and casualty insurers for US at Bloomberg Intelligence. So, Matt,
Speaker 1: the story for the insurers just keeps getting more and
Speaker 1: more complicated. We had the pandemic, we had events canceled
Speaker 1: for that reason, and then of course we had protests,
Speaker 1: some of which turned into riots. Just how on the
Speaker 1: hook are insurers for all of these events? Yeah, the
Speaker 1: combination of all these events will probably make for the
Speaker 1: worst insured loss year ever. UM as a bull of
Speaker 1: distinctions to make when you're you know, saying that, typically, UM,
Speaker 1: when you have a large event, which previously the most
Speaker 1: cost the event was Hurricane Katrina in the United States,
Speaker 1: that's usually isolated to at least one geographic region. So
Speaker 1: what's really distinguishing the pandemic is the fact that it's
Speaker 1: impacting pretty much every major, large global city in the world. UM.
Speaker 1: And that's what's going to contribute to this large loss Alright,
Speaker 1: so Matt, can the insurance industry handle this? Yeah, for sure.
Speaker 1: So the insurance industry is well capitalized. Two thousand seventeen
Speaker 1: and two thousand eighteen were pretty bad years in the
Speaker 1: United States for insured losses, with a number of hurricanes
Speaker 1: adding up, and even through that, insurance companies remained pretty
Speaker 1: well capitalized. And I think the other important point is
Speaker 1: that if these losses are very geographically dispersed um by region,
Speaker 1: they're going to be very very dispersed by company me too,
Speaker 1: So it's going to be spread across the entire global industry.
Speaker 1: So I wouldn't have capital concerns for the entire industry.
Speaker 1: Some companies here and there could get into trouble thought well.
Speaker 1: And of course we should note that when it comes
Speaker 1: to that side of the equation, insurance companies are huge investors,
Speaker 1: and with the out and NASDAC and all those industries
Speaker 1: at all time highs, that part of their balance street
Speaker 1: hasn't really been hurt like it might have been. But
Speaker 1: one of the other side, I mean, we had so
Speaker 1: many lobbying groups trying to get injurers to pay out
Speaker 1: money for things like rent or you know, COVID nineteen stoppages,
Speaker 1: and they just are not prepared to do so they're
Speaker 1: going to fight it all the way. It may go
Speaker 1: to you know, a higher court or even the Supreme
Speaker 1: Court at some point. But what what what will happen
Speaker 1: with contract law? Will those contracts be changed post talk? Yeah?
Speaker 1: I don't think so, Vanni. So a number of states
Speaker 1: tried to essentially force insurance cut these to retroactively pay
Speaker 1: business interruption claims that specifically excluded viruses, and those bills
Speaker 1: have seemed to have lost momentum um in the various
Speaker 1: states and none of them came into law. The industry
Speaker 1: would have fought that very hard, and like you said,
Speaker 1: it could have even been the case that went all
Speaker 1: the way up to the Supreme Court. I don't think
Speaker 1: that's going to happen retroactively. I do think going forward
Speaker 1: there will be a number of things. Were already discussing
Speaker 1: a global or i should say United States Pandemic fund
Speaker 1: where insurers would potentially pay pandemic claims but then could
Speaker 1: be reimbursed, kind of similar to what we have for
Speaker 1: terrorism right now. So I think the effects are going
Speaker 1: to be in the future more than they are changing
Speaker 1: contracts that already happened in the past. So, Matt, how
Speaker 1: these big property and casualty insurance stocks, how they performed
Speaker 1: here in the markets. You're talking about some of the
Speaker 1: biggest losses ever. I can't imagine investors wanted to have
Speaker 1: anything to do with these things. Yeah, I think so.
Speaker 1: What happened initially was the stocks took a big dip
Speaker 1: in conjunction with the market, and in our published view
Speaker 1: was that the stocks went down a lot more than
Speaker 1: what their exposure might be even in the worst year ever. Uh,
Speaker 1: they've since rebounded, and as Vonnie was mentioning earlier, obviously
Speaker 1: these companies are big investors, and when a lot of
Speaker 1: industry participants are talking about this being the biggest loss ever,
Speaker 1: they are including, uh, the investment impact, which is not
Speaker 1: typically included when we talk about this. So, uh, there's
Speaker 1: a little bit of I guess, you know, building up
Speaker 1: the event, maybe even bigger than it is. And what
Speaker 1: I would note is that several large insures have already
Speaker 1: said that in the second quarter they did see and
Speaker 1: as we've seen with the market, a dramatic rebound in that.
Speaker 1: So I think that's going to be a little bit
Speaker 1: of a limiting factor. What about events, how long will
Speaker 1: events be canceled for? And you know, out to when
Speaker 1: our insurance companies liable in the sense of, you know,
Speaker 1: when do people actually start booking things? I mean, are
Speaker 1: people booking things pre pandemic for two or is that
Speaker 1: like not even on the cards? Yeah, it's not the
Speaker 1: These policies will typically be written on an annual basis,
Speaker 1: so stuff that may be happening in one Uh, those
Speaker 1: policies may not even be written yet. And if they are,
Speaker 1: they're certainly going to exclude um viruses and pandemics. So
Speaker 1: you know, what we're what we'll see now is the
Speaker 1: fall out of stuff for this year and maybe the
Speaker 1: first half of next year, and a lot of that's
Speaker 1: going to fall on the European market, which writes a
Speaker 1: lot of that event cancelation insurance, especially for these big
Speaker 1: events like Wimbledon. Um, you're not going to see US
Speaker 1: insures taking a lot of that risk. So I mean,
Speaker 1: have we seen these companies take some big low loss
Speaker 1: provisions or just put you kind of provisions for losses
Speaker 1: on their policies that Um yeah, I mean, well, so far,
Speaker 1: I'd say the US companies have not. The first quarter
Speaker 1: they didn't have huge losses. Child for instance, it was
Speaker 1: very low number, but they said, you know, we need
Speaker 1: to be prepared for the second third quarter that we're
Speaker 1: going to have a lot higher of losses. So the
Speaker 1: biggest losses right now have been in European companies and
Speaker 1: um reinsurance companies, which is insurance for the insurance companies.
Speaker 1: So as of right now, it's it's still a little
Speaker 1: bit of a weight and see game where you know,
Speaker 1: everyone's talking about the big losses out there. We do
Speaker 1: see the Europeans having them, but as far as the US,
Speaker 1: we still have to wait for the second and third quarter.
Speaker 1: And Matt, thanks so much for joining us. We appreciate
Speaker 1: it as always. Matt few Palazzola senior analysts covering the
Speaker 1: property and casual the insurance business for Bloomberg Intelligence. He's
Speaker 1: got years of experience covering that space. And you know, interesting,
Speaker 1: even though it's going to be uh the worst year
Speaker 1: ever in terms of losses for the insurance companies AI,
Speaker 1: they're able to handle it from a financial perspective, and
Speaker 1: b their stocks are actually bouncing back off those thods
Speaker 1: really fine. Fascinating. Thanks for listening to Bloomberg Markets podcast.
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