1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,239 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,680 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,280 --> 00:00:33,919 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,000 --> 00:00:37,080 Speaker 2: Terminal and the Bloomberg Business App. Here's the take from 10 00:00:37,120 --> 00:00:40,200 Speaker 2: evercre Julian Emmanuel is somewhat cautious. Here's the quote from him. 11 00:00:40,440 --> 00:00:42,839 Speaker 2: Given the uncertainty on policy in the economy and with 12 00:00:42,960 --> 00:00:46,320 Speaker 2: stocks expensive, three plus steps forward rally is set to 13 00:00:46,400 --> 00:00:49,360 Speaker 2: yield to two steps back correction. Julian joins us now 14 00:00:49,360 --> 00:00:51,120 Speaker 2: for more. Julian, good Mornick, good morning. We want to 15 00:00:51,120 --> 00:00:53,000 Speaker 2: give you some credit. A number of weeks ago, still 16 00:00:53,000 --> 00:00:54,760 Speaker 2: a lot of pan account there, a lack of confidence, 17 00:00:54,760 --> 00:00:58,000 Speaker 2: and you said, we've seen the lows recession averted. That 18 00:00:58,080 --> 00:01:01,120 Speaker 2: certainly looks like a good call. At least can things 19 00:01:01,200 --> 00:01:02,040 Speaker 2: change and how quickly? 20 00:01:02,200 --> 00:01:05,199 Speaker 3: Well, It's amazing, John, because when you think about it, right, 21 00:01:05,240 --> 00:01:09,080 Speaker 3: as long term investors, we are supposed to be thinking twelve, 22 00:01:09,400 --> 00:01:13,440 Speaker 3: twenty four, thirty six months in advance, and in this environment, 23 00:01:13,520 --> 00:01:16,600 Speaker 3: there is so much news and so much change that 24 00:01:16,640 --> 00:01:19,640 Speaker 3: you can barely think twelve twenty four or thirty six 25 00:01:19,800 --> 00:01:23,440 Speaker 3: hours in advance. And that was really part of the 26 00:01:23,480 --> 00:01:27,440 Speaker 3: condition that's set up that low on April seventh, you know, 27 00:01:27,600 --> 00:01:33,360 Speaker 3: just abject panic about the state of the economy, you know, 28 00:01:33,480 --> 00:01:36,440 Speaker 3: the need to de risk, and from our point. 29 00:01:36,200 --> 00:01:39,360 Speaker 4: Of view, we do believe that you are. 30 00:01:39,400 --> 00:01:43,120 Speaker 3: Going to end It's obviously a difficult path avert the 31 00:01:43,160 --> 00:01:47,720 Speaker 3: recession barely, but again, when we think about where the 32 00:01:47,760 --> 00:01:52,400 Speaker 3: market is right now, there's that high level of uncertainty 33 00:01:53,120 --> 00:01:56,600 Speaker 3: that makes it, you know, a difficult proposition to commit 34 00:01:56,640 --> 00:01:57,520 Speaker 3: capital long term. 35 00:01:57,440 --> 00:01:59,640 Speaker 2: At least a frank the econom account comes quite well, 36 00:02:00,120 --> 00:02:02,840 Speaker 2: not just about recession or no recession, and we'll continue 37 00:02:02,840 --> 00:02:06,040 Speaker 2: that conversation later on. This morning, we've seen growth expectations 38 00:02:06,080 --> 00:02:09,160 Speaker 2: come down from two to somewhere closer to zero, and 39 00:02:09,240 --> 00:02:11,720 Speaker 2: I just wonder what your expectations are now phenomenal growth 40 00:02:11,760 --> 00:02:13,840 Speaker 2: in the year ahead, and what you need to see 41 00:02:13,919 --> 00:02:17,160 Speaker 2: from these talks between the US and China. What's achievable, 42 00:02:17,320 --> 00:02:18,120 Speaker 2: what's reasonable? 43 00:02:18,360 --> 00:02:22,959 Speaker 3: Well, I think the acknowledgment and I think Secretary Vesson 44 00:02:23,400 --> 00:02:26,120 Speaker 3: is painting it the correct way, is that this is 45 00:02:26,120 --> 00:02:29,200 Speaker 3: a process. It's going to take time, it's going to 46 00:02:29,240 --> 00:02:30,520 Speaker 3: take a number of months. 47 00:02:30,680 --> 00:02:33,240 Speaker 4: There will probably be wins. 48 00:02:32,840 --> 00:02:37,840 Speaker 3: Announced small ones over the next several weeks. Obviously TikTok 49 00:02:37,960 --> 00:02:41,720 Speaker 3: is an issue that's coming up again in reasonably short order. 50 00:02:42,400 --> 00:02:45,080 Speaker 3: But from our point of view, again, just the fact 51 00:02:45,120 --> 00:02:48,080 Speaker 3: that the process is going in the right direction is 52 00:02:48,120 --> 00:02:49,800 Speaker 3: a plus. But at the end of the day, and 53 00:02:49,840 --> 00:02:52,240 Speaker 3: as you said at the top of the show, we 54 00:02:52,320 --> 00:02:54,680 Speaker 3: don't know where the landing zone is. And if the 55 00:02:54,760 --> 00:02:59,320 Speaker 3: landing zone is a global weighted tariff right somewhere of 56 00:02:59,320 --> 00:03:04,040 Speaker 3: around fifty teen to seventeen percent, that's still extraordinarily high 57 00:03:04,080 --> 00:03:07,600 Speaker 3: by historical standards, and that brings you to growth. 58 00:03:07,680 --> 00:03:10,720 Speaker 4: In our mind, we're looking for point nine for the year. 59 00:03:10,960 --> 00:03:14,000 Speaker 1: Is this a tyflation type environment that calls for a 60 00:03:14,040 --> 00:03:18,400 Speaker 1: stagflation type playbook that we haven't seen for many years. 61 00:03:18,480 --> 00:03:21,520 Speaker 3: Well, we would actually say that, and again in true 62 00:03:21,560 --> 00:03:26,520 Speaker 3: market discounting fashion is that that's already been discounted. So 63 00:03:27,000 --> 00:03:32,280 Speaker 3: in this stagflation playbook. The market averages annually a ten 64 00:03:32,320 --> 00:03:37,840 Speaker 3: percent decline, led by sectors like energy and consumer staples, 65 00:03:38,040 --> 00:03:40,760 Speaker 3: and we've seen in various points of the last few 66 00:03:40,800 --> 00:03:42,560 Speaker 3: months those themes. 67 00:03:42,200 --> 00:03:44,720 Speaker 4: Play out to us. It's actually, again, I. 68 00:03:44,720 --> 00:03:46,480 Speaker 3: Go back to what I said a little while ago, 69 00:03:46,840 --> 00:03:50,600 Speaker 3: to the extent possible and necessary, we want to look 70 00:03:50,680 --> 00:03:55,280 Speaker 3: through this under the assumption that all sides are incentivized 71 00:03:55,600 --> 00:03:58,640 Speaker 3: to make sure the global economy stays on course. So 72 00:03:58,840 --> 00:04:02,400 Speaker 3: we think that now's the time to re engage in 73 00:04:02,440 --> 00:04:07,360 Speaker 3: the longer term themes of the sectors that we're leading 74 00:04:07,720 --> 00:04:10,200 Speaker 3: prior to the sell off, and the sectors that we 75 00:04:10,280 --> 00:04:13,160 Speaker 3: think are going to continued to lead technology centric. 76 00:04:13,320 --> 00:04:15,520 Speaker 1: Okay, you say you look through this, but what is 77 00:04:15,560 --> 00:04:17,240 Speaker 1: this that we're looking through? And I talked, I think 78 00:04:17,240 --> 00:04:19,200 Speaker 1: about what you just said, which is the market's pricing 79 00:04:19,200 --> 00:04:22,000 Speaker 1: and a cyflationary like scenario. But they're not necessarily pricing 80 00:04:22,040 --> 00:04:25,839 Speaker 1: in a federal reserve that responds to stagflation. They are 81 00:04:25,880 --> 00:04:29,520 Speaker 1: actually pricing in a federal reserve that responds to something 82 00:04:29,720 --> 00:04:33,080 Speaker 1: more like recession or more like some kind of negative 83 00:04:33,360 --> 00:04:36,359 Speaker 1: growth shock that maybe isn't in the cards. If we 84 00:04:36,400 --> 00:04:39,279 Speaker 1: have a sagflation type of environment. How much is that 85 00:04:39,320 --> 00:04:42,040 Speaker 1: the ultimate wildcard, whether the that is going to respond 86 00:04:42,040 --> 00:04:44,960 Speaker 1: to this like some sort of recessionary or recessionary like 87 00:04:45,000 --> 00:04:48,599 Speaker 1: condition versus stiflation, which is much more difficult. 88 00:04:48,720 --> 00:04:51,880 Speaker 3: So look, there's no question about the fact that we 89 00:04:51,920 --> 00:04:54,720 Speaker 3: will find out we already know this, but we'll find 90 00:04:54,720 --> 00:04:57,560 Speaker 3: out more that the Fed's hands are in fact tied 91 00:04:57,600 --> 00:05:00,279 Speaker 3: to with a certain extent, and that obviously goes back 92 00:05:00,279 --> 00:05:03,400 Speaker 3: to the ratcheting hire of inflation expectations. 93 00:05:03,640 --> 00:05:04,920 Speaker 4: But ultimately I. 94 00:05:04,960 --> 00:05:07,560 Speaker 3: Go back to Chair Pale's use of the t word 95 00:05:07,920 --> 00:05:11,520 Speaker 3: transitory a number of weeks ago. I don't think he 96 00:05:11,600 --> 00:05:15,200 Speaker 3: would have used that without having true conviction whether it's 97 00:05:15,200 --> 00:05:21,040 Speaker 3: a function of demand moderating Inflation's happened before. Go on, Well, 98 00:05:22,680 --> 00:05:26,840 Speaker 3: you try not to repeat the same mistakes. But actually, 99 00:05:26,880 --> 00:05:31,239 Speaker 3: to us, that's the path forward, And I would say 100 00:05:31,560 --> 00:05:34,279 Speaker 3: that in fact, as we've seen in other times over 101 00:05:34,279 --> 00:05:36,839 Speaker 3: the last couple of years, if we take the under 102 00:05:37,320 --> 00:05:39,880 Speaker 3: on the number of cuts the market is pricing, that 103 00:05:40,000 --> 00:05:41,720 Speaker 3: will end up being a market positive. 104 00:05:41,960 --> 00:05:44,560 Speaker 5: How challenging is it going to be as these talks start, 105 00:05:44,720 --> 00:05:47,400 Speaker 5: to Jonathan's point first time, around eighteen months we see 106 00:05:47,440 --> 00:05:49,840 Speaker 5: fits and starts. Sometimes when it comes to these negotiations, 107 00:05:50,080 --> 00:05:52,760 Speaker 5: how challenging is it going to be to keep your 108 00:05:52,760 --> 00:05:55,120 Speaker 5: head on and look straight ahead and say, I'm not 109 00:05:55,240 --> 00:05:58,239 Speaker 5: going to get distracted by all the stop and start 110 00:05:58,279 --> 00:06:00,800 Speaker 5: and go and potentially some of the rhetoric that will 111 00:06:00,839 --> 00:06:01,200 Speaker 5: come from this. 112 00:06:01,480 --> 00:06:05,040 Speaker 3: Well, that's kind of why we're cautious in the near term, 113 00:06:05,480 --> 00:06:08,560 Speaker 3: within the context of our view that that April seventh 114 00:06:08,600 --> 00:06:12,800 Speaker 3: low was the resumption of the structuraball market, that at 115 00:06:12,839 --> 00:06:15,000 Speaker 3: some point down the road we are going to see 116 00:06:15,200 --> 00:06:18,039 Speaker 3: new all time highs. But to your point, it's even 117 00:06:18,120 --> 00:06:21,200 Speaker 3: more of a challenge because we know we're about to 118 00:06:21,240 --> 00:06:25,080 Speaker 3: get data that's going to scare us over the next 119 00:06:25,560 --> 00:06:26,679 Speaker 3: number of weeks and months. 120 00:06:26,760 --> 00:06:28,080 Speaker 2: What a scary data look like. 121 00:06:29,440 --> 00:06:29,720 Speaker 4: You know? 122 00:06:30,560 --> 00:06:33,320 Speaker 3: To us, it all goes back to the labor market. 123 00:06:33,760 --> 00:06:36,719 Speaker 3: So the thing that we focus on the most is 124 00:06:36,760 --> 00:06:40,840 Speaker 3: the high frequency weekly jobless claims. If that starts nudging 125 00:06:40,880 --> 00:06:44,320 Speaker 3: towards three hundred thousand, that's when you're going to get 126 00:06:44,400 --> 00:06:47,720 Speaker 3: sort of gross scare act too. And that's sort of 127 00:06:47,480 --> 00:06:49,520 Speaker 3: our two steps back process. 128 00:06:49,240 --> 00:06:51,120 Speaker 2: Takes us back to the FED last summer. We know 129 00:06:51,160 --> 00:06:53,120 Speaker 2: what they did. They reduced interest rates by one hundred 130 00:06:53,160 --> 00:06:55,520 Speaker 2: basis points the moment you've got to freak out in 131 00:06:55,560 --> 00:06:57,760 Speaker 2: the labor market, just a small one in the summer 132 00:06:57,760 --> 00:07:00,240 Speaker 2: of last year. That's when it started. They move. Are 133 00:07:00,240 --> 00:07:01,200 Speaker 2: they constrained this time? 134 00:07:01,320 --> 00:07:03,680 Speaker 4: They are constrained. There's no question about it. 135 00:07:03,760 --> 00:07:07,360 Speaker 3: And you know even more so because they're certainly going 136 00:07:07,360 --> 00:07:10,720 Speaker 3: to get political pressure in however many hours that's going 137 00:07:10,760 --> 00:07:14,680 Speaker 3: to be. But the fact is is that the inflation 138 00:07:14,800 --> 00:07:19,400 Speaker 3: dynamic is different and at risk of being more anchored 139 00:07:19,440 --> 00:07:21,680 Speaker 3: than it has been in the past. We don't think 140 00:07:21,760 --> 00:07:23,200 Speaker 3: ultimately it will be, but. 141 00:07:23,160 --> 00:07:24,000 Speaker 4: There is that risk. 142 00:07:24,160 --> 00:07:26,440 Speaker 2: The President doesn't like it when other central banks reduce 143 00:07:26,480 --> 00:07:28,640 Speaker 2: interest rights. And it's interesting that going into this one, 144 00:07:28,720 --> 00:07:31,560 Speaker 2: it's not the ECP this time around, it's the Chinese, and. 145 00:07:31,520 --> 00:07:33,680 Speaker 1: They're doing it pretty aggressively to pave the way for 146 00:07:33,720 --> 00:07:36,760 Speaker 1: fiscal stimulus. In addition, it's basically everything the US isn't doing, 147 00:07:37,000 --> 00:07:40,400 Speaker 1: and they're setting the stage potentially to bolster an economy 148 00:07:40,400 --> 00:07:43,400 Speaker 1: that has been flagging, but also potentially to gurd to 149 00:07:43,440 --> 00:07:46,160 Speaker 1: sort of set the stage for retaliation potentially to head 150 00:07:46,200 --> 00:07:46,760 Speaker 1: into these talks. 151 00:07:47,240 --> 00:07:49,360 Speaker 2: It's going to say, as always, thanks for dropping by 152 00:07:49,520 --> 00:08:03,080 Speaker 2: Chilian and Manuel another cult premissra of JP Morgan writing, 153 00:08:03,080 --> 00:08:05,400 Speaker 2: we are in a giant game of check in between 154 00:08:05,440 --> 00:08:08,280 Speaker 2: the market, the administration, and the rest of the world. 155 00:08:08,560 --> 00:08:11,360 Speaker 2: Maybe great deals are just a round the corner, prayer 156 00:08:11,400 --> 00:08:13,560 Speaker 2: joint is now for more preaking mornic morning. Are they 157 00:08:13,600 --> 00:08:14,600 Speaker 2: just a rand the corner? 158 00:08:14,840 --> 00:08:18,280 Speaker 6: I think that's what the equity markets hoping, not realizing, 159 00:08:18,360 --> 00:08:21,800 Speaker 6: or maybe hoping that that doesn't happen. That trade deals, 160 00:08:22,000 --> 00:08:25,080 Speaker 6: even in agreement in principle with all our trading partners, 161 00:08:25,200 --> 00:08:26,120 Speaker 6: is incredibly hard. 162 00:08:26,160 --> 00:08:27,200 Speaker 7: It's going to take a while. 163 00:08:27,800 --> 00:08:31,360 Speaker 6: The administration saying this is strategic uncertainty, which tells you 164 00:08:31,400 --> 00:08:35,600 Speaker 6: remember when we were thinking maybe April second was peak uncertainty, Well, okay, 165 00:08:35,640 --> 00:08:37,480 Speaker 6: maybe it was peak or not. 166 00:08:37,520 --> 00:08:38,319 Speaker 7: That much lower. 167 00:08:38,520 --> 00:08:41,600 Speaker 6: This is a plateau of uncertainty that the economy. 168 00:08:41,720 --> 00:08:44,240 Speaker 7: It's going to weigh on the economy. It's very nonlinear. 169 00:08:44,520 --> 00:08:47,440 Speaker 6: You can handle some time of uncertainty. When that just 170 00:08:47,840 --> 00:08:51,400 Speaker 6: goes into weeks and months, and you know, Congress is 171 00:08:51,400 --> 00:08:53,880 Speaker 6: also sort of dealing with the fiscal side. So there's 172 00:08:53,960 --> 00:08:56,600 Speaker 6: uncertainty on immigration, there's uncertainty on trade. 173 00:08:56,720 --> 00:08:59,280 Speaker 7: When all that uncertainty starts to weigh on the economy, 174 00:08:59,760 --> 00:09:01,560 Speaker 7: I think the equity market's hoping, well. 175 00:09:01,440 --> 00:09:03,680 Speaker 6: The deals right here. At least we know they're talking. 176 00:09:03,760 --> 00:09:04,560 Speaker 6: That's good news. 177 00:09:04,600 --> 00:09:06,199 Speaker 7: We weren't sure if that was happening. 178 00:09:06,559 --> 00:09:08,079 Speaker 6: But it's going to take a long time even to 179 00:09:08,120 --> 00:09:09,920 Speaker 6: get that agreement in principle, So we don't know how 180 00:09:09,920 --> 00:09:10,560 Speaker 6: long it will. 181 00:09:10,480 --> 00:09:12,480 Speaker 7: Take, and we don't know the end point. 182 00:09:12,679 --> 00:09:16,160 Speaker 6: The end point is not where we were on, you know, 183 00:09:16,240 --> 00:09:17,200 Speaker 6: at the start of this year. 184 00:09:17,280 --> 00:09:20,199 Speaker 2: No question, it's a policy shock. The ACP's decided it's 185 00:09:20,200 --> 00:09:23,360 Speaker 2: a disinflationary shock that've cut rights. The Chinese have done 186 00:09:23,440 --> 00:09:26,440 Speaker 2: the same thing overnight. The Federal Reserve when they have 187 00:09:26,520 --> 00:09:28,280 Speaker 2: to address the same question, what kind of a shock 188 00:09:28,360 --> 00:09:29,200 Speaker 2: is it for them? 189 00:09:29,960 --> 00:09:32,520 Speaker 6: I think Cheval's going to have to master the art 190 00:09:32,520 --> 00:09:33,560 Speaker 6: of saying nothing today. 191 00:09:34,160 --> 00:09:36,680 Speaker 7: You know. So, what kind of shock is a great question. 192 00:09:37,200 --> 00:09:39,560 Speaker 6: I think it's a supply shock, which is very hard 193 00:09:39,600 --> 00:09:42,840 Speaker 6: for monitory policy to address, but the Fed really can't. 194 00:09:42,679 --> 00:09:44,680 Speaker 7: Commit to it. It might morph. 195 00:09:45,160 --> 00:09:47,000 Speaker 6: I think it will from a supply shock to a 196 00:09:47,000 --> 00:09:49,880 Speaker 6: demand shock when you get prices going up and the 197 00:09:49,880 --> 00:09:54,800 Speaker 6: consumer has to pick between dolls or anything else and services. 198 00:09:54,840 --> 00:09:58,080 Speaker 7: Do they cut back on services? The US is a service. 199 00:09:58,120 --> 00:10:00,120 Speaker 6: Led econy, but look at the data right now. Now, 200 00:10:00,120 --> 00:10:02,280 Speaker 6: if you take a step back, the hard data is okay. 201 00:10:02,960 --> 00:10:06,040 Speaker 6: You know, payrolls are strong, Inflation is still above target. 202 00:10:06,280 --> 00:10:08,760 Speaker 6: So I think the financial conditions have eased in the 203 00:10:08,840 --> 00:10:11,000 Speaker 6: last month, or at least in the last few weeks. 204 00:10:11,080 --> 00:10:13,120 Speaker 6: So I think the Fed will say we have no urgency. 205 00:10:13,160 --> 00:10:16,400 Speaker 6: They've already cut rates, They've taken the preemptive steps. I 206 00:10:16,400 --> 00:10:18,480 Speaker 6: think people are looking for them to be preemptive. They've 207 00:10:18,559 --> 00:10:21,600 Speaker 6: already preemptive last year. They've taken rates down. We're at 208 00:10:21,600 --> 00:10:23,280 Speaker 6: four and a half. They're going to keep it here 209 00:10:23,400 --> 00:10:26,560 Speaker 6: until they figured out what's the shock, what's the policy offset. 210 00:10:26,600 --> 00:10:29,160 Speaker 6: Do we get a big fiscal stimulus deal, in which 211 00:10:29,200 --> 00:10:32,160 Speaker 6: case they don't need to address the supply shock. So 212 00:10:32,360 --> 00:10:35,640 Speaker 6: I think for the Fed, it's trying to, you know, 213 00:10:35,880 --> 00:10:37,720 Speaker 6: I think clarify the reaction function. 214 00:10:37,880 --> 00:10:39,600 Speaker 7: That's the most they can do that. 215 00:10:39,720 --> 00:10:42,360 Speaker 6: Look, if the economy slows down, we'll respond. We're not 216 00:10:42,400 --> 00:10:45,679 Speaker 6: there yet. We're watching like everyone else, we're watching everything, 217 00:10:45,720 --> 00:10:47,360 Speaker 6: and we'll respond appropriate. 218 00:10:47,080 --> 00:10:48,000 Speaker 7: The reaction function. 219 00:10:48,240 --> 00:10:50,320 Speaker 1: This is really interesting to me because right now we 220 00:10:50,320 --> 00:10:52,440 Speaker 1: don't have a clear sense of what the reaction function 221 00:10:52,600 --> 00:10:54,960 Speaker 1: is and what data dependency means in the new world, 222 00:10:55,200 --> 00:10:58,880 Speaker 1: where data is incredibly backward looking, and this economy depends 223 00:10:58,880 --> 00:11:01,320 Speaker 1: on people having thirty dollars, is not necessarily two dollars. 224 00:11:01,360 --> 00:11:03,760 Speaker 1: And when you start to have that come to fruition, 225 00:11:03,920 --> 00:11:06,679 Speaker 1: how quickly could you see it manifest in the actual 226 00:11:06,679 --> 00:11:10,000 Speaker 1: heart data as a demand shock rather than the much 227 00:11:10,040 --> 00:11:14,200 Speaker 1: more quickly moving supply shock that translates into higher inflation 228 00:11:14,360 --> 00:11:15,880 Speaker 1: that could come as soon as next. 229 00:11:15,679 --> 00:11:18,440 Speaker 6: Week, right, So, I think that's the question we're all 230 00:11:18,440 --> 00:11:20,640 Speaker 6: grappling with that. You know, we've not seen it in 231 00:11:20,679 --> 00:11:23,439 Speaker 6: the hard data. How long does it take? I don't 232 00:11:23,480 --> 00:11:25,520 Speaker 6: think it's that long. I do think it's a little 233 00:11:25,559 --> 00:11:28,719 Speaker 6: more delayed because we learn from the pandemic, companies learn 234 00:11:28,760 --> 00:11:32,120 Speaker 6: from the pandemic consumers. I've not done any early shopping, 235 00:11:32,160 --> 00:11:34,760 Speaker 6: but people have, you know. I think this front loading. 236 00:11:34,800 --> 00:11:36,560 Speaker 6: You're seeing it in the data, You're seeing it in 237 00:11:36,600 --> 00:11:40,400 Speaker 6: the trade data. You're seeing it in you know, companies 238 00:11:40,760 --> 00:11:44,120 Speaker 6: sort of picking up appiling inventories. So the lag might 239 00:11:44,160 --> 00:11:46,280 Speaker 6: be a little longer. What I'm watching is what do 240 00:11:46,400 --> 00:11:49,400 Speaker 6: companies do. Do they pass on that cost? Do prices 241 00:11:49,480 --> 00:11:51,480 Speaker 6: go up? Do we see it next week in CPI? 242 00:11:51,600 --> 00:11:54,440 Speaker 6: If prices are going up. That's when consumers have to 243 00:11:54,440 --> 00:11:56,920 Speaker 6: decide where do they cut back because real incomes are 244 00:11:56,960 --> 00:11:57,680 Speaker 6: not really growing. 245 00:11:58,040 --> 00:11:59,040 Speaker 7: So maybe it. 246 00:11:59,000 --> 00:12:02,840 Speaker 6: Shows up in prices first, and then consumers start to 247 00:12:02,840 --> 00:12:06,480 Speaker 6: pull back on demand. Or do companies say, our margins 248 00:12:08,080 --> 00:12:11,520 Speaker 6: can afford to take that price increase, and in that case, 249 00:12:11,559 --> 00:12:14,920 Speaker 6: when margin compression starts to build, do they start to 250 00:12:15,000 --> 00:12:17,120 Speaker 6: lay off people? So I think we're going to have 251 00:12:17,120 --> 00:12:20,000 Speaker 6: to watch consumers. We're also watching companies. What do companies do? 252 00:12:20,040 --> 00:12:22,920 Speaker 6: I think hiring freezers are happening to the layoff start. 253 00:12:23,280 --> 00:12:25,160 Speaker 6: And so it's the next few months. I don't think 254 00:12:25,160 --> 00:12:27,560 Speaker 6: we're waiting till fourth quarter. I think the next few 255 00:12:27,559 --> 00:12:30,240 Speaker 6: months you'll either see the consumers pulling back or you'll 256 00:12:30,240 --> 00:12:33,800 Speaker 6: see companies trying to keep some margin and having to 257 00:12:33,800 --> 00:12:36,720 Speaker 6: cut costs elsewhere. And I guess the interplay of that 258 00:12:36,800 --> 00:12:38,800 Speaker 6: will show up in the economic data, which the FED 259 00:12:38,840 --> 00:12:39,400 Speaker 6: will respond to. 260 00:12:39,480 --> 00:12:41,600 Speaker 1: It seems like the Chris Waller reaction function is to 261 00:12:41,640 --> 00:12:44,200 Speaker 1: look through the price increases and look straight to what 262 00:12:44,240 --> 00:12:47,040 Speaker 1: could potentially happen with the demand shock, What could happen 263 00:12:47,080 --> 00:12:49,400 Speaker 1: to the labor market. Do you expect to get a 264 00:12:49,400 --> 00:12:52,040 Speaker 1: better sense of whether that's consensus today at a meeting 265 00:12:52,240 --> 00:12:54,000 Speaker 1: that francistan Al is going to sleep through. 266 00:12:54,800 --> 00:12:57,720 Speaker 6: I don't think we'll get such a cleaner signal from 267 00:12:58,160 --> 00:13:00,920 Speaker 6: chap Out because we've and I think there's a little 268 00:13:00,920 --> 00:13:04,800 Speaker 6: bit of path dependency. We just lived through a transitory 269 00:13:04,920 --> 00:13:08,960 Speaker 6: supply driven pandemic shock becoming a demand shock because we 270 00:13:08,960 --> 00:13:11,600 Speaker 6: had a lot of fiscal stimulus and it fed through 271 00:13:11,640 --> 00:13:12,600 Speaker 6: into wages. 272 00:13:12,280 --> 00:13:13,520 Speaker 7: And inflation expectations. 273 00:13:13,600 --> 00:13:16,040 Speaker 6: So I think what we'll hear from Chepaul is we 274 00:13:16,120 --> 00:13:18,880 Speaker 6: haven't seen it in the data. We're watching inflation expectations, 275 00:13:19,559 --> 00:13:21,439 Speaker 6: so you know, which is why I struggled with them 276 00:13:21,480 --> 00:13:24,560 Speaker 6: being preemptive. But I do think when they see that data, 277 00:13:24,600 --> 00:13:26,600 Speaker 6: and I think it's a matter of months, they can 278 00:13:26,640 --> 00:13:30,240 Speaker 6: be very aggressive. The power leg fed doesn't necessarily move 279 00:13:30,240 --> 00:13:33,160 Speaker 6: in twenty five increments. They started hiking late and then 280 00:13:33,160 --> 00:13:35,560 Speaker 6: they went in seventy five increments. I think they're going 281 00:13:35,640 --> 00:13:38,760 Speaker 6: to start almost by definition, a little late because they're 282 00:13:38,760 --> 00:13:40,600 Speaker 6: waiting on data that is lagging. 283 00:13:40,960 --> 00:13:42,680 Speaker 7: But once they realize it, and I think. 284 00:13:42,559 --> 00:13:44,600 Speaker 6: That's where the market's pricing in the market's pricing in 285 00:13:44,640 --> 00:13:46,960 Speaker 6: a scenario where they don't need to do anything because 286 00:13:47,080 --> 00:13:51,480 Speaker 6: maybe we get these quick deals, credible quick deals, or 287 00:13:51,520 --> 00:13:53,640 Speaker 6: the scenario where the economy actually slows down and the 288 00:13:53,679 --> 00:13:56,400 Speaker 6: FED then aggressively cuts. I think we're pricing in this 289 00:13:56,760 --> 00:13:59,400 Speaker 6: bimodal distribution, which is why the rate market's pricing in 290 00:13:59,440 --> 00:14:01,800 Speaker 6: these rate cuts. I think actually the market can price 291 00:14:01,840 --> 00:14:04,000 Speaker 6: him more if you start to see that hard data. 292 00:14:04,600 --> 00:14:05,760 Speaker 2: You said they're going to be like I can think 293 00:14:05,760 --> 00:14:07,840 Speaker 2: of one person who doesn't like people being like, particularly 294 00:14:07,880 --> 00:14:10,120 Speaker 2: Chairman Pound. It's the President of the United States. That 295 00:14:10,200 --> 00:14:11,880 Speaker 2: this afternoon is going to be somewhat interesting. 296 00:14:12,080 --> 00:14:13,840 Speaker 5: Absolutely, I think you're going to get a live drip 297 00:14:13,840 --> 00:14:16,319 Speaker 5: feed on truth social of him, job voting, or potentially 298 00:14:16,360 --> 00:14:18,959 Speaker 5: we talks to the press. He's going to say chair 299 00:14:19,040 --> 00:14:21,640 Speaker 5: Pal is wrong and should be cutting interest rates. But 300 00:14:21,680 --> 00:14:23,960 Speaker 5: that's not going to be new. We've heard this all 301 00:14:24,040 --> 00:14:25,880 Speaker 5: wong from the President. The one thing that he has 302 00:14:25,960 --> 00:14:27,480 Speaker 5: come out and said is he does not want to 303 00:14:27,480 --> 00:14:28,960 Speaker 5: actually get rid of him, even though he has in 304 00:14:28,960 --> 00:14:30,560 Speaker 5: the past. He's the word termination. 305 00:14:30,680 --> 00:14:32,240 Speaker 2: Do you think this comes up in the news conference 306 00:14:32,240 --> 00:14:33,880 Speaker 2: today or is this yesterday's news. 307 00:14:33,960 --> 00:14:36,320 Speaker 6: I'm sure it'll come up, and I'm sure Chefal is 308 00:14:36,400 --> 00:14:40,400 Speaker 6: prepared to say we're apolitical, We're not even thinking about 309 00:14:40,440 --> 00:14:42,800 Speaker 6: this because there is an argument which I don't love 310 00:14:42,880 --> 00:14:46,080 Speaker 6: that because he's getting this pushback to cut that that 311 00:14:46,200 --> 00:14:47,320 Speaker 6: chepel may not cut. 312 00:14:47,560 --> 00:14:47,640 Speaker 7: No. 313 00:14:47,800 --> 00:14:50,680 Speaker 6: I think they're looking at their mandate, the mandate. I 314 00:14:50,720 --> 00:14:53,440 Speaker 6: agree it's backward looking data, but the hard data is 315 00:14:53,480 --> 00:14:55,560 Speaker 6: not suggesting that they need to cut here. So he's 316 00:14:55,600 --> 00:14:57,680 Speaker 6: got an easy pass. I think it can get a 317 00:14:57,720 --> 00:15:00,400 Speaker 6: lot harder if the unemployment rate starts to rise and 318 00:15:00,520 --> 00:15:03,400 Speaker 6: inflation starts to rise. I think then he's going to 319 00:15:03,440 --> 00:15:06,480 Speaker 6: have to explain why he's not cutting rates. 320 00:15:06,600 --> 00:15:09,120 Speaker 5: But JUX suppose this moment in time to before the 321 00:15:09,160 --> 00:15:11,920 Speaker 5: election when he cut rates, Why did he do it? 322 00:15:11,960 --> 00:15:12,080 Speaker 7: Then? 323 00:15:12,640 --> 00:15:15,200 Speaker 6: I think, you know, the labor market was showing signs 324 00:15:15,200 --> 00:15:17,840 Speaker 6: of weakness. Now I'd like to give the Fed credit 325 00:15:17,920 --> 00:15:20,480 Speaker 6: that just because the cut rates, the labor market sort 326 00:15:20,520 --> 00:15:21,120 Speaker 6: of recover. 327 00:15:21,240 --> 00:15:21,280 Speaker 8: No. 328 00:15:21,400 --> 00:15:23,880 Speaker 6: I think turns out that was a sort of noise 329 00:15:23,920 --> 00:15:27,800 Speaker 6: in the data. We had those week three week payroll reports. 330 00:15:27,640 --> 00:15:29,400 Speaker 7: And FED funds was at five and a half. 331 00:15:29,640 --> 00:15:31,880 Speaker 6: So the cut rates to take some of that edge 332 00:15:31,960 --> 00:15:36,520 Speaker 6: off the economy to move rates lower, they didn't need 333 00:15:36,560 --> 00:15:37,080 Speaker 6: to do more. 334 00:15:37,200 --> 00:15:38,760 Speaker 7: The long and sold off, So I think. 335 00:15:38,640 --> 00:15:40,720 Speaker 6: The market pushed back and said no, you actually don't 336 00:15:40,720 --> 00:15:42,680 Speaker 6: need to cut a lot more. The FED heard it, 337 00:15:43,040 --> 00:15:45,240 Speaker 6: so I think that I don't think is political. He'll 338 00:15:45,280 --> 00:15:47,960 Speaker 6: absolutely be asked that. But you know, I think the 339 00:15:48,160 --> 00:15:50,240 Speaker 6: as long as he's not fired, I think it's a 340 00:15:50,280 --> 00:15:50,920 Speaker 6: free country. 341 00:15:51,040 --> 00:15:54,200 Speaker 2: People can slight barrier, right, as long as he's not 342 00:15:54,320 --> 00:15:56,320 Speaker 2: five let's build on some of this and unpack it. 343 00:15:56,520 --> 00:15:58,760 Speaker 2: So on March nineteenth, we close around four twenty four 344 00:15:58,800 --> 00:16:02,000 Speaker 2: on tens. We're around four to twenty four on tens, 345 00:16:02,000 --> 00:16:04,560 Speaker 2: despite the fact we had a major policy shop Dan 346 00:16:04,640 --> 00:16:06,800 Speaker 2: in Washington, DC. You know where this is cat number 347 00:16:06,840 --> 00:16:09,640 Speaker 2: one question for portfolio managers right now for anybody's cross 348 00:16:09,680 --> 00:16:12,080 Speaker 2: ass set. Is the long bond going to provide me 349 00:16:12,200 --> 00:16:14,520 Speaker 2: some comfort if things go wrong with the economy. 350 00:16:15,280 --> 00:16:16,720 Speaker 7: I'm not sure about the long bond. 351 00:16:16,840 --> 00:16:19,720 Speaker 6: I think the long bond has supply demand for treasuries 352 00:16:19,800 --> 00:16:24,120 Speaker 6: as much as the economic fundamentals of where FED policy 353 00:16:24,160 --> 00:16:24,680 Speaker 6: is going to be. 354 00:16:25,040 --> 00:16:25,760 Speaker 7: The five year. 355 00:16:25,960 --> 00:16:29,320 Speaker 6: Absolutely, we've been adding any backup in interest rates, We've 356 00:16:29,320 --> 00:16:32,520 Speaker 6: been adding to the five year. Concerns around releveraging, we've 357 00:16:32,520 --> 00:16:35,080 Speaker 6: been adding to the five year because that's much more 358 00:16:35,240 --> 00:16:39,440 Speaker 6: levered to essentially fedcuts and that end point. So we 359 00:16:39,440 --> 00:16:41,360 Speaker 6: don't have to have necessarily a view. Do they start 360 00:16:41,360 --> 00:16:44,040 Speaker 6: cutting in July or September, what's the end point. I 361 00:16:44,040 --> 00:16:46,000 Speaker 6: think it's going to be below that three percent. So 362 00:16:46,080 --> 00:16:48,480 Speaker 6: the five year, I think does provide you that hedge. 363 00:16:48,840 --> 00:16:51,040 Speaker 6: You know, I think it's it's a true hedge. The 364 00:16:51,080 --> 00:16:54,480 Speaker 6: long end, now we're talking about supply demand, is what's 365 00:16:54,520 --> 00:16:58,440 Speaker 6: the end goal of tariffs. Is it to remove the 366 00:16:58,480 --> 00:17:01,120 Speaker 6: trade deficit. If it is to remove the trade deficits 367 00:17:01,160 --> 00:17:02,440 Speaker 6: of the rest of the world, doesn't need to hold 368 00:17:02,440 --> 00:17:05,080 Speaker 6: as much in treasures. I don't think that's the end goal, 369 00:17:05,160 --> 00:17:07,280 Speaker 6: but you know, I think the long end has a 370 00:17:07,280 --> 00:17:10,560 Speaker 6: lot more supply demand. We're also talking about this reconciliation package. 371 00:17:10,760 --> 00:17:13,240 Speaker 6: It's very hard to get the Medicaid cuts in there. 372 00:17:13,440 --> 00:17:16,000 Speaker 6: So if Congress doesn't end up doing the cuts but 373 00:17:16,119 --> 00:17:19,399 Speaker 6: still manages to do all these tax cuts, you know, 374 00:17:19,480 --> 00:17:22,160 Speaker 6: beyond the extension, I think that's going to put pressure 375 00:17:22,200 --> 00:17:25,080 Speaker 6: on the long end. If we have a politicized FED 376 00:17:25,119 --> 00:17:27,280 Speaker 6: at some point, inflation rist premium skin rise. 377 00:17:27,280 --> 00:17:28,879 Speaker 7: So I think there's a lot more going on with 378 00:17:28,920 --> 00:17:31,040 Speaker 7: the long end. I would stay away from the long end. 379 00:17:31,040 --> 00:17:34,440 Speaker 6: We like steepness, but I think that zero to five 380 00:17:34,600 --> 00:17:35,720 Speaker 6: is still rock solid. 381 00:17:35,960 --> 00:17:38,720 Speaker 1: What has changed in the past month or really since 382 00:17:38,760 --> 00:17:42,160 Speaker 1: the last FED meeting that makes you that much less 383 00:17:42,240 --> 00:17:43,560 Speaker 1: positive on the long. 384 00:17:43,440 --> 00:17:47,600 Speaker 7: End of the YELD curve. April second, But what about it? 385 00:17:48,000 --> 00:17:50,119 Speaker 6: So I think the idea you know, and I think 386 00:17:50,160 --> 00:17:51,480 Speaker 6: you all have talked about it, which I think is 387 00:17:51,480 --> 00:17:52,879 Speaker 6: a great way to saying, is this a shock to 388 00:17:52,920 --> 00:17:55,240 Speaker 6: the cycle or the system? And is this like a 389 00:17:55,359 --> 00:18:00,000 Speaker 6: change in the US lead world order? Trading order, economic DAN? 390 00:18:00,359 --> 00:18:02,360 Speaker 6: Trade is always a lot of US have been talking 391 00:18:02,400 --> 00:18:04,960 Speaker 6: about trade. The flip side of trade is that the 392 00:18:05,000 --> 00:18:07,840 Speaker 6: rest of the world buys US assets, and if we're 393 00:18:07,920 --> 00:18:10,600 Speaker 6: trying to reduce the trade deficit, it means that the 394 00:18:10,640 --> 00:18:13,919 Speaker 6: net international capital position of the US is going to change. 395 00:18:14,000 --> 00:18:15,520 Speaker 7: If the rest of the world doesn't need. 396 00:18:15,440 --> 00:18:18,680 Speaker 6: To own as much in US assets, cost of capital 397 00:18:18,720 --> 00:18:21,679 Speaker 6: is going to go up. It's not just for companies 398 00:18:21,720 --> 00:18:25,160 Speaker 6: and consumers, for the US government. And at the same time, 399 00:18:25,160 --> 00:18:27,119 Speaker 6: what are we getting in terms of the on the 400 00:18:27,119 --> 00:18:30,520 Speaker 6: fiscal side, If we were getting significant fiscal retrenchment, I 401 00:18:30,520 --> 00:18:32,720 Speaker 6: would have said, okay, demands less, supply. 402 00:18:32,560 --> 00:18:34,639 Speaker 7: Is going to be less too. We're not really seeing 403 00:18:34,680 --> 00:18:35,560 Speaker 7: that now. 404 00:18:35,800 --> 00:18:38,000 Speaker 6: You know, the tax bill is being talked about, So 405 00:18:38,080 --> 00:18:41,640 Speaker 6: I think April second, I don't view that as necessary, 406 00:18:41,760 --> 00:18:44,200 Speaker 6: just a negotiating chip, and you know, we'll just get 407 00:18:44,240 --> 00:18:46,359 Speaker 6: better fair trade deals and we'll go. 408 00:18:46,440 --> 00:18:47,920 Speaker 7: Back to where we were the start of this year. 409 00:18:47,960 --> 00:18:51,360 Speaker 6: I think the administration's trying, and I think the damage 410 00:18:51,400 --> 00:18:53,520 Speaker 6: is already being done. The rest of the world now 411 00:18:53,560 --> 00:18:57,040 Speaker 6: sees the US, not necessarily as a very credible trading partner, 412 00:18:57,520 --> 00:19:00,520 Speaker 6: and therefore, should capital come back to US. I think 413 00:19:00,520 --> 00:19:02,000 Speaker 6: we have to do a lot of work to attract 414 00:19:02,000 --> 00:19:02,760 Speaker 6: that capital back. 415 00:19:03,160 --> 00:19:05,000 Speaker 5: When it comes to the tax bill, does the FED 416 00:19:05,080 --> 00:19:07,359 Speaker 5: need to cut if we get all the sweeteners the 417 00:19:07,359 --> 00:19:08,400 Speaker 5: President has promised? 418 00:19:09,240 --> 00:19:11,840 Speaker 7: Not necessarily, but do we get that? 419 00:19:12,040 --> 00:19:14,040 Speaker 6: And I think that's why the FED, and I hope 420 00:19:14,119 --> 00:19:15,439 Speaker 6: chep Owls asked about that. 421 00:19:15,720 --> 00:19:15,800 Speaker 9: That. 422 00:19:15,880 --> 00:19:16,920 Speaker 7: How does the tax deal? 423 00:19:16,960 --> 00:19:20,639 Speaker 6: It's another form of uncertainty they did see. You know, 424 00:19:20,720 --> 00:19:23,840 Speaker 6: what resulted in inflation becoming entrenched. I think was part 425 00:19:23,840 --> 00:19:27,680 Speaker 6: of it was fiscal you know, right after the pandemic. 426 00:19:27,720 --> 00:19:30,120 Speaker 7: So if we get significant fyscal stimulus that. 427 00:19:30,080 --> 00:19:33,359 Speaker 6: Can offset tariffs, the FED can step back. 428 00:19:33,680 --> 00:19:35,000 Speaker 7: I don't think we're going to get that. 429 00:19:34,960 --> 00:19:37,240 Speaker 6: And the FED will realize it and and you know, 430 00:19:37,280 --> 00:19:40,040 Speaker 6: then they'll have to cut more aggressively. But we don't know, 431 00:19:40,080 --> 00:19:41,399 Speaker 6: and they don't know, and so they're just going to 432 00:19:41,480 --> 00:19:42,680 Speaker 6: try and say nothing for an. 433 00:19:42,600 --> 00:19:44,719 Speaker 2: Hour, which is going to be going to be fun, right, 434 00:19:44,800 --> 00:19:47,080 Speaker 2: isn't it? Life on Bloomberg saye lights around the staff 435 00:19:47,119 --> 00:19:59,800 Speaker 2: and it Heythan of Truist is pushing back writing effortens 436 00:19:59,840 --> 00:20:02,919 Speaker 2: that yes, the term risk reward profile is less favorable 437 00:20:03,240 --> 00:20:05,919 Speaker 2: following the sharp market rebound. Keith Joint just now for 438 00:20:05,960 --> 00:20:07,960 Speaker 2: more Keith kipmonic, great to be here. Just want to 439 00:20:08,000 --> 00:20:10,440 Speaker 2: frame your years so far, just for the audience, because 440 00:20:10,480 --> 00:20:13,840 Speaker 2: it's been pretty decent. You downgraded equities something like five 441 00:20:13,960 --> 00:20:16,600 Speaker 2: days after equity's top down all time highs in the 442 00:20:16,600 --> 00:20:19,680 Speaker 2: middle of February. You clearly think things have shifted again. 443 00:20:20,200 --> 00:20:23,399 Speaker 2: The risk reward profile has changed given the aggressive runny 444 00:20:23,400 --> 00:20:25,160 Speaker 2: we've seen off the loads. Where are you now? 445 00:20:25,960 --> 00:20:28,080 Speaker 8: That's why, Well, we are thinking that the risk reward 446 00:20:28,119 --> 00:20:29,080 Speaker 8: is somewhat less favorable. 447 00:20:29,119 --> 00:20:31,119 Speaker 10: At the lows we were down nineteen percent. 448 00:20:31,240 --> 00:20:34,240 Speaker 8: We were telling our investors to start thinking about upside risk, 449 00:20:34,320 --> 00:20:36,520 Speaker 8: not just downside risk. Because at that point you were 450 00:20:36,560 --> 00:20:39,639 Speaker 8: down nineteen percent, you were pricing in a recession well, 451 00:20:39,840 --> 00:20:42,080 Speaker 8: largely pricing in a recession at this point. As you 452 00:20:42,119 --> 00:20:44,640 Speaker 8: snap back, we've kind of really priced in a good 453 00:20:44,680 --> 00:20:47,600 Speaker 8: scenario going forward. So if I look at it using 454 00:20:47,760 --> 00:20:49,720 Speaker 8: this way of the evidence approach, we still think the 455 00:20:49,760 --> 00:20:53,199 Speaker 8: economy continues to slow down somewhat, earning estimates likely have 456 00:20:53,240 --> 00:20:55,280 Speaker 8: some downside. At the same time, when you look at 457 00:20:55,280 --> 00:20:57,560 Speaker 8: the forward multiple for the market, you're round twenty and 458 00:20:57,600 --> 00:21:00,199 Speaker 8: a half at the peak we were at twenty two. 459 00:21:00,880 --> 00:21:03,520 Speaker 8: I would argue that given the uncertainty, that we shouldn't 460 00:21:03,520 --> 00:21:04,239 Speaker 8: be back at twenty two. 461 00:21:04,280 --> 00:21:05,280 Speaker 10: And it's not just the terrorists. 462 00:21:05,320 --> 00:21:07,560 Speaker 8: Don't forget earlier this year when we were at the highs, 463 00:21:07,960 --> 00:21:10,159 Speaker 8: we had deep seat come in, so on the margin, 464 00:21:10,560 --> 00:21:13,160 Speaker 8: tech evaluations should be somewhat lower than they were as well. 465 00:21:13,200 --> 00:21:15,159 Speaker 8: So putting that all together, it doesn't mean we have 466 00:21:15,240 --> 00:21:17,040 Speaker 8: to collapse. It doesn't mean we don't have some headlines 467 00:21:17,080 --> 00:21:19,480 Speaker 8: to keet this market up, but we think the upside 468 00:21:19,480 --> 00:21:21,840 Speaker 8: is likely capped around fifty eight hundred. On the upside, 469 00:21:21,840 --> 00:21:24,360 Speaker 8: maybe you squeeze because sentiment is still relatively negative. That's 470 00:21:24,400 --> 00:21:26,160 Speaker 8: the biggest asset for the market right now. 471 00:21:26,200 --> 00:21:28,439 Speaker 2: This information in the headline, this information and how the 472 00:21:28,440 --> 00:21:30,480 Speaker 2: market responds to the headline, what do you make of 473 00:21:30,480 --> 00:21:32,680 Speaker 2: these mosts this morning and response to these scheduled talks 474 00:21:32,680 --> 00:21:33,280 Speaker 2: this weekend. 475 00:21:33,480 --> 00:21:35,159 Speaker 8: You know, as we were talking a little bit earlier, 476 00:21:35,200 --> 00:21:36,800 Speaker 8: I think a month ago this would have really moved 477 00:21:36,840 --> 00:21:37,840 Speaker 8: the market much more. 478 00:21:38,119 --> 00:21:39,600 Speaker 10: I think, you know, we've moved up a lot. 479 00:21:39,640 --> 00:21:41,479 Speaker 8: So some of this is priced in the market is 480 00:21:41,520 --> 00:21:43,840 Speaker 8: pricing in that we're going to get some terroriff relief. 481 00:21:44,200 --> 00:21:46,040 Speaker 8: But the question that I think we're all wrestling with 482 00:21:46,119 --> 00:21:48,160 Speaker 8: is how much STAMMERS has been done. And we still 483 00:21:48,160 --> 00:21:50,680 Speaker 8: think look at US GDP estimates they would come into 484 00:21:50,720 --> 00:21:52,720 Speaker 8: the year above two percent there at one point three, 485 00:21:52,800 --> 00:21:55,959 Speaker 8: one point four, and then globally you're seeing GDP estimates 486 00:21:56,000 --> 00:21:57,200 Speaker 8: come down for China, for. 487 00:21:57,240 --> 00:21:59,800 Speaker 10: Europe, for the UK, so it's not just the US story. 488 00:22:00,080 --> 00:22:00,520 Speaker 7: I guess. 489 00:22:00,560 --> 00:22:04,080 Speaker 10: The challenge I have is that at at this valuation levels. 490 00:22:03,840 --> 00:22:06,560 Speaker 8: Even if forward estimates stay somewhere resilient. You saw that 491 00:22:06,600 --> 00:22:09,840 Speaker 8: with Disney this morning, you're still trading at a pretty 492 00:22:09,880 --> 00:22:12,600 Speaker 8: hefty multiple, and we still think there's some downside, trying 493 00:22:12,600 --> 00:22:14,480 Speaker 8: to keep an open mind what could go right. And 494 00:22:14,520 --> 00:22:16,760 Speaker 8: the tech side is something where we've seen spending still 495 00:22:16,800 --> 00:22:19,080 Speaker 8: pretty healthy, so that's a good story, but at this 496 00:22:19,160 --> 00:22:20,720 Speaker 8: point on a shorter term basis, we just think the 497 00:22:20,800 --> 00:22:22,480 Speaker 8: risk reward is a little bit less favorable. 498 00:22:22,600 --> 00:22:26,400 Speaker 5: Keith President Trump's maximus approach on April second, this Liberation Day, 499 00:22:26,400 --> 00:22:28,800 Speaker 5: that chart that came out, then continue ratcheting up on 500 00:22:28,880 --> 00:22:30,120 Speaker 5: China one hundred and forty five percent. 501 00:22:30,160 --> 00:22:32,400 Speaker 7: Did he cushion the market to then be. 502 00:22:32,400 --> 00:22:35,720 Speaker 5: Able to absorb whatever rate he ends on, whether or 503 00:22:35,760 --> 00:22:38,480 Speaker 5: not it's ten percent tariff ring in sixty percent on China? 504 00:22:38,680 --> 00:22:39,080 Speaker 10: I think so. 505 00:22:39,240 --> 00:22:41,160 Speaker 8: I mean, if you think about where we are right now, 506 00:22:41,160 --> 00:22:44,240 Speaker 8: we're fifteen percent above that low from early April, so 507 00:22:44,240 --> 00:22:46,320 Speaker 8: we have a long like a big cushion to get 508 00:22:46,359 --> 00:22:49,280 Speaker 8: back down there as well. So I do think Listen, 509 00:22:49,359 --> 00:22:51,320 Speaker 8: you come out with the most aggressive stance, you pull 510 00:22:51,320 --> 00:22:53,800 Speaker 8: it back. But again, the market at this point, when 511 00:22:53,800 --> 00:22:56,600 Speaker 8: you've come back and where valuations are, I would say 512 00:22:56,600 --> 00:22:59,600 Speaker 8: that the market is certainly expecting some teriff relief, But 513 00:23:00,040 --> 00:23:02,480 Speaker 8: are we not going to see some slow down? Businesses 514 00:23:02,480 --> 00:23:05,199 Speaker 8: are still are somewhat frozen. And I guess the other 515 00:23:05,240 --> 00:23:07,840 Speaker 8: thing we've been wrestling with too, is there is a 516 00:23:07,840 --> 00:23:10,360 Speaker 8: difference between the economy and the stock market, right, I mean, 517 00:23:10,800 --> 00:23:13,359 Speaker 8: the economy small and middle sized businesses that. 518 00:23:13,359 --> 00:23:15,399 Speaker 10: We talk to are more. 519 00:23:15,240 --> 00:23:17,280 Speaker 8: Concerned that the bigger companies are able to manage this 520 00:23:17,320 --> 00:23:19,399 Speaker 8: a somewhat better. And we all know that the S 521 00:23:19,440 --> 00:23:21,160 Speaker 8: and P five hundred is much more of a growth 522 00:23:21,200 --> 00:23:24,520 Speaker 8: index with forty percent plus in tech and communication, So 523 00:23:24,840 --> 00:23:26,600 Speaker 8: there's this also. That's why I also think that low 524 00:23:26,680 --> 00:23:29,920 Speaker 8: is a pretty good low, because the technology earnings, unlike 525 00:23:29,920 --> 00:23:32,359 Speaker 8: the oble and market, are still moving higher at this point. 526 00:23:32,840 --> 00:23:35,399 Speaker 7: So well, so where are you seeing opportunity then? 527 00:23:35,480 --> 00:23:38,639 Speaker 1: If you are sounds like tech companies, Yes, it sounds 528 00:23:38,640 --> 00:23:41,439 Speaker 1: like Rustle two thousand. No, it sounds like there's a 529 00:23:41,440 --> 00:23:44,959 Speaker 1: real question though about bonds as an offset about gold. 530 00:23:45,320 --> 00:23:49,280 Speaker 1: It seems like structurally we have changed the assumptions since 531 00:23:49,359 --> 00:23:51,800 Speaker 1: April second, for at least some portfolio managers. 532 00:23:51,880 --> 00:23:53,840 Speaker 8: Yeah, early in the year, back in February, we did 533 00:23:53,920 --> 00:23:56,040 Speaker 8: downgrade small caps well less favorable for some of the 534 00:23:56,040 --> 00:23:57,720 Speaker 8: things I mentioned. They are achieved, maybe a bit over 535 00:23:57,760 --> 00:24:00,560 Speaker 8: sold from a Sextus standpoint, because those are the back 536 00:24:00,600 --> 00:24:01,639 Speaker 8: and forth and the whiplast. 537 00:24:01,680 --> 00:24:02,480 Speaker 10: What we're trying to. 538 00:24:02,440 --> 00:24:04,760 Speaker 8: Do is we have a mixed sector approach, so we 539 00:24:04,800 --> 00:24:08,640 Speaker 8: have our favorite technology of growth players communication services. 540 00:24:08,640 --> 00:24:10,440 Speaker 10: You're seeing there with you know, not only like the 541 00:24:10,480 --> 00:24:11,359 Speaker 10: Metas and the. 542 00:24:13,280 --> 00:24:15,119 Speaker 8: Googles of the world, but also as we saw with 543 00:24:15,200 --> 00:24:18,040 Speaker 8: Disney and Netflix. So there's some kind of secular growth 544 00:24:18,040 --> 00:24:21,000 Speaker 8: there our favorite defensive areas utilities, but there's also a 545 00:24:21,000 --> 00:24:23,400 Speaker 8: secular story there with AI, which we're seeing actually last 546 00:24:23,440 --> 00:24:25,639 Speaker 8: couple of days. And then on the cyclical side, we 547 00:24:25,640 --> 00:24:28,920 Speaker 8: were favorable on financials, and our view is like, instead 548 00:24:28,920 --> 00:24:30,760 Speaker 8: of trying to try to move back and forth each 549 00:24:30,800 --> 00:24:33,840 Speaker 8: day with these moves, have your favorite area of defensive 550 00:24:34,240 --> 00:24:36,320 Speaker 8: growth and cyclical as well. 551 00:24:36,440 --> 00:24:38,879 Speaker 1: You said the error a ceiling was about fifty eight hundred. 552 00:24:39,240 --> 00:24:39,920 Speaker 7: What's your floor? 553 00:24:40,520 --> 00:24:40,760 Speaker 4: You know? 554 00:24:41,119 --> 00:24:43,720 Speaker 8: Well, I think the floor is likely that low, that 555 00:24:43,800 --> 00:24:46,080 Speaker 8: forty eight thirty five, and maybe we find support before that, 556 00:24:46,160 --> 00:24:48,399 Speaker 8: you know, you know, maybe you know, fifty one hundred 557 00:24:48,400 --> 00:24:50,200 Speaker 8: somewhere in that neighborhood. Again, keep an open mind. I 558 00:24:50,240 --> 00:24:52,080 Speaker 8: think that floor is good as long as you don't 559 00:24:52,119 --> 00:24:55,399 Speaker 8: go into recession. Our house views we're around fifty to fifty, 560 00:24:55,440 --> 00:24:57,360 Speaker 8: which is, you know, that's where we're basically at. 561 00:24:57,680 --> 00:25:01,000 Speaker 10: And you did have you know, the VIC spike, and you. 562 00:25:00,920 --> 00:25:03,160 Speaker 8: Know the sentiment that you normally seem at bottoms, And 563 00:25:03,200 --> 00:25:05,000 Speaker 8: the question is do you just v shape right to 564 00:25:05,080 --> 00:25:07,080 Speaker 8: new all time highs or come back down? And we 565 00:25:07,119 --> 00:25:08,600 Speaker 8: do think the FED is somewhere constrained. 566 00:25:08,920 --> 00:25:10,640 Speaker 2: This is the big issue we've all got as investors 567 00:25:10,720 --> 00:25:13,320 Speaker 2: right now. Can the promise of deals continue sustaining the 568 00:25:13,359 --> 00:25:16,280 Speaker 2: secretary market? And there is there a risk that between 569 00:25:16,320 --> 00:25:18,439 Speaker 2: now and whatever the deal looks like we hit an 570 00:25:18,440 --> 00:25:21,119 Speaker 2: air pocket in the economic data. And if we do, 571 00:25:21,119 --> 00:25:23,160 Speaker 2: do we have a good understanding of what is defensive 572 00:25:23,440 --> 00:25:25,200 Speaker 2: in the secrety market? Can you have a so answer 573 00:25:25,240 --> 00:25:25,399 Speaker 2: all that? 574 00:25:25,520 --> 00:25:28,600 Speaker 8: Yeah, sure, I have all the answers for us today now, 575 00:25:28,720 --> 00:25:30,719 Speaker 8: and I think that's I think the biggest thing as 576 00:25:30,760 --> 00:25:32,760 Speaker 8: I'm thinking about again, I always think about it because 577 00:25:32,760 --> 00:25:35,080 Speaker 8: we're a bit more defensive. What could go right as well? 578 00:25:35,480 --> 00:25:37,280 Speaker 8: You know, is the market going to look through this 579 00:25:37,320 --> 00:25:38,040 Speaker 8: as a short term here? 580 00:25:38,119 --> 00:25:38,199 Speaker 10: Right? 581 00:25:38,240 --> 00:25:40,119 Speaker 8: If we're buying companies, we're really buying them for the 582 00:25:40,119 --> 00:25:42,240 Speaker 8: next five and ten years and that secular story of 583 00:25:42,280 --> 00:25:44,080 Speaker 8: AI is still there. So I guess the question is 584 00:25:44,119 --> 00:25:47,480 Speaker 8: will the market see through some short term pain or 585 00:25:47,520 --> 00:25:50,399 Speaker 8: at least a reduction in growth that the market is 586 00:25:50,400 --> 00:25:52,919 Speaker 8: a discounting mechanism. But at the same time, you know, 587 00:25:53,000 --> 00:25:54,679 Speaker 8: almost have to see it to believe it. So I 588 00:25:54,720 --> 00:25:57,359 Speaker 8: actually think that will constrain the upside. And so if 589 00:25:57,400 --> 00:25:59,840 Speaker 8: we come back down and we think that we're past this, 590 00:26:00,119 --> 00:26:03,080 Speaker 8: will likely look to baby upgrade stocks again. But we're 591 00:26:03,160 --> 00:26:05,280 Speaker 8: just not based on the risk reward at this point. 592 00:26:05,320 --> 00:26:06,840 Speaker 8: By the way, I'm not waiting for clarity. I'm not 593 00:26:06,880 --> 00:26:08,639 Speaker 8: waiting because it was say, hey, we want clarity. By 594 00:26:08,680 --> 00:26:10,959 Speaker 8: the time clarity comes to the market has moved. But I'm 595 00:26:11,000 --> 00:26:13,240 Speaker 8: looking for a better risk reward. And from a nasal 596 00:26:13,280 --> 00:26:16,040 Speaker 8: allocation standpoint, we're not saying to go like thirty percent cash. 597 00:26:16,119 --> 00:26:17,480 Speaker 8: We have a little bit more cash, we have a 598 00:26:17,480 --> 00:26:20,080 Speaker 8: little bit less equities. We still have high quality bonds 599 00:26:20,080 --> 00:26:23,520 Speaker 8: which actually have been acting well. We upgraded investment grade 600 00:26:23,520 --> 00:26:26,480 Speaker 8: bonds on the spread winding recently. We've been bullish gold 601 00:26:26,520 --> 00:26:29,000 Speaker 8: all year, though I will say short term it's a 602 00:26:29,000 --> 00:26:30,080 Speaker 8: bit extended as well. 603 00:26:30,160 --> 00:26:31,879 Speaker 2: We've seen it aggressive rarely off the low. That's the 604 00:26:31,960 --> 00:26:34,080 Speaker 2: number one question for me, Lisa. Can we keep this 605 00:26:34,200 --> 00:26:37,160 Speaker 2: secuity market granted higher? Can it be sustained just by 606 00:26:37,160 --> 00:26:39,679 Speaker 2: the promise of deals, and can it be sustained by 607 00:26:39,720 --> 00:26:42,199 Speaker 2: the promise of deals even if you bump into some 608 00:26:42,280 --> 00:26:43,679 Speaker 2: weak heart data. 609 00:26:43,440 --> 00:26:45,720 Speaker 1: A lot of people say that's the ultimate check hard data. 610 00:26:45,840 --> 00:26:47,879 Speaker 1: When it actually does roll over, that is going to 611 00:26:47,920 --> 00:26:52,400 Speaker 1: be what ultimately could check this sense that we've seen 612 00:26:52,400 --> 00:26:55,239 Speaker 1: in the markets. I'm wondering about foreign demand and how 613 00:26:55,320 --> 00:26:57,480 Speaker 1: much that changes in the meantime, how much there's been 614 00:26:57,520 --> 00:27:01,879 Speaker 1: a structural shift for dollars nominated assets that coincide with 615 00:27:02,000 --> 00:27:03,240 Speaker 1: potential hard data. 616 00:27:03,040 --> 00:27:03,639 Speaker 11: That does roll over. 617 00:27:03,720 --> 00:27:05,560 Speaker 2: Okay, if I finished on that premise, re talked about 618 00:27:05,560 --> 00:27:07,639 Speaker 2: this earlier on. We keep coming back to this framework. 619 00:27:07,800 --> 00:27:10,840 Speaker 2: Were seeing a cycle level shock or a system level shock? 620 00:27:11,359 --> 00:27:13,119 Speaker 2: And if you're still trying to figure that out, do 621 00:27:13,240 --> 00:27:16,000 Speaker 2: investors abroad behave as if we are seeing a system 622 00:27:16,080 --> 00:27:20,000 Speaker 2: level shock and begin to diversify away from dollar denominated assets. 623 00:27:20,119 --> 00:27:21,520 Speaker 2: Is there a risk of that plank out? Do you 624 00:27:21,520 --> 00:27:23,520 Speaker 2: see signs of it already plank out. 625 00:27:23,800 --> 00:27:24,359 Speaker 10: On the margin? 626 00:27:24,400 --> 00:27:26,120 Speaker 8: But I don't think there's a wholesale change. I think 627 00:27:26,119 --> 00:27:28,439 Speaker 8: there was kind of this abrupt change initially. But the 628 00:27:28,440 --> 00:27:30,600 Speaker 8: way we're thinking about it from a portfolio standpoint, we've 629 00:27:30,600 --> 00:27:32,560 Speaker 8: been team USA for several years and we still have 630 00:27:32,600 --> 00:27:36,560 Speaker 8: a slight US tilt. But second according you have more 631 00:27:36,600 --> 00:27:38,679 Speaker 8: different you know, you have different scenarios happening. You have 632 00:27:38,720 --> 00:27:41,320 Speaker 8: the currency moving a lot. We're bringing our bets and 633 00:27:41,320 --> 00:27:44,040 Speaker 8: we've been doing that since last fall. We added to 634 00:27:44,080 --> 00:27:46,840 Speaker 8: EM a little bit, we added to investment sorry developed 635 00:27:46,880 --> 00:27:49,080 Speaker 8: markets this year. I mean, it is notable that on 636 00:27:49,160 --> 00:27:51,520 Speaker 8: this V shaped recovery, while the US market's still below 637 00:27:51,640 --> 00:27:54,440 Speaker 8: the highs, you know, Europe's back to all time highs. 638 00:27:54,480 --> 00:27:57,280 Speaker 8: European financials are all time highs. The other thing that's 639 00:27:57,320 --> 00:28:00,000 Speaker 8: interesting if you look at the returns you know, Internet 640 00:28:00,080 --> 00:28:02,840 Speaker 8: are developed about they're up about twelve percent, you know, 641 00:28:02,880 --> 00:28:05,440 Speaker 8: almost like nine percent. Is the currency on that side 642 00:28:05,440 --> 00:28:08,240 Speaker 8: as well? A longer time, longer term though, we still say, 643 00:28:08,320 --> 00:28:10,800 Speaker 8: you know, are the's big the best companies in the world. 644 00:28:10,800 --> 00:28:12,679 Speaker 8: They're still in the US, so we have that battle. 645 00:28:12,680 --> 00:28:13,480 Speaker 10: But even I guess the. 646 00:28:13,480 --> 00:28:16,320 Speaker 8: Bottom line is stay with the US, but bring in 647 00:28:16,359 --> 00:28:18,560 Speaker 8: those best. And I do think there is some some 648 00:28:18,600 --> 00:28:21,359 Speaker 8: signal in that the recovery has happened quicker overseas. 649 00:28:21,480 --> 00:28:24,560 Speaker 2: It's still exceptional. What did Mark Romans say over Apollo, 650 00:28:24,560 --> 00:28:26,480 Speaker 2: It's just not hyper exceptional anymore. 651 00:28:26,560 --> 00:28:29,600 Speaker 1: It's heading down to just exceptional. And yet, what does 652 00:28:29,720 --> 00:28:32,040 Speaker 1: just exceptional look like? After so many decades of the 653 00:28:32,119 --> 00:28:34,520 Speaker 1: US being exceptional when it comes to the currency, when 654 00:28:34,520 --> 00:28:36,480 Speaker 1: it comes to its funding markets, and then of course 655 00:28:36,600 --> 00:28:37,760 Speaker 1: when it comes to tech development. 656 00:28:37,840 --> 00:28:39,320 Speaker 2: A lot of changed is the Fed last night on 657 00:28:39,320 --> 00:28:41,760 Speaker 2: March nineteenth, one of the bigger changes in foreign exchange. 658 00:28:41,800 --> 00:28:43,520 Speaker 2: You wrote dollar was trading at one O nine. This 659 00:28:43,600 --> 00:28:46,920 Speaker 2: morning one's thirteen sixty one. Keith is good to see you, sir. 660 00:28:47,000 --> 00:28:59,280 Speaker 2: Thank you. Keith le under that of Truist some pourt 661 00:28:59,280 --> 00:29:01,800 Speaker 2: study of PGM fixed income has this to say. He's 662 00:29:01,840 --> 00:29:04,360 Speaker 2: got thoughts. What's started out as a year that could 663 00:29:04,360 --> 00:29:07,880 Speaker 2: have been easily achieved. Trained growth has now quickly deteriorated. 664 00:29:08,200 --> 00:29:10,360 Speaker 2: We will be lucky to see growth in the one 665 00:29:10,360 --> 00:29:13,080 Speaker 2: percent range. Tom joins us now for more. Tom, good morning, 666 00:29:13,160 --> 00:29:13,800 Speaker 2: got to see. 667 00:29:13,640 --> 00:29:15,960 Speaker 9: You, Good see you all. Has everyone very. 668 00:29:15,800 --> 00:29:18,239 Speaker 2: Well, been very busy since we last spoke. A lot 669 00:29:18,240 --> 00:29:20,479 Speaker 2: of changed since the Fed last met March nineteenth, they 670 00:29:20,480 --> 00:29:23,600 Speaker 2: put out an SEP, and in their SEP, their forecast 671 00:29:23,640 --> 00:29:25,440 Speaker 2: for growth of this year for twenty twenty five was 672 00:29:25,480 --> 00:29:27,760 Speaker 2: one point seven percent, and that was a downgrade from 673 00:29:27,760 --> 00:29:29,680 Speaker 2: the previous forecast. And we all sat around the table 674 00:29:29,680 --> 00:29:31,440 Speaker 2: and said, well, look, compare that to where the median 675 00:29:31,520 --> 00:29:34,360 Speaker 2: dot is. They've downgraded their assessment of growth, and the 676 00:29:34,360 --> 00:29:36,840 Speaker 2: Median dot is unchanged. They've not increased the outlook for 677 00:29:36,840 --> 00:29:39,719 Speaker 2: interest rate cuts. My question to you if they put 678 00:29:39,760 --> 00:29:42,560 Speaker 2: an SEP out today and what is not due. But 679 00:29:42,600 --> 00:29:45,320 Speaker 2: if they did and had to downgrade that GDP target 680 00:29:45,360 --> 00:29:48,520 Speaker 2: one point seven percent down to say one percent, what 681 00:29:48,520 --> 00:29:49,440 Speaker 2: would the median dot do? 682 00:29:49,680 --> 00:29:51,640 Speaker 11: So they would be in good company if they downgraded 683 00:29:51,680 --> 00:29:56,280 Speaker 11: it a one percent, and yeah, the median died, I 684 00:29:56,280 --> 00:29:58,560 Speaker 11: think would not move. And I think this really sort 685 00:29:58,560 --> 00:30:01,959 Speaker 11: of drives home they're sort of where they're leaning, right. 686 00:30:01,960 --> 00:30:03,920 Speaker 11: I mean, in terms of dual mandate, it's entirely bad 687 00:30:03,960 --> 00:30:06,840 Speaker 11: inflation right now. And you know, the irony, of course 688 00:30:06,920 --> 00:30:09,160 Speaker 11: is I think the administration is sort of, you know, 689 00:30:09,160 --> 00:30:11,160 Speaker 11: as much as they desperately want the FED to cut raids, 690 00:30:11,160 --> 00:30:13,080 Speaker 11: I think all that's happening is actually it's just going 691 00:30:13,120 --> 00:30:15,440 Speaker 11: to sort of, you know, sort of force that day 692 00:30:15,560 --> 00:30:16,480 Speaker 11: out even further. 693 00:30:16,720 --> 00:30:18,600 Speaker 9: So we expect cuts this year, but. 694 00:30:18,560 --> 00:30:20,719 Speaker 11: We just don't expect them, you know, immediately. I mean, 695 00:30:20,720 --> 00:30:22,959 Speaker 11: we don't expect that. I think even July is actually 696 00:30:23,000 --> 00:30:24,920 Speaker 11: looking a little too early for us, so I think 697 00:30:24,920 --> 00:30:27,440 Speaker 11: it'd be more backloaded. But I think that there's no 698 00:30:27,520 --> 00:30:29,960 Speaker 11: question that if you have inflation above target, if you 699 00:30:29,960 --> 00:30:32,920 Speaker 11: have inflation expectations that are starting the process of becoming unanchored, 700 00:30:33,280 --> 00:30:37,120 Speaker 11: and if you're now waiting for the inflation thrust from teriffs, 701 00:30:37,280 --> 00:30:39,400 Speaker 11: I think that this really sort of pushes the FED 702 00:30:39,440 --> 00:30:40,040 Speaker 11: to the silence. 703 00:30:40,120 --> 00:30:41,320 Speaker 7: Can you help us out a little bit? 704 00:30:41,480 --> 00:30:44,120 Speaker 1: No one knows anything about anything. These FED officials have 705 00:30:44,160 --> 00:30:46,600 Speaker 1: actually been going around the country listening to business leaders 706 00:30:46,920 --> 00:30:47,800 Speaker 1: and talking with people. 707 00:30:47,840 --> 00:30:49,440 Speaker 7: The whole FED listens ideas. 708 00:30:50,000 --> 00:30:54,280 Speaker 1: Are they gleaning any more information about the stasis in 709 00:30:54,400 --> 00:30:56,720 Speaker 1: C suites, the idea of what companies are doing and 710 00:30:56,760 --> 00:30:58,160 Speaker 1: how that could triggle into the economy. 711 00:30:58,240 --> 00:31:01,000 Speaker 11: Yeah, I mean, honestly, it's little in the Beige book, right, 712 00:31:01,080 --> 00:31:02,680 Speaker 11: I mean in the beageook you can hear this. 713 00:31:02,800 --> 00:31:04,640 Speaker 9: In the isms, you can hear this. I mean anything 714 00:31:04,640 --> 00:31:05,400 Speaker 9: that actually. 715 00:31:05,080 --> 00:31:07,120 Speaker 11: Has some sort of like you know, sort of qualitative 716 00:31:07,520 --> 00:31:10,480 Speaker 11: sort of assessment attached to it, we hear it loud 717 00:31:10,560 --> 00:31:12,800 Speaker 11: and clear, and all of these reports. Now, I think 718 00:31:12,800 --> 00:31:14,880 Speaker 11: this gets to a really important idea because pal keeps 719 00:31:14,880 --> 00:31:17,360 Speaker 11: one saying, hey, but you know, the soft data is 720 00:31:17,400 --> 00:31:21,240 Speaker 11: you know, sort of softening, but the hard data remains firm. Okay, 721 00:31:21,240 --> 00:31:24,280 Speaker 11: But at some point the soft becomes the hard data, 722 00:31:24,800 --> 00:31:26,720 Speaker 11: and I think we have to sort of recognize that. 723 00:31:26,840 --> 00:31:27,680 Speaker 9: You know, it's funny. 724 00:31:27,720 --> 00:31:29,680 Speaker 11: I think the last few years have really done a 725 00:31:29,680 --> 00:31:31,840 Speaker 11: disservice to this entire conversation because there has been a 726 00:31:31,840 --> 00:31:34,760 Speaker 11: divergence between the hard and soft data for reasons that 727 00:31:34,800 --> 00:31:36,640 Speaker 11: are pretty clear, right, I mean, which I'm happy to 728 00:31:36,640 --> 00:31:39,400 Speaker 11: elaborate on. So I think if you just lop off 729 00:31:39,440 --> 00:31:41,640 Speaker 11: the last few years and you look at the Harvard 730 00:31:42,040 --> 00:31:46,160 Speaker 11: soft data, historically speaking, they do move together. So it's 731 00:31:46,200 --> 00:31:48,160 Speaker 11: I think it's just a question of time now before 732 00:31:48,240 --> 00:31:49,120 Speaker 11: it sort of translates. 733 00:31:49,200 --> 00:31:51,040 Speaker 1: Neil dot has put out there this idea that hard 734 00:31:51,120 --> 00:31:54,080 Speaker 1: data is getting inflated by the pull forward one hundred percent, 735 00:31:54,320 --> 00:31:56,040 Speaker 1: and there's this feeling that you really have to look 736 00:31:56,040 --> 00:31:58,320 Speaker 1: at the soft data, which is a much more accurate 737 00:31:58,360 --> 00:32:01,640 Speaker 1: reflection now than say, ye're or two years ago. If 738 00:32:01,680 --> 00:32:04,840 Speaker 1: that's true, why are you less worried about some kind 739 00:32:04,880 --> 00:32:08,600 Speaker 1: of real pernicious outcome for the economy given how negative 740 00:32:08,600 --> 00:32:09,680 Speaker 1: the soft data has looked. 741 00:32:09,760 --> 00:32:12,760 Speaker 11: Yeah, so, which is why we've taken down our growth expectations, 742 00:32:12,760 --> 00:32:15,560 Speaker 11: I mean, and not just taking down our growth expectations, 743 00:32:15,560 --> 00:32:17,920 Speaker 11: but raised our recession probabilities. 744 00:32:18,720 --> 00:32:20,080 Speaker 9: It's a coin flip right now. 745 00:32:20,320 --> 00:32:22,280 Speaker 11: Whether or not you have a recession, we still expect 746 00:32:22,280 --> 00:32:25,920 Speaker 11: economic expansion to continue at a much slower pace. But 747 00:32:26,000 --> 00:32:28,360 Speaker 11: I think you know you are taking that to account, 748 00:32:28,440 --> 00:32:30,880 Speaker 11: I think in a very meaningful way, recognizing that the 749 00:32:30,920 --> 00:32:34,400 Speaker 11: downside risk I think is growing seemingly by the day. 750 00:32:34,480 --> 00:32:36,600 Speaker 5: Coin flip based on what what's the catalyst, whether or 751 00:32:36,640 --> 00:32:38,880 Speaker 5: not deals credible deals get done into. 752 00:32:38,880 --> 00:32:41,720 Speaker 9: Frystrating the window is closing rapidly. 753 00:32:42,080 --> 00:32:44,960 Speaker 11: I think if you don't start to see some real deals, 754 00:32:45,640 --> 00:32:48,160 Speaker 11: which again seems seemingly they're teeing that up right now, 755 00:32:48,840 --> 00:32:52,440 Speaker 11: I think that you'll the confidence that's already been wrecked, 756 00:32:52,640 --> 00:32:54,760 Speaker 11: I think remains that way, and people and companies stay 757 00:32:54,760 --> 00:32:56,240 Speaker 11: on the sidelines. And I'll say one last thing on this, 758 00:32:56,240 --> 00:32:57,720 Speaker 11: because I think it's such an important idea that I 759 00:32:57,760 --> 00:32:58,680 Speaker 11: think everyone's missing. 760 00:32:58,840 --> 00:33:01,560 Speaker 9: Let's say you do get credible and. 761 00:33:02,360 --> 00:33:05,520 Speaker 11: If you have the threat of tariffs that remain in 762 00:33:05,520 --> 00:33:07,880 Speaker 11: place even after the deals get done, which I can 763 00:33:07,880 --> 00:33:10,280 Speaker 11: easily see a scenario like that playing out, then I 764 00:33:10,280 --> 00:33:14,560 Speaker 11: think that just actually keeps already crumbled confidence pretty pretty suppressed. 765 00:33:14,720 --> 00:33:16,520 Speaker 2: This keeps them back to the theory that maybe we've 766 00:33:16,560 --> 00:33:19,520 Speaker 2: started a process, the process has starts and it becomes 767 00:33:19,520 --> 00:33:22,680 Speaker 2: self fulfilling. What is on your dashboard beyond just say 768 00:33:23,280 --> 00:33:26,000 Speaker 2: volume going through the port of Ala, what's next? How 769 00:33:26,000 --> 00:33:27,040 Speaker 2: did the dominoes fall? 770 00:33:27,160 --> 00:33:29,320 Speaker 11: Yeah, I think it gets to exactly this idea that 771 00:33:29,360 --> 00:33:31,360 Speaker 11: we were just talking about. I think the dominoes have 772 00:33:31,400 --> 00:33:33,640 Speaker 11: to fall, and I think this is the most critical domino. 773 00:33:33,800 --> 00:33:34,240 Speaker 9: It has to be. 774 00:33:34,240 --> 00:33:37,520 Speaker 11: Okay, terrorists are done right, like we've got We've achieved 775 00:33:37,560 --> 00:33:40,200 Speaker 11: what we wanted. Because if you keep the stick of 776 00:33:41,400 --> 00:33:44,760 Speaker 11: tariffs out there, I think that it's the uncertainty that 777 00:33:44,800 --> 00:33:46,760 Speaker 11: everyone keeps on talking about will just remain in place. 778 00:33:46,920 --> 00:33:49,640 Speaker 2: There's a price for that uncertainty. And right now, that price, Lisa, 779 00:33:49,920 --> 00:33:52,400 Speaker 2: is wait and see. A lot of companies, to your question, 780 00:33:52,560 --> 00:33:54,640 Speaker 2: are just sitting there on their hands and saying, got 781 00:33:54,640 --> 00:33:55,240 Speaker 2: to wait and see. 782 00:33:55,600 --> 00:33:57,600 Speaker 1: In the meantime, though they have to raise prices, so 783 00:33:57,640 --> 00:33:59,800 Speaker 1: they might wait and see when it comes to their investments. 784 00:34:00,040 --> 00:34:02,160 Speaker 1: They might wait and see when it comes to hiring people. 785 00:34:02,200 --> 00:34:04,520 Speaker 1: But they have some of them at least have talked 786 00:34:04,520 --> 00:34:06,640 Speaker 1: about how they can't wait and see when it comes 787 00:34:06,640 --> 00:34:08,960 Speaker 1: to at least passing along that price increase, which is 788 00:34:09,000 --> 00:34:11,840 Speaker 1: the reason why you might see that inflation aspect reflective 789 00:34:11,880 --> 00:34:13,279 Speaker 1: faster than anything else. 790 00:34:13,480 --> 00:34:15,200 Speaker 11: And actually, I make one last point, I don't know 791 00:34:15,239 --> 00:34:16,839 Speaker 11: that's like the queue for you wrapping it up. 792 00:34:17,520 --> 00:34:20,239 Speaker 2: So I think, how did you not? 793 00:34:21,160 --> 00:34:21,960 Speaker 9: I know your tricks? 794 00:34:22,840 --> 00:34:25,200 Speaker 11: So I think, just keep in mind something to this 795 00:34:25,280 --> 00:34:28,279 Speaker 11: really important idea. If all of a sudden you start 796 00:34:28,320 --> 00:34:31,520 Speaker 11: to see margin compression, right, profit margin compression, then the 797 00:34:31,560 --> 00:34:35,000 Speaker 11: labor part of that equation becomes even worse. I mean, look, 798 00:34:35,000 --> 00:34:37,000 Speaker 11: we're already expecting labor to slow down, and there's already 799 00:34:37,000 --> 00:34:37,880 Speaker 11: signs that that's happening. 800 00:34:37,920 --> 00:34:39,560 Speaker 9: That would make it, I think, meaningfully worse. 801 00:34:39,560 --> 00:34:43,239 Speaker 2: I have one more question. Somebody to guy Mida Case says, 802 00:34:43,239 --> 00:34:44,880 Speaker 2: this is going to be really boring. How could you 803 00:34:44,920 --> 00:34:46,759 Speaker 2: make this interest in this news conference? What would you 804 00:34:46,760 --> 00:34:47,600 Speaker 2: ask the chairman? 805 00:34:47,880 --> 00:34:48,080 Speaker 4: You know? 806 00:34:48,680 --> 00:34:50,200 Speaker 11: So I think that this would be one of these 807 00:34:50,760 --> 00:34:54,520 Speaker 11: events where I'm guessing Howell would would love it if 808 00:34:54,560 --> 00:34:55,000 Speaker 11: there was. 809 00:34:55,080 --> 00:34:56,640 Speaker 9: No press conference attached to this. 810 00:34:58,000 --> 00:34:59,799 Speaker 11: You know, I don't know that there's anything more than 811 00:34:59,800 --> 00:35:01,640 Speaker 11: he can can say that's new, I think, and in fact, 812 00:35:01,680 --> 00:35:03,359 Speaker 11: inference to him, I think he's doing the right thing. 813 00:35:03,360 --> 00:35:05,080 Speaker 11: I think he's basically saying we'll wait and see more 814 00:35:05,160 --> 00:35:07,480 Speaker 11: to see what happens, and I can live with that narrative. 815 00:35:07,680 --> 00:35:09,440 Speaker 2: We know each other too well. Go away some for 816 00:35:09,520 --> 00:35:14,440 Speaker 2: selling picture. Thank you, sir. This is the Bloomberg Surveillance Podcast, 817 00:35:14,560 --> 00:35:18,480 Speaker 2: bringing you the best in markets, economics, angio politics. You 818 00:35:18,480 --> 00:35:21,280 Speaker 2: can watch the show live on Bloomberg TV weekday mornings 819 00:35:21,280 --> 00:35:24,200 Speaker 2: from six am to nine am Eastern. Subscribe to the 820 00:35:24,239 --> 00:35:27,759 Speaker 2: podcast on Apple, Spotify or anywhere else you listen, and 821 00:35:27,800 --> 00:35:30,919 Speaker 2: as always, on the Bloomberg Terminal and the Bloomberg Business app.