00:00:02 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 00:00:09 Speaker 2: This is a breaking news update from Bloomberg, instant reaction and analysis from our three thousand journalists and analysts around the world, and. 00:00:20 Speaker 3: The July jobs report crossing the Bloomberg terminal right now, and it shows that the US economy actually lost twenty three thousand jobs in the month of July. This is a lot less than the eighty thousand we were expecting to be added, and we added fifty seven thousand in the month of June. Moving to the unemployment rate, it dipped to four point one percent versus the prior month's four point two percent. The expectation was for four point two percent. Labor force participation rate coming in at sixty one point four percent. The month before it was sixty one and a half percent, and that's a bit lower than the expectation. Want to move over to the wage component here, which provides more clues on inflame. Average hourly earnings a month over month up just a tenth of a percent, a scant tenth of a percent. Average hourly earnings year over year up three point two percent. The expectation was for three and a half percent, so again a big surprise to the downside the economy losing twenty three thousand jobs in the month of July. The expectation was for an edition of eighty thousand. I want to take a quick look at how the market is reacting. 00:01:25 Speaker 4: Here. 00:01:25 Speaker 3: Looks like futures, guys, at least for the moment, hanging on to those earlier games. 00:01:29 Speaker 5: Back over to you, Alexis, thank you so much. 00:01:32 Speaker 6: The markets movie as you can imagine, equities lift here, thinking free money will be out there in a lower rate environment. The yield space is the most elastic, and you see it in the two year yield in a solid nine basis points four point one six percent, basically halfway back to that coveted three point ninety nine thirty year bond. Doesn't come in as much as you'd expect, but nevertheless, from a five twenty two into five point one to nine two percent. Damien, your thoughts on the set of numbers here the revisions extremere. 00:02:04 Speaker 7: Yeah, yeah, no, I mean exactly. We have a revised down for the last for the last print of twenty thousand from fifty seven and this negative twenty three print. You would think we'll get some people's attention, but to well, let's see this point. It looks like equities are kind of looking through it for the minute. And I don't want to call this a nothing burger by any stretch. I mean, Claudia, I mean you know this. This, I'm wonderful it is going to move markets. 00:02:23 Speaker 6: We'll have to see her, Claudia Summer, letting her digest the data here a little bit. I do want to say, with the ECO screen that we have at Bloomberg, the change in non firm payrolls was negative twenty three versus a survey of eighty some people were there. But the two months payroll adjustment and negative one to ozh three, that's combined negative one hundred twenty six. 00:02:49 Speaker 5: I think we've given her enough time. 00:02:50 Speaker 6: Claudia sum joins us here to provide perspective. Claudia, this must change the debate at the FED. 00:02:59 Speaker 4: So first, does this remind you of anything? I mean a year ago exactly this employment report was when we had the very large downward revision, the downside surprise, the downward revisions, and the BLS commissioner lost her job. Right, So now, just looking quickly and I can't you know, do all the details of this government education government education was a big decline and one of the things that happens in the summer. It can be really tough with like the school calendars, and if things slip a little bit with the seasonal adjustment, you can get some kind of squorely numbers in terms of the education. That certainly is at play for the downside MYSS today. That was something that was very clear in last year's numbers as well, So I don't want to, you know, dismiss this. And of course that was a shift from we'd had a strong labor market to like, WHOA, maybe it's not so strong. So I do think there is signal here. There's probably a fair bit of noise and some seasonal issues that'll look through. The unemployment rate did tick down, right. I think the one thing that for the FED that maybe of most interest is wages coming in soft. 00:04:01 Speaker 6: I'm getting out my HP twelve C calculator because Constance Hunter. I wouldn't do this for Claudia, but Constance Hunter jumped in, here's we're going to do. 00:04:09 Speaker 5: Can we do this in the control room? 00:04:10 Speaker 6: Can we rip up the script that have Claudia and Constans together? 00:04:15 Speaker 5: Is that did you check with their people, Yeah, they say it. 00:04:18 Speaker 6: Okay, consense hunter getting wired up right now, getting folks futures up thirty two the advanced Nasdaq lifts double up eight tenths of a percent. Here in the yield again, the two year yield is the most elastic in it of four point one six percent. Damian ask a smart question to doctor some Well, I figure out the three months moving average on my HP twelve C. 00:04:40 Speaker 7: Well, Dr Salm, I mean average hourly earning is down zero point one percent month over month. I mean, you know you mentioned the Beige Book before the break, right, and you know what did the Beige Book show us that consumers are adjusting by taking on more debt, buying less but shopping more frequently trading down to cheaper alternatives. Is this really wearing on them now? I mean what does this all mean for the consumer? 00:04:59 Speaker 4: So on the consumer side, this this is not good news. I mean, paychecks are such a key driver of consumer span. I'm not the only driver, but this is a soft a soft eating. I think the one where you know, the implications maybe come out the strongest for this is on the FED side. You know, the thing that would get the Fed moving towards rate hikes the fastest. Where if there was any sign of overheating in the labor market, this is exactly the opposite of overheating. We hadn't seen wage growth really picking up, but we really hadn't seen it slowing down much. And so this really takes like the labor market isn't pushing up inflation, and frankly, if it softens it it might help hold down some of that inflation. 00:05:40 Speaker 5: We are so advantaged. 00:05:41 Speaker 6: Claudia Samnus Century Advisors and joining us now Constance Hunter, chief economists EIU. The two of them together commercial free across America in this half hour on yield. Christina kat Menu of Investigo will join us here and a bit Constant Hunter. You're over there working on the terminal looking at the numbers. I got a ninety day average, a three month moving average subject to revision, of twenty thousand per. 00:06:06 Speaker 5: Month on jobs. 00:06:07 Speaker 6: You can give me in all your academics, Claudia samac I don't care politically in America. In defense of the president, that's an unacceptable statistic for America to see a three months moving average of twenty thousand jobs per month. It doesn't get it done well. 00:06:25 Speaker 1: We don't think it gets it done. I'm gonna take off my headphones. 00:06:29 Speaker 5: Please take please take time. 00:06:30 Speaker 1: Okay, I'm echoing in there, echoing. I'm back on to hear Claudia. But in any case, you know, last year when we had changes to immigration, when we were deporting a number of people, there was widespread spread speculation that actually the monthly requirement had fallen. This year, what we saw with jobs, with payroll numbers increasing monthly, but the unemployment really not coming down significantly. Is that well, maybe it's higher this year thousand over the last three months, and then that fall in the unemployment rate that is not That is not a good look for the president. You're right, and it bolsters his case to cut rates. He's going to keep beating that drum. I think this bolsters our call for a hold. This is this is definitely a warrants a hold. 00:07:21 Speaker 6: Does this study that we're seeing right now? Can government officials in the FED get out front or they colossally ex post where they just have to wait for the data before they go flat or cut rates. 00:07:36 Speaker 4: So, I mean, policymakers never have a full picture of the economy when they make a decision. It just it takes too long, and there's always we always want one more piece of data, one more piece of information. But when you have enough questions or you have enough tension, that can that certainly can be you know, a reason to move a little more slowly until you get a decisive signal. I mean, I don't. I don't think today's data are decisive and in reshaping that we've had a largely balanced labor market so far this year, but they raise some concerns and we'll, you know, get more on inflation. We'll see if the distinplation is sticking or not. So you get what you have and you have to make a decisions. 00:08:09 Speaker 5: She decid, she did, she's such a pro. Today's date it wasn't decisive. 00:08:15 Speaker 6: Is there ever an economist who's ever said that today's dat has decided? Damien Sasawer with Constants Hunter and Claudius Constant. 00:08:23 Speaker 7: I mean, I'm just looking at so for futures here, I mean I see whites up a tick to a tick and a half, Reds are up two and a half, three ticks. I mean, so you know obviously what we're seeing here or yields down, price up, and is that the right Uh, you know, is that the right reaction to this? And just how much do you think the market's going to rush to price September out of the equation. Is that what we're looking at here. 00:08:42 Speaker 1: I think the market will begin to price September out of the equation. I think Claudia is right. Tom. I was almost going to say, you never look at just one number, and of course you don't, but you preface your question on the three month moving average, right, And I think that's what we're talking about here. One piece of concern, right, is you saw the unemployment rate fall for bad reasons, not good reasons to study participation felt people exams? 00:09:06 Speaker 5: Who would that be? Folks? 00:09:07 Speaker 6: Because of that where the unemployment rates goes down for bad reasons discuss doctor Hunter. 00:09:13 Speaker 1: Well, certainly, if you see that participation rate decline, it's only one tenth, but it's enough that we saw this load growth of jobs and we saw the unemployment rate fall. It suggests to you that either there's low supply along with load demand that is not a robust labor market situation. And you know, I was looking before I came on last night. I was I got buried in data as I as I sometimes do. And if you look at the FEDS Financial Conditions Index there, it suggests it suggests that we have tailwinds. Now those tailwinds are diminishing, but it suggests that monetary policy is loose here. And if we have loose monetary policy and a budget deficit of six percent and this is the best we can do, I think it begs asking some questions about the underlying economy. 00:10:03 Speaker 7: Yeah, I mean, look constant, and the equity market agrees with you. I mean, it is rallying here. 00:10:08 Speaker 5: I mean they see exactly what you see. 00:10:10 Speaker 7: This is an excuse for them to price out rate hikes, to basically get dubvish, and that is great for high for for sky assets. And so you know, shifting to you, I mean, Claudia just talked to us a little bit more about what's the FOBT. I mean, does this take some of the balance out of what next week's inflation print is going to look like? I mean, what are you looking for next? What's the next big figure that you're going to lean into? Data wise? 00:10:31 Speaker 5: Well? 00:10:31 Speaker 4: Absolutely, the inflation data are front and center right and you want to see we got a very soft inflation read for June. We don't expect that to show up again in July exactly that way. But you want to see some softness or at least getting back to something that's consistent with target right, and so there'll be a lot of attention to the CPI, the PPI, the import prices. I mean, inflation is still front and center, because inflation is still very far from the FEDS target and you need and if nothing else, you want to see it move in the right direction. Today we're seeing employment move and not the right direction. Maybe next week we'll get some better news on inflation, but I don't think this takes any pressure off of the CPI. And before this that meets again, we're gonna get one more payroll and we've got next week's CPI and another one. So there's a lot of data to. 00:11:15 Speaker 6: Come across America, a real treat together. Claudia sam with us today from News Century Advisors and Constance Hunter of EIU off the Shock report. We're up, Futures up thirty nine now, Nasdaq is up a solid stick one percent on the Nasdaq futures, so even Bitcoin vaults up seven hundred dollars. Constance demand that I quote Pelly Winners l one fifty seven on Brench crude right now in the most elastic yield. The two year of four point one five percent in a solid nine basis points, I'm going to call that a ginormous movement, even the ten year in seven basis points. I want to go to your two wheelhouses, Claudia. Let me begin with you, with all of your deserved acclaim over recession. We've had a pop phenomenal GDP. John writing over Breen notes consumption and investment eight ish percent, like a banana republic. 00:12:12 Speaker 5: Do you just assume that if. 00:12:14 Speaker 6: We have a tepa job economy and we don't cut rates fast enough, that nominal the animal spirit comes. 00:12:21 Speaker 5: Down to a more lower normal rate. 00:12:25 Speaker 4: So I am concerned if the labor market isn't firing on all cylinders, and certainly if it weakens, that would be an issue. And we've seen we got recent data again, I mean the labor share continues to drop, like the share of the income and the economy going to workers. That does not feel like a good situation. And I think to Constance's point, I worry more right now about the structure underpinning the economy than maybe the cyclical the boombus, the recess. It's like things are moving under the hood of the labor market, and I think that's the labor force growth, population, aging, what's happening with AI. So there's some really big themes that I think we should pay attention to, and maybe less to the boom bus cycle, right, because I'm not sure that's the biggest thing happening right now. 00:13:12 Speaker 5: Kind of sance. 00:13:12 Speaker 6: The EIU remit is a wonderful global remit. What does this job report signal to other central banks? I mean, it simply takes away the effervescence, doesn't it. 00:13:25 Speaker 1: You know, I would say other central banks are going to look much more closely at CPI data next week than they are. The jobs to data agree, But of course it does. To Claudia's point, right, it's what's going on under the hood here, and we have an aging labor market, we have an aging population. We're seeing people age out of the labor market. That is not a unique problem to the United States, right. We see this around the world. This is a challenge for central banks, and one could argue that is the biggest challenge for Japan and one of the reasons why we have the situation in Japan where they have a very high budget deficit or debt to GDP ratio, right, and there's concern about that fiscal situation and it was getting expressed in the currency, and we had the intervention that we had last week. So this theme of you know, what, how do you grow an economy with an aging population? Does AI help or hinder that These are as existential questions. I think that all economists, central bankers are not are looking at when they're looking at economies right now. 00:14:27 Speaker 7: And yet there's a desire to keep financial conditions loose here in the US, like you rightly point out, I mean, talk to us about what you learned from yesterday's refunding announcement. I mean they just in my mind kick the can down the road again, right, I mean, like, so, you know, your right to focus on fundamentals like debt to GDP here in the US, but the market has not paid attention to that for so long. You know, at what time, you know, the things at least start to flash amber to you constantly. 00:14:50 Speaker 1: So worsh has his task forces, We have our task forces. So there's a few things we're looking at that we felt we had to really do a deep dive. And to your point, Tom, across country comparison right up there is what is fiscal space? What constitutes fiscal space? When does it get tricky? 00:15:07 Speaker 4: Who? 00:15:08 Speaker 8: Who? 00:15:08 Speaker 9: You know? 00:15:08 Speaker 1: Obviously we see it's not uniform across countries, and so I think one of the things we have to think about here is are what is expected in fression and how does that feed into term premia and then what's that back loop to funding the government? 00:15:25 Speaker 6: Christina Campmenian does her people are quite upset, you know, I mean she needs more air time, Claudia. So last question to you, with immense respect for your academics, and it's just simply you're launching forward. I guess the end of August Jackson Hole and into September as well. It's still to America's the political reality. Kevin Hassett with Bloomberg in the ten o'clock our folks, Michael McGee and Danny Berger. I'm sorry, Claudia. And in economics on a job's day, it's two distinct Americas, isn't it. 00:15:58 Speaker 4: There's a lot of division in the labor market. I mean the division I like to focus on is this low higher, low fire economy, right for workers who have a job, like their job. It's a good job. This is this still is a pretty good labor market. Today's number is notwithstanding for people trying to get back in, trying to get them for the first time. This is tough. And this wage growth is not keeping up with the price growth, and that's a bigger that's a bigger problem. So yeah, there's a lot of divisions here. 00:16:25 Speaker 5: I love the wage growth idea. This is a this is why we do this. This is good. 00:16:30 Speaker 6: Thank you so much for the doctor Sam, Thank you so much. New Century Advisor. Both of them very active on LinkedIn. Look for their publishing out here. Today we have also, you know, I love it when world class talent calls it and says. 00:16:44 Speaker 5: Me, me, me, me me, Can I get on together? 00:16:47 Speaker 6: Are tentatives Stephanie Roth's schedule to be with us and from City Group Andrew holland Orse, who nailed this call. We're trying to line them up right now. We have to go through a I mean, I mean hollin Ors is like, great, you just call. 00:16:59 Speaker 5: A cell phone. I picks right up here. Definitely, Roth, You've. 00:17:02 Speaker 6: Got to go through like six layers of compliance joining us right now Christina, thank us for being patient off the shock economics. How does this economics play into a two year full faith and credit market. 00:17:15 Speaker 10: Look, I mean, the market is sitting here and we've been all trying to understand what is the new reaction function of the FED. Chair of the FED Committee under wars. 00:17:23 Speaker 5: And he wants it to be data. 00:17:25 Speaker 10: I don't know if we know what he wants it to be quite yet. I think the jury is still out there, and I think July was very different than June, so we'll see. But the market is grappling with all of these data prints, and we've taken out, certainly pricing for September and you're pricing now what just about one full hike only by December? 00:17:42 Speaker 7: So right, So, I mean, I know you guys are short duration over there at investment. I know you, like Steep Nares talked to us about how does this change the the you know, your outlook at all over in ear term. 00:17:53 Speaker 10: Look, I think there are a few things. Again, if we go back to this new regime from the FED right and talking about letting the market do the work, I think that introduces a lot more volatility, and especially in the back end of the curve. So I think that still means that you are looking for higher yields, higher yields out the curve and steepercurve. We haven't broadly this year, You've seen a lot of flattening of the curves. So I think that that still holds. And the tremendous amount of AI and hyperscaler issuance weighs on that too. And I know you guys have been talking about that today and it's been a theme. But you have these companies that are issuing the size of government bond deals weighing on the market. So I think we are still warranting, needing higher yields out the curve. 00:18:36 Speaker 7: So Christina, you know, I'm an emerging market fixed income guy. I look at em credit, I look at the basis to investment grade spreads, and I look at it and I say, wow, ten basis points. Wow, that is as tight as I have ever ever seen it. And I think you're absolutely right to hit on that. I think you're to date what three hundred billion in hyper scale we call it AI issuance. Going forward, I mean it's not going to go away, right, I mean they just roll this over ad to it. I mean at what point do you see the crowding out effect that many many strategists and analysts are calling for. 00:19:04 Speaker 10: Here, So we have been again when we look at our portfolios and we manage global portfolios, we have the three lovers of rates, credit and FX. Credit is where we've leaned on the least just because of how tight spreads are. And I know that's kind of been unpopular opinion, and corporates have continued to perform well and stay tight, but I think that's where there's the most kind of jump risk and concern. And I think it's been supported by this appetite for all in yields just given levels. But like you have to take a step back and say, A, you have this change in regimes, which should mean higher even government bonds. You are it's not the end of the issuance out of these issues. So there's more to come. And we've been at such compressed yield levels for so long, So talking about can a tenure be at five and a quarter? 00:19:48 Speaker 5: Sure? 00:19:49 Speaker 10: Is that in the potential? 00:19:51 Speaker 7: So you know, we talk about the different factors which drive total returns and fixed income. You've got duration, you've got spread, you've got coupon income, you have FX, right, so talk to us about you know exactly what you do. If you don't like duration and you don't like spreads, does that mean you're shifting and you're kind of leaning into currency risk here? 00:20:09 Speaker 10: So currency risk has definitely been kind of top of mind, I'd say, of the last two years. It's certainly I know something Tom and I have been talking about of like Asia is so miss priced, Asia so much price, and it's that kind of what has been most miss price has been frustrating and obviously has gotten more play in the last week and a half with official yen intervention in the Korea move. But yeah, I think we are sitting in an environment where people, even coming out of the July meeting say, Okay, from an FX perspective, we're in this multipolar world. There are different things driving it. So can we lean into em kerry and at least until we get music to my kind of to the to the next FED meeting, we have this holding period, we have a lot of data. This is obviously a shift, but like, let's take a step back to and say, when we came to the beginning of the year, people were talking about is breaking even payrolls zero twenty five fifty. So yes, this is a big reset from where we were running the first three months of the year. But maybe that thesis actually hasn't changed, so it's not as robust. 00:21:12 Speaker 6: But this is not this is just wonderful force, Claudia. So I'm with this kind of sense hunter to Christina camp Many who looks at yield where their global reach and we've got scheduled Stephanie Roth and Andrew Hollenhorst we're working on right now. It's City Group. I want you to take the yield shop here. I got too many economists lined up. We got to get some real conversation and with Christina camp Many as well. Do you have an underlying disinflation and real GDP growth vectors that are lower that will support a lower yield environment. 00:21:45 Speaker 10: Look, I think that there are disinflationary trends that were in place at the beginning of the year. Again, if you zoom back to where we were in January, before Middle East situation kind of became front and center. That was the thes housing to come down, like a lot of these things to come down. Again, we're back in the world with a lot of uncertainty. We don't know what the situation in the Middle East is. We don't know where oil will end up. It has been shoppy, it has come down. I think at food sitting at eighty is something that the economy can sustain at one twenty. 00:22:19 Speaker 4: That's very different. 00:22:19 Speaker 10: And I think what the FED is trying to weed through in all of us in the markets and all the economists are what is most concerning, most likely for the FED is the kind of COVID style rollover that you're seeing it into wages and into pricing power in the economy, and that which we haven't seen yet, but it's something that people are concerned about. 00:22:37 Speaker 5: It's nuts. It's nuts, is what is my scientific analysis. 00:22:41 Speaker 6: Christina Kemedi, thank you so much with Invesco, with great perspective there again that benchmark two year yield four point one seven percent now in eight basis points. Some perspective from Andrew Hallenhorst, who has to publish into Friday and more importantly get a research note ready for Monday morning. What paragraphs will you chang and most abruptly, Andrew of a Monday research report. 00:23:05 Speaker 8: Yeah, So, I think the big thing I'm going to be emphasizing is that we are running slower job growth on an underlying average basis. We have a lot of noise around that looking at these numbers, that's kind of what we thought was happening. It's the second month on that we've got in these huge downward revisions the last two months. So two months ago we were sitting at one hundred and eighty eight thousand three month moving average job growth. Yes, that number this morning just twenty thousand, So it's come down quite substantially. 00:23:33 Speaker 6: And to give me your study of that, the political realities of Kevin Hassett at at ten o'clock hour this morning, that number, a three month moving average is completely inappropriate for any politician in America. 00:23:48 Speaker 8: Yeah, I don't think that it's an acceptable long term job growth number. There is a question about you know, is population growth just so slow now that you can reconcile that with keeping the unemployment rate relatively unchanged. Didn't come down this morning with the participation rate falling. But this is this is where it gets tricky for the FED. Right, We're used to hearing over the last few months a federal reserve that could almost operate as a single mandate FED, and we just heard a lot about inflation and inflation being above target, that discussion of downside risk to the job market had really kind of left the conversation. So I'm interested to see now after this report we start to get a little bit more of that trickling back in. 00:24:26 Speaker 7: Andrew, I have just I mean, like, this looks like a perfect report for the Trump administration, right, I mean, you had positive construction of manufacturing figures inside the data, and you basically got, you know, the data kind of to do a bit of worse's heavy lifting for them, right and price out some of these hikes. I mean, talk to us a little bit about where the White House stands with this. 00:24:44 Speaker 8: It really really takes the pressure off. In terms of a September rate hike, it would now look. 00:24:49 Speaker 4: A bit strange. 00:24:50 Speaker 8: I think it will look even strange after he had some cooler inflation data. Let's see how that plays out. We have a big report next week. But this job's report in and of itself, I think there's a very reasonable case you could make now to wait and see, because you are balancing these two mandates, and that is interesting. What you know, what we're seeing in some manufacturing construction, and we had manufacturing ism that was up at a multi year high earlier this week. And you do see that it's this AI boom right, which is really affecting the economy, and there are some sectors that are really benefiting from it. There are other sectors that aren't seeing much of the uplift from it. So it's a shifting economy. 00:25:29 Speaker 5: Why let me lose this bok. 00:25:31 Speaker 6: So let me tell you across America right now, we're so honored in short notice, Andrew helen Hurst with iss of City Group leading all of their US economic coverage. Stephanie Roth, I believe is on deck here in a moment. We are commercials free to the top of the hour. We think so many people, including interactive brokers Conor Resnic and others that support us, that we will continue forward here commercial free. We do it with futures doubled up forty one. The NaSTA continues to put on a here on futures up one point two percent this morning, two years subsides down just a little bit four point one seven percent in a solid seven basis points. Andrew, if there's two Americas and there's a job summary that's inappropriate, what can the politicians do short term besides job own the chairman of the FED. 00:26:24 Speaker 8: Yeah, I don't know if this is something that can be addressed in the short term politically, right we can talk longer term and I think actually most of the longer term solutions for the economy, the deficit, the debt, a lot of those are probably bipartisan and that's something that's hard to see a lot of in our current political system. Dynamic, but in terms of this data that's coming in now, these are just powerful external forces right where you have a new technology of really strong demand associated with it around AI, We've got oil prices that are fluctuating. This is the reality is that a lot of the shocks and the trends that affect the economy are things that aren't under the control of politicians. 00:27:10 Speaker 4: It's very difficult for them. 00:27:12 Speaker 7: Andrew, I mean, the dollar is selling off on this newss and you but I mean it's the end too. I mean, I think if you look at G ten here, it's nochi and then the yen, they're both up, you know, six point six point seven percent here, you know, on the session, talk to us a little bit about the reaction here in the dollar. I mean, do we see you know, scope for dollar weakness to continue here. 00:27:29 Speaker 8: Yeah, so I mean we were talking about taking the pressure off the FED to hike rates. I'm also taking a little bit of pressure off of Japanese monetary policy makers and looking at that currency this morning. 00:27:45 Speaker 4: Yeah, it is. 00:27:45 Speaker 8: It is an interesting situation right in terms of how are the monetary policy makers going to respond, both in the US as well as globally. We obviously have that intervention in the currency last week. Everybody is still watching that that you know that you have you have two things that are going on right when you think about the strength of the dollar. One is what's the relative strength of the US economy quite strong, right, really benefiting from the AI tailwind. And then where are relative interest rates in the US economy? 00:28:17 Speaker 5: Well, that is where we've had. 00:28:19 Speaker 8: The ECB that hype rates, and you've had expectations that you know, the BOE could hike, and we have the bo J of course that is on some kind of a hiking cycle. So you know, those things together have kind of kept us more neutral on the dollar, thinking that you know, stronger gross stronger dollar. On the other hand, lower rates in the US that should be weaker dollar. 00:28:39 Speaker 6: Andrew, you're a trooper Veronica Clerk never would have come on. You know, I'm say, City Girl, thank you so much. Andrew Hollanorski look for his work as he publishes Friday and into Monday. Stephanie Roth joins us Wolf Research here as we are commercial free as well. 00:28:57 Speaker 5: What are you going to lead with on a Friday note? 00:29:00 Speaker 9: I think it's that this supports the Fed and staying on a hold. How can they possibly be hiking into this in an environment where inflation is likely also heading on? 00:29:07 Speaker 6: Let's see the opportunity to them for Chairman Watsh to reset after that disastrous press conference. 00:29:12 Speaker 5: This is a real window for him to reset. 00:29:14 Speaker 9: Yeah, it is, And I mean we saw to some extent that the ft article is maybe some pints that you know, he'll reset to some extend in the communication front. I think we'll have to see what happens next week with CPI. Our expectation is it will come in on the softer side, which will then just continue to feed into this narrative, which, by the way, often happens in the summer because seasonals tend to move in that direction that the economy, the lad mark is a little bit softer than it previously appeared. 00:29:36 Speaker 7: Well, Stephanie, the market clearly agrees with you. I mean, just a few minutes ago we were talking about whites and reds. Whites were openly up, but a tick or two. Now September, the U twenty six so for contract up five to five and a half ticks, So they are pricing, really price starting to price it out right now. I mean the reds are up eight to nine ticks. I mean the front end of the curve is rallying and rallying hard. Does that make sense to you? I mean, should we be feeling this more on the front end? I mean, what do you think about you know, the sheep the yield curve? 00:30:00 Speaker 5: Yeah, I think we should. 00:30:01 Speaker 9: I mean the immediate reaction is that they're less likely to be going in September. Does that mean the inflation problem is solved? We're gonna have to see to some extent. 00:30:10 Speaker 1: It's going to take some time. 00:30:12 Speaker 9: Our expectation, though, is that we have a combination of tariffs, the Iran war and AI which has been boosting inflation by about one hundred basis points as those move through the data, and you have seasonals that will support slower inflation from here Neil dudda with. 00:30:26 Speaker 6: Us at seven am, and he's been very cautious on the labor front. Quote, the economy is that nearly as strong as everyone seems to think. The jobs data are not as important as inflation, so that it's not exactly good. 00:30:38 Speaker 5: Bond market is misreading the Fed. 00:30:40 Speaker 6: Is the bond market out front here on gloom given that the inflation reports are still to come. 00:30:47 Speaker 9: Yeah, I mean, I think that the bond market was certainly a lot more hawkish than investors. When we surveyed our own clients of equity investors, for the most part, they were expecting the FED to stay on hold. So it's interesting that just the divergent that you saw in terms of how bomb markets are pricing versus expectations from equity investors, and in this environment, it might prove to be the case that the Fed is just able to stay on hold from here. And now we've learned that ortion Trump are in much more communication than many people previously thought, which kind of shows his cards to some extent that he is would certainly prefer to do nothing in September. If the data force him to, he will, But this certainly gives an opportunity to stay on hold and do it credibly. 00:31:26 Speaker 7: Stephanie, What does this imply for real yields? I mean, what do you I mean, we see you know, ten yure reel yields kind of yeah, I mean that they must come inment off the back of this news. 00:31:34 Speaker 4: Right, absolutely, yeah. 00:31:35 Speaker 7: I mean so then my question really is just how much are reields reflecting growth expectations? 00:31:41 Speaker 6: Right? 00:31:41 Speaker 5: I mean so? 00:31:42 Speaker 7: And if they are, I mean, shouldn't we be seeing, you know, a rally further out along the curve. I mean, it seems like as you get out to the greens and the blues, things start to trail off. 00:31:49 Speaker 6: Here. 00:31:49 Speaker 7: I'm just looking again at the front end of the US yield curve here, I'm looking at futures contracts which you're trading here, and you know, it just seems to me that a lot of this move is concentrated in the very very ultra front and the whites and the reds here. 00:32:00 Speaker 9: Yeah, me, and I think that's the initial that's the sort of maejerk reaction. It's okay, well, the immediate response is okay, well, the FED is obviously a lot less likely to be hiking in September, But does that solve a lot of the other problems. There's also the supply demand issues at the longer end of the curve, which it helps to sort of, you know, keep the longer end of the curve a little bit more elevated than would otherwise be the case. But we know we might be in an environment later in the year where you actually see the long end come down a bit more. 00:32:25 Speaker 6: But into the election, and I go back to John Edwards standing on the lawn I think it was in New Orleans a million years ago, identifying two Americas. I get more response from people Stephanie Roth on the split, the divide in America, and there's you know, the politics and culture wars and all that. Forget about it. I got a three month run rate of twenty thousand per month, which is totally unacceptable. And I got bidding on properties. You're looking out in San Francisco, aren't you. 00:32:58 Speaker 7: You were looking at five million as I'm looking at coral gables. 00:33:01 Speaker 5: And how does a. 00:33:03 Speaker 6: FED manage an economy that is so divided between the halves? 00:33:08 Speaker 5: And they have nuts? 00:33:09 Speaker 9: Yeah, I mean that's been the case for a number of years now. It's been this K shaped economy which is a problem, and I don't think it's fair to set to look at the last three month average in perils. I don't think it's fair to look at the prior three month average. 00:33:20 Speaker 6: I think three months average twenty thousand non farm bay rolls is a valid statistic for Kevin Acid. 00:33:28 Speaker 9: No, I don't. I don't think. I don't think it's I don't think it's a fair reflection of what's actually happening in labor market. 00:33:34 Speaker 5: I think it's more buoyant. 00:33:35 Speaker 9: I think it's more boyant, similar to how we were feeling months ago when fair, when it was well over one hundred. 00:33:40 Speaker 4: That was almost two hundred thousand fair. 00:33:42 Speaker 5: Okay. 00:33:42 Speaker 4: So I think it's just an. 00:33:43 Speaker 9: Environment where you have to smooth through a lot more of this, and there's seems to be more seasonality problems in the data than we're aware of, a combination of World Cup and some issues within leisure. It's just been a you know, an environment where there's been a lot of. 00:33:57 Speaker 4: Sort of quirks in the data. 00:33:58 Speaker 9: When he smoothed through and it tells you lead market is fine, it's not overheating, but it probably doesn't suggest me there's a you know, urgent need for cuts either 00:34:09 Speaker 8: M HM