1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,600 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,640 Speaker 1: at Bloomberg dot com slash podcast. Let's do a little 7 00:00:22,680 --> 00:00:25,079 Speaker 1: stocks round table. Let's talk some stocks here. I'm gonna 8 00:00:25,079 --> 00:00:27,320 Speaker 1: throw a couple of sectors that we really like to 9 00:00:27,360 --> 00:00:30,120 Speaker 1: talk about. One is technology. Uh so we do that 10 00:00:30,160 --> 00:00:32,400 Speaker 1: with an a rock Rana. He's a senior anost covering 11 00:00:32,440 --> 00:00:35,519 Speaker 1: all things technology for Bloomberg Intelligence. He joins us here 12 00:00:35,560 --> 00:00:38,559 Speaker 1: on a Bloomberg Interactive broker studio and Debi Aikin. She 13 00:00:38,680 --> 00:00:42,519 Speaker 1: covers luxury, which is right down Matt's ali, but she 14 00:00:42,600 --> 00:00:46,040 Speaker 1: covers the luxury. She's based in London for Bloomberg Intelligence. 15 00:00:46,200 --> 00:00:48,720 Speaker 1: Deb let's start with you here. Can you give us 16 00:00:48,760 --> 00:00:54,000 Speaker 1: just an overview of how luxury spending performed during the 17 00:00:54,040 --> 00:00:58,360 Speaker 1: pandemic and now today in what looks like is going 18 00:00:58,400 --> 00:01:04,520 Speaker 1: to be from much of the world a recession. So um. 19 00:01:04,640 --> 00:01:08,119 Speaker 1: During the pandemic so um. We saw a big shift 20 00:01:08,160 --> 00:01:11,280 Speaker 1: to online. So initially we saw stores closed, we saw 21 00:01:11,520 --> 00:01:16,800 Speaker 1: sales overall down around six UM. Beyond that we then 22 00:01:16,840 --> 00:01:23,360 Speaker 1: saw full recovery UM and into two. If we head 23 00:01:23,360 --> 00:01:26,400 Speaker 1: into recession, we don't see it yet in luxury and 24 00:01:26,480 --> 00:01:29,200 Speaker 1: both the mid and the very top end. We are 25 00:01:29,280 --> 00:01:31,680 Speaker 1: fearful for some of the entry points, but we're not 26 00:01:31,760 --> 00:01:35,640 Speaker 1: seeing the pressure there yet for fashion items yet, but 27 00:01:35,760 --> 00:01:40,080 Speaker 1: for luxury bottom men, no, and the comments that we're 28 00:01:40,080 --> 00:01:44,040 Speaker 1: receiving so far with l um H haven't reported UM 29 00:01:44,120 --> 00:01:47,160 Speaker 1: and also for we could also say for consumer staples 30 00:01:47,240 --> 00:01:50,360 Speaker 1: brands overall as well. If you've got number one tier 31 00:01:50,400 --> 00:01:53,640 Speaker 1: one positions, they're still holding up and prices have been 32 00:01:53,680 --> 00:01:57,280 Speaker 1: passed through. Yeah. I notice you cover luxury like air 33 00:01:57,440 --> 00:02:01,080 Speaker 1: Mares or LVMH, but also Practice and Gamble and Unilever. 34 00:02:01,800 --> 00:02:04,480 Speaker 1: So I didn't know if debbikon was just stepping down. 35 00:02:04,520 --> 00:02:06,400 Speaker 1: What do you call it when consumers um, you know, 36 00:02:06,520 --> 00:02:09,639 Speaker 1: normally shop at Waitrose and then they go to Walmart. Yeah, exactly, 37 00:02:10,440 --> 00:02:12,480 Speaker 1: it's not you know, for one like A P and 38 00:02:12,520 --> 00:02:16,119 Speaker 1: G who reported this afternoon, UM, what you see there 39 00:02:16,200 --> 00:02:18,440 Speaker 1: is that they have such a wide range of price 40 00:02:18,520 --> 00:02:23,440 Speaker 1: points across KEYTI categories and big brands that they're able 41 00:02:23,480 --> 00:02:26,160 Speaker 1: to capture the consumers they move around, whether it be 42 00:02:26,280 --> 00:02:29,880 Speaker 1: that they look for ten dollar small pack or a 43 00:02:29,919 --> 00:02:32,440 Speaker 1: forty dollar multi pack to feel that they're getting value 44 00:02:32,480 --> 00:02:35,200 Speaker 1: for money. All right, let's spring in round to talk 45 00:02:35,240 --> 00:02:38,960 Speaker 1: a little technology, another part of the economy that seems 46 00:02:38,960 --> 00:02:42,920 Speaker 1: in pretty good stead much like you know, luxury, I mean, 47 00:02:43,000 --> 00:02:45,079 Speaker 1: but I mean, but but the same. The worry is 48 00:02:45,120 --> 00:02:47,720 Speaker 1: the same, right for investors that a downturn is going 49 00:02:47,760 --> 00:02:53,440 Speaker 1: to affect um the outlook. Right. They reported the results 50 00:02:53,440 --> 00:02:55,680 Speaker 1: that were in line with estimates, but we're more worried 51 00:02:55,680 --> 00:02:59,679 Speaker 1: about the outlook, right one in the case of Adobe, Adobe, 52 00:02:59,639 --> 00:03:01,880 Speaker 1: and we headed the analyst day last night, so they 53 00:03:01,880 --> 00:03:05,520 Speaker 1: gave guidance for three and you know, in our view 54 00:03:05,680 --> 00:03:08,640 Speaker 1: they talked about softness and some of their business. But 55 00:03:08,720 --> 00:03:11,000 Speaker 1: the stock reaction tells me that the by side probably 56 00:03:11,040 --> 00:03:14,120 Speaker 1: was expecting a lot worse than what they said. Um 57 00:03:14,200 --> 00:03:15,919 Speaker 1: And I think, you know, this is a stock that's 58 00:03:15,919 --> 00:03:18,239 Speaker 1: just got beaten up so badly over the last year. 59 00:03:18,480 --> 00:03:21,760 Speaker 1: It's down from its peak ever since they announced the 60 00:03:21,800 --> 00:03:24,959 Speaker 1: Figma deal. It's down over so I think this is 61 00:03:25,000 --> 00:03:27,720 Speaker 1: a bit of a relief rally for them that you know, 62 00:03:27,840 --> 00:03:29,639 Speaker 1: next year it is not going to be maybe as 63 00:03:29,680 --> 00:03:31,799 Speaker 1: bad as what people were thinking. But they don't they 64 00:03:31,800 --> 00:03:35,880 Speaker 1: haven't had the supply chain issues, they haven't had so 65 00:03:36,000 --> 00:03:40,240 Speaker 1: much the chip problems. These are software creators, right, um, 66 00:03:40,280 --> 00:03:43,120 Speaker 1: but they I guess have to pay much more for 67 00:03:43,160 --> 00:03:45,800 Speaker 1: workers that aren't coming to the office anymore. So the 68 00:03:45,800 --> 00:03:48,480 Speaker 1: wage inflations is an issue. But at the same time, 69 00:03:48,520 --> 00:03:51,680 Speaker 1: these are products that have immense pricing power, so you know, 70 00:03:51,720 --> 00:03:54,080 Speaker 1: margins really don't get hurt in the software world as 71 00:03:54,160 --> 00:03:56,560 Speaker 1: much as it does in the consumer area. But the 72 00:03:56,560 --> 00:03:59,000 Speaker 1: big deal for a company like Adobe would be what's 73 00:03:59,040 --> 00:04:01,480 Speaker 1: the top line growth? Megin, These guys have done a 74 00:04:01,480 --> 00:04:03,960 Speaker 1: phenomenal job over the last I would say seven eight 75 00:04:04,080 --> 00:04:08,000 Speaker 1: years growing in plus organically. I think that's the number 76 00:04:08,080 --> 00:04:10,480 Speaker 1: that's not going to happen over the next couple of years. 77 00:04:10,520 --> 00:04:12,720 Speaker 1: But I think it seems like the byside is already 78 00:04:12,920 --> 00:04:15,520 Speaker 1: you know, brought into that. All right. I want to 79 00:04:15,560 --> 00:04:21,000 Speaker 1: talk China because it affects both onoragamous technology sector and 80 00:04:21,279 --> 00:04:24,039 Speaker 1: deb and luxury and deb When I think of some 81 00:04:24,120 --> 00:04:29,880 Speaker 1: of the drivers for luxury spending in Paris, in you know, Milan, 82 00:04:30,080 --> 00:04:34,240 Speaker 1: in New York City. I think of the Chinese tourist 83 00:04:34,960 --> 00:04:38,039 Speaker 1: that has to be totally decimated because we have China 84 00:04:38,320 --> 00:04:43,040 Speaker 1: still effectively shut down. We do, But what's happened is 85 00:04:43,080 --> 00:04:46,440 Speaker 1: that the if we think about the whole luxury market 86 00:04:46,920 --> 00:04:49,839 Speaker 1: pre COVID, we would say that Chinese consumer was taken 87 00:04:49,920 --> 00:04:53,080 Speaker 1: towards a third of the market overall, but that they 88 00:04:53,080 --> 00:04:55,480 Speaker 1: would do a quote if they're spent in in China, 89 00:04:55,680 --> 00:04:57,760 Speaker 1: and it's more source were opened in China and the 90 00:04:57,839 --> 00:05:01,960 Speaker 1: other three quarters when he was spending. That's transition to China. 91 00:05:02,279 --> 00:05:04,720 Speaker 1: It's you know, the other problem. You do have a 92 00:05:04,760 --> 00:05:07,960 Speaker 1: supply chain issue. I assume I tried to buy UM 93 00:05:08,000 --> 00:05:11,240 Speaker 1: and Arrow Leathers a jacket from Arrow Leathers the Highwaymen, 94 00:05:11,279 --> 00:05:14,880 Speaker 1: which is their iconic horse leather chrome x L jacket. 95 00:05:15,240 --> 00:05:17,240 Speaker 1: They created it forty years ago and it goes for 96 00:05:17,279 --> 00:05:19,400 Speaker 1: a real premium. Can you do have any idea? What 97 00:05:19,600 --> 00:05:22,560 Speaker 1: are you talking about? I have no idea. Well, well, 98 00:05:22,600 --> 00:05:25,880 Speaker 1: they can't get them. They can't get the horse leather 99 00:05:25,960 --> 00:05:28,320 Speaker 1: in the door, they can't get those deliveries from Chrome 100 00:05:28,480 --> 00:05:32,560 Speaker 1: x L or horween. And I'm assuming that UM, you know, 101 00:05:33,440 --> 00:05:36,040 Speaker 1: LVMH and air Mas had the same problems with a 102 00:05:36,080 --> 00:05:39,080 Speaker 1: lot of their materials. So the thing is that they 103 00:05:39,120 --> 00:05:42,600 Speaker 1: work on such long dated because of how exclusive they are, 104 00:05:42,640 --> 00:05:46,160 Speaker 1: they work on such long dated, long term agreements. They 105 00:05:46,160 --> 00:05:48,839 Speaker 1: don't have that issue. The issue they have is maintained 106 00:05:48,839 --> 00:05:52,760 Speaker 1: in volume from demand. So for MS, we know that 107 00:05:52,800 --> 00:05:56,760 Speaker 1: their model is unlimited supply and their issue, their bottleneck 108 00:05:56,839 --> 00:05:59,880 Speaker 1: is that they have to open one new store, sorry, 109 00:06:00,000 --> 00:06:02,880 Speaker 1: a new production plant. UM it would be there twenty 110 00:06:02,920 --> 00:06:05,080 Speaker 1: three to twenty six over the next three to four 111 00:06:05,200 --> 00:06:08,800 Speaker 1: years for their leather goods division, and everything has always 112 00:06:08,839 --> 00:06:12,680 Speaker 1: produced out of Italy, out of UM, out of France, 113 00:06:13,160 --> 00:06:16,000 Speaker 1: so they've always had a very flexible supply chain, which 114 00:06:16,080 --> 00:06:18,479 Speaker 1: became even more flexible over the last couple of years. 115 00:06:18,800 --> 00:06:21,839 Speaker 1: So for them, the China situation recently has been about 116 00:06:21,839 --> 00:06:25,640 Speaker 1: closed stores and also close supply chain because of zero 117 00:06:25,880 --> 00:06:29,200 Speaker 1: you know, the lockdown policy that has started to reopen. 118 00:06:29,279 --> 00:06:31,760 Speaker 1: And even the data we just got this afternoon kind 119 00:06:31,760 --> 00:06:34,400 Speaker 1: of ties in from B and G that the market 120 00:06:34,480 --> 00:06:37,760 Speaker 1: is down about mid single digit overall year to date 121 00:06:37,960 --> 00:06:40,640 Speaker 1: in China, but that you're getting double digit growth from 122 00:06:40,720 --> 00:06:45,520 Speaker 1: June only Son On the tech side, China, both as 123 00:06:45,640 --> 00:06:48,760 Speaker 1: a buyer of technology and a supplier of technology. What's 124 00:06:48,839 --> 00:06:51,480 Speaker 1: kind of the the tech car. The biggest company that's 125 00:06:51,480 --> 00:06:53,840 Speaker 1: exposed without is Apple. So we're gonna find out next 126 00:06:53,880 --> 00:06:55,960 Speaker 1: week of how that's going to shape up, because we 127 00:06:56,120 --> 00:06:59,000 Speaker 1: think that China numbers are going to be weak because 128 00:06:59,160 --> 00:07:02,200 Speaker 1: of the luck outs. And the second part is China. 129 00:07:02,520 --> 00:07:05,560 Speaker 1: You know, j generate over the revenue from the Greater 130 00:07:05,720 --> 00:07:09,000 Speaker 1: China region, but a hundred percent of the iPhones are 131 00:07:09,000 --> 00:07:11,120 Speaker 1: close to hundred percent of the iPhones are assembled in 132 00:07:11,160 --> 00:07:13,720 Speaker 1: that region. So if, for example, we do get into 133 00:07:13,760 --> 00:07:15,880 Speaker 1: an area, we don't envision that happening in the next 134 00:07:15,880 --> 00:07:18,080 Speaker 1: six months, but let's say over the next twelve months, 135 00:07:18,360 --> 00:07:21,120 Speaker 1: if there is an increase in demand for the phones, 136 00:07:21,480 --> 00:07:23,840 Speaker 1: then they could be some supply chain problems. Right now, 137 00:07:23,960 --> 00:07:27,880 Speaker 1: we don't see that. And is the supply chain for 138 00:07:28,040 --> 00:07:32,160 Speaker 1: technology where is it? I guess are we back to 139 00:07:32,240 --> 00:07:35,200 Speaker 1: normal ish or close to it? We are back to 140 00:07:35,280 --> 00:07:38,400 Speaker 1: normalists because of demand reasons, but if the demand picks up, 141 00:07:38,480 --> 00:07:41,000 Speaker 1: we could have some problems down the road. And you 142 00:07:41,080 --> 00:07:44,280 Speaker 1: know the biggest issue is that you can't really diversify 143 00:07:44,360 --> 00:07:47,320 Speaker 1: from China that easily. It's taken twenty years to build 144 00:07:47,360 --> 00:07:50,200 Speaker 1: this supply chain. It's gonna take another decade of plus 145 00:07:50,240 --> 00:07:53,440 Speaker 1: two even entangle it even slightly, or bringing chips back 146 00:07:53,480 --> 00:07:55,840 Speaker 1: to the state of Ohio. So I mean, that's a 147 00:07:55,880 --> 00:07:58,400 Speaker 1: good thing. The great exactly that they can thank you 148 00:07:58,440 --> 00:08:01,080 Speaker 1: so much for joining us that they can follow retail 149 00:08:01,320 --> 00:08:05,120 Speaker 1: for Bloomberg Intelligence, including a luxury from our not narrow 150 00:08:05,200 --> 00:08:09,280 Speaker 1: leathers apparently but apparently not but howe or great producer 151 00:08:09,400 --> 00:08:12,360 Speaker 1: of tanned leather hides sure, who doesn't know that? And 152 00:08:12,640 --> 00:08:14,760 Speaker 1: on a rock Ronnie he covers all things technology for 153 00:08:14,920 --> 00:08:18,600 Speaker 1: Bloomberg Intelligence, joining us here in our Bloomberg Interactive Broker 154 00:08:18,640 --> 00:08:22,120 Speaker 1: studio round taping. A little uh, technology, a little luxury, 155 00:08:22,200 --> 00:08:23,880 Speaker 1: a couple of areas that we like to talk about. 156 00:08:23,960 --> 00:08:27,680 Speaker 1: And again both kind of dependent to varying degrees as 157 00:08:27,720 --> 00:08:30,440 Speaker 1: both a supplier and a source of demand on China, 158 00:08:30,680 --> 00:08:36,440 Speaker 1: and that's kind of continues to be an issue. Markets 159 00:08:36,480 --> 00:08:38,439 Speaker 1: kind of mixed here. We had two ripping days on 160 00:08:38,520 --> 00:08:41,920 Speaker 1: the upside, uh, and now kind of markets kind of digesting. 161 00:08:41,960 --> 00:08:44,200 Speaker 1: So let's talk market. So let's do this round table 162 00:08:44,280 --> 00:08:46,760 Speaker 1: thing again. We're sitting literally at a round table here 163 00:08:46,800 --> 00:08:49,720 Speaker 1: in our Bloomberg for those of you listeners who haven't 164 00:08:49,720 --> 00:08:51,559 Speaker 1: seen it. You should come in. Yeah, come on in 165 00:08:51,640 --> 00:08:53,880 Speaker 1: and see the studio. It's awesome. Mike built us a 166 00:08:54,040 --> 00:08:56,600 Speaker 1: nice studio. We appreciate it. We've got Gina Martin Adams, 167 00:08:56,679 --> 00:08:59,640 Speaker 1: chief equity market strategist with Bloomberg Intelligence. She joins us 168 00:08:59,640 --> 00:09:02,199 Speaker 1: in our blue Brick Interactive broker studio. And then we 169 00:09:02,400 --> 00:09:05,920 Speaker 1: have Vince Signarella, a global macro strategist with Bloomberg Intelligent. No, 170 00:09:06,040 --> 00:09:08,959 Speaker 1: he's not global macro strategist with Bloomberg News, And I 171 00:09:09,000 --> 00:09:10,800 Speaker 1: don't know what the heck he does. But he's been 172 00:09:10,840 --> 00:09:13,800 Speaker 1: trading stocks and bonds and currencies and all that kind 173 00:09:13,840 --> 00:09:18,280 Speaker 1: of stuff for decades. And he is firmly ensconced in Westchester, 174 00:09:18,679 --> 00:09:20,520 Speaker 1: and they will get him out of there. Uh. I 175 00:09:20,559 --> 00:09:23,040 Speaker 1: don't think ever. Vince. Let's start with you here. Um, 176 00:09:23,200 --> 00:09:26,280 Speaker 1: we had a couple of ripping days here in the market. 177 00:09:26,720 --> 00:09:29,880 Speaker 1: What did you make of it? Well? I think what 178 00:09:30,000 --> 00:09:33,040 Speaker 1: we're seeing, Um, a lot of traders are are sort 179 00:09:33,080 --> 00:09:34,880 Speaker 1: of putting their finger on some of the weaker data 180 00:09:34,920 --> 00:09:37,560 Speaker 1: that we've been seeing, especially in the housing market. Uh. 181 00:09:37,760 --> 00:09:40,599 Speaker 1: And they now have fully priced in the November and 182 00:09:40,640 --> 00:09:44,760 Speaker 1: December hikes and hoping coping that we will continue to 183 00:09:44,800 --> 00:09:47,640 Speaker 1: see this weaker data, if you will, that shows inflation 184 00:09:47,760 --> 00:09:50,240 Speaker 1: moderating and perhaps we get a pause from the said 185 00:09:50,320 --> 00:09:52,760 Speaker 1: in the first quarter. We've also come a very, very 186 00:09:52,840 --> 00:09:55,480 Speaker 1: long ways, as I'm sure Gina will be able to 187 00:09:55,720 --> 00:09:59,079 Speaker 1: articulate far better than I in terms of hitting technical levels. 188 00:09:59,280 --> 00:10:01,200 Speaker 1: But that had some thing to do with it. Um. 189 00:10:01,559 --> 00:10:04,120 Speaker 1: We hit a fifty retracement I believe it was from 190 00:10:04,200 --> 00:10:08,400 Speaker 1: the June numbers, and that triggered some machine buying and 191 00:10:08,559 --> 00:10:11,120 Speaker 1: a lot to stop lost buying as well, and that's 192 00:10:11,160 --> 00:10:13,840 Speaker 1: put us put a little base under us. We're right 193 00:10:13,880 --> 00:10:16,360 Speaker 1: now we're following believe it or not, UK ten year 194 00:10:16,440 --> 00:10:20,480 Speaker 1: guilts as the guilds fall in UH in Europe, US 195 00:10:20,520 --> 00:10:23,400 Speaker 1: treasury yields dropping a touch from this morning's highs, and 196 00:10:23,800 --> 00:10:27,080 Speaker 1: that's lifted the equity market initially. And as you mentioned, 197 00:10:27,160 --> 00:10:29,199 Speaker 1: we're now more of a mixed place. Do you know 198 00:10:29,240 --> 00:10:32,600 Speaker 1: how much do the algorithms make a difference? Everyone talks 199 00:10:32,920 --> 00:10:36,920 Speaker 1: about the algorithms as it helgoes. You know, they're the 200 00:10:37,080 --> 00:10:40,040 Speaker 1: you know, the evil terminators from the future coming back 201 00:10:40,120 --> 00:10:43,560 Speaker 1: to kill us. Um, Is it true? Did the algories 202 00:10:43,679 --> 00:10:46,560 Speaker 1: drive that crazy rally that we saw last Thursday. Are 203 00:10:46,600 --> 00:10:50,440 Speaker 1: they behind what we saw um Monday and Tuesday. Look, 204 00:10:50,480 --> 00:10:52,959 Speaker 1: I think anybody that pretends like they can answer that 205 00:10:53,120 --> 00:10:57,920 Speaker 1: question is simply pretending nobody knows, and it's all speculation. 206 00:10:58,240 --> 00:11:03,439 Speaker 1: It's all speculation, it's all assumption. We know that there 207 00:11:03,559 --> 00:11:06,760 Speaker 1: is a higher degree of algorithmic trading and quantitatively driven 208 00:11:06,880 --> 00:11:11,760 Speaker 1: trading in the market, so most likely it had some status, 209 00:11:11,840 --> 00:11:15,360 Speaker 1: some role to play. But was this particular bottom any 210 00:11:15,440 --> 00:11:17,559 Speaker 1: different than the one in June, any different than the 211 00:11:17,600 --> 00:11:19,679 Speaker 1: one at the end of eighteen, any different than the 212 00:11:19,760 --> 00:11:23,360 Speaker 1: one at the beginning of Nobody knows that answer. They've 213 00:11:23,440 --> 00:11:27,559 Speaker 1: all been bottoms that have formed in sort of a 214 00:11:27,679 --> 00:11:32,319 Speaker 1: close correlation with a rise in algorithmic trading. As as 215 00:11:32,320 --> 00:11:35,920 Speaker 1: an influencer on the market, I think what matters is 216 00:11:36,200 --> 00:11:39,040 Speaker 1: what is the market now valuing? How is the market 217 00:11:39,120 --> 00:11:42,240 Speaker 1: trading on the outlook? What does sentiment really look like? 218 00:11:42,840 --> 00:11:46,320 Speaker 1: Because these are things that will drive ultimate a sort 219 00:11:46,360 --> 00:11:50,000 Speaker 1: of activity and flows in the market longer term. The 220 00:11:50,120 --> 00:11:54,520 Speaker 1: algois can certainly make turning points look more vicious and 221 00:11:54,880 --> 00:11:58,959 Speaker 1: surprise the consensus outlook more, but ultimately there still is 222 00:11:59,160 --> 00:12:02,559 Speaker 1: our long long term underlying fundamental drivers. Two stocks that 223 00:12:02,600 --> 00:12:04,160 Speaker 1: I think we want to kind of focus, but was 224 00:12:04,240 --> 00:12:06,360 Speaker 1: that it was that a bottom? I mean, when we 225 00:12:06,480 --> 00:12:10,840 Speaker 1: look back, are we gonna say, um, you know, uh, 226 00:12:11,280 --> 00:12:15,360 Speaker 1: October what was it? October twelfth at thirty seventy seven 227 00:12:15,480 --> 00:12:18,079 Speaker 1: was the bottom in the SMP. I would say that 228 00:12:18,200 --> 00:12:21,200 Speaker 1: from a fundamental perspective, our model that we updated at 229 00:12:21,200 --> 00:12:22,800 Speaker 1: the beginning of the year said that we would trade 230 00:12:22,840 --> 00:12:25,079 Speaker 1: to thirty six hundred to price in some form of 231 00:12:25,240 --> 00:12:29,000 Speaker 1: very mild recession. That is very close to the level 232 00:12:29,040 --> 00:12:32,400 Speaker 1: where we bottomed in October. Our model now says there's 233 00:12:32,480 --> 00:12:35,640 Speaker 1: downside to closer to thirty one to price in a 234 00:12:35,720 --> 00:12:40,559 Speaker 1: more vicious normal recession. But we're still questioning whether a 235 00:12:40,640 --> 00:12:44,439 Speaker 1: vicious normal recession is likely to emerge. Um. We have 236 00:12:44,640 --> 00:12:47,280 Speaker 1: seen a significant loadown in economic growth, so we have 237 00:12:47,440 --> 00:12:51,319 Speaker 1: very clearly and very adequately now priced the slowdown that 238 00:12:51,360 --> 00:12:56,000 Speaker 1: we're experiencing in but we're still working through what looks like. 239 00:12:57,240 --> 00:13:00,840 Speaker 1: I think that the market has adequately priced roughly five 240 00:13:00,920 --> 00:13:04,679 Speaker 1: percent downside to earnings expectations. If we can get a 241 00:13:04,760 --> 00:13:07,160 Speaker 1: turn from the FED, the market may have priced up 242 00:13:07,160 --> 00:13:10,120 Speaker 1: to a fifteen percent down fifteen percent downside an EPs, 243 00:13:10,720 --> 00:13:13,120 Speaker 1: but there's still a lot of outstanding question marks in 244 00:13:13,200 --> 00:13:15,800 Speaker 1: the outlook, and I think that is likely to create 245 00:13:15,960 --> 00:13:21,720 Speaker 1: some persistent volatility. Maybe this was the bottom. Again, from 246 00:13:21,760 --> 00:13:25,240 Speaker 1: a sentiment perspective, it looks like a bottom. Our market 247 00:13:25,280 --> 00:13:29,200 Speaker 1: pulse index reached very serious extremes. Most of the sentiment 248 00:13:29,280 --> 00:13:30,800 Speaker 1: surveys that we're getting out of some of the cell 249 00:13:30,840 --> 00:13:35,360 Speaker 1: side shops are confirming sentiment is awful, and that is 250 00:13:35,559 --> 00:13:40,000 Speaker 1: usually first precondition for a bottom. But is it the 251 00:13:40,120 --> 00:13:43,200 Speaker 1: only condition? Not necessarily, Vince. What's it feel like out 252 00:13:43,240 --> 00:13:45,120 Speaker 1: in the trenches when you talk to the traders, they 253 00:13:45,360 --> 00:13:47,760 Speaker 1: are they trading like where we are at or near 254 00:13:47,960 --> 00:13:50,839 Speaker 1: or forming a bottom? Or are they like Dennis Gartman 255 00:13:50,840 --> 00:13:52,679 Speaker 1: who had onto the last hour we said we got 256 00:13:52,760 --> 00:13:56,440 Speaker 1: a lot more pain to go. Well, they're not trading 257 00:13:56,480 --> 00:13:58,079 Speaker 1: like we have a lot more pain to go. A 258 00:13:58,160 --> 00:14:00,280 Speaker 1: lot of guys are now like Gina Man, And from 259 00:14:00,320 --> 00:14:03,040 Speaker 1: the sentiment standpoint, a little bit of a shift from 260 00:14:03,200 --> 00:14:05,439 Speaker 1: a cellar ally to look to buy the dip. And 261 00:14:05,559 --> 00:14:08,760 Speaker 1: that's mostly among the day traders. They're looking for opportunities 262 00:14:09,360 --> 00:14:12,120 Speaker 1: to get in the market today, especially with the following 263 00:14:12,200 --> 00:14:16,400 Speaker 1: that interest rate move and just recently um I just 264 00:14:16,600 --> 00:14:18,559 Speaker 1: literally a few moments ago, had a trader tell me 265 00:14:18,679 --> 00:14:21,400 Speaker 1: that he's turning his lungs into shorts, and he looks 266 00:14:21,480 --> 00:14:23,840 Speaker 1: very right at the moment because the VIX was holding 267 00:14:23,920 --> 00:14:25,880 Speaker 1: up and would not uh and would not go down. 268 00:14:26,040 --> 00:14:30,240 Speaker 1: So uh, they are trading off these technical levels here 269 00:14:30,320 --> 00:14:35,080 Speaker 1: and there, but the sentiment looks like traders want to 270 00:14:35,160 --> 00:14:38,240 Speaker 1: believe that we're at least putting in a temporary low 271 00:14:38,520 --> 00:14:41,000 Speaker 1: and and some of the technical support it. Um And 272 00:14:41,080 --> 00:14:43,200 Speaker 1: look at the inforce correlation between the dollar and the 273 00:14:43,360 --> 00:14:46,160 Speaker 1: S and P five. The dollar looks like it's putting 274 00:14:46,200 --> 00:14:49,840 Speaker 1: in a technical top, but it could easily be a 275 00:14:49,960 --> 00:14:52,960 Speaker 1: very temporary one and we could step, you know, a 276 00:14:53,000 --> 00:14:55,240 Speaker 1: couple of months from now, step back into a major 277 00:14:55,320 --> 00:14:58,360 Speaker 1: sell off if we get some kind of black Swan moment. 278 00:14:59,240 --> 00:15:01,880 Speaker 1: So just quick on earnings. I know we've only had 279 00:15:01,920 --> 00:15:06,240 Speaker 1: sixty two SP five companies report, but my question is 280 00:15:06,400 --> 00:15:09,680 Speaker 1: its earnings is as it relates to how much lower 281 00:15:09,800 --> 00:15:12,360 Speaker 1: do you think earnings will go? Should go, need to go? 282 00:15:12,560 --> 00:15:15,840 Speaker 1: That kind of thing. Yeah, So in this very short 283 00:15:16,000 --> 00:15:19,880 Speaker 1: term earnings expectations are actually too low. The consensus got 284 00:15:20,000 --> 00:15:22,920 Speaker 1: too bearish on on third quarter, and the content census 285 00:15:23,000 --> 00:15:25,320 Speaker 1: continues to get more bearish in the very short term, 286 00:15:25,360 --> 00:15:27,920 Speaker 1: despite the fact that companies are actually beating third quarter 287 00:15:28,040 --> 00:15:31,360 Speaker 1: expectations for the year two dollars in the most recent 288 00:15:31,440 --> 00:15:34,080 Speaker 1: survey that I saw from Lou Way. So, but if 289 00:15:34,120 --> 00:15:37,680 Speaker 1: you look out forward twelve months, analysts are anticipating eight 290 00:15:37,720 --> 00:15:40,400 Speaker 1: percent growth still, and that number is too high. It 291 00:15:40,520 --> 00:15:43,400 Speaker 1: seems very unlikely that given the macro economic conditions, we're 292 00:15:43,400 --> 00:15:45,520 Speaker 1: going to get a percent growth over the next twelve months, 293 00:15:45,560 --> 00:15:47,480 Speaker 1: and analysts need to bring those numbers in. I think 294 00:15:47,520 --> 00:15:50,880 Speaker 1: the problem with the earning seasons right now is analysts 295 00:15:50,920 --> 00:15:54,240 Speaker 1: and companies alike have very limited visibility into the quarter ahead, 296 00:15:54,360 --> 00:15:57,200 Speaker 1: let alone the year ahead, and so what we're seeing 297 00:15:57,280 --> 00:16:00,800 Speaker 1: is this really strong concentration of revisions in just the 298 00:16:00,880 --> 00:16:04,240 Speaker 1: weeks leading into any individual earning season, with very little 299 00:16:04,400 --> 00:16:07,480 Speaker 1: change to the longer term outlook. Given the degree of uncertainty. 300 00:16:07,640 --> 00:16:09,560 Speaker 1: It's interesting if you look at you know, Lou Wang 301 00:16:09,640 --> 00:16:13,560 Speaker 1: puts together this table of strategists. They're not completely comprehensive, 302 00:16:13,720 --> 00:16:16,360 Speaker 1: but you know, we've got twenty two twenty three replies 303 00:16:16,360 --> 00:16:19,000 Speaker 1: and we're looking at two or twenty two uh an 304 00:16:19,120 --> 00:16:21,200 Speaker 1: estimate for EPs at the end of two and the 305 00:16:21,320 --> 00:16:23,800 Speaker 1: same for an estimate at an EPs at the end 306 00:16:23,800 --> 00:16:26,760 Speaker 1: of three. All right, good stuff. Gena Martin Adams, Chief 307 00:16:26,760 --> 00:16:30,400 Speaker 1: equity strategist Bloomberg Intelligence. Vince Signarella, global macro strategist with 308 00:16:30,520 --> 00:16:33,560 Speaker 1: Bloomberg News. You know Gene is a Florida Gator. I 309 00:16:33,640 --> 00:16:39,600 Speaker 1: didn't just remember that good stuff. We had a couple 310 00:16:39,640 --> 00:16:42,760 Speaker 1: of days just ripping it. Uh, kind of some indecision 311 00:16:42,880 --> 00:16:44,640 Speaker 1: out there, a lot of folks, So we were just talking. 312 00:16:44,720 --> 00:16:47,880 Speaker 1: Gena Martin Adams has been Signarella talking about bottoms. I 313 00:16:47,960 --> 00:16:51,680 Speaker 1: don't know, um long for a long period of time. 314 00:16:51,720 --> 00:16:53,040 Speaker 1: I think that's the only way to play the same. 315 00:16:53,080 --> 00:16:55,040 Speaker 1: But let's talk to somebody actually does this for a living. 316 00:16:55,120 --> 00:16:57,360 Speaker 1: Robert Teter. He's the head of investment policy and the 317 00:16:57,400 --> 00:17:00,040 Speaker 1: strategy group at Silver Crest Asset Management, based here in 318 00:17:00,120 --> 00:17:03,120 Speaker 1: New York City. Robert's in our studio because he comes 319 00:17:03,120 --> 00:17:05,280 Speaker 1: into the office everyday match just like us. So, uh, 320 00:17:05,359 --> 00:17:07,680 Speaker 1: it definitely gets the gold star. Robert, what are you 321 00:17:07,760 --> 00:17:09,399 Speaker 1: dealing with this market here? I mean, we've got a 322 00:17:09,440 --> 00:17:12,320 Speaker 1: FED raising rates. I probably have some earnings risk out there, 323 00:17:13,000 --> 00:17:17,600 Speaker 1: but man, the markets off. What do I do from here? Yeah, 324 00:17:17,640 --> 00:17:19,920 Speaker 1: that's a great question. It is a very confusing and 325 00:17:20,040 --> 00:17:23,040 Speaker 1: complex market right here. Interesting to sort of look beyond 326 00:17:23,080 --> 00:17:24,639 Speaker 1: the headlines, if you ask me so. One of the 327 00:17:24,720 --> 00:17:26,200 Speaker 1: things that I've been doing is spending a lot of 328 00:17:26,280 --> 00:17:28,760 Speaker 1: time looking at the message we're getting from earnings. Unless far, 329 00:17:28,840 --> 00:17:31,480 Speaker 1: the message from earnings has been consumer is pretty strong, 330 00:17:31,600 --> 00:17:33,760 Speaker 1: not too many problems on the consumer side. Earnings have 331 00:17:33,840 --> 00:17:35,640 Speaker 1: been a little bit better than feared, and I think 332 00:17:35,680 --> 00:17:37,800 Speaker 1: that sets a fairly constructive tone. Now we're still in 333 00:17:37,880 --> 00:17:41,000 Speaker 1: the danger zone for inflation, but thus far the message 334 00:17:41,000 --> 00:17:43,560 Speaker 1: on the economy has been reasonably sound from earnings. I mean, 335 00:17:43,760 --> 00:17:46,800 Speaker 1: the problem though, is that inflation. If inflation continues, the 336 00:17:46,840 --> 00:17:49,520 Speaker 1: consumer strength isn't going to hang on because wages haven't 337 00:17:49,600 --> 00:17:52,800 Speaker 1: kept up with inflation, and we're starting to see more 338 00:17:52,920 --> 00:17:58,359 Speaker 1: credit card usage UM still elevated accounts, according to Brian 339 00:17:58,400 --> 00:18:01,280 Speaker 1: moynihan at Bank America UM, which is good news, but 340 00:18:02,280 --> 00:18:04,040 Speaker 1: you have to expect, you know, as long as I 341 00:18:04,200 --> 00:18:06,639 Speaker 1: pay five ten a gallon for gas, but I'm not 342 00:18:06,680 --> 00:18:09,760 Speaker 1: gonna last much longer. Yeah, that's right. That's really the 343 00:18:09,880 --> 00:18:12,080 Speaker 1: timeline question that I think is in focus here, and 344 00:18:12,119 --> 00:18:14,159 Speaker 1: it's a matter of do we get inflation under control, 345 00:18:14,240 --> 00:18:16,560 Speaker 1: do we get the Fed pausing before you start to 346 00:18:16,560 --> 00:18:18,600 Speaker 1: see some of that pass through, whether it's lagged effects 347 00:18:18,680 --> 00:18:20,879 Speaker 1: or otherwise, onto the consumer and onto earnings. And so 348 00:18:21,040 --> 00:18:22,960 Speaker 1: that's really the race that's in place right now, is 349 00:18:23,280 --> 00:18:25,560 Speaker 1: you know which which happens first, to break in inflation 350 00:18:26,119 --> 00:18:27,639 Speaker 1: or a break in the economy. I think if we 351 00:18:27,960 --> 00:18:30,280 Speaker 1: hold off the break in the economy and breaking earnings 352 00:18:30,560 --> 00:18:32,119 Speaker 1: for another quarter or two, will be in a much 353 00:18:32,160 --> 00:18:34,160 Speaker 1: better spot inflation wise and give the Fed a little 354 00:18:34,160 --> 00:18:36,880 Speaker 1: more flexibility. So I mean, looking at it again, we've 355 00:18:36,880 --> 00:18:39,080 Speaker 1: been talking about the two year yield here four point five. 356 00:18:40,400 --> 00:18:42,080 Speaker 1: This is not a bad place to be. I mean, 357 00:18:42,160 --> 00:18:44,360 Speaker 1: how do you think about that visa v equities here? 358 00:18:44,640 --> 00:18:46,560 Speaker 1: That's right, it is a pretty compelling option, a lot 359 00:18:46,640 --> 00:18:48,479 Speaker 1: better than it used to be. I think that's one 360 00:18:48,560 --> 00:18:50,119 Speaker 1: of the big reasons that we've seen some of the 361 00:18:50,160 --> 00:18:52,800 Speaker 1: outflows from equities. It's not been too painful to hide 362 00:18:52,840 --> 00:18:55,000 Speaker 1: out in cash or near cash, at least in the 363 00:18:55,080 --> 00:18:56,760 Speaker 1: immediate future. And I think if you take a little 364 00:18:56,800 --> 00:18:59,720 Speaker 1: longer term view, with an expectation that towards the end 365 00:18:59,760 --> 00:19:01,840 Speaker 1: of next year we won't have as much inflation problem, 366 00:19:01,920 --> 00:19:04,359 Speaker 1: you might see rates coming down a bit. The reverse 367 00:19:04,440 --> 00:19:06,639 Speaker 1: relationship reverses back to where it's been a little more 368 00:19:06,680 --> 00:19:09,480 Speaker 1: upside and equities a little less upside, and fixed income 369 00:19:09,600 --> 00:19:13,960 Speaker 1: everybody wants uh income, it seems right, um, And I 370 00:19:14,040 --> 00:19:19,359 Speaker 1: wonder what your thought is about dividend stocks Are they safe? 371 00:19:20,080 --> 00:19:22,639 Speaker 1: And also about private investments it seems like it's a 372 00:19:22,960 --> 00:19:26,560 Speaker 1: bigger option even for retail. Yeah, so on both those things. 373 00:19:26,600 --> 00:19:29,480 Speaker 1: On on dividends, I think generally speaking they are reasonably 374 00:19:29,520 --> 00:19:31,680 Speaker 1: safe unless we go into a major recession, which I'm 375 00:19:31,680 --> 00:19:34,080 Speaker 1: not looking for, and so most company balance sheets are 376 00:19:34,080 --> 00:19:36,480 Speaker 1: pretty sound. It looks like dividends are pretty stable. We 377 00:19:36,560 --> 00:19:38,159 Speaker 1: haven't heard the term the stretch for yield in a 378 00:19:38,240 --> 00:19:39,680 Speaker 1: long time, because there is some yield. But I do 379 00:19:39,760 --> 00:19:42,600 Speaker 1: think dividends are valuable here. It's a known quantity and 380 00:19:42,640 --> 00:19:44,520 Speaker 1: you know what you're getting and is valuable. UM. On 381 00:19:44,600 --> 00:19:46,280 Speaker 1: the private side, I think it's interesting. You know a 382 00:19:46,359 --> 00:19:49,359 Speaker 1: lot of investors have been newly into privates. Is probably 383 00:19:49,560 --> 00:19:52,760 Speaker 1: an awakening for them here as to how things transpire 384 00:19:52,840 --> 00:19:55,280 Speaker 1: in that marketplace. I think if you have the ability 385 00:19:55,400 --> 00:19:57,960 Speaker 1: to handle the time horizon, handle illiquidity, there are some 386 00:19:58,040 --> 00:20:01,280 Speaker 1: great opportunities there, but important to be very, very selective 387 00:20:01,320 --> 00:20:03,320 Speaker 1: it's not a not a one size fits all type 388 00:20:03,359 --> 00:20:05,480 Speaker 1: of thing. A lot of noise beneath the surface in 389 00:20:05,600 --> 00:20:07,719 Speaker 1: terms of how those investments play out, and so important 390 00:20:07,760 --> 00:20:10,479 Speaker 1: to be selective. But good opportunities if you're careful. All right, 391 00:20:10,560 --> 00:20:14,360 Speaker 1: If if we are approaching peak inflation, if we are 392 00:20:14,480 --> 00:20:18,200 Speaker 1: approaching you know, maybe some type of pivot late this 393 00:20:18,320 --> 00:20:20,720 Speaker 1: year early next year in rates. Are there some sectors 394 00:20:21,200 --> 00:20:24,480 Speaker 1: that you're willing to kind of put some get some 395 00:20:25,160 --> 00:20:31,639 Speaker 1: approaching a pivot? Maybe maybe that's been telling us for 396 00:20:31,720 --> 00:20:35,320 Speaker 1: months there's no pivot coming. I'm reading between the tea leaves. 397 00:20:35,640 --> 00:20:37,800 Speaker 1: I'm paid to think ahead. So early in twenty three, 398 00:20:37,920 --> 00:20:40,439 Speaker 1: is there any place you want to start dipping your toe. Well, 399 00:20:40,480 --> 00:20:42,400 Speaker 1: one of the things that I think looks pretty attractive 400 00:20:42,440 --> 00:20:44,479 Speaker 1: here is small cap on a couple of bases. One 401 00:20:44,600 --> 00:20:46,520 Speaker 1: is on evaluation basis, which has been the case for 402 00:20:46,600 --> 00:20:48,880 Speaker 1: a long time. We haven't broken that trend of small 403 00:20:48,960 --> 00:20:51,679 Speaker 1: cap being cheaper and and for arguably good reasons. There 404 00:20:51,680 --> 00:20:54,639 Speaker 1: are benefits to scale in this massive global economy. But 405 00:20:54,760 --> 00:20:56,680 Speaker 1: I do think that the trends that we talked about 406 00:20:56,720 --> 00:20:58,480 Speaker 1: at the beginning and the middle of the pandemic of 407 00:20:58,600 --> 00:21:02,199 Speaker 1: re on shoring and the Erican manufacturing renaissance. Um, we're 408 00:21:02,240 --> 00:21:04,120 Speaker 1: still in place, they're just not playing out as fast 409 00:21:04,200 --> 00:21:05,639 Speaker 1: as many had hoped for. And so I do think 410 00:21:05,680 --> 00:21:08,040 Speaker 1: that sets a tail wind behind the small cap space. 411 00:21:08,080 --> 00:21:10,199 Speaker 1: So I do think that looks pretty compelling. And then 412 00:21:10,240 --> 00:21:12,760 Speaker 1: the consumer areas held up reasonably well also, And so 413 00:21:12,880 --> 00:21:14,920 Speaker 1: until we start to see any kind of cracks on 414 00:21:14,960 --> 00:21:17,440 Speaker 1: the consumer, I think consumer stocks are being sort of 415 00:21:17,560 --> 00:21:20,400 Speaker 1: underappreciated here in terms of their ability to pass through 416 00:21:20,440 --> 00:21:23,160 Speaker 1: price increases and generate strong earnings. So that's one trend 417 00:21:23,320 --> 00:21:27,199 Speaker 1: that you think is still ongoing. What about the reopening trade? 418 00:21:27,880 --> 00:21:30,959 Speaker 1: Does that continue? What about a shift from goods to services? 419 00:21:31,160 --> 00:21:32,760 Speaker 1: Is that an important trend? I mean, what are the 420 00:21:32,840 --> 00:21:36,480 Speaker 1: other key threads that you're pulling out of this? Uh tip, 421 00:21:36,560 --> 00:21:39,520 Speaker 1: what's the site guist right now? Yeah, that's super important. 422 00:21:39,560 --> 00:21:41,800 Speaker 1: I think that is a trend that's come through from 423 00:21:41,840 --> 00:21:43,480 Speaker 1: what we've seen in earning. So you've seen you know, 424 00:21:43,560 --> 00:21:46,720 Speaker 1: commentary around the consumer, particularly out of travel and leisure, 425 00:21:46,800 --> 00:21:50,320 Speaker 1: restaurant space, airlines, all pointing to consumer being very strong. 426 00:21:50,400 --> 00:21:52,480 Speaker 1: And I think that that continues until you get to 427 00:21:52,560 --> 00:21:55,000 Speaker 1: a point where you see a slowdown in jobs or 428 00:21:55,040 --> 00:21:57,120 Speaker 1: you see a real slowdown in terms of wage gains. 429 00:21:57,400 --> 00:21:59,840 Speaker 1: Um So, I think that's a durable and trend here 430 00:21:59,880 --> 00:22:02,320 Speaker 1: that that can continue for some time. On the good side, 431 00:22:02,359 --> 00:22:04,360 Speaker 1: you're absolutely right that has slowed down. You know, people 432 00:22:04,400 --> 00:22:06,479 Speaker 1: are back in offices and back here in the studio 433 00:22:06,520 --> 00:22:09,000 Speaker 1: and not not at home and buying things in ordering things, 434 00:22:09,080 --> 00:22:11,200 Speaker 1: and so some of these trends have been fairly predictable 435 00:22:11,400 --> 00:22:13,479 Speaker 1: and they seem to be playing out this quarter from 436 00:22:13,480 --> 00:22:16,040 Speaker 1: what we're hearing on earnings valuation, do you feel like 437 00:22:16,080 --> 00:22:20,520 Speaker 1: the market is fairly valued, is offered some opportunities here 438 00:22:20,640 --> 00:22:22,720 Speaker 1: or with the earnings risk maybe still not there for you. 439 00:22:23,240 --> 00:22:25,480 Speaker 1: I think it's pretty fairly valued. Um. I do think 440 00:22:25,520 --> 00:22:27,359 Speaker 1: that that the key to it all really is going 441 00:22:27,400 --> 00:22:28,960 Speaker 1: to be when we get that pause from the FED. 442 00:22:29,040 --> 00:22:31,560 Speaker 1: And I think you could see valuation improved quite a 443 00:22:31,600 --> 00:22:34,280 Speaker 1: bit whenever that moment happens. As to exactly the day 444 00:22:34,320 --> 00:22:36,680 Speaker 1: when it happens, hard to tell. But I think stocks 445 00:22:36,720 --> 00:22:39,040 Speaker 1: are fairly valued here. They're certainly at or below long 446 00:22:39,160 --> 00:22:40,960 Speaker 1: term averages. And I think if you get some improvement 447 00:22:40,960 --> 00:22:43,240 Speaker 1: on the rates side, we'll see some recovery invaluation. But 448 00:22:43,359 --> 00:22:46,800 Speaker 1: that's not buying it. Well, I pause. I could see happening, 449 00:22:47,000 --> 00:22:49,440 Speaker 1: you know, after they get to find a pivot. But 450 00:22:49,520 --> 00:22:51,440 Speaker 1: I don't think a pivot. So I mean, it's not 451 00:22:51,480 --> 00:22:55,680 Speaker 1: about what I think. This messages pounded into me, pounded 452 00:22:55,760 --> 00:22:57,879 Speaker 1: into me by the Federal Reserve, right, and I think 453 00:22:57,960 --> 00:23:01,720 Speaker 1: pounded into investors. We have seen the SMP fall down 454 00:23:01,800 --> 00:23:06,560 Speaker 1: to and um, that's because the Fed keeps telling people 455 00:23:06,680 --> 00:23:09,120 Speaker 1: there is no pivot coming. Yeah, and the Russell. You're 456 00:23:09,240 --> 00:23:11,040 Speaker 1: just mentioning the Russell, I mean the small caps that's down. 457 00:23:12,400 --> 00:23:15,000 Speaker 1: So maybe some some opportunity there. Robert Teter, thanks so 458 00:23:15,119 --> 00:23:18,160 Speaker 1: much for joining us. Robert Teter, his head of Investment 459 00:23:18,200 --> 00:23:22,159 Speaker 1: Policy and Strategy Group at Silver Crest Asset Management UH 460 00:23:22,280 --> 00:23:24,520 Speaker 1: in New York City, comes to us live in our 461 00:23:24,520 --> 00:23:28,480 Speaker 1: Bloomberg interactor, not phoning it in like so many people 462 00:23:28,560 --> 00:23:32,560 Speaker 1: we know even within this building, uphone and we're just 463 00:23:32,640 --> 00:23:35,400 Speaker 1: putting our foot down on that going forward. Robert Teter, 464 00:23:35,440 --> 00:23:42,440 Speaker 1: thanks so much for joining us. We've got the more 465 00:23:42,560 --> 00:23:45,720 Speaker 1: round table because we want to talk a little macroeconomics. 466 00:23:45,880 --> 00:23:48,000 Speaker 1: You want to do that, I would like to, And 467 00:23:48,080 --> 00:23:50,760 Speaker 1: we brought in one of our favorite guests and we 468 00:23:50,880 --> 00:23:55,840 Speaker 1: have a former UH economists apparently, But yeah, he's got 469 00:23:55,880 --> 00:23:57,840 Speaker 1: a little problem with being on time. But we've got 470 00:23:58,160 --> 00:24:01,879 Speaker 1: Ben Emmon's managing director of Global acro Strategy UH from 471 00:24:01,920 --> 00:24:05,240 Speaker 1: Medley Global Advisors. He has this in studio studio and 472 00:24:05,400 --> 00:24:08,240 Speaker 1: Carl Ricka Donna BNP Parrybot used to be a Bloomberg 473 00:24:08,240 --> 00:24:11,280 Speaker 1: intelligence but he's back saying hi to all his old friends, 474 00:24:11,320 --> 00:24:14,560 Speaker 1: probably rating the pantry upstairs, and we'll see him at 475 00:24:14,600 --> 00:24:18,679 Speaker 1: some point taking hands, taking selfies, exactly, handing on business cards. Now, 476 00:24:18,880 --> 00:24:23,000 Speaker 1: so Ben, talk to us about kind of your recession call. 477 00:24:23,080 --> 00:24:25,840 Speaker 1: Has it changed or how has it changed, if at 478 00:24:25,840 --> 00:24:30,480 Speaker 1: all over the last weeks maybe months here, because that's 479 00:24:30,560 --> 00:24:32,439 Speaker 1: kind of been the center of attention for a lot 480 00:24:32,520 --> 00:24:34,600 Speaker 1: of folks. If you assume that the PET is the 481 00:24:34,680 --> 00:24:37,320 Speaker 1: FET is going to continue to raise rates. Yeah, it 482 00:24:37,400 --> 00:24:40,280 Speaker 1: hasn't changed. But I think that what I found interesting 483 00:24:40,400 --> 00:24:42,440 Speaker 1: is that in the production data you can now really 484 00:24:42,520 --> 00:24:45,320 Speaker 1: see that the supply chain problem is being resolved. And 485 00:24:45,400 --> 00:24:46,920 Speaker 1: that's why we have a bit of an upturn in 486 00:24:47,000 --> 00:24:50,640 Speaker 1: the data coming through. You're not GDP now data, it's 487 00:24:50,680 --> 00:24:53,960 Speaker 1: been stronger, and that's really in net trade impact and 488 00:24:54,040 --> 00:24:57,160 Speaker 1: that's supply chain, right, that's really clearing. So that's that's 489 00:24:57,200 --> 00:24:58,719 Speaker 1: I think, I guess some sort of a catch up 490 00:24:58,760 --> 00:25:01,640 Speaker 1: from earlier this year, which means that we're I think 491 00:25:01,720 --> 00:25:04,000 Speaker 1: not in this recession just yet. Well, if we have 492 00:25:04,200 --> 00:25:08,560 Speaker 1: stronger GDP data and it looks like the supply chain 493 00:25:08,760 --> 00:25:13,400 Speaker 1: inflation problems are abating, does that mean we could see 494 00:25:13,920 --> 00:25:19,359 Speaker 1: lower inflation and higher growth than maybe previously expected. So 495 00:25:20,240 --> 00:25:24,399 Speaker 1: no recession or even a light recession as compared to 496 00:25:24,520 --> 00:25:29,360 Speaker 1: something longer and deeper. I think from that Saturday economy, yes, 497 00:25:29,920 --> 00:25:33,200 Speaker 1: you know, the durable goods deflation is coming through, that's clear, 498 00:25:33,240 --> 00:25:36,440 Speaker 1: and the supply chain easy. But the real issue that 499 00:25:36,520 --> 00:25:40,080 Speaker 1: we have in the United States is a food inflation problem, 500 00:25:40,200 --> 00:25:43,600 Speaker 1: and that's really sticky inflation that's difficult to get on 501 00:25:43,680 --> 00:25:46,000 Speaker 1: the control for. You know, I think a period of time, 502 00:25:46,359 --> 00:25:48,800 Speaker 1: will that push the economy and tied into recession. No, 503 00:25:49,160 --> 00:25:52,600 Speaker 1: But as we all know, a bigger catalysis overhanging the 504 00:25:52,640 --> 00:25:55,639 Speaker 1: economies how the housing market starts to really adjust and 505 00:25:55,880 --> 00:25:58,040 Speaker 1: you see how the home sales really collapsing in big 506 00:25:58,119 --> 00:26:00,560 Speaker 1: cities like l A. So AT think that is a 507 00:26:00,720 --> 00:26:04,359 Speaker 1: that's a surface impact. So if I take that together, 508 00:26:04,359 --> 00:26:06,760 Speaker 1: I say we got one side of the economy clearing 509 00:26:06,800 --> 00:26:10,160 Speaker 1: the supply chain. More downward pressure comes through in prices. 510 00:26:10,359 --> 00:26:12,480 Speaker 1: But there's the surface side of the economy that's not 511 00:26:12,600 --> 00:26:16,680 Speaker 1: only hop as food in fleshing's too sticky with housing contracting. 512 00:26:16,800 --> 00:26:20,280 Speaker 1: So it puts the economy still at risk of this recession. 513 00:26:20,320 --> 00:26:22,760 Speaker 1: I see Carl here, but I don't think it's a 514 00:26:23,000 --> 00:26:25,600 Speaker 1: deep recession you have until you get two rates of 515 00:26:25,680 --> 00:26:27,920 Speaker 1: over five six percent for the fat and that's you know, 516 00:26:28,200 --> 00:26:30,000 Speaker 1: that may be the case next year, you know, if 517 00:26:30,040 --> 00:26:32,680 Speaker 1: we can't get in flesh under control. But we're not 518 00:26:32,760 --> 00:26:35,399 Speaker 1: there at this stage, all right, Carl Ka Donna has 519 00:26:35,480 --> 00:26:39,080 Speaker 1: darkened the door. Chief's Economists for BNP Parry bab formally 520 00:26:39,480 --> 00:26:44,440 Speaker 1: of Bloomberg Intelligence Chief Economists here. So BNP Parry Bob, 521 00:26:44,680 --> 00:26:49,560 Speaker 1: do you speak French? Okay, great, good for you, all right, 522 00:26:49,600 --> 00:26:52,560 Speaker 1: So what's it? That's it? That's it? What is the 523 00:26:52,640 --> 00:26:55,439 Speaker 1: house view of BNP PARRYA. What are you telling your 524 00:26:55,480 --> 00:26:58,679 Speaker 1: clients these days? Because you now have clients. Yes, well, 525 00:26:58,760 --> 00:27:01,879 Speaker 1: we just updated our house few this morning actually, and 526 00:27:02,200 --> 00:27:05,720 Speaker 1: and so you know, looking back at the kind of 527 00:27:05,920 --> 00:27:10,240 Speaker 1: slew of negative inflation numbers we've seen, which which my 528 00:27:10,920 --> 00:27:14,280 Speaker 1: partner in crime here across the studio that was so 529 00:27:14,400 --> 00:27:19,080 Speaker 1: eloquently laying out the problem is the supply chain healing, 530 00:27:19,240 --> 00:27:23,160 Speaker 1: which is happening to some degree, is happening too slowly 531 00:27:23,400 --> 00:27:26,959 Speaker 1: and too late, and it's being overwhelmed by what we're 532 00:27:27,000 --> 00:27:29,840 Speaker 1: seeing in the service sector right the surging rent pressures 533 00:27:30,320 --> 00:27:33,199 Speaker 1: h and also in fact, in the last CPI report, 534 00:27:34,000 --> 00:27:37,800 Speaker 1: increasing evidence of wage price spiral dynamics. So our view 535 00:27:37,960 --> 00:27:42,760 Speaker 1: is while at the September meeting maybe nine out of 536 00:27:42,880 --> 00:27:46,720 Speaker 1: ten FETE officials favored a more aggressive tapering UH, in fact, 537 00:27:46,800 --> 00:27:49,920 Speaker 1: eighteen out of nineteen we're favoring some sort of downshift 538 00:27:50,400 --> 00:27:53,439 Speaker 1: UH in terms of tightening later this year, presumably at 539 00:27:53,480 --> 00:27:58,720 Speaker 1: the December meeting, down meeting from fifty exact exactly. We 540 00:27:58,960 --> 00:28:01,600 Speaker 1: no longer think that's going to be viable. That less 541 00:28:01,720 --> 00:28:05,400 Speaker 1: bad report was pretty ugly. The wage price spiral dynamics 542 00:28:05,760 --> 00:28:09,639 Speaker 1: look pretty nasty, UH. And so the icing on the 543 00:28:09,720 --> 00:28:13,119 Speaker 1: cake is the fact that inflation expectations are low at 544 00:28:13,160 --> 00:28:15,960 Speaker 1: the moment, but the question is are they stable? And 545 00:28:16,040 --> 00:28:18,760 Speaker 1: as we looked at last week's data, the New York 546 00:28:18,840 --> 00:28:22,680 Speaker 1: Fed survey showed three and five year inflation expectations starting 547 00:28:22,720 --> 00:28:26,240 Speaker 1: to notch higher. Uh. The University of Michigan survey showed 548 00:28:26,280 --> 00:28:29,400 Speaker 1: the same thing for longer run inflation expectations. Even Matt 549 00:28:29,480 --> 00:28:31,600 Speaker 1: Miller's complaining about the price he's paying at the gas 550 00:28:31,680 --> 00:28:34,200 Speaker 1: pump now that the prices have started moving higher again. 551 00:28:34,720 --> 00:28:37,399 Speaker 1: And so the concern is that, Uh, just as we 552 00:28:37,480 --> 00:28:39,800 Speaker 1: saw back in May and June when the FED panicked 553 00:28:40,360 --> 00:28:43,160 Speaker 1: on the news that inflation expectations were starting to drift higher, 554 00:28:43,640 --> 00:28:46,720 Speaker 1: we think this is closing the window on them being 555 00:28:47,000 --> 00:28:50,120 Speaker 1: able to kind of execute a whether it's soft landing 556 00:28:50,240 --> 00:28:54,160 Speaker 1: or non recessionary outcome. It's seventy in December more in 557 00:28:54,280 --> 00:28:56,840 Speaker 1: Q one, and that puts puts US in recession seventy 558 00:28:56,880 --> 00:28:59,200 Speaker 1: five November seventy five December more in Q one. Why 559 00:28:59,200 --> 00:29:03,200 Speaker 1: are are expectations so important? I mean, in terms of 560 00:29:03,680 --> 00:29:08,240 Speaker 1: um predicting inflation. I've recently looked back and found that 561 00:29:08,560 --> 00:29:11,400 Speaker 1: the bond market is horrible at that There's there's no 562 00:29:11,800 --> 00:29:14,600 Speaker 1: no one who's good at estimating what inflation is um, 563 00:29:15,000 --> 00:29:18,240 Speaker 1: you know, further out than a couple of quarters. But 564 00:29:18,400 --> 00:29:21,320 Speaker 1: expectations are really key to the Fed, right, They are 565 00:29:21,480 --> 00:29:25,800 Speaker 1: really critical to inflation dynamics in the economy. If households 566 00:29:25,840 --> 00:29:31,120 Speaker 1: and businesses have the assumption that inflation is low and stable, uh, 567 00:29:31,280 --> 00:29:33,880 Speaker 1: then they act accordingly. And if they have the perception 568 00:29:34,000 --> 00:29:37,959 Speaker 1: that inflation is higher on a longer run basis, then 569 00:29:38,000 --> 00:29:40,960 Speaker 1: they act differently. And so this is very critical to 570 00:29:41,040 --> 00:29:43,280 Speaker 1: all of the price dynamics in the economy. So households 571 00:29:43,320 --> 00:29:46,000 Speaker 1: may not accurately be able to assess for inflation is 572 00:29:46,040 --> 00:29:49,160 Speaker 1: heading into your head, but just their sentiment matters to 573 00:29:49,280 --> 00:29:52,360 Speaker 1: how inflation dynamics pan out. And so the kind of 574 00:29:52,480 --> 00:29:54,320 Speaker 1: worst nightmare for the FED or or one are the 575 00:29:54,320 --> 00:29:57,280 Speaker 1: worst nightmares for the FED is that the expectations genie 576 00:29:57,400 --> 00:29:59,840 Speaker 1: gets out of the bottle. And that's the difference between 577 00:30:00,320 --> 00:30:02,920 Speaker 1: where we are right now compared to the nineteen seventies. Right, 578 00:30:02,960 --> 00:30:04,760 Speaker 1: Everyone says, well, it's you know, it's the nineteen seventies 579 00:30:04,760 --> 00:30:09,320 Speaker 1: all over again. Not true, because inflation expectations were becoming 580 00:30:09,440 --> 00:30:13,320 Speaker 1: disanchored for a fifteen year period in the nineteen seventies. 581 00:30:13,400 --> 00:30:16,240 Speaker 1: That meant Pulp Bulker needed a nine pound sledge hammer. 582 00:30:16,560 --> 00:30:18,640 Speaker 1: I'll explain to you what that is after the show. Paul, Yes, 583 00:30:19,560 --> 00:30:23,520 Speaker 1: in the never held a nine hammer. I have people 584 00:30:23,560 --> 00:30:29,160 Speaker 1: that do expects have not disanchored, right, So they haven't 585 00:30:29,200 --> 00:30:31,720 Speaker 1: been disanchored for a decade, which means that, you know, 586 00:30:31,880 --> 00:30:34,720 Speaker 1: Jerome Powell doesn't need the same sledge hammer that Paul 587 00:30:34,760 --> 00:30:37,720 Speaker 1: Bolker used. But if they start to creep higher the 588 00:30:37,760 --> 00:30:40,600 Speaker 1: fed nose, it's very expensive to get those pressures back 589 00:30:40,640 --> 00:30:42,240 Speaker 1: in the bottle, and so that's why they will act 590 00:30:42,320 --> 00:30:45,640 Speaker 1: very aggressively if that starts. Student to quickly add to 591 00:30:45,760 --> 00:30:48,440 Speaker 1: Carl's points, is really good. You know the market is 592 00:30:48,480 --> 00:30:51,640 Speaker 1: so bad, Matt, because you're really talking about nominal rates. 593 00:30:52,000 --> 00:30:55,520 Speaker 1: How these break evens are determined nominal rates, real rates 594 00:30:55,560 --> 00:30:59,120 Speaker 1: are dynamic. It's really dead so too as being people 595 00:30:59,160 --> 00:31:01,480 Speaker 1: out as shaying, look at these break evens, they've fallen 596 00:31:01,520 --> 00:31:04,880 Speaker 1: so much that predicts a collapse in CPI. No, sorry, 597 00:31:04,960 --> 00:31:07,080 Speaker 1: this isn't it's just nominal rate moves. And that's just 598 00:31:07,160 --> 00:31:10,160 Speaker 1: the dynamic of the tips or the treasury market specific 599 00:31:10,600 --> 00:31:12,440 Speaker 1: which the FAT by the way, has put out papers 600 00:31:12,480 --> 00:31:14,760 Speaker 1: on They found that out like yeah, we do do 601 00:31:14,880 --> 00:31:17,760 Speaker 1: with liquidly respremum in tips. That makes them just not 602 00:31:17,960 --> 00:31:21,840 Speaker 1: as accurate as maybe some of the surveys that Karl's mentioning. 603 00:31:22,400 --> 00:31:26,480 Speaker 1: So back to the FAT, those expectation markets matter. But 604 00:31:26,560 --> 00:31:28,680 Speaker 1: I think what we're seeing in those household service is 605 00:31:28,760 --> 00:31:31,640 Speaker 1: the ultimately determinant, and that was their reaction back in 606 00:31:31,800 --> 00:31:34,640 Speaker 1: I believe it was July that that Michigan, particularly miche 607 00:31:34,640 --> 00:31:37,760 Speaker 1: and Economic came out as the preliminary estimate that's booked 608 00:31:37,800 --> 00:31:39,960 Speaker 1: them and immediately shifted them to the seventy five base 609 00:31:40,000 --> 00:31:42,760 Speaker 1: point hike. I think that really was the start of 610 00:31:42,880 --> 00:31:45,880 Speaker 1: the Okay, we're no longer in one seventy five base 611 00:31:45,920 --> 00:31:49,240 Speaker 1: point hike pace. This is becoming deep base right until 612 00:31:49,800 --> 00:31:53,560 Speaker 1: these expectations are moderating. I think this is we cannot 613 00:31:53,600 --> 00:31:56,240 Speaker 1: really go away from seventy five. If you look at 614 00:31:56,320 --> 00:32:00,360 Speaker 1: Cascario overnight with what he was talking, he's just admitting that, saying, yeah, 615 00:32:00,440 --> 00:32:04,840 Speaker 1: we have to reach higher credit card usage has gone up, right, So, um, 616 00:32:04,920 --> 00:32:08,719 Speaker 1: and if inflation continues at a higher pace than wage increases, 617 00:32:09,280 --> 00:32:11,920 Speaker 1: how much longer can we count on this consumer to 618 00:32:13,240 --> 00:32:17,000 Speaker 1: support the U. S economy? Ben not that long, I think, 619 00:32:17,080 --> 00:32:20,440 Speaker 1: you know, because the inflation is eroting. If real incomes 620 00:32:20,480 --> 00:32:24,480 Speaker 1: continue to be this negative, Um, it's just spending power 621 00:32:24,520 --> 00:32:26,600 Speaker 1: continues to be eroded. So I do think that what 622 00:32:26,720 --> 00:32:30,480 Speaker 1: we're seeing is maybe the last gasp of credit card 623 00:32:30,560 --> 00:32:34,880 Speaker 1: spending before you do hit a break. Now, again to 624 00:32:34,960 --> 00:32:37,960 Speaker 1: the earlier discussion, the economy is still not at that 625 00:32:38,080 --> 00:32:41,440 Speaker 1: procession or in recession. I think, so this is why 626 00:32:41,480 --> 00:32:45,280 Speaker 1: it was maintain this consumer spending. So it's it's it's 627 00:32:45,320 --> 00:32:47,640 Speaker 1: I think at this tipping point, you have too many, 628 00:32:47,640 --> 00:32:50,880 Speaker 1: you have too negative real income plus get the tip 629 00:32:50,960 --> 00:32:53,520 Speaker 1: of potentially in the recession. So I think they will 630 00:32:53,600 --> 00:32:57,200 Speaker 1: change consumer spending. Matt back in the summer when there 631 00:32:57,280 --> 00:33:01,320 Speaker 1: was recession concerned, um, you know, might team was banking 632 00:33:01,400 --> 00:33:04,280 Speaker 1: on the fact pun intended banking on the fact that 633 00:33:04,520 --> 00:33:08,400 Speaker 1: the households had accumulated about two point five trillion dollars 634 00:33:08,640 --> 00:33:12,280 Speaker 1: of excess savings during the pandemic that insulate we're a 635 00:33:12,360 --> 00:33:15,040 Speaker 1: twenty trillion dollar economy. So two and a half trillion 636 00:33:15,240 --> 00:33:17,000 Speaker 1: is a lot of extra money, a lot of dry 637 00:33:17,040 --> 00:33:21,240 Speaker 1: powder for consumers to confront inflation. That's you know, outpacing 638 00:33:21,480 --> 00:33:23,680 Speaker 1: a lot of their wage gains for instance, that's more 639 00:33:23,720 --> 00:33:26,520 Speaker 1: money than private equity has. Yeah, well, we burned through 640 00:33:26,600 --> 00:33:29,840 Speaker 1: a trillion last quarter, right, so now we're down to 641 00:33:29,880 --> 00:33:32,800 Speaker 1: about one point four trillion of excess savings. So for 642 00:33:33,040 --> 00:33:35,480 Speaker 1: burning through savings at the pace we did last quarter, 643 00:33:35,920 --> 00:33:38,120 Speaker 1: Then that tells you kind of Q one of next 644 00:33:38,240 --> 00:33:41,080 Speaker 1: year will be the moment of reckoning, where a lot 645 00:33:41,200 --> 00:33:43,480 Speaker 1: of the dry powder has been spent. And this means 646 00:33:43,480 --> 00:33:46,240 Speaker 1: a few things. That means number one, consumers will pull 647 00:33:46,280 --> 00:33:50,000 Speaker 1: back right or or spend more in line with what 648 00:33:50,160 --> 00:33:53,040 Speaker 1: they're earning in the labor market. So so non farm 649 00:33:53,080 --> 00:33:56,080 Speaker 1: payrolls in wage games become a lot more relevant to 650 00:33:56,240 --> 00:33:59,360 Speaker 1: kind of consumer dynamics. That's number one. But issue number 651 00:33:59,360 --> 00:34:03,440 Speaker 1: two is consumer has become more price sensitive when they 652 00:34:03,480 --> 00:34:05,760 Speaker 1: don't have those success savings telling you know that that 653 00:34:06,000 --> 00:34:08,719 Speaker 1: enable them to kind of ignore price increases. And so 654 00:34:08,880 --> 00:34:13,040 Speaker 1: the elasticity in a lot of discretionary spending categories could 655 00:34:13,040 --> 00:34:16,040 Speaker 1: start to change. But that means that until that happens, 656 00:34:16,239 --> 00:34:18,400 Speaker 1: there's not a lot of elasticity, and so it's kind 657 00:34:18,440 --> 00:34:22,440 Speaker 1: of premature to expect much improvement on the inflation front. Ben, 658 00:34:22,520 --> 00:34:24,440 Speaker 1: what do you think about the labor market here? A 659 00:34:24,520 --> 00:34:25,960 Speaker 1: lot of folks are saying and we're not going to 660 00:34:26,040 --> 00:34:28,560 Speaker 1: go into a recession because we're everybody's got a job, 661 00:34:28,760 --> 00:34:33,759 Speaker 1: wages are going up. Um, how concernary that this labor 662 00:34:33,840 --> 00:34:37,400 Speaker 1: market may start to show some cracks. So I think 663 00:34:37,480 --> 00:34:39,840 Speaker 1: the last not this report, but the report before, and 664 00:34:39,920 --> 00:34:41,840 Speaker 1: I think this is on a one hand, this is 665 00:34:41,920 --> 00:34:46,160 Speaker 1: labor force movements. But I found it notable that previous 666 00:34:46,239 --> 00:34:51,360 Speaker 1: reports showed a major uptake in Hispanic employments African American employments, 667 00:34:51,920 --> 00:34:54,080 Speaker 1: and as we studies out, that showed like if we 668 00:34:54,160 --> 00:34:57,960 Speaker 1: are moving towards this recessionary environment, given the access hiring, 669 00:34:58,040 --> 00:35:01,160 Speaker 1: this happens that those groups have been particularly vulnerable, and 670 00:35:01,280 --> 00:35:04,960 Speaker 1: that's would change a lot of the labor dynamic. Now 671 00:35:05,040 --> 00:35:07,560 Speaker 1: I don't have the old statis exact in mind, but 672 00:35:07,640 --> 00:35:10,520 Speaker 1: we know there's access hiring. I think to the earlier 673 00:35:10,520 --> 00:35:14,680 Speaker 1: discussion before Paul, if you have companies really start to 674 00:35:14,760 --> 00:35:17,480 Speaker 1: set that group of people, then it will it will 675 00:35:17,600 --> 00:35:21,000 Speaker 1: change and you could see labor force expansion. But really 676 00:35:21,080 --> 00:35:23,480 Speaker 1: it's unemployment right that starts to right for real, so 677 00:35:24,360 --> 00:35:26,520 Speaker 1: which is not exactly there yet. You know, we had 678 00:35:26,560 --> 00:35:29,279 Speaker 1: we had a surprising strong payover report with people coming 679 00:35:29,320 --> 00:35:31,200 Speaker 1: back in the labor force, so there must be got 680 00:35:31,280 --> 00:35:34,320 Speaker 1: like two job openings for every job or something like that. 681 00:35:34,719 --> 00:35:37,879 Speaker 1: We also have sidelined people to write it's like over 682 00:35:37,960 --> 00:35:41,160 Speaker 1: two million people from the COVID or out of reasons sidelines, 683 00:35:41,200 --> 00:35:43,200 Speaker 1: so to speak. So this is why it keeps the 684 00:35:43,239 --> 00:35:45,600 Speaker 1: market sur tight. I'm not on the sideline. Did we 685 00:35:45,719 --> 00:35:49,240 Speaker 1: just heard We just heard Nathan Hagar report that half 686 00:35:49,400 --> 00:35:52,480 Speaker 1: more than half of Americans are either looking for a 687 00:35:52,560 --> 00:35:56,080 Speaker 1: second job or already have one. Really, that seems a 688 00:35:56,120 --> 00:35:58,680 Speaker 1: little well, I guess the priory that inflation has gone on. 689 00:35:58,719 --> 00:36:00,439 Speaker 1: If you're not keeping up, you need that had hustle 690 00:36:00,520 --> 00:36:04,960 Speaker 1: Paul exactly, as I look at the labor market. Right, 691 00:36:05,080 --> 00:36:07,520 Speaker 1: We've seen some very dramatic swings during the pandemic. Right, 692 00:36:07,560 --> 00:36:10,759 Speaker 1: the economy covered very quickly when the worst of the 693 00:36:10,800 --> 00:36:15,000 Speaker 1: COVID crisis had passed, but the labor market only returned 694 00:36:15,120 --> 00:36:18,759 Speaker 1: to February levels in the middle of this summer, right, 695 00:36:18,800 --> 00:36:20,600 Speaker 1: So we had a big expansion in g d P. 696 00:36:21,080 --> 00:36:23,360 Speaker 1: Payrolls didn't keep up. So that tells you there was 697 00:36:23,360 --> 00:36:27,120 Speaker 1: a productivity surge, and productivity was about four times as 698 00:36:27,160 --> 00:36:31,600 Speaker 1: pre pandemic level growth rate during that period. But productivity 699 00:36:31,680 --> 00:36:34,440 Speaker 1: is mean reverting. It has mean reverted because we know 700 00:36:34,520 --> 00:36:36,560 Speaker 1: in the first half of the year the economy didn't grow, 701 00:36:36,640 --> 00:36:39,640 Speaker 1: in fact, it contracted mildly, but we created about three 702 00:36:39,719 --> 00:36:43,480 Speaker 1: point five million jobs. So productivity collapsed, right, it is 703 00:36:43,520 --> 00:36:46,600 Speaker 1: now mean reverted, and what that means is, uh, no 704 00:36:46,800 --> 00:36:50,400 Speaker 1: longer can we live in a suspended animation world? And 705 00:36:50,560 --> 00:36:53,080 Speaker 1: now development in the labor market are going to be 706 00:36:53,320 --> 00:36:56,880 Speaker 1: much more tightly tied to economic growth, which means that 707 00:36:57,600 --> 00:37:00,439 Speaker 1: if we're heading towards a growth rate of zero point 708 00:37:00,560 --> 00:37:03,560 Speaker 1: three percent at your end, the tone in the labor 709 00:37:03,680 --> 00:37:07,640 Speaker 1: data is going to deteriorate. Appreciate. We've seen a you know, 710 00:37:07,800 --> 00:37:09,600 Speaker 1: a slow down from where we were at midyear four 711 00:37:09,680 --> 00:37:12,239 Speaker 1: hundred or five hundred thousand per month to two d 712 00:37:12,360 --> 00:37:15,120 Speaker 1: and fifty thousand per month ish in the last report, 713 00:37:15,160 --> 00:37:17,480 Speaker 1: and I think we're going to see that erosion continue 714 00:37:17,480 --> 00:37:20,600 Speaker 1: over the next several months, mediumto longer term. If we 715 00:37:20,760 --> 00:37:26,560 Speaker 1: get through this um the global economy put on hold 716 00:37:27,200 --> 00:37:31,719 Speaker 1: and then refueled with trillions and trillions of dollars of 717 00:37:31,840 --> 00:37:34,960 Speaker 1: fiscal stimulus, you know, if we get through that without 718 00:37:35,120 --> 00:37:38,520 Speaker 1: a major recession, somebody deserves a gold star, right, I mean, 719 00:37:38,760 --> 00:37:42,319 Speaker 1: what an insane experiment more than gold start. But yeah, 720 00:37:42,400 --> 00:37:47,680 Speaker 1: you know, looking the IMF meetings last week, China the 721 00:37:47,760 --> 00:37:51,800 Speaker 1: worst Christina Alina georgie Eva. That was the lead quote 722 00:37:52,000 --> 00:37:54,960 Speaker 1: coming out of the meetings. And from my colleague Marcello Carvallo, 723 00:37:55,040 --> 00:37:57,439 Speaker 1: who was at those meetings, uh, you know, he said 724 00:37:57,480 --> 00:37:59,719 Speaker 1: that the tone of the meetings was just so some 725 00:38:00,080 --> 00:38:02,799 Speaker 1: or and downbeat. No silver lining. That is a dismal 726 00:38:02,880 --> 00:38:05,040 Speaker 1: science after all. But if we look at Europe, which 727 00:38:05,120 --> 00:38:09,040 Speaker 1: is most likely in recession, UK definitely struggling, China growth 728 00:38:09,120 --> 00:38:12,240 Speaker 1: prospects dimming, and now the US probably moving into recession 729 00:38:12,280 --> 00:38:14,200 Speaker 1: in the first part the next year, it's hard to 730 00:38:14,600 --> 00:38:17,080 Speaker 1: earn the gold star mats. This trust is not going 731 00:38:17,120 --> 00:38:20,080 Speaker 1: to get a gold star. No, she lost all the confidence, right, 732 00:38:20,120 --> 00:38:22,600 Speaker 1: So it's about like, I mean, this is the story 733 00:38:22,880 --> 00:38:25,239 Speaker 1: that that makes Now we're going into this discussion. Yes she, 734 00:38:25,400 --> 00:38:29,560 Speaker 1: I mean, is she out? What a legacy? That's that's rough. Yeah, 735 00:38:29,600 --> 00:38:32,520 Speaker 1: and look that policy just announcing it. It's just put 736 00:38:32,600 --> 00:38:34,680 Speaker 1: the economy right in the recession. And I think it's 737 00:38:34,880 --> 00:38:37,879 Speaker 1: literally what happened to the turmoil the collapse. That's called 738 00:38:37,920 --> 00:38:41,600 Speaker 1: an own goal. Yes, so so the Bank of England 739 00:38:41,680 --> 00:38:43,960 Speaker 1: brief fild nats. You know that no choice but to 740 00:38:44,000 --> 00:38:48,160 Speaker 1: do super size hikes or you spiral out of completely 741 00:38:48,160 --> 00:38:50,360 Speaker 1: out of control. All right, good stuff. I don't know 742 00:38:50,400 --> 00:38:53,000 Speaker 1: whose bright idea was to get too economists in the 743 00:38:53,040 --> 00:38:55,640 Speaker 1: studio at the same time. But I enjoyed it, you did, okay, 744 00:38:56,200 --> 00:39:00,040 Speaker 1: But on the fourth hand, yes, exactly, alright, alright and 745 00:39:00,160 --> 00:39:03,680 Speaker 1: Emmons Managing director and global macro strategist at Medley Global Advisors, 746 00:39:03,719 --> 00:39:08,120 Speaker 1: and Carver Kadna, Chief US economist at BNP Parry Bah which, 747 00:39:08,200 --> 00:39:11,240 Speaker 1: by the way, on your bio page, list say Paris address. 748 00:39:11,560 --> 00:39:13,720 Speaker 1: I know you don't You're not working at the Paris address. 749 00:39:13,719 --> 00:39:15,839 Speaker 1: How do you know address that? So we'll have more 750 00:39:15,880 --> 00:39:19,080 Speaker 1: company takes the company jet. Yeah. Maybe. Thanks for listening 751 00:39:19,120 --> 00:39:22,600 Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen 752 00:39:22,640 --> 00:39:26,879 Speaker 1: to interviews of Apple Podcasts or whatever podcast platform you prefer. 753 00:39:27,320 --> 00:39:31,279 Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three. 754 00:39:31,920 --> 00:39:34,520 Speaker 1: On Fall Sweeney, I'm on Twitter at pt Sweeney. Before 755 00:39:34,560 --> 00:39:37,680 Speaker 1: the podcast, you can always catch us worldwide at Bloomberg Radio.