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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along

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Speaker 1: with Jonathan Ferrell and Lisa Brownwitz Jay Ley, we bring

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Speaker 1: you insight from the best and economics, finance, investment, and

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Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg

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Speaker 1: dot com, and of course on the Bloomberg Terminal. The

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Speaker 1: grand experiment John at Goldman Sachs many many years ago

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Speaker 1: was to say, Abbey, Joseph, Abbey, Joseph Cohen, we can

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Speaker 1: hire her and she can make a name of it.

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Speaker 1: On Women's International International Women's Day, It's very important that

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Speaker 1: we speak and get the current thoughts of Abbe Joseph

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Speaker 1: Cohen of Goldman Sachs advisory director and their senior investment strategist. Abby,

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Speaker 1: you have seen this too many times before, the angst

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Speaker 1: of the ambiguity up we go almost the fear of

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Speaker 1: economic and GDP success. How do equities react when you

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Speaker 1: get a surge in g d P as we anticipate. Well, Tom,

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Speaker 1: first of all, thank you very much for including me

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Speaker 1: today in the discussion. Uh. It is an important day

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Speaker 1: in an important week for women. Um. You are asking

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Speaker 1: exactly the right question about the markets uh. And that

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Speaker 1: is this um is it good news or bad news

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Speaker 1: for the economy to be recovering, And I would say

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Speaker 1: it is good news. Now. We are seeing, of course,

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Speaker 1: this very significant rotation in terms of views. Those stocks

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Speaker 1: that have performed extremely well only because interest rates were

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Speaker 1: down uh and low may have a problem, but there

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Speaker 1: are plenty of other opportunities in the equity market as

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Speaker 1: we do see a rotation towards those stocks that do

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Speaker 1: better when we feel work comfortable with the pace of

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Speaker 1: economic recovery and hopefully over the next couple of years

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Speaker 1: true economic expansion. UH. These of course include the small

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Speaker 1: cap names, also the value names where there's been this

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Speaker 1: wide gap in things like pe ratios and so on.

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Speaker 1: We're also seeing an improvement in stocks that are great sensitive.

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Speaker 1: There are some security some companies that do better when

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Speaker 1: interest rates are a little bit higher, and we of

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Speaker 1: course are seeing some movement now in those seens that

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Speaker 1: do better when we come out of lockdown. And the

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Speaker 1: good news on the vaccine UH will I think be helpful.

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Speaker 1: And of course those areas include things like restaurants and accommodation.

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Speaker 1: I mean, I'm not going to mince words. Goldman Sachs

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Speaker 1: has been out front on a bull call. Constant has

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Speaker 1: led the way to sp xtree. What does the gloom

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Speaker 1: crew get wrong? Well, the the argument behind this really

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Speaker 1: great outlook from from David is also based upon the

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Speaker 1: above consensus for you from Jon hot Sis, our chief economist,

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Speaker 1: who believes that this year the US will see g

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Speaker 1: d P of close to seven percent, and it's even

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Speaker 1: better fourth quarter over fourth quarter, basically about seven point

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Speaker 1: seven percent. And that's based upon let's say four factors.

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Speaker 1: Number one, this very robust fiscal package. Number two, the

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Speaker 1: Fed staying basically friendly, UH. Number three, UH, the virus

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Speaker 1: to press sectors beginning to rebound. And also let's remember

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Speaker 1: that there's an awful lot of pent up savings in

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Speaker 1: the economy. UH, the average consumer balance sheet and again

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Speaker 1: I'm looking at the media and there are many exceptions,

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Speaker 1: but the average exactly actually looking good. Debt balances are down,

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Speaker 1: savings are up. And when people feel a little bit

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Speaker 1: better about the outlook, UH, they'll start to to move

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Speaker 1: forward um and and start set think. And that's great

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Speaker 1: for the economy. But you asked about the gloom crowd,

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Speaker 1: and I think with the gloom crowd keeps coming back

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Speaker 1: to is that there could be an uptick in inflation.

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Speaker 1: Wouldn't be surprising. That's built into Yahn's forecast as well.

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Speaker 1: But let's look at inflation as being a function of

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Speaker 1: two different things. Number One, there are some special factors

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Speaker 1: happening this year. Maybe it's the energy prices and so on.

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Speaker 1: And there's also, of course that quick rebound um in

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Speaker 1: prices from the very depressed levels that we saw in

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Speaker 1: some sectors. But the second important reason that inflation may

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Speaker 1: move up a little bit um is that we are

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Speaker 1: seeing an improved economy, and I think that's great news.

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Speaker 1: You know, it's the opposite side of the coin. On

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Speaker 1: one side, the economy is doing better. On the other side,

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Speaker 1: prices are not quite so depressed. The Goldman Sax forecast

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Speaker 1: on cp I does show it moving up from about

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Speaker 1: a one point one last year to two point five

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Speaker 1: this year. But we're looking at CPI that by historical levels,

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Speaker 1: that is not a problematic level for inflation, and by

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Speaker 1: the way, that is the FEDS target level for inflation.

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Speaker 1: About I think you've seen it all, and many people

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Speaker 1: come on this program and they try and look to

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Speaker 1: history to find a parallel with the moment we're in

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Speaker 1: right now. How original is this moment and what makes

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Speaker 1: it unique? That's a great question. And I think what

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Speaker 1: makes it unique is that none of us, regardless of

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Speaker 1: how long we've been in the markets, have seen a

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Speaker 1: pandemic inspired recession, UM bear market, and now of course

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Speaker 1: the recovery. And what pleases us in terms of what

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Speaker 1: might happen is that we are seeing policies that are

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Speaker 1: aimed at providing relief. So we've had a friendly federal

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Speaker 1: Reserve and other central banks are doing what they can

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Speaker 1: as well. And now, of course we have this very

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Speaker 1: meaningful relief package coming in the form of fiscal policy.

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Speaker 1: And I think it's important not to categorize this totally

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Speaker 1: is a stimulus package, because it's not. It's a relief

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Speaker 1: package aimed at getting us out of the hole. And

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Speaker 1: the next important thing to be watching is what the

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Speaker 1: Congress can pass and the President can sign with regard

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Speaker 1: to really moving us forward UM, and that would include UM,

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Speaker 1: you know, things like the infrastructure reform, things like addressing

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Speaker 1: some of the big issues in the labor markets, UM

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Speaker 1: and UH. There are some underlying problems that really must

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Speaker 1: meet must be addressed, and are not quite addressed yet,

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Speaker 1: even in this very large package that we expect to

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Speaker 1: be assigned into law later this week. I mean, that's

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Speaker 1: on the fundamental side, or it's become the fundamentals in

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Speaker 1: terms of fiscal support. There's also a question on the

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Speaker 1: technical side what that means in markets we've seen coming

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Speaker 1: into this year. This year is different also because the

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Speaker 1: global reflation trade trade has not come along with a

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Speaker 1: weeker dollar. In fact, the dollar is stronger against every

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Speaker 1: single emerging markets currency major one out there a year

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Speaker 1: a year to date, and we're looking today at the

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Speaker 1: biggest cell off of the ms c I Emerging Market

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Speaker 1: Currency Index versus the dollar going back to last March.

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Speaker 1: How does that alter your views going forward or do

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Speaker 1: you think that this is the indication of a different

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Speaker 1: regime where the dollar can strength and yields can rise

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Speaker 1: and that doesn't come along with the rest of the

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Speaker 1: rest of the world improving at the same pace. Yea,

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Speaker 1: So let's let's step back for just a moment um.

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Speaker 1: When we do currency forecast, obviously we're looking at all

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Speaker 1: the same factors that other people are, but one factor

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Speaker 1: really has dominated since the beginning of the pandemic, and

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Speaker 1: that is the safe haven nature of the US dollar

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Speaker 1: as the world's reserve currency UM, and if anything, that

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Speaker 1: has been somewhat in anst UM over the recent past,

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Speaker 1: in part because the United States UM has been able

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Speaker 1: to take somewhat more aggressive measures than other nations in

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Speaker 1: coming out and we also are now looking a little

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Speaker 1: bit better in terms of vaccination rate and so on.

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Speaker 1: What happens going forward in will be a function not

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Speaker 1: just of US, but it's two of all currencies. What

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Speaker 1: happens to other nations UM. So far we have seen

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Speaker 1: some disappointment with regard to some of the emerging economies.

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Speaker 1: But one thing we should all be watching is whether

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Speaker 1: an improved tone in US economic activity will help bring

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Speaker 1: our trading partners along with US. And that certainly would

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Speaker 1: be a good new scenario. You know, John, you mentioned

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Speaker 1: that last week. I mean one final question, if we

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Speaker 1: can on this day as we look to women like

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Speaker 1: you that were out front. You know this and I

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Speaker 1: know this from the CFA Institute that securities research lead

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Speaker 1: the way, whether we're Abby Joseph Cohen, Luis Humata, what

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Speaker 1: Sally Crocheck did at Bernstein, and the wonderful Alice bb Longley,

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Speaker 1: who I read religiously years ago. I believe it at

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Speaker 1: d l J. How do we impart what securities research

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Speaker 1: did with women over to other parts of the financial industry, Tom,

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Speaker 1: It's a vexing question. What we basically see in financial

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Speaker 1: services and some other industries as well, is that there

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Speaker 1: may be a large number of women coming in at

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Speaker 1: the bottom end of that pyramid, and we all have

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Speaker 1: to do better, not just in financial services but other

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Speaker 1: industries in enhancing that pipeline. So, for example, we do

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Speaker 1: see that women are well represented in the number of industries,

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Speaker 1: but as you move up, say to the VP level

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Speaker 1: or the empty level, that's where we see uh flattening out.

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Speaker 1: And by the way, while we can point to problems

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Speaker 1: here in the US, it's worse in most other countries.

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Speaker 1: Um and and so they're looking to us interestingly to

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Speaker 1: get things better. But let me spend just one more moment,

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Speaker 1: you know, we we tend to think about these professional

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Speaker 1: white collar jobs. The real problem for many women in

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Speaker 1: this has not been a good year for women who

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Speaker 1: are really on the front line, those who are heavily

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Speaker 1: represented in some of those virus afflicted sectors, including restaurants

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Speaker 1: and accommodation, but also in state and local governments where

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Speaker 1: women tend to be overrepresented by numbers in physitions like

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Speaker 1: teachers and social workers. And over the last year, state

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Speaker 1: and local governments have in fact reduced jobs by something

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Speaker 1: like nine hundred thousand, and that affects women much more dramatically.

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Speaker 1: The labor force rate for women now is much lower

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Speaker 1: than for men. If you look at adults, it's about

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Speaker 1: participation for men, it's only for women, and this has

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Speaker 1: long term consequences in terms of potential scarring of the

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Speaker 1: labor force, especially for women. I'll be really important issues

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Speaker 1: and we appreciate your time coming on this probably around

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Speaker 1: this morning to share them. Abbe Joseph coming that of

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Speaker 1: Gellman sax An International Women's Day. We have been flattered

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Speaker 1: by how our team has gotten us some important voices.

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Speaker 1: Abby Joseph Cohen on the Marcus Elizabeth economy in China

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Speaker 1: and now Deborah Fuller from the number one microbiology platform

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Speaker 1: in America that is all known as a University of

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Speaker 1: Washington and their School of Medicine and Microbiology, where she

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Speaker 1: provides important research leadership. Were thrilled she could bring us

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Speaker 1: up to date on the pandemic. Deborah Fuller, there's so

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Speaker 1: many looking at the clear and present. You and your

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Speaker 1: leadership at Washington are trying to figure out where we'll

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Speaker 1: be on COVID two years from now, five years from now,

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Speaker 1: and even indeed out the two thousand thirty one. How

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Speaker 1: do we prepare for the next virus? Right? So, right

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Speaker 1: now we uh, we're doing great against the current viruses,

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Speaker 1: but as we can see that, we're constantly battling new

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Speaker 1: variants that are coming out Already the manufacturers Jane J.

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Speaker 1: Mcdonna Viiser, they're updating their vaccines to combat the next

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Speaker 1: one to come. And so we're we're gonna enter in

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Speaker 1: the cycle that would be similar to two flu, where

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Speaker 1: we're just going to have to constantly get another update

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Speaker 1: and and always lingering in the background would be uh,

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Speaker 1: the potential that a new variant could emerge, It could

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Speaker 1: cause yet another pandemic. That's the case for flu, and

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Speaker 1: that's the case for coronaviruses. So what we're working on

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Speaker 1: is really thinking about the future, is really about developing

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Speaker 1: what we would call hand coronavirus vaccine, one that would

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Speaker 1: be able to induce immune responses against parts of the

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Speaker 1: virus that are very conserved and and allow us to

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Speaker 1: have immunity against not just the current variants, but future

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Speaker 1: variants to come in and provide us protection against the

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Speaker 1: future pandemics. Are we constrained because we don't have an

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Speaker 1: efficacious vaccine that can go worldwide and particularly to worldwide

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Speaker 1: impoverished areas that we don't need the refrigeration or the

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Speaker 1: fanciness of m RNA vaccines. Do we need to get

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Speaker 1: to a basic vaccine? Absolutely. I have always said that

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Speaker 1: the ideal pandemic vaccine is one that could be UH

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Speaker 1: stored at room temperature and administered in a single shot

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Speaker 1: and ideally self administered. That is really the way to

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Speaker 1: effectively and rapidly distribute and get a vaccine quickly worldwide,

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Speaker 1: in into core as well as wealthy countries. That's another

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Speaker 1: area that we're working on. We're working on a room

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Speaker 1: temperature stable UH nucleic acid vaccine that's actually based on

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Speaker 1: DNA rather than RNA, because that's much more stable and

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Speaker 1: when that can be self administered without a need on syringe.

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Speaker 1: It's about to say self administered with a needle might

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Speaker 1: be a different proposition, DOT or full or perhaps people

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Speaker 1: wouldn't be that excited about that. There is There is

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Speaker 1: a question though, whether the mr and A technology is

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Speaker 1: shortened the time from the discovery of how to combat

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Speaker 1: a new strain of either coronavirus or some other virus

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Speaker 1: to actually getting vaccines rolled out into people's arms. How

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Speaker 1: much have we shortened the vaccine rollout? Oh substantially? With

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Speaker 1: the RNA vaccines as well as the new viral vector

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Speaker 1: vaccines that Jane j is developing, enables really rapid update

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Speaker 1: because you only need the sequence of whatever variant is

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Speaker 1: emerging to Traditionally, vaccines would take eight nine months to update.

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Speaker 1: With these new technologies, we're looking at eight nine weeks

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Speaker 1: to be able to update and then roll out a

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Speaker 1: new version. Dr Fuller, How different are these vaccines from

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Speaker 1: one another? Base of this idea that a lot of

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Speaker 1: officials are trying to prevent people from vaccine shopping, and

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Speaker 1: yet there have been different efficacy rates, right they The

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Speaker 1: efficacy rates are really based on the fact that the

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Speaker 1: vaccines were at really different times. The Madonna Advisor m

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Speaker 1: RNA vaccines were tested when the first variants emerged, and

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Speaker 1: these vaccines, all three vaccines, were designed to combat that

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Speaker 1: initial variant. So so the the RNA vaccines were actually

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Speaker 1: the world variant with stacked in favor of making those

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Speaker 1: look actually better because when you have a vaccine that

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Speaker 1: is a better match to the current variant, you're going

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Speaker 1: to get better efficacy. So J and J by the

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Speaker 1: time they got to their clinical trial, the variants had emerged,

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Speaker 1: and so the differences I think in efficacy really can't

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Speaker 1: interpret that to mean that to one vaccine is better

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Speaker 1: than the other. What's really important is if you look

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Speaker 1: at real lot, real world impact, what we're seeing is

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Speaker 1: all three of these vaccines have a profound impact and

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Speaker 1: protecting against severe disease and death. I mean we're closed

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Speaker 1: to protection from death. And that's really what's important. That's

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Speaker 1: what we're after with vaccines is to get it to

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Speaker 1: a point where we don't have to be afraid of

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Speaker 1: the high mortality rate of this virus. To that point,

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Speaker 1: it's very close. Don't thanks few times today, don't to

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Speaker 1: Debora full of that, the University of Washington School of

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Speaker 1: Medicine professor. There is a point, is Liz Goldenberg lectured

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Speaker 1: me years ago, where you switch from yield to a

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Speaker 1: price analysis. Cathy Jones at Schwab Center for Financial Research,

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Speaker 1: and knows this very well. She watches the flows of

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Speaker 1: what people are doing with their money. And Cathy, I

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Speaker 1: calculate from the end of August, I have a tenure

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Speaker 1: yield down a good amount in price, eight point three

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Speaker 1: percent down in price. Are we heading for a bond

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Speaker 1: bear market? You know? I think we could be over

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Speaker 1: the long run. I certainly think that the lows that

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Speaker 1: we've put in UH, those very very low yields around

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Speaker 1: half of one percent on the ten year or I

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Speaker 1: think a third of one percent of the tenure UH

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Speaker 1: is probably the low for a long time. But bear

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Speaker 1: market is you know, price over time or yield over time.

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Speaker 1: So we're looking out two to five years down the read. Yeah,

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Speaker 1: I think that yields continue to go higher as long

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Speaker 1: as the economy does recover from the COVID COVID nineteen crisis,

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Speaker 1: as it continues to do. But the magnitude of the

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Speaker 1: move from here is not likely to be nearly as

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Speaker 1: fast or as great I think in the next leg

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Speaker 1: as it has been from that previous flow. Kathy, we

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Speaker 1: discussed so many times about how self limiting a move

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Speaker 1: high would be because of the amount of debt that

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Speaker 1: we've added to this economy. I remember in and around

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Speaker 1: one percent talking about one maybe it was maybe it

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Speaker 1: was one fifty, one sixty Right now, where is it

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Speaker 1: in your mind? Well, you know, one sixty was our

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Speaker 1: target coming into the year, and now that we're here,

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Speaker 1: we do start to see a little bit of that

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Speaker 1: pushback from the risk markets and risk assets. But certainly

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Speaker 1: yields are not so high that we're going to see

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Speaker 1: a huge economic deterioration from here unless unless we start

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Speaker 1: to see credit spread blow out or something like that.

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Speaker 1: You know, you push up towards positive real rate and

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Speaker 1: the two percent plus area, and then we're probably going

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Speaker 1: to see a negative feedback loop work its way through.

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Speaker 1: You know, you have a lot of companies, the smaller,

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Speaker 1: low rated, unrated companies, the zombie companies that have been

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Speaker 1: rolling over debt for a long time. Their ability to

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Speaker 1: continue to do that if rates push up another forty

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Speaker 1: fifty basis points is going to be challenged. Wait, that's important.

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Speaker 1: Another forty fifty basis points. That's all it would take

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Speaker 1: for some of these companies to face true financing pressures.

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Speaker 1: You're talking about in the high yield space in particular, Yeah,

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Speaker 1: we just did an analysis of some of the zombie companies.

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Speaker 1: That's hard to get really good data, but a lot

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Speaker 1: of have been really living on fumes. And so you know,

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Speaker 1: if you if you look at the private debt area,

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Speaker 1: the really low rated UM bonds, they're going to be

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Speaker 1: challenged unless unless the conditions changed in terms of revenue.

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Speaker 1: Well from here, the reason why this is such an

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Speaker 1: important point, Cathy, is because people have come on this

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Speaker 1: show and others and said that the real rate risk

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Speaker 1: is for rates increasing, right, is duration and not credit

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Speaker 1: because credit looks good given the backdrop that we have

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Speaker 1: in the easy financing conditions. Are you saying that that

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Speaker 1: story is changing, that credit is starting to matter that

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Speaker 1: much more because as you get that rise and interest rates,

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Speaker 1: some of these credits are that much more sensitive to

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Speaker 1: any tightening, let alone forty fifty basis points. Well, I

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Speaker 1: think you have to differentiate between saying, you know, investment

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Speaker 1: grade where we've seen a sell off from the investment

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Speaker 1: grade market basically because of duration, not credit risk. Right,

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Speaker 1: And we're not worried about i G. Even in the

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Speaker 1: higher rated part of hill, We're not worried as much

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Speaker 1: because you know, this is a potent um combination of

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Speaker 1: easy fiscal a very accommodative monetary policy, and very expansive

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Speaker 1: fiscal policy. That's good for credit. But when you get

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Speaker 1: into the lower rated credit where are you've seen this

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Speaker 1: big build up of debt and the lack of earnings

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Speaker 1: that we've seen. Unless they start to kick in on

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Speaker 1: those earnings, we're going to see some deterioration there. Well, Kathy,

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Speaker 1: we have to talk about the next logical question then,

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Speaker 1: and that's the maturity wall funding requirements, And from what

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Speaker 1: we've seen in the last twelve months is an extension

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Speaker 1: of the average maturity for so many of these companies

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Speaker 1: because funding conditions have been so good. It's there a

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Speaker 1: maturity wall on the horizon. I haven't heard about it.

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Speaker 1: Do you see it? Yeah? I don't have an askment

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Speaker 1: of maturity wall that we're particularly worried about at this

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Speaker 1: stage of the game. Um, you know, there is a

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Speaker 1: lot of that build up and we're certainly going to

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Speaker 1: face some financing problems down the road, but I think

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Speaker 1: it continues to get pushed out, so that's not something

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Speaker 1: we're worried about for this year or even early next year. Kathy.

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Speaker 1: Always good to see you as always Kathy Jones of

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Speaker 1: the SWAB Center for Financial Research. We've been the great

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Speaker 1: privilege of talking to those within the Ethan Harris shop

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Speaker 1: at Bank of American Securities. As we mentioned with Dr

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Speaker 1: Harris the other day, Michelle Meyer has been absolutely brilliant

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Speaker 1: over the years and the pulse of the American economy.

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Speaker 1: She joined us here with their leadership and not only

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Speaker 1: that but her symbolism of International Women's Day and getting

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Speaker 1: it done. Michelle, you know we have followed followed your

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Speaker 1: career and it's always narrow questions about this and that.

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Speaker 1: I want to give you a broader question. What is

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Speaker 1: the quality of US seven point three percent economic growth?

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Speaker 1: What's the makeup of that big number you have Q

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Speaker 1: four to Q four. Thanks Tom, and thanks for the

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Speaker 1: question having me on today on an important day. UM So,

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Speaker 1: when you think about the drivers of US economic growth,

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Speaker 1: and particularly this year with a studying we're forecasting seven

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Speaker 1: point three percent growth, when you measured on that Q

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Speaker 1: four of a Q four basis, we think a lot

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Speaker 1: of it has to do with the consumer. It has

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Speaker 1: to do with the resolve of the consumer to spend

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Speaker 1: and the ability of the consumer to spend. I mean,

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Speaker 1: this is a household sector that is sitting on very

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Speaker 1: strong balance sheets, that is sitting on a lot of

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Speaker 1: dry powder in terms of the amount of cash that

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Speaker 1: is accumulated and more to come um, which as a

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Speaker 1: result of the latest stimulus spill um and and the

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Speaker 1: consumer has already engaged, it's proven to be resilient, and

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Speaker 1: we think there's a lot more to come um in

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Speaker 1: the coming months and quarters as the economy continues to

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Speaker 1: move forward and it's reopening. Michelle, do you think that

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Speaker 1: the concerns have been overstated that people have been holding

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Speaker 1: cash simply to pay down debt going forward that's been deferred.

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Speaker 1: I think that has been overblown on an aggregate basis.

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Speaker 1: I'm sure that is happening on a on a micro level,

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Speaker 1: and you certainly see that in some of the narratives

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Speaker 1: and in the anecdotes that are out there, but you're

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Speaker 1: not seeing that on aggregate. I mean, when you think

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Speaker 1: about the debt levels, we don't have that much debt

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Speaker 1: to pay down. It's not the the two thousand eight period,

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Speaker 1: or you had very very very much the case that

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Speaker 1: there was access debt, you needed to deleverage. Households need

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Speaker 1: to clean up their balance sheets. It's not the case today.

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Speaker 1: We entered this crisis, this pandemic with pretty low debt ratios,

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Speaker 1: historically low financial obligations ratios. Um And I think yes,

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Speaker 1: some will we go Some of that excess cash will

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Speaker 1: be going to pay down debt, but the majority will

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Speaker 1: be able to be used in some form, to be

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Speaker 1: able to be kind of pumped back into the economy

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Speaker 1: via spending. Well, the economy have the same sort of

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Speaker 1: composition when people start pumping their money back in other word,

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Speaker 1: services goods, given that that dynamic has shifted quite a

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Speaker 1: bit during the pandemic. In other words, are we going

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Speaker 1: back to normal or is this going to be a

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Speaker 1: new normal with perhaps more goods and fewer services just

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Speaker 1: in general? Well, I don't think we Yeah, I don't

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Speaker 1: think we should assume that we're going to go back

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Speaker 1: to the economy as it looked prior to the pandemic.

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Speaker 1: Too much has changed in the world and in the

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Speaker 1: economy in the last year, um And, I mean certainly

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Speaker 1: the the embrace of more to technology, the embrace of

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Speaker 1: an online retailer that has now you know, shown itself

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Speaker 1: through a variety of different categories and sectors, to spend um.

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Speaker 1: But you know, when you think about the basket spend

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Speaker 1: right when the pandemic hit, Yes, people were predominantly spending

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Speaker 1: on goods because they couldn't spend on leisure and other

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Speaker 1: types of services. Once they are able to spend on

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Speaker 1: leisure and services, there will be a certain amount of

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Speaker 1: demand that shows through for those categories, but that will

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Speaker 1: be the equilibrium either. Right. We have to get past

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Speaker 1: that pent up demand and then we'll figure out what

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Speaker 1: that right balance is between goods and services. Michelle, do

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Speaker 1: you know what's so original about this moment? I'd love

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Speaker 1: to get some insight into your conversations with clients. The

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Speaker 1: bulls and bears both agree on whether data is going

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Speaker 1: to be in about four months. They just disagree on

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Speaker 1: how they think the fetes going to respond to it

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Speaker 1: in the months after that. When you speak to clients,

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Speaker 1: how many of them just roughly just throw out a number,

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Speaker 1: how many of them are convinced by the FETs reaction

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Speaker 1: function when data actually starts to pick up aggressively, when

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Speaker 1: inflation and starts to pick up too. You know, I

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Speaker 1: would say the majority of the clients we talked to

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Speaker 1: UM have an appreciation for the fence reaction function in

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Speaker 1: that they recognize it is different than the prior cycle,

434
00:25:13,280 --> 00:25:15,680
Speaker 1: that this is not a FED that is looking to normalize.

435
00:25:15,720 --> 00:25:17,720
Speaker 1: This is not a FED that's going to hike upon

436
00:25:17,800 --> 00:25:20,320
Speaker 1: a falling unemployment rate, And it's not a FAT that's

437
00:25:20,320 --> 00:25:22,480
Speaker 1: going to hike when they start to sniff out inflation.

438
00:25:22,520 --> 00:25:25,239
Speaker 1: They are going to wait until the unemployment rate is

439
00:25:25,320 --> 00:25:29,679
Speaker 1: below estimates of NERO, until you've reached that maximum employment measure.

440
00:25:29,840 --> 00:25:33,560
Speaker 1: They're gonna wait until you properly have inflation. But here's

441
00:25:33,680 --> 00:25:36,240
Speaker 1: here's the Here's I think the distinction where there's a debate.

442
00:25:36,320 --> 00:25:39,119
Speaker 1: It's what's the level of inflation? Right? So is it

443
00:25:39,240 --> 00:25:40,920
Speaker 1: that they need to say two percent inflation and they're

444
00:25:40,920 --> 00:25:42,840
Speaker 1: going to want to get going, or will theF that

445
00:25:43,040 --> 00:25:46,560
Speaker 1: actually be able to tolerate something above two percent for

446
00:25:46,600 --> 00:25:48,159
Speaker 1: a period of time. And that's where I think you

447
00:25:48,200 --> 00:25:50,679
Speaker 1: do have a little bit of a disagreement amongst market

448
00:25:50,680 --> 00:25:52,919
Speaker 1: participants that want to try to urge the FED along

449
00:25:52,920 --> 00:25:55,600
Speaker 1: in their hiking cycle. And John, do you really really

450
00:25:55,640 --> 00:25:59,320
Speaker 1: important question four months out? It's not only about the FED.

451
00:25:59,800 --> 00:26:03,560
Speaker 1: It's this disagreement about the makeup of the American economy.

452
00:26:03,680 --> 00:26:06,919
Speaker 1: It's raging debate and the darkts have changed, Michelle, the

453
00:26:06,960 --> 00:26:09,639
Speaker 1: targets in the labor market change. For this Federal Reserve

454
00:26:09,720 --> 00:26:12,120
Speaker 1: and for market participants, we have to change what we're

455
00:26:12,160 --> 00:26:15,320
Speaker 1: looking at too. It's not about aggregant numbers. It's about disparity.

456
00:26:15,440 --> 00:26:18,359
Speaker 1: By definition, does not just mean Michelle, the Fed moves

457
00:26:18,440 --> 00:26:23,320
Speaker 1: much later than they would have otherwise in previous cycles. Yes,

458
00:26:23,359 --> 00:26:25,639
Speaker 1: that is exactly what the Fed is trying to communicate,

459
00:26:25,680 --> 00:26:28,320
Speaker 1: and I think for very good reasons. They're saying, it's

460
00:26:28,359 --> 00:26:30,639
Speaker 1: not just about getting that you three, that aggregate and

461
00:26:30,680 --> 00:26:33,600
Speaker 1: measure of the employment rate down. It's much more than that.

462
00:26:33,640 --> 00:26:35,919
Speaker 1: Maximum employment is to be able to get people to

463
00:26:35,960 --> 00:26:37,719
Speaker 1: re engage in the labor force. So look at these

464
00:26:37,720 --> 00:26:41,520
Speaker 1: broader measures. I've include labor force participation rates. It's about

465
00:26:41,560 --> 00:26:45,880
Speaker 1: getting the unemploymer rate down across income, racial and income.

466
00:26:46,359 --> 00:26:48,840
Speaker 1: They said income divides, right, So it's it's broad based,

467
00:26:48,880 --> 00:26:52,000
Speaker 1: it's complete. And the key to that is that it

468
00:26:52,040 --> 00:26:56,239
Speaker 1: will make it sustainable. Right, if you have an unemployment rate,

469
00:26:56,280 --> 00:26:58,760
Speaker 1: if you have a labor market that's tight enough across

470
00:26:58,800 --> 00:27:01,800
Speaker 1: the board, it could last, It could it could feed

471
00:27:01,880 --> 00:27:04,359
Speaker 1: upon itself, and you can have a much stronger and

472
00:27:04,359 --> 00:27:08,919
Speaker 1: more persistent recovery. What percent of the agony here the

473
00:27:09,040 --> 00:27:14,280
Speaker 1: job agony forward is restaurants, bars, hospitality, What percent of

474
00:27:14,320 --> 00:27:17,800
Speaker 1: it is pandemic jobs, and what percent is the greater

475
00:27:17,840 --> 00:27:22,960
Speaker 1: American economy jobs. So there's a lot of room for

476
00:27:23,040 --> 00:27:26,399
Speaker 1: expansions still in those categories leisure in hospitality, and we

477
00:27:26,440 --> 00:27:28,560
Speaker 1: saw that in the last jobs report the majority of

478
00:27:28,640 --> 00:27:31,200
Speaker 1: jobs creed in the private sector were in leisure on hospitality,

479
00:27:31,240 --> 00:27:33,800
Speaker 1: which was a payback from the decline we have seen

480
00:27:33,840 --> 00:27:37,000
Speaker 1: in December of January and those categories. So, um, as

481
00:27:37,040 --> 00:27:41,040
Speaker 1: economy reopens, you naturally will get a big jump in

482
00:27:41,440 --> 00:27:44,840
Speaker 1: job creation in those categories. Will it get all the

483
00:27:44,840 --> 00:27:47,760
Speaker 1: way back to pre pandemic levels. I think that's debatable.

484
00:27:47,800 --> 00:27:51,199
Speaker 1: There probably will be some inevitable scarring in those in

485
00:27:51,240 --> 00:27:54,120
Speaker 1: those sectors, but yes, you will have certainly a good

486
00:27:54,160 --> 00:27:56,679
Speaker 1: amount of job creation there. The key, though, I think,

487
00:27:56,800 --> 00:27:58,560
Speaker 1: is what comes next as you know that tom right,

488
00:27:58,640 --> 00:28:01,840
Speaker 1: once you get past that just kind of mechanical reopening swing,

489
00:28:02,240 --> 00:28:04,760
Speaker 1: what does the economy look like. What's the momentum for growth,

490
00:28:04,800 --> 00:28:07,040
Speaker 1: and that I think will ultimately be field void. How

491
00:28:07,119 --> 00:28:10,800
Speaker 1: much consumers are spending and how that this naturally feeds

492
00:28:10,800 --> 00:28:14,920
Speaker 1: back into broad based business investment, which then feeds back

493
00:28:14,920 --> 00:28:17,119
Speaker 1: into the labor market through your job creations. So you

494
00:28:17,160 --> 00:28:20,240
Speaker 1: need to get to that positive feedback loop ultimately, UM,

495
00:28:20,280 --> 00:28:22,159
Speaker 1: to get to get a better appreciation of what the

496
00:28:22,200 --> 00:28:24,320
Speaker 1: economy looks like after this ALF set and done. Is

497
00:28:24,320 --> 00:28:26,000
Speaker 1: it too early to do? Right? Hot? Guess is? Do

498
00:28:26,000 --> 00:28:31,120
Speaker 1: you have a right hot guest at this point? Miche three? Four? Yeah, Um,

499
00:28:31,320 --> 00:28:34,120
Speaker 1: so we're in the camp that the FEDS first site

500
00:28:34,119 --> 00:28:36,720
Speaker 1: will be in three more likely in the second half,

501
00:28:36,720 --> 00:28:39,920
Speaker 1: in the first half, but that's you know, still up

502
00:28:39,920 --> 00:28:42,760
Speaker 1: to up to the data. Frankly, Um, you know, to

503
00:28:42,880 --> 00:28:45,080
Speaker 1: get the FETE to hike before that. To get the

504
00:28:45,080 --> 00:28:48,000
Speaker 1: FETE to think about a hike next year, you know,

505
00:28:49,080 --> 00:28:52,200
Speaker 1: a lot would have to go very, very very right.

506
00:28:52,240 --> 00:28:54,360
Speaker 1: And again we are forecasting a lot to go right.

507
00:28:54,400 --> 00:28:57,080
Speaker 1: We are forecasting a very strong economy. But I think

508
00:28:57,120 --> 00:28:59,760
Speaker 1: for the FETE to feel comfortable a lift off that quick,

509
00:29:00,000 --> 00:29:04,320
Speaker 1: they would need to see the inflation cycle really really

510
00:29:04,400 --> 00:29:07,800
Speaker 1: speed up, Inflation expectations move up in a meaningful way.

511
00:29:08,280 --> 00:29:12,880
Speaker 1: UM wage growth showing signs again of increasing across the board,

512
00:29:13,280 --> 00:29:15,520
Speaker 1: and that would convince them that inflation will be able

513
00:29:15,560 --> 00:29:17,520
Speaker 1: to take off, and I'm just not convinced that will

514
00:29:17,560 --> 00:29:20,120
Speaker 1: happen by the end of next year. Michelle tremendous as

515
00:29:20,120 --> 00:29:22,800
Speaker 1: always and good to see a michellema of Banks America

516
00:29:22,880 --> 00:29:31,920
Speaker 1: Securities on this better Outlook, this better economy. This is

517
00:29:31,920 --> 00:29:36,400
Speaker 1: a joy. Very Grant is with bursting and UH with

518
00:29:36,560 --> 00:29:40,760
Speaker 1: the senior portfolio manager responsible investing, and she brings to

519
00:29:40,800 --> 00:29:43,040
Speaker 1: the job and this concludes the s G and the

520
00:29:43,080 --> 00:29:46,959
Speaker 1: rest of it. She brings to the job a prodigious

521
00:29:47,160 --> 00:29:52,280
Speaker 1: resume and ability and all the different aspects of investing,

522
00:29:52,400 --> 00:29:55,880
Speaker 1: including with the CFA Institute in her work years ago

523
00:29:56,000 --> 00:29:59,480
Speaker 1: on the study of shorting and such. She's just immensely

524
00:29:59,520 --> 00:30:03,120
Speaker 1: accomp We're thrilled to a a value Grant. Whether it's your valerie.

525
00:30:03,560 --> 00:30:08,680
Speaker 1: When did you realize on International Women's Day? Did it

526
00:30:08,720 --> 00:30:11,920
Speaker 1: was a little bit challenging for women? Did that happen

527
00:30:12,040 --> 00:30:15,080
Speaker 1: early on or did that happen when you walked through

528
00:30:15,120 --> 00:30:19,720
Speaker 1: the door of the house at Sally Crawchuck Built. Oh

529
00:30:19,800 --> 00:30:25,520
Speaker 1: my goodness, well, good morning everyone. Um. I would say that,

530
00:30:25,880 --> 00:30:28,600
Speaker 1: you know, that was sort of a realization for me

531
00:30:28,920 --> 00:30:32,920
Speaker 1: as a young girl, but it's not something that I

532
00:30:32,920 --> 00:30:38,800
Speaker 1: paid a lot of attention to or view necessarily as

533
00:30:38,800 --> 00:30:42,040
Speaker 1: something to slow me down. And that's because of my mother.

534
00:30:43,160 --> 00:30:47,920
Speaker 1: My mother was a very unconventional person in many ways.

535
00:30:47,920 --> 00:30:51,360
Speaker 1: She was a mathematician by training, and she worked for

536
00:30:51,400 --> 00:30:55,040
Speaker 1: the U. S Department of Defense as an operations research analyst.

537
00:30:55,600 --> 00:31:00,240
Speaker 1: So she was extremely smart and had a quite unconventional

538
00:31:00,400 --> 00:31:03,640
Speaker 1: career for a woman at that time. And so I

539
00:31:03,680 --> 00:31:05,760
Speaker 1: saw her, you know, get up and do what she

540
00:31:05,880 --> 00:31:07,720
Speaker 1: was doing, and I said, well, I'm gonna do what

541
00:31:07,720 --> 00:31:10,760
Speaker 1: I'm gonna do, and um, I just repeat it from there,

542
00:31:10,800 --> 00:31:13,560
Speaker 1: so to speak. How do we extend that? Or Lisa

543
00:31:13,600 --> 00:31:16,360
Speaker 1: Abramoins was telling me this morning of the challenges that

544
00:31:16,480 --> 00:31:19,680
Speaker 1: her Chicago, of everybody in the room was a guy

545
00:31:19,760 --> 00:31:22,600
Speaker 1: except her, and some of the fancy math she did.

546
00:31:22,640 --> 00:31:25,040
Speaker 1: I think of, you know what Sally Cratchuck did at

547
00:31:25,120 --> 00:31:29,080
Speaker 1: your Alliance Bernstein then Sanford Bernstein and building out their

548
00:31:29,120 --> 00:31:34,120
Speaker 1: research capability. How do we get more women doing what

549
00:31:34,200 --> 00:31:38,840
Speaker 1: young Valerie Grant did, which is doing math, doing statistics.

550
00:31:38,920 --> 00:31:42,120
Speaker 1: How do we how do we jump start that? Well?

551
00:31:42,160 --> 00:31:47,400
Speaker 1: I think that really just making the the the learning

552
00:31:47,440 --> 00:31:53,480
Speaker 1: experience perhaps more accessible and more engaging. And then also

553
00:31:53,520 --> 00:31:55,080
Speaker 1: I think there's a lot of work to be done

554
00:31:55,160 --> 00:31:59,400
Speaker 1: just to talk about how fun and how enjoyable a

555
00:31:59,480 --> 00:32:03,480
Speaker 1: career in finance can be. I think sometimes that's overlooked.

556
00:32:03,520 --> 00:32:06,000
Speaker 1: People talk about the struggles and the challenges, but it's

557
00:32:06,000 --> 00:32:10,160
Speaker 1: actually a really fun job interesting. Every day is different

558
00:32:10,200 --> 00:32:12,640
Speaker 1: and new, and so I think we have to begin

559
00:32:12,760 --> 00:32:16,200
Speaker 1: to convey that part of it more um and encourage

560
00:32:16,200 --> 00:32:18,880
Speaker 1: women to to stick with it and to find their

561
00:32:19,040 --> 00:32:22,680
Speaker 1: find their spot. My colleague Paul Sweeney has been miserable

562
00:32:22,720 --> 00:32:27,600
Speaker 1: every single day financial career. Yeah, Valerie, you know, I

563
00:32:27,640 --> 00:32:29,800
Speaker 1: worked at twenty years on Wall Street as a research

564
00:32:29,840 --> 00:32:32,160
Speaker 1: channelis and then I helped build the research department here

565
00:32:32,200 --> 00:32:35,040
Speaker 1: a Bloomberg for about ten years. And what I found was,

566
00:32:35,520 --> 00:32:38,920
Speaker 1: you know, some of those incoming classes of analysts, whether

567
00:32:38,920 --> 00:32:40,880
Speaker 1: it's going into into the investment bank where they hire

568
00:32:40,880 --> 00:32:43,160
Speaker 1: a couple hundred kids every year at a school or

569
00:32:43,320 --> 00:32:46,680
Speaker 1: m MBA programs, they look pretty diverse. The statistics are

570
00:32:46,720 --> 00:32:48,920
Speaker 1: pretty darn good. But then when you get seven to

571
00:32:49,000 --> 00:32:52,440
Speaker 1: ten years later, when you start talking managing director or partner,

572
00:32:53,040 --> 00:32:57,440
Speaker 1: not so diverse anymore. It's it's that interim period where uh,

573
00:32:57,800 --> 00:33:01,440
Speaker 1: women and other minorities seem to fall out of the workforce.

574
00:33:01,480 --> 00:33:05,720
Speaker 1: It seems like you know that that's true. I think

575
00:33:05,760 --> 00:33:08,000
Speaker 1: that there is certainly less diversity at the top of

576
00:33:08,000 --> 00:33:11,440
Speaker 1: the house, so to speak. We are seeing some progress.

577
00:33:11,760 --> 00:33:15,040
Speaker 1: I have my actually Harvard Business Field classmate, Jane Fraser

578
00:33:15,120 --> 00:33:18,920
Speaker 1: over at City running a major financial institution. There are

579
00:33:18,960 --> 00:33:23,560
Speaker 1: several other women. Uh the Sunda Brown Ducket who just

580
00:33:23,800 --> 00:33:26,640
Speaker 1: was named CEO at t I a A Is another example.

581
00:33:27,040 --> 00:33:30,920
Speaker 1: So there are some examples of that glass ceiling being shattered.

582
00:33:31,280 --> 00:33:34,440
Speaker 1: But I do think it's important for organizations to take

583
00:33:34,480 --> 00:33:37,000
Speaker 1: a close look at their culture. They have to look

584
00:33:37,040 --> 00:33:40,880
Speaker 1: at pay equity. They have to look at pay equity,

585
00:33:41,000 --> 00:33:42,960
Speaker 1: and I repeat that at third time. They have to

586
00:33:43,040 --> 00:33:47,680
Speaker 1: look at pay equity because that's a signal. It says

587
00:33:47,760 --> 00:33:50,360
Speaker 1: to a young woman or a person of color, or

588
00:33:50,440 --> 00:33:53,800
Speaker 1: quite frankly, to white men, you'll be treated fairly here.

589
00:33:54,760 --> 00:33:57,400
Speaker 1: Everybody has a fair shot. And I think that's something

590
00:33:57,440 --> 00:34:01,920
Speaker 1: that the financial services UM industry, if you will, could

591
00:34:01,960 --> 00:34:04,640
Speaker 1: do a better job on transparency, on pay equity, and

592
00:34:04,720 --> 00:34:07,920
Speaker 1: also just you know, making sure that they're um they

593
00:34:07,920 --> 00:34:11,600
Speaker 1: are actually enforcing those types of policies and practices is

594
00:34:11,719 --> 00:34:14,919
Speaker 1: very important as a motivating factor. Yeah, all right, let's

595
00:34:14,920 --> 00:34:19,040
Speaker 1: shift to the markets, Valerie. You know we're hearing more

596
00:34:19,080 --> 00:34:23,120
Speaker 1: and more about E s G investing, environmental social governance.

597
00:34:23,640 --> 00:34:27,960
Speaker 1: Bloomberg certainly features a lot of data on the terminal

598
00:34:28,040 --> 00:34:31,520
Speaker 1: to help investors with their investing looking at E s G.

599
00:34:32,040 --> 00:34:35,200
Speaker 1: Talk to us about how you view uh this part

600
00:34:35,400 --> 00:34:41,080
Speaker 1: of you know, portfolio management. I think that responsible investing,

601
00:34:41,440 --> 00:34:45,040
Speaker 1: or the integration of environmental, social and governance factors into

602
00:34:45,120 --> 00:34:48,400
Speaker 1: traditional approaches to investing is one of the most exciting

603
00:34:48,520 --> 00:34:52,239
Speaker 1: areas in asset management right now. Um. I think that

604
00:34:52,280 --> 00:34:55,560
Speaker 1: what we've seen, particularly over the last couple of years

605
00:34:55,719 --> 00:35:00,600
Speaker 1: is just an acceleration and focus on issues like climb change,

606
00:35:01,040 --> 00:35:06,720
Speaker 1: diversity and inclusion, pay equity, which we've already discussed, worker safety,

607
00:35:07,200 --> 00:35:10,279
Speaker 1: and data privacy and security, and all of these used

608
00:35:10,320 --> 00:35:13,960
Speaker 1: to be considered ancillary issues. But I think what investors

609
00:35:13,960 --> 00:35:17,360
Speaker 1: have realized is that they often have a direct impact

610
00:35:17,800 --> 00:35:20,040
Speaker 1: on equity values. And then if you look at the

611
00:35:20,080 --> 00:35:23,200
Speaker 1: fixed income side of the house, there there are consequences

612
00:35:23,239 --> 00:35:26,080
Speaker 1: there as well in terms of the credit worthiness of

613
00:35:26,520 --> 00:35:30,280
Speaker 1: some of the issuers out there. So, um, it's exciting

614
00:35:30,400 --> 00:35:33,400
Speaker 1: and I'm I'm happy to be part of it. Valerie

615
00:35:33,400 --> 00:35:36,640
Speaker 1: when I look at E. S. G and you know

616
00:35:36,840 --> 00:35:40,400
Speaker 1: it's all the rage. Let's be honest, all our radar,

617
00:35:40,520 --> 00:35:44,920
Speaker 1: Valerie Grants radar, my radar, Paul Sweeney's radars up. Because

618
00:35:44,920 --> 00:35:48,399
Speaker 1: when every something is the rage, it usually doesn't turn

619
00:35:48,440 --> 00:35:52,360
Speaker 1: out good. Are you concerned that it's so in that

620
00:35:52,440 --> 00:35:56,719
Speaker 1: it could be challenging? I don't think so, because the

621
00:35:57,040 --> 00:36:00,840
Speaker 1: reality is that they're still lot of work to be

622
00:36:00,880 --> 00:36:04,080
Speaker 1: done in terms of even just basic levels of disclosure,

623
00:36:04,160 --> 00:36:09,000
Speaker 1: corporate disclosure on material, environmental, social and governance issues. I

624
00:36:09,040 --> 00:36:12,520
Speaker 1: think that the data currently is still very uneven. So

625
00:36:12,680 --> 00:36:14,480
Speaker 1: for those of you have been in the investing business

626
00:36:14,520 --> 00:36:17,480
Speaker 1: a long time, you can probably remember back in the

627
00:36:17,520 --> 00:36:20,960
Speaker 1: old days when the data even on basic financial performance

628
00:36:21,040 --> 00:36:25,160
Speaker 1: perhaps was very inconsistently reported. So I think there's still

629
00:36:25,200 --> 00:36:30,520
Speaker 1: a lot of opportunity for both fundamental approaches and systematic

630
00:36:30,560 --> 00:36:36,080
Speaker 1: approaches in responsible investing. And I just think that the

631
00:36:36,239 --> 00:36:40,120
Speaker 1: demand will continue for some time. Yeah, not enough time,

632
00:36:40,239 --> 00:36:42,640
Speaker 1: very Grant. We have to get you on again. Thank

633
00:36:42,640 --> 00:36:45,200
Speaker 1: you so much for joining us with Alliance Bernstein and

634
00:36:45,239 --> 00:36:49,920
Speaker 1: really running all of their responsible investing operations. Just hugely

635
00:36:50,000 --> 00:36:54,440
Speaker 1: qualified value. Grant. Thank you so much. This is the

636
00:36:54,480 --> 00:36:59,120
Speaker 1: Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays

637
00:36:59,160 --> 00:37:02,600
Speaker 1: from seven to two Nami Eastern on Bloomberg Radio and

638
00:37:02,760 --> 00:37:07,040
Speaker 1: on Bloomberg Television each day from six to nine am

639
00:37:07,080 --> 00:37:10,840
Speaker 1: for insight from the best in economics, finance, investment, and

640
00:37:10,920 --> 00:37:17,480
Speaker 1: international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud,

641
00:37:17,640 --> 00:37:21,200
Speaker 1: Bloomberg dot com, and of course, on the terminal. I'm

642
00:37:21,280 --> 00:37:23,960
Speaker 1: Tom Keene, and this is Bloomberg