1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,239 Speaker 2: Terminal and the Bloomberg Business app. Stocks bouncing back as 10 00:00:37,240 --> 00:00:40,479 Speaker 2: President Donald Trump temper's his trade stance on China. Seema 11 00:00:40,479 --> 00:00:43,240 Speaker 2: Shah of Principal Asset Management Rights in the following Even 12 00:00:43,280 --> 00:00:45,600 Speaker 2: after the strong performance of the past six months with 13 00:00:45,640 --> 00:00:48,479 Speaker 2: the S and P five hundred thirty five percent from 14 00:00:48,520 --> 00:00:52,560 Speaker 2: its liberation day trough, equity markets have further room to run. 15 00:00:52,800 --> 00:00:55,680 Speaker 2: Seema joins us now for more. Sema, welcome to the program. 16 00:00:55,720 --> 00:00:58,240 Speaker 2: Will you get a helping hand from earning season and 17 00:00:58,280 --> 00:00:59,880 Speaker 2: from bank earnings this week? 18 00:01:01,360 --> 00:01:03,920 Speaker 3: Hey John, Yeah, I think that that is definitely on 19 00:01:03,920 --> 00:01:05,480 Speaker 3: the cards. You know, when we're looking across at the 20 00:01:05,520 --> 00:01:08,600 Speaker 3: macro outlook, we're still feeling pretty positive. Of course, there 21 00:01:08,600 --> 00:01:10,720 Speaker 3: are some signs that slow down within the labor market, 22 00:01:10,720 --> 00:01:14,200 Speaker 3: but we're not talking about recessionary area, and typically in 23 00:01:14,200 --> 00:01:17,920 Speaker 3: this kind of environment we can see continued performance from financials. 24 00:01:18,680 --> 00:01:21,280 Speaker 3: So along with those tech stocks which continue to drive 25 00:01:21,280 --> 00:01:24,200 Speaker 3: the market, we would think that financials can join in 26 00:01:24,200 --> 00:01:26,560 Speaker 3: with that rally and help push the act market a 27 00:01:26,560 --> 00:01:27,160 Speaker 3: little bit further. 28 00:01:27,319 --> 00:01:29,360 Speaker 2: The same it's not just bank earnings on the calendar, 29 00:01:29,400 --> 00:01:32,240 Speaker 2: also a meeting potentially between the two leaders from China 30 00:01:32,480 --> 00:01:36,440 Speaker 2: from the US President Trump and leadership. How big a 31 00:01:36,520 --> 00:01:39,560 Speaker 2: factor will there be in your routelook the trade negotiations, 32 00:01:39,560 --> 00:01:42,600 Speaker 2: the friction, the tension between China and the United States. 33 00:01:43,959 --> 00:01:45,680 Speaker 3: Yeah, it's a great question because you know, in the 34 00:01:45,720 --> 00:01:48,560 Speaker 3: last couple of weeks, it's completely fadden out of the headlines. 35 00:01:48,560 --> 00:01:51,440 Speaker 3: You know, nobody really talking about the risk associated with it. 36 00:01:51,480 --> 00:01:53,320 Speaker 3: So the news on Friday, I think did come as 37 00:01:53,320 --> 00:01:55,120 Speaker 3: a clearly did job the market. 38 00:01:56,080 --> 00:01:59,040 Speaker 4: It has the potential to have very very serious. 39 00:01:59,400 --> 00:02:01,760 Speaker 3: Impact on the economy, both from a growth side and 40 00:02:01,800 --> 00:02:04,120 Speaker 3: from an inflation side, so we obviously have to keep 41 00:02:04,120 --> 00:02:06,760 Speaker 3: a close eye on that at the moment. From our perspective, 42 00:02:06,920 --> 00:02:10,720 Speaker 3: we're going to go along the assumption that things eventually 43 00:02:10,840 --> 00:02:13,880 Speaker 3: kind of work themselves out simply because the risk is 44 00:02:13,919 --> 00:02:17,240 Speaker 3: so big, but it does clearly have the potential and 45 00:02:17,280 --> 00:02:19,600 Speaker 3: so investors and I think the key thing is that 46 00:02:19,600 --> 00:02:22,680 Speaker 3: there has been so much complacency within the market about 47 00:02:22,680 --> 00:02:26,080 Speaker 3: what could happen to have much further the equity market 48 00:02:26,080 --> 00:02:29,520 Speaker 3: could run that this has been a good reminder that 49 00:02:29,520 --> 00:02:31,320 Speaker 3: there are still risks on the horizon. 50 00:02:31,480 --> 00:02:34,239 Speaker 5: Risks of re escalation between the US and China. 51 00:02:34,400 --> 00:02:36,840 Speaker 6: How much does it also reiterate the risk. 52 00:02:36,760 --> 00:02:38,880 Speaker 5: That this is now just a one time price shock, 53 00:02:39,160 --> 00:02:42,400 Speaker 5: but it's an ongoing process of terroriffs that come on 54 00:02:42,560 --> 00:02:45,840 Speaker 5: in different waves and price effects that happen over time, 55 00:02:45,919 --> 00:02:48,359 Speaker 5: kind of like what we saw from Levi's last week. 56 00:02:49,760 --> 00:02:51,560 Speaker 3: Yeah, and you know, at least I mean, I think 57 00:02:51,560 --> 00:02:53,520 Speaker 3: this is one of the things that we've been considering 58 00:02:53,600 --> 00:02:57,000 Speaker 3: is that from the tariff perspective, this is an ongoing story. 59 00:02:57,040 --> 00:02:59,080 Speaker 3: We know that tariffs are going to be used continuously 60 00:02:59,120 --> 00:03:02,280 Speaker 3: as a geopolitical time and for any other kind of 61 00:03:02,320 --> 00:03:05,120 Speaker 3: negotiations that the US is looking to do. We're also 62 00:03:05,200 --> 00:03:09,200 Speaker 3: expecting even before Friday that tariffs would continue to move 63 00:03:09,240 --> 00:03:12,520 Speaker 3: a little bit higher. They change in focus sectors, more 64 00:03:12,600 --> 00:03:14,919 Speaker 3: company focus. So I think this is still in built, 65 00:03:15,080 --> 00:03:16,880 Speaker 3: but we have seen time and time again that from 66 00:03:16,880 --> 00:03:20,160 Speaker 3: a market perspective, these kind of headlines, they do start 67 00:03:20,200 --> 00:03:23,240 Speaker 3: to move back and back and back in people's mindsets, 68 00:03:23,360 --> 00:03:26,799 Speaker 3: especially as companies do start to kind of navigate their 69 00:03:26,800 --> 00:03:27,320 Speaker 3: way through. 70 00:03:27,639 --> 00:03:29,720 Speaker 4: So it's not to say that there won't be any impact. 71 00:03:29,800 --> 00:03:30,320 Speaker 6: There will be. 72 00:03:30,480 --> 00:03:33,520 Speaker 3: It is contributing to an economic slowdown, but we're not 73 00:03:33,600 --> 00:03:38,040 Speaker 3: looking at something which is recession, like provided the US 74 00:03:38,160 --> 00:03:40,480 Speaker 3: China negotiations do move in the right direction over the 75 00:03:40,480 --> 00:03:41,040 Speaker 3: coming weeks. 76 00:03:41,120 --> 00:03:43,040 Speaker 5: So if there isn't really that gread of a chance 77 00:03:43,080 --> 00:03:45,400 Speaker 5: of recession, which is what I'm hearing from you, do 78 00:03:45,480 --> 00:03:48,120 Speaker 5: you buy any dip or was always have on Friday 79 00:03:48,440 --> 00:03:52,160 Speaker 5: something that you want to welcome usher in and dive into. 80 00:03:54,040 --> 00:03:55,840 Speaker 3: I do think, and I think any kind of noise, 81 00:03:55,920 --> 00:03:58,320 Speaker 3: either with regards to their shutdown or even with the 82 00:03:58,840 --> 00:04:01,720 Speaker 3: trade engines, these are opportunities because we're trying to look 83 00:04:01,760 --> 00:04:03,320 Speaker 3: beyond the noise. And you know this has been a 84 00:04:03,320 --> 00:04:06,280 Speaker 3: really good learning for this year is back in April 85 00:04:06,360 --> 00:04:09,520 Speaker 3: when everyone was really worried about recession. They're worried about 86 00:04:09,520 --> 00:04:11,600 Speaker 3: how there was going to be a very significant market correction. 87 00:04:11,960 --> 00:04:14,680 Speaker 3: We are very very significantly from those moments and the 88 00:04:14,680 --> 00:04:17,560 Speaker 3: market has matched to look through, so we would assume 89 00:04:17,640 --> 00:04:20,960 Speaker 3: that this is going to be a continuation. Evaluations are 90 00:04:20,960 --> 00:04:24,760 Speaker 3: that much higher. The economic BACKDOB is a little bit slower, 91 00:04:25,200 --> 00:04:27,000 Speaker 3: so you know, we're not going to be expecting to 92 00:04:27,000 --> 00:04:29,640 Speaker 3: see gains as significant as we've had in the last 93 00:04:29,680 --> 00:04:31,839 Speaker 3: couple of months. But to our mind, this is still 94 00:04:31,839 --> 00:04:33,440 Speaker 3: a positive setup for equities. 95 00:04:34,040 --> 00:04:36,160 Speaker 1: The issue though, with what's going on with trade is 96 00:04:36,200 --> 00:04:39,400 Speaker 1: that JD. Vance is talking about the fact that it's 97 00:04:39,600 --> 00:04:43,120 Speaker 1: up to Beijing to choose the path of reason. Does 98 00:04:43,120 --> 00:04:45,520 Speaker 1: it not feel different this time than it did in 99 00:04:45,560 --> 00:04:46,080 Speaker 1: the spring? 100 00:04:47,760 --> 00:04:49,920 Speaker 3: There are definitely differences, and I think the key thing 101 00:04:50,000 --> 00:04:52,120 Speaker 3: is that, you know, China is showing that it has 102 00:04:52,320 --> 00:04:54,440 Speaker 3: a lot of power in this. You know, it's got 103 00:04:54,440 --> 00:04:58,600 Speaker 3: a very very strong negotiating tool. So it's very much 104 00:04:58,640 --> 00:05:00,960 Speaker 3: sitting in I guess, in the area and you know, 105 00:05:00,960 --> 00:05:02,640 Speaker 3: what is the US going to do to to kind 106 00:05:02,640 --> 00:05:05,120 Speaker 3: of bring down the tensions. So there is a difference, 107 00:05:05,400 --> 00:05:06,800 Speaker 3: But I think at the end of the day, because 108 00:05:06,839 --> 00:05:10,159 Speaker 3: the impact could be so serious, it's almost that too 109 00:05:10,200 --> 00:05:13,880 Speaker 3: big to fail situation, which we would assume is is 110 00:05:13,880 --> 00:05:17,840 Speaker 3: going to push both sides to some kind of negotiation point. 111 00:05:17,960 --> 00:05:19,359 Speaker 3: You know, it doesn't necessarily mean that we're going to 112 00:05:19,360 --> 00:05:21,159 Speaker 3: be looking at lower tasks. We could be even looking 113 00:05:21,160 --> 00:05:23,440 Speaker 3: at slightly higher tasks and where they are today, but 114 00:05:23,520 --> 00:05:25,720 Speaker 3: we wouldn't expect there to be a move back to 115 00:05:25,760 --> 00:05:27,520 Speaker 3: the one hundred, one hundred and thirty five percent tasks that 116 00:05:27,560 --> 00:05:28,640 Speaker 3: we did see earlier this year. 117 00:05:28,760 --> 00:05:30,760 Speaker 1: Do you think this just gets done by November first, 118 00:05:30,800 --> 00:05:33,120 Speaker 1: where the President said that seems like an eternity for him, 119 00:05:33,279 --> 00:05:36,240 Speaker 1: or is this a twenty twenty sixth story for the market. 120 00:05:37,240 --> 00:05:39,320 Speaker 3: I think we can get somewhere by November the first, 121 00:05:39,360 --> 00:05:40,400 Speaker 3: and I have to say, I think it's going to 122 00:05:40,400 --> 00:05:41,960 Speaker 3: be very very rocky road with a lot. 123 00:05:41,800 --> 00:05:43,560 Speaker 4: Of noise, a lot of back and forth. 124 00:05:44,360 --> 00:05:46,920 Speaker 3: But certainly I think that the issues with China is 125 00:05:46,960 --> 00:05:49,159 Speaker 3: not something which can be put to bed very quickly. 126 00:05:49,440 --> 00:05:50,960 Speaker 3: I would assume that this is going to be a 127 00:05:51,000 --> 00:05:53,039 Speaker 3: situation that we're going to be talking about through twenty 128 00:05:53,040 --> 00:05:56,320 Speaker 3: twenty six through twenty twenty seven, and that rivalry between 129 00:05:56,360 --> 00:05:58,320 Speaker 3: the two countries is going to be something which is 130 00:05:58,360 --> 00:06:02,000 Speaker 3: a continued pain point which comes back to rock the market. 131 00:06:02,000 --> 00:06:04,280 Speaker 3: Every now and then over the foreseeable future. 132 00:06:04,400 --> 00:06:06,560 Speaker 5: What was interesting, and John pointed this out earlier, is 133 00:06:06,560 --> 00:06:09,000 Speaker 5: that on Friday we saw rally and to US treasuries, 134 00:06:09,240 --> 00:06:11,480 Speaker 5: and this was different than what we saw after the August, 135 00:06:11,720 --> 00:06:14,560 Speaker 5: the April second Liberation Day, and it raises the question 136 00:06:15,000 --> 00:06:17,880 Speaker 5: about whether the market is looking through any kind of 137 00:06:17,960 --> 00:06:21,640 Speaker 5: price shocks as one time transitory, or whether it's complacent 138 00:06:21,760 --> 00:06:25,520 Speaker 5: about the inflationary ramifications of this decoupling between the US 139 00:06:25,560 --> 00:06:27,400 Speaker 5: and China over a longer period of time. 140 00:06:27,680 --> 00:06:28,400 Speaker 2: How do you see that? 141 00:06:29,760 --> 00:06:31,440 Speaker 4: Yeah, it's an interesting one because you know, in the 142 00:06:31,520 --> 00:06:32,000 Speaker 4: last couple of. 143 00:06:32,000 --> 00:06:34,320 Speaker 3: Months you haven't really seen the inflation impact that people 144 00:06:34,320 --> 00:06:37,080 Speaker 3: are anticipating in April, and so I think that what 145 00:06:37,120 --> 00:06:39,800 Speaker 3: we saw on Friday was just this assumption that this 146 00:06:39,880 --> 00:06:42,600 Speaker 3: is the continuation. There will only be a one time shock, 147 00:06:42,640 --> 00:06:45,400 Speaker 3: You'll be very modest. This is really really early day. 148 00:06:45,480 --> 00:06:47,480 Speaker 3: So to our minds, one of the key risks that 149 00:06:47,520 --> 00:06:49,200 Speaker 3: we do need to look out for in twenty twenty 150 00:06:49,240 --> 00:06:51,920 Speaker 3: six is, you know, the inflation number is moving a 151 00:06:51,960 --> 00:06:55,040 Speaker 3: little bit higher than anticipated. At the moment, we're expecting 152 00:06:55,120 --> 00:06:57,480 Speaker 3: CPI to be hovering around the kind of the mid 153 00:06:57,760 --> 00:06:59,479 Speaker 3: I actually said the three point two to three point 154 00:06:59,480 --> 00:07:02,240 Speaker 3: three percent level. If we were to see it move 155 00:07:02,560 --> 00:07:05,440 Speaker 3: above three and a half percent towards it four percent number, well, 156 00:07:05,440 --> 00:07:08,360 Speaker 3: then I think the equations kind of change, and I 157 00:07:08,440 --> 00:07:10,120 Speaker 3: think that that would be a real sticking point for 158 00:07:10,160 --> 00:07:12,040 Speaker 3: the market. But it is really early days, and I 159 00:07:12,040 --> 00:07:14,560 Speaker 3: think as we go into to earning season that to 160 00:07:14,680 --> 00:07:16,080 Speaker 3: us is going to be the key thing that we're 161 00:07:16,120 --> 00:07:19,600 Speaker 3: listening out for. What are CEOs telling us about the 162 00:07:19,640 --> 00:07:22,560 Speaker 3: price impact, how much they're planning to be passing on. 163 00:07:22,680 --> 00:07:24,760 Speaker 3: And I think that that picture won't be very clear 164 00:07:25,280 --> 00:07:27,600 Speaker 3: until we're looking into Q one Q two of next year. 165 00:07:28,280 --> 00:07:31,800 Speaker 2: Stay with us. More Bloomberg Surveillance coming up after this. 166 00:07:40,840 --> 00:07:43,200 Speaker 2: Let's turn to the US dollar. The index down eight 167 00:07:43,240 --> 00:07:47,160 Speaker 2: percent year today, facing ongoing volatility. Jean Balvan, head of 168 00:07:47,160 --> 00:07:50,200 Speaker 2: the black Rock Investment Institute, rights, we see the US 169 00:07:50,280 --> 00:07:54,000 Speaker 2: dollar slide tied to expected FED rate cuts and fiscal concerns, 170 00:07:54,080 --> 00:07:58,520 Speaker 2: not evidence its reserve status is under threat. Jehan joins 171 00:07:58,600 --> 00:08:00,960 Speaker 2: us now for more. Johnk and morning, Good morning. How 172 00:08:00,960 --> 00:08:03,720 Speaker 2: difficult people finally get to draw a distinction between one 173 00:08:04,160 --> 00:08:04,640 Speaker 2: and the other. 174 00:08:05,760 --> 00:08:08,200 Speaker 7: Yeah, I think, you know, if you look at this 175 00:08:08,320 --> 00:08:10,520 Speaker 7: year and the commentaries around the dollar and so on, 176 00:08:10,600 --> 00:08:14,680 Speaker 7: and connect the dots between you know, uncertainty and pausing 177 00:08:14,720 --> 00:08:17,600 Speaker 7: so on. It's easy to tell the story that investors 178 00:08:17,600 --> 00:08:20,080 Speaker 7: are more skeittish about the dollar, and it's a specific 179 00:08:20,160 --> 00:08:23,440 Speaker 7: dollar kind of risk premium that is being applied. But 180 00:08:23,960 --> 00:08:25,360 Speaker 7: I mean when you look under the hood and the 181 00:08:25,560 --> 00:08:27,760 Speaker 7: facts so far this year, I mean, there's no massive 182 00:08:27,800 --> 00:08:31,080 Speaker 7: disconnect between the dollar weakness we've seen in historical fundamental 183 00:08:31,320 --> 00:08:35,000 Speaker 7: behavior and so on the face of it. You know, 184 00:08:35,080 --> 00:08:37,680 Speaker 7: there might be down the road question about the reserve 185 00:08:37,679 --> 00:08:39,959 Speaker 7: currency status, but I don't think we have the evidence 186 00:08:39,960 --> 00:08:43,200 Speaker 7: for it yet. I think moreover, when you look since 187 00:08:43,240 --> 00:08:46,120 Speaker 7: the you know, all the discussion about central bank independence 188 00:08:46,120 --> 00:08:48,000 Speaker 7: and so on, like eat it up over the summer 189 00:08:48,120 --> 00:08:51,280 Speaker 7: and a bit before, the dollar didn't really weaken against 190 00:08:51,280 --> 00:08:54,280 Speaker 7: other kind of G ten currencies, So we think it's 191 00:08:54,320 --> 00:08:56,920 Speaker 7: more of a broader fiscal story. 192 00:08:57,120 --> 00:09:01,320 Speaker 6: Globally, you see y'll curve steep uh. 193 00:09:01,040 --> 00:09:04,800 Speaker 7: And that has some impact on gold versus currencies, But 194 00:09:04,800 --> 00:09:06,760 Speaker 7: I don't think we see really a US dollar kind 195 00:09:06,760 --> 00:09:08,080 Speaker 7: of reserve currency trade yet. 196 00:09:08,200 --> 00:09:10,480 Speaker 5: I brought I'm glad that you brought up gold, because 197 00:09:10,600 --> 00:09:13,280 Speaker 5: the dollar has to appreciated dramatically against gold, and you 198 00:09:13,280 --> 00:09:15,600 Speaker 5: could argue that the only reason why you haven't seen 199 00:09:15,760 --> 00:09:17,920 Speaker 5: a greater weakening than the dollar is because nobody else 200 00:09:17,960 --> 00:09:20,720 Speaker 5: is much better. I mean, how much is this absolutely 201 00:09:20,760 --> 00:09:25,079 Speaker 5: debasement but represented in gold, not necessarily anything specific about 202 00:09:25,080 --> 00:09:28,079 Speaker 5: the dollar as reserve status, but is generally a change 203 00:09:28,080 --> 00:09:29,400 Speaker 5: in the global financial system. 204 00:09:29,640 --> 00:09:31,600 Speaker 7: Yeah, I think that's a that's the that's there's more 205 00:09:31,640 --> 00:09:35,080 Speaker 7: to data think going on right now, which is how 206 00:09:35,080 --> 00:09:37,080 Speaker 7: we will resolve these fiscal outlooks. 207 00:09:37,120 --> 00:09:37,560 Speaker 6: Globally. 208 00:09:37,840 --> 00:09:41,120 Speaker 7: We see what's happening in France, we see Japan and 209 00:09:41,200 --> 00:09:44,640 Speaker 7: the US, so I think it's it's a common story. Uh, 210 00:09:44,800 --> 00:09:47,480 Speaker 7: the dollar, sorry, the goal gold is attractive in that context. 211 00:09:47,559 --> 00:09:49,679 Speaker 7: I'm not sure, uh you know, if it's going to 212 00:09:49,720 --> 00:09:52,240 Speaker 7: be a long term trade, but clearly when the guard, 213 00:09:52,280 --> 00:09:54,480 Speaker 7: when when the markets is a bit more anxious about 214 00:09:54,480 --> 00:09:57,679 Speaker 7: these questions, we see a narrative that it's gold up. 215 00:09:57,679 --> 00:09:59,880 Speaker 7: It's been playing up. It hasn't worked for a long time. 216 00:10:00,040 --> 00:10:01,280 Speaker 7: It has been working this year, for sure. 217 00:10:01,320 --> 00:10:03,480 Speaker 5: You talked about a yeld curve steepening, and the more 218 00:10:03,520 --> 00:10:05,679 Speaker 5: we talk about this, the more I question why we're 219 00:10:05,679 --> 00:10:07,600 Speaker 5: not seeing an even steper yield curve where we're not 220 00:10:07,640 --> 00:10:09,439 Speaker 5: seeing even more of a sell off in long bonds 221 00:10:09,480 --> 00:10:12,080 Speaker 5: globally and developed markets, given some of the fiscal concerns, 222 00:10:12,080 --> 00:10:15,760 Speaker 5: and given frankly, this debasement that we've been talking about, 223 00:10:16,040 --> 00:10:17,200 Speaker 5: does that strike you as odd? 224 00:10:18,200 --> 00:10:21,360 Speaker 7: I think we're getting We might be getting lucky at this, 225 00:10:21,600 --> 00:10:27,120 Speaker 7: at this juncture where the US economy might be weakening 226 00:10:27,440 --> 00:10:31,800 Speaker 7: just enough so that this doesn't really come to head. 227 00:10:31,200 --> 00:10:32,040 Speaker 6: Just right now. 228 00:10:32,400 --> 00:10:35,040 Speaker 7: We were a bit more concerned coming into September that 229 00:10:35,080 --> 00:10:38,760 Speaker 7: you would see, you know, inflation maybe not behaving. Last 230 00:10:38,760 --> 00:10:40,240 Speaker 7: time I was here, I was talking about like the 231 00:10:40,559 --> 00:10:42,120 Speaker 7: doubts we had about the ability of the FED to 232 00:10:42,120 --> 00:10:44,960 Speaker 7: cut as much as the market was expecting. Now we 233 00:10:45,000 --> 00:10:46,920 Speaker 7: are a bit more confident that the Fed can deliver. 234 00:10:48,080 --> 00:10:50,920 Speaker 7: Macro is weakening enough, and that's going to help relieve 235 00:10:51,040 --> 00:10:53,920 Speaker 7: some of the debt servicing cost tensions that were happening. 236 00:10:53,960 --> 00:10:56,559 Speaker 7: So we might be for the next few months, or 237 00:10:56,559 --> 00:10:57,800 Speaker 7: I don't know, for a long in a more of 238 00:10:57,840 --> 00:11:01,280 Speaker 7: a lucky spot where these concerns are not really coming 239 00:11:01,280 --> 00:11:03,960 Speaker 7: to head. But underneath that, I totally agree that there's 240 00:11:03,960 --> 00:11:05,679 Speaker 7: a bit of a disconnect, and that's why we think 241 00:11:05,760 --> 00:11:08,640 Speaker 7: longer term was I need to see long long term 242 00:11:08,720 --> 00:11:12,160 Speaker 7: rates go up from here in a ten year closer 243 00:11:12,200 --> 00:11:14,680 Speaker 7: to five makes more sense for US than four percent, 244 00:11:15,320 --> 00:11:16,520 Speaker 7: you know, a few years down their road. 245 00:11:16,640 --> 00:11:18,920 Speaker 1: John, When you say there's no evidence right now that 246 00:11:18,960 --> 00:11:22,200 Speaker 1: the dollars reserve currency status is under threat, what would 247 00:11:22,280 --> 00:11:24,640 Speaker 1: you see if it was, what would be happening? 248 00:11:25,080 --> 00:11:26,439 Speaker 6: I think you would. 249 00:11:26,480 --> 00:11:29,679 Speaker 7: So you look at this year, and fifty percent of 250 00:11:29,760 --> 00:11:32,559 Speaker 7: the weakening that we've seen can be attributed to the 251 00:11:32,640 --> 00:11:35,360 Speaker 7: increase easing expectation from the FAD. So just the interest 252 00:11:35,400 --> 00:11:37,800 Speaker 7: rate differential story that we've seen this year playing out 253 00:11:38,080 --> 00:11:40,200 Speaker 7: explains a bit, explains a big part of the move. 254 00:11:40,640 --> 00:11:45,400 Speaker 7: And then you know the yield curve steepening investor asking 255 00:11:45,440 --> 00:11:47,839 Speaker 7: more for a term premium for you know, holding that 256 00:11:48,720 --> 00:11:51,080 Speaker 7: us that maybe that has played some role as well. 257 00:11:51,360 --> 00:11:53,000 Speaker 7: But the point is that if you look at like 258 00:11:53,040 --> 00:11:55,840 Speaker 7: how the dollars behave relative to like term premium the 259 00:11:55,960 --> 00:12:00,440 Speaker 7: VIX or interest rate differential, historically that relation ship hasn't 260 00:12:00,480 --> 00:12:03,400 Speaker 7: really broken. If we were seeing that relationship broke break 261 00:12:03,720 --> 00:12:06,640 Speaker 7: and the dollar being much weaker than these fundamentals suggests, 262 00:12:07,000 --> 00:12:08,880 Speaker 7: then I think that would start to be evidence that 263 00:12:08,920 --> 00:12:11,600 Speaker 7: the investors are asking for more than just the fundamentals, 264 00:12:12,160 --> 00:12:13,560 Speaker 7: and they're more worried about a dollar. 265 00:12:13,679 --> 00:12:15,760 Speaker 2: What signal do you take from the relationship between gold 266 00:12:15,800 --> 00:12:18,640 Speaker 2: and risk more generally the equity market move pad with 267 00:12:18,880 --> 00:12:19,920 Speaker 2: the gold move this year. 268 00:12:20,400 --> 00:12:24,920 Speaker 7: Yeah, I think there's a story around, you know, some 269 00:12:24,960 --> 00:12:28,000 Speaker 7: concern of fiscal dominance maybe playing out down the road, 270 00:12:28,160 --> 00:12:30,320 Speaker 7: not a reality, but markets are paying some. 271 00:12:32,400 --> 00:12:33,120 Speaker 6: Credence to that. 272 00:12:33,200 --> 00:12:35,800 Speaker 7: But at the same time, before you get there, you 273 00:12:35,840 --> 00:12:38,360 Speaker 7: have an environment that's going to be pretty supportive for equity. 274 00:12:38,480 --> 00:12:39,920 Speaker 6: So I don't think there's really a disconnect. 275 00:12:39,960 --> 00:12:44,760 Speaker 7: It's an easy financial condition world maintained for longer bids, 276 00:12:45,080 --> 00:12:47,560 Speaker 7: you know, equities, but you want to get some insurance 277 00:12:48,120 --> 00:12:48,640 Speaker 7: with gold. 278 00:12:48,679 --> 00:12:51,040 Speaker 2: Did you think we are on the path towards fiscal 279 00:12:51,080 --> 00:12:53,600 Speaker 2: dominance in twenty six I think this. 280 00:12:53,520 --> 00:12:54,319 Speaker 6: Is a huge call. 281 00:12:54,400 --> 00:12:56,559 Speaker 7: And one things that I keep saying is it's very 282 00:12:56,800 --> 00:12:58,520 Speaker 7: in twenty twenty five. One thing that we need to 283 00:12:58,559 --> 00:13:01,080 Speaker 7: guard against is like extra apple laid from like what 284 00:13:01,200 --> 00:13:03,520 Speaker 7: looks very dramatic and then your term to long term 285 00:13:03,520 --> 00:13:07,480 Speaker 7: consequences and big change. Right, So on a day you 286 00:13:07,520 --> 00:13:10,599 Speaker 7: see some headlines you can be tempted to see I 287 00:13:10,760 --> 00:13:12,920 Speaker 7: never would have expected to see headline like this, so 288 00:13:13,040 --> 00:13:16,280 Speaker 7: hence we're going to see physical dominance At the same time. 289 00:13:16,320 --> 00:13:18,400 Speaker 7: I think these are big steps. There's going to be 290 00:13:18,400 --> 00:13:21,319 Speaker 7: equalibrium forces playing out, So I think this is something 291 00:13:21,360 --> 00:13:23,000 Speaker 7: you need to put more weight on than you would 292 00:13:23,040 --> 00:13:24,080 Speaker 7: have had historically. 293 00:13:24,080 --> 00:13:25,720 Speaker 6: But I don't think this is a default. 294 00:13:25,840 --> 00:13:27,600 Speaker 2: So at least I talked a lot about this. You 295 00:13:27,640 --> 00:13:30,560 Speaker 2: look at the TRAS rate that's aggressively shortened duration. The 296 00:13:30,559 --> 00:13:33,720 Speaker 2: Federal Reserve under this leadership is putting a priority on 297 00:13:33,760 --> 00:13:35,760 Speaker 2: cutting interest rates, so at least a bias to reduce 298 00:13:35,800 --> 00:13:38,640 Speaker 2: interest rates even with inflation around three. Now, that might 299 00:13:38,679 --> 00:13:41,840 Speaker 2: not be fiscal dominance per se, but maybe the symptoms 300 00:13:41,920 --> 00:13:45,200 Speaker 2: of it. The consequence is a similar There's some crossover 301 00:13:45,240 --> 00:13:47,000 Speaker 2: here which I think speaks to the gout trait doesn't 302 00:13:47,000 --> 00:13:48,520 Speaker 2: it to some extent at least. 303 00:13:48,520 --> 00:13:51,520 Speaker 7: Yeah, I think as long as long as the macro 304 00:13:51,600 --> 00:13:53,960 Speaker 7: picture evolves in a way that I mean, it's sounds 305 00:13:54,000 --> 00:13:55,600 Speaker 7: cynical to put it this way, but like there's a 306 00:13:55,640 --> 00:14:00,600 Speaker 7: proper cover for cutting rates from a macro perspective. Markets 307 00:14:00,640 --> 00:14:03,320 Speaker 7: might be concerned about, like what's really the motivation behind it, 308 00:14:03,360 --> 00:14:06,200 Speaker 7: and whether it's like yeah, but as long as we 309 00:14:06,240 --> 00:14:07,880 Speaker 7: have the proof of it, I think we're going to 310 00:14:08,000 --> 00:14:11,120 Speaker 7: run with We're not in the fiscal dominance world just yet, 311 00:14:11,160 --> 00:14:13,800 Speaker 7: but yeah, I think it's going to depend on if 312 00:14:13,800 --> 00:14:17,040 Speaker 7: we reach the point where it's really very hard to 313 00:14:17,080 --> 00:14:20,440 Speaker 7: explain cutting rates just on the business of the macro outlook, 314 00:14:20,480 --> 00:14:23,640 Speaker 7: and and it looks like we're deviating, then I think 315 00:14:23,640 --> 00:14:24,760 Speaker 7: it's going to be and I want to I don't 316 00:14:24,760 --> 00:14:26,200 Speaker 7: think it's going to be continuous. I think there's going 317 00:14:26,240 --> 00:14:28,040 Speaker 7: to be like a discontinuity at that point if we 318 00:14:28,120 --> 00:14:28,640 Speaker 7: deal there. 319 00:14:29,400 --> 00:14:32,920 Speaker 2: Stay with US mobile imperc surveillance. Coming up after this, 320 00:14:41,760 --> 00:14:44,840 Speaker 2: building on this historic story Norman Rule, they form a 321 00:14:44,920 --> 00:14:48,040 Speaker 2: senior US intelligence official rites in the following. The Middle 322 00:14:48,120 --> 00:14:51,200 Speaker 2: Age continues to post many challenges, but the president's approach 323 00:14:51,480 --> 00:14:55,320 Speaker 2: reshuffled the strategic deck, offering opportunities and leaving the US 324 00:14:55,600 --> 00:14:59,120 Speaker 2: the undisputed major power in the region. No, I'm joined 325 00:14:59,160 --> 00:15:02,280 Speaker 2: us now for more. Norm Wickoff Kushner, the President of 326 00:15:02,280 --> 00:15:04,720 Speaker 2: the United States. No, what made a difference here? 327 00:15:06,680 --> 00:15:09,240 Speaker 8: Well, we've got a form a president who has spent 328 00:15:09,600 --> 00:15:13,760 Speaker 8: the first ten months of his administration developing a new 329 00:15:13,800 --> 00:15:17,000 Speaker 8: policy for the Middle East, a policy that focused on 330 00:15:17,120 --> 00:15:23,600 Speaker 8: constraining Iran, Iron's nuclear program, Iran's proxies, providing Israel with 331 00:15:25,080 --> 00:15:29,320 Speaker 8: unalloyed support, but also building very strong relations with a 332 00:15:29,400 --> 00:15:33,920 Speaker 8: variety of Arab partners, resetting relations with Saudi Arabia, the 333 00:15:34,000 --> 00:15:37,560 Speaker 8: United Arab Emirates, but also maintaining strong relations with Qatar, 334 00:15:37,960 --> 00:15:42,320 Speaker 8: and ensuring strong relations with Turkey and Egypt. And together 335 00:15:42,440 --> 00:15:46,000 Speaker 8: this provided an architecture that enabled the Trump administration to 336 00:15:46,080 --> 00:15:49,800 Speaker 8: speak with pretty much everyone that needed to be brought 337 00:15:49,800 --> 00:15:52,840 Speaker 8: to the table, but also to provide pressure on all 338 00:15:52,880 --> 00:15:55,520 Speaker 8: of those parties through those channels, and then he used 339 00:15:56,000 --> 00:16:01,120 Speaker 8: unorthodox approaches mister Wikoff and mister kush and I have 340 00:16:01,600 --> 00:16:04,400 Speaker 8: dealt with mister Kushner in the past, and he's a 341 00:16:04,520 --> 00:16:09,520 Speaker 8: very sober and hard working individual and we've seen extraordinary results. 342 00:16:09,600 --> 00:16:13,440 Speaker 8: We should not over be it, not understate the tectonic 343 00:16:13,560 --> 00:16:14,560 Speaker 8: nature of this moment. 344 00:16:15,160 --> 00:16:17,840 Speaker 1: Norm was it the strategy behind this Trump team that 345 00:16:17,880 --> 00:16:20,720 Speaker 1: really changed it. We spoke to almost hawk Seen on Friday, 346 00:16:20,720 --> 00:16:22,840 Speaker 1: who was an individual that worked under Biden and said 347 00:16:22,840 --> 00:16:25,560 Speaker 1: this deal was on the table in January. What's changed 348 00:16:25,600 --> 00:16:26,440 Speaker 1: in the nine months. 349 00:16:27,600 --> 00:16:31,520 Speaker 8: Well, aspects of this deal are We're always going to 350 00:16:31,560 --> 00:16:33,680 Speaker 8: be on the table. I mean the idea that there 351 00:16:33,720 --> 00:16:38,360 Speaker 8: would be a prisoner exchange, of a release of Palestin prisoners, 352 00:16:38,400 --> 00:16:41,880 Speaker 8: the release of hostages, that there would be some sort 353 00:16:41,920 --> 00:16:45,360 Speaker 8: of a disarmament of Hamas. That was going to be 354 00:16:45,360 --> 00:16:47,920 Speaker 8: true no matter what administration was going to be in power. 355 00:16:48,200 --> 00:16:50,960 Speaker 8: But the idea that you would bring pressure upon the 356 00:16:51,040 --> 00:16:54,320 Speaker 8: parties to. 357 00:16:53,040 --> 00:16:53,840 Speaker 6: Make this happen. 358 00:16:54,200 --> 00:16:56,280 Speaker 8: I don't think that was going to be achievable in 359 00:16:56,280 --> 00:16:59,320 Speaker 8: the Biden administration because of the nature of their relationship 360 00:16:59,400 --> 00:17:02,840 Speaker 8: with the player in the region. And the Trump administration 361 00:17:02,960 --> 00:17:06,240 Speaker 8: had a very different approach, and that approach made this happen. 362 00:17:06,400 --> 00:17:09,720 Speaker 8: So we should be clear the Biden administration's approach to 363 00:17:09,800 --> 00:17:13,119 Speaker 8: the region was unlikely to achieve this result, and the 364 00:17:13,160 --> 00:17:15,720 Speaker 8: Trump administration did this in ten months. 365 00:17:16,760 --> 00:17:17,440 Speaker 4: Normal when it. 366 00:17:17,359 --> 00:17:19,080 Speaker 1: Comes to what comes next, is going to be this 367 00:17:19,200 --> 00:17:23,040 Speaker 1: unprecedented peace conference in Egypt. What do you expect that 368 00:17:23,119 --> 00:17:25,480 Speaker 1: will come of that? Will we get more information on 369 00:17:25,520 --> 00:17:28,240 Speaker 1: what Phase two looks like when it comes to Gaza. 370 00:17:28,920 --> 00:17:31,560 Speaker 6: This is an extraordinary conference in and of itself. This 371 00:17:32,160 --> 00:17:32,760 Speaker 6: is unusual. 372 00:17:32,880 --> 00:17:38,280 Speaker 8: Twenty nations, the President of Indonesia is showing up. You've 373 00:17:38,320 --> 00:17:42,760 Speaker 8: got twenty nations dealing with Mohammuda Bas, who has not 374 00:17:42,920 --> 00:17:43,360 Speaker 8: been to. 375 00:17:45,280 --> 00:17:46,680 Speaker 6: Israel in some time. 376 00:17:47,080 --> 00:17:49,480 Speaker 8: You've got the Prime Minister of Egypt who has been 377 00:17:49,480 --> 00:17:52,199 Speaker 8: invited and may show up nonetheless at the end of 378 00:17:52,240 --> 00:17:58,000 Speaker 8: this important holiday seat holiday. If that happens, that would 379 00:17:58,000 --> 00:18:01,359 Speaker 8: be the first time he has been in Egypt in 380 00:18:01,440 --> 00:18:04,680 Speaker 8: quite a while. That the Israeli Prime Minister attends, that 381 00:18:04,720 --> 00:18:06,879 Speaker 8: would be the first time he would be meeting with 382 00:18:06,920 --> 00:18:09,600 Speaker 8: some of these countries that remember, there are countries attending 383 00:18:09,600 --> 00:18:11,480 Speaker 8: this that do not have relations with. 384 00:18:13,200 --> 00:18:13,520 Speaker 6: Israel. 385 00:18:14,000 --> 00:18:17,040 Speaker 8: And this would be the Israeli Prime Minister attending with 386 00:18:17,440 --> 00:18:22,080 Speaker 8: Prime President Mohamud A Bass, someone he has refused to recognize. 387 00:18:22,119 --> 00:18:25,320 Speaker 8: So this would be an opportunity for Natanyahu and a 388 00:18:25,400 --> 00:18:29,800 Speaker 8: Boss to in essence set the stage for that second effort, 389 00:18:29,800 --> 00:18:33,159 Speaker 8: that second phase also for these countries to identify with 390 00:18:33,240 --> 00:18:35,960 Speaker 8: support they're going to provide, and for the President to 391 00:18:36,000 --> 00:18:39,240 Speaker 8: pull them together and start that process. And it is 392 00:18:39,320 --> 00:18:42,080 Speaker 8: critical to this security that this AID be put in 393 00:18:42,119 --> 00:18:46,359 Speaker 8: place to provide the Palestinian people with the humanitarian and 394 00:18:46,480 --> 00:18:50,560 Speaker 8: security architecture they need to restore their lives. 395 00:18:50,840 --> 00:18:53,200 Speaker 5: Norman, just to that point, you were talking about whether 396 00:18:53,200 --> 00:18:55,000 Speaker 5: it be be Natanya who the Prime Minister of Israel 397 00:18:55,000 --> 00:18:57,840 Speaker 5: will be going. His office said this morning, thanks to 398 00:18:57,920 --> 00:19:00,680 Speaker 5: President Trump for the invitation, that he won't be able 399 00:19:00,720 --> 00:19:02,920 Speaker 5: to attend to to the beginning of the Jewish holiday 400 00:19:03,080 --> 00:19:05,720 Speaker 5: this evening. So we'll see whether he eventually makes it there. 401 00:19:05,760 --> 00:19:07,560 Speaker 5: But right now it doesn't seem like it's the case. 402 00:19:07,560 --> 00:19:10,600 Speaker 5: And I'm just wondering, if you parse this out, is 403 00:19:10,640 --> 00:19:13,400 Speaker 5: this coalescing of powers in the region. 404 00:19:13,640 --> 00:19:16,359 Speaker 6: Going to be helpful to bring Israel back into. 405 00:19:16,280 --> 00:19:19,360 Speaker 5: The international fold or is Israel still the odd man out? 406 00:19:19,400 --> 00:19:21,080 Speaker 5: Is it going to take a lot for them to 407 00:19:21,119 --> 00:19:23,200 Speaker 5: regain some of their previous reputation. 408 00:19:24,560 --> 00:19:27,679 Speaker 8: Well, again, we'll see how long the conference lasts and 409 00:19:27,880 --> 00:19:29,919 Speaker 8: if at the end of the holidays the Prime Minister 410 00:19:30,040 --> 00:19:30,840 Speaker 8: is able to attend. 411 00:19:31,320 --> 00:19:32,199 Speaker 6: We need to see what the. 412 00:19:32,200 --> 00:19:36,520 Speaker 8: Prime minister's politics are like if the hard right becomes 413 00:19:36,520 --> 00:19:40,119 Speaker 8: a problem which prevents him from participating as well, because 414 00:19:40,119 --> 00:19:42,080 Speaker 8: he would be meeting with a boss, he would have 415 00:19:42,160 --> 00:19:43,400 Speaker 8: to make some concessions. 416 00:19:43,400 --> 00:19:46,080 Speaker 6: He has stated no palicitating. 417 00:19:45,520 --> 00:19:50,160 Speaker 8: Authority in the West Bank, so that's Aeron Gaza that 418 00:19:50,160 --> 00:19:52,560 Speaker 8: that's going to be a problem. But we've got a 419 00:19:52,640 --> 00:19:56,199 Speaker 8: situation where the Israelis are now not going to be 420 00:19:56,320 --> 00:20:01,399 Speaker 8: responsible for security or some of the of some of 421 00:20:01,400 --> 00:20:05,399 Speaker 8: the reconstitution of governance in Gaza. The Palestinians will be 422 00:20:05,440 --> 00:20:09,000 Speaker 8: doing this. Will Hamas be responsible for the problems of 423 00:20:09,040 --> 00:20:13,080 Speaker 8: Gaza or the Palestinian authority. It's no longer Israel's responsibility. 424 00:20:13,080 --> 00:20:17,159 Speaker 8: It's not a Palestinian issue and an international inst issue. 425 00:20:17,240 --> 00:20:20,960 Speaker 8: So in essence, the blame shifts from its an Israeli 426 00:20:21,040 --> 00:20:24,640 Speaker 8: problem to an international problem. But again, we must get 427 00:20:24,640 --> 00:20:27,960 Speaker 8: a humanitarian aid, security aid, and rebuild the lives for 428 00:20:28,000 --> 00:20:30,359 Speaker 8: the Palestinian people. So I think before we get to 429 00:20:30,359 --> 00:20:34,040 Speaker 8: that political problem, this is a humanitarian and a security issue, 430 00:20:34,080 --> 00:20:35,919 Speaker 8: and that's where the emphasis will remain. 431 00:20:35,800 --> 00:20:38,080 Speaker 6: At this point. Nor I wonder if there's a broader conclusion. 432 00:20:38,119 --> 00:20:40,520 Speaker 5: Also, because we used to see that the alliance between 433 00:20:40,560 --> 00:20:44,159 Speaker 5: Western nations used to be the United States, Europe, and 434 00:20:44,240 --> 00:20:46,639 Speaker 5: a couple of others, maybe Japan. Now it seems to 435 00:20:46,680 --> 00:20:48,880 Speaker 5: be really shifting to the Middle East. How much has 436 00:20:48,920 --> 00:20:52,600 Speaker 5: this deal in the US's relationship with Saudi Arabia in particular, 437 00:20:53,080 --> 00:20:54,520 Speaker 5: really solidify that idea. 438 00:20:55,720 --> 00:20:57,040 Speaker 6: Well, you've seen several things. 439 00:20:57,040 --> 00:20:59,000 Speaker 8: So first of all, this wouldn't have happened had the 440 00:20:59,080 --> 00:21:02,640 Speaker 8: United States work with Egypt, Qatar, and even Turkey. 441 00:21:03,200 --> 00:21:04,159 Speaker 6: Certainly that's true. 442 00:21:04,200 --> 00:21:09,240 Speaker 8: However, there have been months of intensive diplomatic conversations with 443 00:21:09,320 --> 00:21:13,159 Speaker 8: Saudi Arabia and the United of Arab Emirates, and Saudi 444 00:21:13,200 --> 00:21:16,960 Speaker 8: Arabia working with France and other countries that in essence 445 00:21:17,040 --> 00:21:20,800 Speaker 8: created an architecture that also made this happen outside of 446 00:21:20,840 --> 00:21:25,560 Speaker 8: the United States itself, and that's Saudi Emoradi and diplomatic 447 00:21:25,640 --> 00:21:29,119 Speaker 8: pressure was itself a dynamic that cannot be ignored. So 448 00:21:30,200 --> 00:21:34,159 Speaker 8: these capitals, these rising powers, are something that need to 449 00:21:34,160 --> 00:21:38,720 Speaker 8: be recognized and work with, and the Trump administration, to 450 00:21:38,760 --> 00:21:42,359 Speaker 8: its credit, did exactly that over the last ten months. 451 00:21:42,480 --> 00:21:45,640 Speaker 8: And we're seeing the results so ranging from the chip 452 00:21:45,680 --> 00:21:49,800 Speaker 8: deals that the Trump administration is putting together, the energy discussions, 453 00:21:49,840 --> 00:21:51,800 Speaker 8: and now we're seeing this in the Middle East. It's 454 00:21:51,840 --> 00:21:54,120 Speaker 8: a very interesting and dynamic approach. 455 00:21:55,840 --> 00:21:59,280 Speaker 2: Stay with US Multilemberg. Savannah's coming up off to this. 456 00:22:09,160 --> 00:22:12,000 Speaker 2: Let's stick with the data still impacted by the government shutdown, 457 00:22:12,080 --> 00:22:14,520 Speaker 2: Abigail what a ups right in the following. If the 458 00:22:14,520 --> 00:22:17,720 Speaker 2: government reopens early in the week, it's possible that we 459 00:22:17,760 --> 00:22:21,439 Speaker 2: may receive the September employment situation within two or three 460 00:22:21,680 --> 00:22:24,880 Speaker 2: business days. Abigail joins us now for more, Abigail. If 461 00:22:24,880 --> 00:22:27,560 Speaker 2: we don't, we could have this really strange situation at 462 00:22:27,560 --> 00:22:29,440 Speaker 2: the end of the month where the Federal Reserve has 463 00:22:29,480 --> 00:22:33,520 Speaker 2: the CPI report, but doesn't have payrolls, has CPI about 464 00:22:33,560 --> 00:22:35,879 Speaker 2: three percent, and still decides to cut interest rates. How 465 00:22:35,920 --> 00:22:37,800 Speaker 2: uncomfortable might that moment. 466 00:22:37,600 --> 00:22:41,600 Speaker 4: Be running Thanks thanks for having me join. 467 00:22:42,200 --> 00:22:44,399 Speaker 9: Yeah, look, I think you're totally right to focus in 468 00:22:44,560 --> 00:22:47,399 Speaker 9: on the kind of balance between the labor market and 469 00:22:47,440 --> 00:22:51,000 Speaker 9: the inflation data. I think that's clearly what drove the 470 00:22:51,320 --> 00:22:55,680 Speaker 9: in the September meeting, was this shift towards concerns over 471 00:22:55,720 --> 00:22:58,159 Speaker 9: the labor market. And while we might not get the 472 00:22:58,160 --> 00:23:01,720 Speaker 9: September employment report, as you said, the FMC are expected 473 00:23:01,760 --> 00:23:05,440 Speaker 9: to get the September CPI data later this month, which 474 00:23:05,440 --> 00:23:07,800 Speaker 9: I think will be helpful for them and understanding kind 475 00:23:07,800 --> 00:23:10,680 Speaker 9: of potentially where that balance of risks is. I would 476 00:23:10,720 --> 00:23:13,920 Speaker 9: say that even though we don't have the September employment report, 477 00:23:13,960 --> 00:23:15,880 Speaker 9: we do have kind of other data that we can 478 00:23:15,960 --> 00:23:17,760 Speaker 9: look at to get a sense of the state of 479 00:23:17,760 --> 00:23:20,080 Speaker 9: the labor market, and in particular, you know, we've been 480 00:23:20,119 --> 00:23:22,720 Speaker 9: looking very close at what we're seeing in the initial 481 00:23:22,760 --> 00:23:26,359 Speaker 9: and continuing claim data. These data are not being published, 482 00:23:26,359 --> 00:23:28,360 Speaker 9: you know, in the normal kind of formal report from 483 00:23:28,400 --> 00:23:31,120 Speaker 9: the Department of Labor, but we are able to kind 484 00:23:31,119 --> 00:23:33,800 Speaker 9: of patch together the kind of state level data, and 485 00:23:33,840 --> 00:23:36,720 Speaker 9: you're continuing to see kind of elevated levels of continuing 486 00:23:36,720 --> 00:23:39,720 Speaker 9: claims in those data as well versus this point last year. 487 00:23:40,080 --> 00:23:42,760 Speaker 9: So I do think that that kind of balance between 488 00:23:42,800 --> 00:23:45,439 Speaker 9: the two, you know, the labor market data and the 489 00:23:45,440 --> 00:23:47,800 Speaker 9: inflation side, will keep the FED on tracks kind of 490 00:23:47,800 --> 00:23:50,040 Speaker 9: cut at the meeting at the end of the month. A. 491 00:23:50,240 --> 00:23:52,920 Speaker 5: Yeah, what initially kicked off the sense that the FED 492 00:23:53,040 --> 00:23:55,160 Speaker 5: might be behind the curve and needed to catch up by 493 00:23:55,160 --> 00:23:58,200 Speaker 5: cutting rates was the revisions to the payrolls that really 494 00:23:58,200 --> 00:24:01,080 Speaker 5: came in so much more significantly than people expected. But 495 00:24:01,160 --> 00:24:04,640 Speaker 5: Sneldasai was on the show last week and she said, actually, 496 00:24:04,760 --> 00:24:07,639 Speaker 5: what it means is that the economy was doing pretty 497 00:24:07,680 --> 00:24:11,080 Speaker 5: well without all of those jobs, and without that job 498 00:24:11,080 --> 00:24:13,680 Speaker 5: of creation. Doesn't that speak to a wave of productivity, 499 00:24:14,119 --> 00:24:16,360 Speaker 5: not necessarily to a real weakness. 500 00:24:16,400 --> 00:24:19,360 Speaker 2: I mean, how do you sort of square these ideas. 501 00:24:18,880 --> 00:24:21,640 Speaker 5: That maybe we are just operating with a lower job 502 00:24:21,720 --> 00:24:22,560 Speaker 5: creation base. 503 00:24:23,960 --> 00:24:26,119 Speaker 9: Yeah, Look, I think obviously there's been, you know, a 504 00:24:26,160 --> 00:24:28,440 Speaker 9: wealth of people kind of coming out with estimates of. 505 00:24:28,320 --> 00:24:31,080 Speaker 6: What the run rate of kind of payrolls. 506 00:24:30,680 --> 00:24:32,840 Speaker 9: Or the run rate of employment grows might look like, 507 00:24:33,359 --> 00:24:36,080 Speaker 9: particularly obviously given the shifts we're seeing in terms of 508 00:24:36,119 --> 00:24:39,000 Speaker 9: potentially population grows, but also kind of what we're seeing 509 00:24:39,040 --> 00:24:41,720 Speaker 9: in terms of changes in participation rates. I think we've 510 00:24:41,760 --> 00:24:44,680 Speaker 9: seen obviously participation kind of coming off a little bit, 511 00:24:44,720 --> 00:24:48,720 Speaker 9: and I think that's probably like the driven bicyclicality rather 512 00:24:48,760 --> 00:24:51,120 Speaker 9: than say kind of demographics, which has been the kind 513 00:24:51,119 --> 00:24:54,080 Speaker 9: of down drift that we've seen there in kind of 514 00:24:54,119 --> 00:24:57,040 Speaker 9: recent years. I think the question in terms of the 515 00:24:57,160 --> 00:25:00,000 Speaker 9: kind of run rate and kind of the time together 516 00:25:00,160 --> 00:25:01,920 Speaker 9: of what we're seeing in terms of growth in the 517 00:25:02,000 --> 00:25:04,639 Speaker 9: labor market, I think really what you've seen is it 518 00:25:04,720 --> 00:25:08,439 Speaker 9: stepped down just in terms of demand within the labor market. 519 00:25:08,520 --> 00:25:11,280 Speaker 9: I do think it's potentially more demand driven than it 520 00:25:11,320 --> 00:25:13,760 Speaker 9: is supply driven at this juncture. And I think one 521 00:25:13,760 --> 00:25:15,399 Speaker 9: of the things we have seen is obviously a lot 522 00:25:15,440 --> 00:25:17,359 Speaker 9: of a lot of noise in terms of the growth 523 00:25:17,440 --> 00:25:20,280 Speaker 9: numbers with swings from kind of noisy components, but you 524 00:25:20,359 --> 00:25:22,160 Speaker 9: have seen a step down in terms of the pace 525 00:25:22,200 --> 00:25:25,359 Speaker 9: of domestic demand that underlying pace of demand in the 526 00:25:25,440 --> 00:25:28,399 Speaker 9: US economy was relatively soft through the first half of 527 00:25:28,440 --> 00:25:30,560 Speaker 9: this year versus where it was last year. So I 528 00:25:30,600 --> 00:25:33,000 Speaker 9: do think they kind of slow down you've seen in 529 00:25:33,000 --> 00:25:34,680 Speaker 9: the labor market and the slow down you've seen in 530 00:25:35,160 --> 00:25:37,520 Speaker 9: kind of the broader economy or are kind of broadly 531 00:25:37,560 --> 00:25:38,879 Speaker 9: consistent with one another. 532 00:25:39,200 --> 00:25:40,479 Speaker 6: How do you square that with Delta? 533 00:25:40,760 --> 00:25:42,119 Speaker 5: And I know that this is sort of not a 534 00:25:42,119 --> 00:25:43,960 Speaker 5: perfect data set, but it is the data set that 535 00:25:44,000 --> 00:25:46,880 Speaker 5: we have. Delta reported earnings and it was better than expected, 536 00:25:46,880 --> 00:25:49,359 Speaker 5: and they said they see no reason for there to 537 00:25:49,400 --> 00:25:52,000 Speaker 5: be any softness in the path a head. They're seeing 538 00:25:52,040 --> 00:25:54,679 Speaker 5: demand really pick up across the board. How do you 539 00:25:54,680 --> 00:25:58,760 Speaker 5: square that with a decelerating in labored demand that you 540 00:25:58,880 --> 00:25:59,600 Speaker 5: just talked about. 541 00:26:00,840 --> 00:26:05,000 Speaker 9: Yeah, look, I think there's a potential reason for that 542 00:26:05,040 --> 00:26:07,800 Speaker 9: could be that we are seeing but a narrowing I 543 00:26:07,840 --> 00:26:09,720 Speaker 9: think in terms of the drivers of consumption. 544 00:26:09,920 --> 00:26:10,120 Speaker 8: Right. 545 00:26:10,200 --> 00:26:12,199 Speaker 9: So, one of the things that we've been referencing for 546 00:26:12,240 --> 00:26:14,359 Speaker 9: a while is that we'd expected the lower end of 547 00:26:14,359 --> 00:26:17,000 Speaker 9: the income spectrum would become under more pressure through the 548 00:26:17,000 --> 00:26:17,800 Speaker 9: beginning of this. 549 00:26:17,720 --> 00:26:19,920 Speaker 4: Year, and I do think we have seen that. 550 00:26:20,080 --> 00:26:21,800 Speaker 9: I think one of the things we have seen, though, 551 00:26:21,920 --> 00:26:24,440 Speaker 9: is that the upper income groups are continuing to sit 552 00:26:24,520 --> 00:26:27,639 Speaker 9: on relatively healthy balance sheets. And there's a number of 553 00:26:27,680 --> 00:26:30,680 Speaker 9: elements that we're seeing in terms of the income data, 554 00:26:30,840 --> 00:26:34,440 Speaker 9: particularly the Nipper revisions with a big, a big kind 555 00:26:34,440 --> 00:26:38,000 Speaker 9: of revision in terms of dividend income supporting income growers 556 00:26:38,040 --> 00:26:41,119 Speaker 9: in recent years. And I think that's also unlikely to 557 00:26:41,119 --> 00:26:43,960 Speaker 9: be equally distributed across the income distribution. So if you 558 00:26:44,000 --> 00:26:46,960 Speaker 9: think about kind of where the kind of support for 559 00:26:47,040 --> 00:26:49,840 Speaker 9: kind of recreational services is coming from, it's likely to 560 00:26:49,880 --> 00:26:53,600 Speaker 9: be coming from those upper income groups disproportionately. So I 561 00:26:53,640 --> 00:26:55,919 Speaker 9: think that's that's the reason why you know, we have 562 00:26:56,000 --> 00:26:57,760 Speaker 9: a slowing in terms of the economy, we have a 563 00:26:57,800 --> 00:27:00,760 Speaker 9: slowing in terms of consumption given the potential for kind 564 00:27:00,760 --> 00:27:04,080 Speaker 9: of pass through of tariff headwinds later this year, but 565 00:27:04,160 --> 00:27:06,160 Speaker 9: we don't have an outright contraction. And I do think 566 00:27:06,200 --> 00:27:08,440 Speaker 9: it is because you do have that kind of stronger 567 00:27:08,520 --> 00:27:12,280 Speaker 9: upper income group in particular still kind of able to support, 568 00:27:12,760 --> 00:27:14,639 Speaker 9: you know, the pace of consumption as we go forward. 569 00:27:14,800 --> 00:27:16,359 Speaker 1: And again when it comes to terraffs, how are you 570 00:27:16,359 --> 00:27:18,720 Speaker 1: thinking about the latest rhetoric we have when it comes 571 00:27:18,720 --> 00:27:22,120 Speaker 1: to Beijing In Washington, and potentially an increased teriff rate 572 00:27:22,160 --> 00:27:22,639 Speaker 1: on China. 573 00:27:24,000 --> 00:27:24,240 Speaker 6: Yeah. 574 00:27:24,240 --> 00:27:26,720 Speaker 9: Look, I mean, China is the area where we have 575 00:27:26,880 --> 00:27:29,880 Speaker 9: seen obviously the strongest kind of ratcheting up of tariffs. 576 00:27:30,119 --> 00:27:32,479 Speaker 9: They're sitting with the highest weighted average tariff of kind 577 00:27:32,480 --> 00:27:35,199 Speaker 9: of any country and trading partner that the US has, 578 00:27:35,840 --> 00:27:38,240 Speaker 9: And I think, you know, the kind of resurgence of 579 00:27:38,280 --> 00:27:41,680 Speaker 9: the rhetoric around potential for the one hundred percent tariff 580 00:27:42,119 --> 00:27:45,280 Speaker 9: to be added late last week, I think this is 581 00:27:45,359 --> 00:27:47,840 Speaker 9: just a you know, a timely reminder that this is 582 00:27:47,880 --> 00:27:50,400 Speaker 9: an area where we could continue to see tensions kind 583 00:27:50,400 --> 00:27:53,080 Speaker 9: of flaring up. Obviously, we had the kind of November 584 00:27:53,160 --> 00:27:55,960 Speaker 9: tenth deadline already in the calendar for the potential for 585 00:27:56,000 --> 00:27:59,080 Speaker 9: the reciprocal rate on China to increase. I think, you know, 586 00:27:59,600 --> 00:28:02,320 Speaker 9: the kind of deadline here for the one hundred percent 587 00:28:02,480 --> 00:28:05,120 Speaker 9: of November first potentially gives you a little bit more 588 00:28:05,160 --> 00:28:08,040 Speaker 9: time to see kind of more progress and negotiations between 589 00:28:08,080 --> 00:28:10,560 Speaker 9: the two. So I think for now, you know, we're 590 00:28:10,600 --> 00:28:13,720 Speaker 9: watching to see how that progresses. I think obviously the 591 00:28:13,760 --> 00:28:16,520 Speaker 9: experience of earlier this year we saw a very strong kind 592 00:28:16,560 --> 00:28:19,240 Speaker 9: of increase in terms of tariffs on China that proved 593 00:28:19,280 --> 00:28:22,080 Speaker 9: relatively short lived, so we would be watching to see 594 00:28:22,119 --> 00:28:25,080 Speaker 9: kind of how that rhetoric develops in terms of before 595 00:28:25,119 --> 00:28:26,840 Speaker 9: we would want to kind of think about how that 596 00:28:26,920 --> 00:28:29,520 Speaker 9: might feed into into a kind of the economic outlook 597 00:28:29,520 --> 00:28:30,560 Speaker 9: and our expectations. 598 00:28:31,840 --> 00:28:35,399 Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best 599 00:28:35,400 --> 00:28:38,720 Speaker 2: in markets, economics, angier politics. 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