WEBVTT - Surveillance: Suez Canal Remains Blocked 0:00:05.120 --> 0:00:09.320 Welcome to the Bloombergs Surveillance Podcast Downtown Keene. Along with 0:00:09.440 --> 0:00:13.200 Jonathan Ferroll and Lisa Brownwitz Jay Leye, we bring you 0:00:13.320 --> 0:00:18.640 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance and Apple Podcast SoundCloud, Bloomberg dot Com 0:00:23.920 --> 0:00:29.760 and of course on the Bloomberg Terminal. The top story 0:00:29.760 --> 0:00:32.159 though worldwide, has to be the ship stuck in the 0:00:32.360 --> 0:00:34.159 Suez Canal. So let me go through some of the 0:00:34.200 --> 0:00:36.680 numbers for you, because the numbers are important. Nine point 0:00:36.760 --> 0:00:39.360 six billion dollars worth the traffic a day going through 0:00:39.400 --> 0:00:43.239 that very very important waterway. That's according to estimates from 0:00:43.320 --> 0:00:45.240 the likes of Lloyd's, and the estimates around the amount 0:00:45.240 --> 0:00:46.959 of ships that are waiting to get through there right 0:00:46.960 --> 0:00:49.600 now varies. For us here at Bloomberg, what we're tracking 0:00:49.600 --> 0:00:52.080 about a hundred and eighty five vessels as of yesterday, 0:00:52.280 --> 0:00:55.400 I think Lloyd's estimating that's about a hundred and sixty five. 0:00:55.720 --> 0:00:58.200 What we need to figure out is what is on 0:00:58.280 --> 0:01:00.560 these ships and how bad could things get and how 0:01:00.600 --> 0:01:02.960 bad could things get quickly? So let's do that right 0:01:03.000 --> 0:01:05.800 now with Alan gelder Wood Mackenzie, Vice President of refining, 0:01:05.880 --> 0:01:08.880 chemicals and oil markets. Now, Alan, we all know about 0:01:08.920 --> 0:01:11.440 the proliferation of just in time supply chains that came 0:01:11.440 --> 0:01:14.040 out of Japan and really really gained traction in the 0:01:14.120 --> 0:01:16.840 United States of the eighties and beyond. So, but it's 0:01:16.880 --> 0:01:19.240 important when things like this start to get blocked up. 0:01:19.280 --> 0:01:21.440 I guess my question to you, Alan, is when things 0:01:21.440 --> 0:01:24.280 get critical? Is it days? Is it weeks? And critical 0:01:24.319 --> 0:01:27.360 for who and wear? It's a really good quote. It's 0:01:27.400 --> 0:01:29.560 a really good question and becoming a bit more relevant 0:01:29.800 --> 0:01:32.920 given the news of ship unblocked, but the satellites and 0:01:33.000 --> 0:01:36.240 mid sure it's still layer until certinceing the timing, we 0:01:36.280 --> 0:01:39.120 think the biggest impact we're seeing from all the vessel 0:01:39.160 --> 0:01:42.240 tracking that we do is really around some bulks and 0:01:42.319 --> 0:01:45.600 contain and container shipping, in which case it's all of 0:01:45.600 --> 0:01:49.040 those things that moves on containers, which it's basically across 0:01:49.120 --> 0:01:52.760 the whole global economy. We see less of an impact 0:01:52.840 --> 0:01:55.640 on sort of oil, oil products and l en G, 0:01:56.320 --> 0:01:59.320 but those things sort of the impact on those gets 0:01:59.320 --> 0:02:02.800 bigger if we're still in this situation in a few days, 0:02:02.800 --> 0:02:05.920 so the blockage will have lasted about a week or more. Yeah, 0:02:05.920 --> 0:02:07.480 And then the reason I go to these questions because 0:02:07.480 --> 0:02:08.679 I think it's too easy just to put up the 0:02:08.720 --> 0:02:10.560 pretty pictures and let's say, look at this digger trying 0:02:10.560 --> 0:02:12.720 to get out the big ship and talk about that 0:02:12.960 --> 0:02:15.080 for a number of ads for business people, for I 0:02:15.080 --> 0:02:18.359 think for international traders right now, looking at this situation, 0:02:18.400 --> 0:02:20.480 they want to understand how important it really is and 0:02:20.480 --> 0:02:23.240 when things get critical. So from your perspective, when you 0:02:23.280 --> 0:02:27.240 see that straight through the Suez Canal, I'm trying to 0:02:27.320 --> 0:02:30.800 understand what is on the ships and what can be rerouted. 0:02:30.880 --> 0:02:35.120 One and two if in the oil business, the pipelines 0:02:35.160 --> 0:02:37.760 around there you can use instead, how much capacity is there, 0:02:37.800 --> 0:02:40.440 how much alternatives are they're out there to try and 0:02:40.480 --> 0:02:42.440 tackle some of these issues. If this issues is still 0:02:42.440 --> 0:02:45.919 around for another week or so, we think of think 0:02:45.919 --> 0:02:49.160 of all, there is the Suma pipeline from for the 0:02:49.200 --> 0:02:52.320 south up the city career in the north. That's there's 0:02:52.320 --> 0:02:55.200 plenty of capacity there. The oil market in Europe, there's 0:02:55.240 --> 0:02:58.600 plenty of crew, there's plenty of products. Because we're lockdowns 0:02:58.600 --> 0:03:01.040 are being extent. Lockdowns are being extended, so we don't 0:03:01.080 --> 0:03:03.680 see a problem in sort of Middle East crewed making 0:03:03.720 --> 0:03:06.480 its way to Europe. We're not really seeing much diversion, 0:03:06.840 --> 0:03:11.840 plenty of stock, there's some issues potentially going the other way. 0:03:11.880 --> 0:03:15.320 It's more products. It may be petrochemical feedstocks because they 0:03:15.320 --> 0:03:18.000 tend to flow for the Mediterranean through the Sewers Canal 0:03:18.200 --> 0:03:21.160 and anto Asia seen some price action there. And then 0:03:21.200 --> 0:03:25.359 you've also got some sort of Russian crewed Caspian crew 0:03:25.440 --> 0:03:27.960 that comes out the Black Sea that often goes some 0:03:28.040 --> 0:03:29.680 of that goes through the Sewers Canal. That will be 0:03:29.760 --> 0:03:34.440 restricted with seeing some of those differentials moving, but it's 0:03:34.480 --> 0:03:37.640 relatively small. The oil market isn't isn't a big deal 0:03:38.160 --> 0:03:42.320 um llen g. If we'd last a bit longer, becomes 0:03:42.320 --> 0:03:44.400 a bit of a problem. But in terms of the 0:03:44.480 --> 0:03:46.520 l energy market, the good thing is actually now this 0:03:46.600 --> 0:03:49.560 is the shoulder season where demands relatively low. But if 0:03:49.560 --> 0:03:52.320 the canal still is blocked, some people have to make 0:03:52.320 --> 0:03:55.040 a decision do they go all the way around the 0:03:55.120 --> 0:04:00.320 Cape Cape Cape Horn and that adds nine days, in 0:04:00.360 --> 0:04:03.000 which case the shipping market gets tighter and that will 0:04:03.040 --> 0:04:06.680 then get ultimately get reflected reflected in pricing. We think 0:04:06.680 --> 0:04:10.320 at the moment, the market sitting and waiting and hope 0:04:10.400 --> 0:04:13.040 looking fingers crossed on the news that the whales should 0:04:13.080 --> 0:04:16.200 be cleared like Monday, Tuesday next week. That's some of 0:04:16.240 --> 0:04:18.159 the news that's been gone, but we need to see 0:04:19.720 --> 0:04:22.800 Alan John was talking about people wanting to talk about 0:04:22.800 --> 0:04:25.320 that digger next to the big ship, and frankly, I'm 0:04:25.360 --> 0:04:27.760 among them. I also am curious about the conversations in 0:04:27.760 --> 0:04:32.920 the cockpit of this massive shipping container ship. The reason why, though, 0:04:33.360 --> 0:04:36.000 is a bigger issue, and that is the exhaustion after 0:04:36.080 --> 0:04:39.640 people bought more and more goods to enable themselves to 0:04:39.680 --> 0:04:42.480 hunker down during the pandemic at a time when there 0:04:42.480 --> 0:04:44.880 were more people who are out of commission not able 0:04:44.920 --> 0:04:47.880 to work. Can you talk about the larger story about 0:04:48.000 --> 0:04:51.279 stress points at some of these shipping centers, the idea 0:04:51.279 --> 0:04:54.119 that people are exhausted, they have been stranded at sea 0:04:54.240 --> 0:04:56.240 for days, I mean for months. Frankly, there have been 0:04:56.279 --> 0:04:59.720 stories that does that concern you in a longer lasting way, 0:05:00.040 --> 0:05:03.720 and the oil market and the chemicals market. I think 0:05:03.760 --> 0:05:06.720 it's one of those things that's largely gone hidden, actually, 0:05:07.920 --> 0:05:13.320 the coronavirus global pandemic, the lockdowns there are there have 0:05:13.400 --> 0:05:16.920 been mariners that have been at sea for Argub eighteen months, 0:05:17.000 --> 0:05:19.640 Argue eighteen months or not, and I still have no 0:05:19.680 --> 0:05:21.560 means of getting and have no means of getting home 0:05:21.600 --> 0:05:25.039 so working. So how much fatigue played in the played 0:05:25.080 --> 0:05:29.160 in this incident, I wouldn't want to speculate, but if 0:05:29.200 --> 0:05:32.880 you look at it, we've got supply systems and supply 0:05:33.000 --> 0:05:36.600 chains that are under quite quite a degree of stress. 0:05:37.160 --> 0:05:40.159 And if systems under stress, then mistakes and accidents happen. 0:05:40.560 --> 0:05:45.599 So it's something that the industry needs to be I 0:05:45.600 --> 0:05:48.120 think he's very the shipping industry is very aware of 0:05:48.880 --> 0:05:51.560 and he's trying. He is trying to resolve, and I'd 0:05:51.600 --> 0:05:53.640 love to catch up again about this because if this 0:05:53.760 --> 0:05:55.680 does continue, as you know, it can take about a 0:05:55.680 --> 0:05:58.680 month to get a container ship from say China over 0:05:58.720 --> 0:06:02.800 to the UK for India Mumbai over to Europe as well, 0:06:02.839 --> 0:06:05.000 I can say anywhere from twenty to thirty days too, 0:06:05.000 --> 0:06:06.520 And I think at some point you have to start 0:06:06.520 --> 0:06:09.000 thinking about what that root is gonna look like in 0:06:09.080 --> 0:06:10.760 the months to come for some of these big, big 0:06:10.839 --> 0:06:13.599 journeys with these massive ships. And it's great catch up, 0:06:13.640 --> 0:06:16.039 So we appreciate your time as always. Alan out of 0:06:16.040 --> 0:06:24.080 there of Wood Mackenzie, let's bringing Mamma Dunis now Counter 0:06:24.200 --> 0:06:27.680 editor in chief Mohammed Let's start there the perceptions of 0:06:27.680 --> 0:06:31.040 a rival superpower, how we should engage a rival superpower. 0:06:31.040 --> 0:06:34.320 What have you learned in the polling you've done recently well? 0:06:34.440 --> 0:06:37.440 Within our World Affair survey that we conducted in the 0:06:37.520 --> 0:06:39.680 second of the first half of February, we basically asked 0:06:39.720 --> 0:06:43.000 Americans about the favorability of perceptions of a series of 0:06:43.080 --> 0:06:46.000 nations UM. What we found is a record low in 0:06:46.080 --> 0:06:49.040 favorability of China, and this trend goes back to the 0:06:49.160 --> 0:06:54.600 nine Today of Americans say they have a favorable view 0:06:54.720 --> 0:06:58.880 of China. In this UH pole, we also ask about 0:06:59.320 --> 0:07:02.440 perceptions of who the greatest enemy is of the United States. 0:07:02.760 --> 0:07:05.640 In the past, North Korea got a lot of attention 0:07:05.839 --> 0:07:08.440 back in eighteen when there were a lot of UH 0:07:08.560 --> 0:07:11.800 missile launches and rhetoric going back and forth. This year 0:07:11.840 --> 0:07:13.880 was the highest record ever and this trend goes back 0:07:13.920 --> 0:07:17.080 to two thousand and one, where forty percent of Americans 0:07:17.240 --> 0:07:20.600 viewed China as UM the greatest enemy that the United 0:07:20.640 --> 0:07:25.240 States currently faces. It's interesting that half of Americans also 0:07:25.400 --> 0:07:28.800 perceived China's economy to be the leading economy of the 0:07:28.840 --> 0:07:32.200 world UM. And when we ask Americans about the critical 0:07:32.640 --> 0:07:36.360 threats to the vital interests of the United States. China 0:07:36.480 --> 0:07:39.640 is one of the many actually areas where there is 0:07:39.680 --> 0:07:42.680 agreement on both the right and the left in terms 0:07:42.720 --> 0:07:46.920 of viewing its economic rise as a threat to the 0:07:47.040 --> 0:07:49.840 United States. So seventy eight percent of Republicans say it's 0:07:49.840 --> 0:07:53.160 a critical threat of Democrats and about six and ten 0:07:53.200 --> 0:07:56.560 Americans overall. Mohammed always think language is important. Whenever we 0:07:56.600 --> 0:07:59.960 talk about is tompict try to use the words Chinese 0:08:00.000 --> 0:08:03.320 Communist Party and talk about the government and not the Chinese. 0:08:03.640 --> 0:08:05.920 And I know a lot of people do that innocently, 0:08:06.120 --> 0:08:09.000 without malice. They will refer to China as the Chinese 0:08:09.000 --> 0:08:11.520 and not the Chinese Communist Party. But the reason I 0:08:11.520 --> 0:08:13.360 think this is important right now is because I do wonder, 0:08:13.560 --> 0:08:16.400 at a really tense moment for the Asian American community 0:08:16.480 --> 0:08:20.320 and the deep issues, deeply upsetting issues that are being 0:08:20.320 --> 0:08:23.800 increasingly highlighted over the last several months, whether there is 0:08:23.840 --> 0:08:27.160 a risk of conflating the issues around the Chinese Communist 0:08:27.160 --> 0:08:30.960 Party and they bleed over and spill into and exacerbate 0:08:31.040 --> 0:08:35.520 maybe much more nastier cultural issues here at home. Absolutely, 0:08:35.600 --> 0:08:38.480 and it's a now more important time than ever to 0:08:38.559 --> 0:08:40.439 really make that distinction, and I'm happy to give me 0:08:40.440 --> 0:08:43.120 the opportunity to do that. UM. First of all, in 0:08:43.240 --> 0:08:47.480 terms of favorability, Americans on the whole really do distinguish 0:08:47.600 --> 0:08:51.400 between sort of China and just Asian people in general. 0:08:51.480 --> 0:08:54.560 The data actually hand that out. Japan has one of 0:08:54.559 --> 0:08:58.360 the highest favorability ratings of any country we ask among Americans. 0:08:58.400 --> 0:09:02.240 Taiwan's favorability reading is on par with Israel. UM. So 0:09:02.600 --> 0:09:07.199 the notion that the favorability of China or Chinese policies 0:09:07.240 --> 0:09:09.720 in specific with trade, and we have data to show 0:09:09.720 --> 0:09:12.280 that that's really where the concern is with the vast 0:09:12.320 --> 0:09:16.440 majority of Americans certainly shouldn't be read to mean, UM, 0:09:16.480 --> 0:09:20.800 suddenly that everybody in America or of people in America 0:09:21.000 --> 0:09:25.760 have negative feelings towards Chinese people or citizens. UM. Of course, 0:09:26.240 --> 0:09:29.760 we've seen a series of very horrific hate crimes UM, 0:09:29.840 --> 0:09:33.160 not only in Atlanta, but many smaller ones across the 0:09:33.240 --> 0:09:37.200 United States. It's not really new UM for the United States. 0:09:37.240 --> 0:09:39.959 But what we know from the past, UM is that 0:09:40.080 --> 0:09:43.200 take trade, for example, Americans are very positive on trade. 0:09:43.640 --> 0:09:46.079 They tend to be very positive on trade with most 0:09:46.080 --> 0:09:48.960 countries that have a major trade relationship with the United 0:09:48.960 --> 0:09:54.720 States Mexico, Canada, the EU, etcetera. But they consistently had 0:09:54.720 --> 0:09:58.680 a less positive perception of the trade relationship with China 0:09:58.760 --> 0:10:02.480 in particular. So we definitely don't want to conflate these 0:10:02.480 --> 0:10:06.880 two issues, um first and foremost, because human beings, of 0:10:06.920 --> 0:10:09.760 course should always be treated as such, a not a 0:10:09.760 --> 0:10:13.200 reverberation of policy. Somebody in Muhammad in the United States, 0:10:13.240 --> 0:10:17.240 I can comfortably uh say that I strongly believe in that. 0:10:17.840 --> 0:10:19.920 But in addition to the fact that these issues are 0:10:19.920 --> 0:10:23.760 real um their longstanding and a lot of the you know, 0:10:23.880 --> 0:10:27.920 rhetoric that we saw even around the COVID virus um 0:10:28.160 --> 0:10:32.439 had likely agged on some of that concerned. But that 0:10:32.480 --> 0:10:35.160 doesn't change the fact that most Americans still know the 0:10:35.160 --> 0:10:38.760 origin of this pandemic wasn't China. There's a huge issue 0:10:38.760 --> 0:10:43.079 with the World Health Organization and information about the origins 0:10:43.120 --> 0:10:46.440 of it. So the issues are real, but it's absolutely essential, 0:10:46.440 --> 0:10:51.240 of course, that we separate policies from persons. Mohammed, we 0:10:51.280 --> 0:10:53.880 only have about forty five seconds. What is the implication 0:10:54.080 --> 0:10:57.160 of public feeling right now in the United States? Increasingly 0:10:57.160 --> 0:10:59.959 that China is the biggest economic threat. Is it military 0:11:00.120 --> 0:11:02.960 action or is it just more support for actions down 0:11:03.000 --> 0:11:07.839 in Washington, d C. I think overwhelmingly Americans view this 0:11:07.920 --> 0:11:11.680 really as an economic challenge. Um from the perspective of 0:11:11.679 --> 0:11:14.640 public opinion. Obviously there's a huge security element to this. 0:11:14.960 --> 0:11:18.160 But the more that we ask Americans about the trade issues, 0:11:18.200 --> 0:11:20.959 the more that we find most of them actually focused 0:11:21.000 --> 0:11:23.640 on it. For example, when we ask about the situation 0:11:23.720 --> 0:11:28.080 between the conflict between China and Taiwan, only of Americans 0:11:28.160 --> 0:11:30.400 view that as a critical threat to the vital interests 0:11:30.400 --> 0:11:33.319 of the United States versus, of course the economic rise 0:11:33.320 --> 0:11:36.000 of China. What an important conversation. How mud stay close 0:11:36.000 --> 0:11:37.920 and come back soon. I'd love to push this one further. 0:11:38.040 --> 0:11:45.959 How M a junist there the Gallup editor in Chapehan 0:11:46.040 --> 0:11:49.880 principal Global Investors chief strategists from over at Principle. Let's 0:11:49.880 --> 0:11:52.079 start there, Sama, Do you think the cycnical tries breaking 0:11:52.120 --> 0:11:54.480 down or just taking a pause? I think it's taking 0:11:54.520 --> 0:11:55.920 a pause, But I have to say that that the 0:11:56.000 --> 0:11:58.280 number one question I've received in the last week from 0:11:58.280 --> 0:12:01.480 investors is it is the cyclical trade getting a bit 0:12:01.480 --> 0:12:04.360 too frothy? And when do we know when it's time 0:12:04.400 --> 0:12:07.199 to shift. So this is already very pertinent in people's minds, 0:12:07.400 --> 0:12:08.920 and I think one of the reasons is is that 0:12:08.960 --> 0:12:11.000 the market is very much one sided. In the last 0:12:11.000 --> 0:12:13.480 few weeks, it's very much, you know, very optimistic about 0:12:13.480 --> 0:12:16.840 GDP growth, very optimistic about reopening the vaccines, and you know, 0:12:16.880 --> 0:12:19.000 as we've seen that a lot of people really concerned 0:12:19.000 --> 0:12:21.760 about inflation rather than COVID, and you know what, COVID 0:12:21.760 --> 0:12:24.240 hasn't gone away. So I think this is a good reminder. 0:12:24.480 --> 0:12:26.920 But really the underlying story is still one of very 0:12:26.920 --> 0:12:30.440 strong fiscal stimulus eventual reopening, even if the timing isn't 0:12:30.440 --> 0:12:32.719 too certain seeming. What I've found fascinating, it's just the 0:12:32.800 --> 0:12:35.440 lack of differentiation through much of the year until recently 0:12:35.800 --> 0:12:37.400 we came into the year in the conversation and we 0:12:37.440 --> 0:12:39.640 said repeatedly on this show with you two was around 0:12:39.679 --> 0:12:42.920 synchronized global growth. But the vaccine rollout has been anything 0:12:42.960 --> 0:12:45.640 but synchronized globally, and the outlook for growth has been 0:12:45.760 --> 0:12:47.880 anything but synchronized as well. When it comes to the 0:12:47.920 --> 0:12:51.040 upgrades to expectations, we've seen the revisions over the last 0:12:51.040 --> 0:12:52.920 couple of weeks, Yet what have we seen. We've seen 0:12:53.000 --> 0:12:55.480 US banks up for good reason, US yeld tire. We've 0:12:55.480 --> 0:12:58.320 seen European banks rally too, even though we're told that 0:12:58.360 --> 0:13:01.040 the outlook for European growth is inconsistent with the move 0:13:01.080 --> 0:13:02.760 we saw from yields. That was from the e c B, 0:13:03.320 --> 0:13:05.640 not from me. We've seeing e M equities do well 0:13:05.679 --> 0:13:08.920 as well, even with China and Chinese growth and credit 0:13:08.920 --> 0:13:12.800 impulse rolling over and growth maturing. Do you think that 0:13:12.880 --> 0:13:16.080 the breakdown in the cyclical trade on a global basis 0:13:16.520 --> 0:13:18.840 needed to consolidate before we can start to look at 0:13:18.840 --> 0:13:22.160 some real differentiation between regions as we start to build 0:13:22.160 --> 0:13:25.160 out this year again, Yeah, absolutely, I think you know 0:13:25.200 --> 0:13:27.040 increasingly the big question is you know which one is 0:13:27.080 --> 0:13:29.760 going to be the winner because not everyone, unlike we've 0:13:29.840 --> 0:13:31.679 experienced in the last year, not everyone is going to 0:13:31.720 --> 0:13:34.319 be doing particularly well. And as you said, that vaccine 0:13:34.360 --> 0:13:36.120 roll up is probably going to be the game change 0:13:36.120 --> 0:13:37.960 of picking out who's gonna be good and who's gonna 0:13:37.960 --> 0:13:39.920 be bad and kind of I was listening to some 0:13:39.960 --> 0:13:42.920 of your discussion earlier about Europe, and yes, you it 0:13:42.960 --> 0:13:45.839 will accelerate, that vaccine roll up will accelerate, but they 0:13:45.840 --> 0:13:49.000 are falling further and further behind, and by autumn they 0:13:49.040 --> 0:13:51.120 absolutely need to get their house in order, because that 0:13:51.240 --> 0:13:54.600 is when we're also expecting another way. So I think, 0:13:54.600 --> 0:13:56.760 you know, you really does have a task on its hand. 0:13:57.320 --> 0:14:00.400 And from a macro perspective, you know, Europe, even in 0:14:00.400 --> 0:14:02.360 the second half of the year, I wonder if it's 0:14:02.400 --> 0:14:04.880 really going to be able to catch up with the US. 0:14:06.600 --> 0:14:09.720 See how much are you actively changing your guidance in 0:14:09.800 --> 0:14:13.440 terms of what you think people should be investing in. Yeah, 0:14:13.480 --> 0:14:15.280 we we have in the last few weeks we have 0:14:16.000 --> 0:14:20.760 reduced our allocation to emerging markets concerns again about the dollar. 0:14:20.840 --> 0:14:23.760 You know, we came into this year expecting generally everyon 0:14:23.840 --> 0:14:26.400 to be on level terms a week a dollar story, 0:14:26.480 --> 0:14:29.280 and you know, we've seen that narrative significantly change along 0:14:29.320 --> 0:14:31.960 the lines as we've seen the fiscal stimmers package be 0:14:32.040 --> 0:14:35.080 introducing the US. We've also reduced allocation to Europe that 0:14:35.120 --> 0:14:36.840 was a little bit before the end of last year. 0:14:37.240 --> 0:14:40.000 Um and also maybe you know, reconsidering some of the 0:14:40.040 --> 0:14:42.400 small cup moves, we do think that maybe it's gone 0:14:42.520 --> 0:14:44.440 quite far and needs to take a little bit bit 0:14:44.480 --> 0:14:47.880 of time of retrenchment before we get back in that one, 0:14:49.400 --> 0:14:51.760 What are you looking at to decide whether or not 0:14:51.840 --> 0:14:54.400 there's going to be more retrenchent retrenchment in the Russell 0:14:54.440 --> 0:14:57.040 two thousand, is it an idea of the retail investor 0:14:57.080 --> 0:14:59.600 and are perhaps being as present? Is it the idea 0:14:59.640 --> 0:15:02.200 that oath isn't going to necessarily accelerate as quickly as 0:15:02.240 --> 0:15:06.200 people have thought, or are the signposts? I have to say, 0:15:06.240 --> 0:15:08.800 I don't think it's that straightforward as maybe it has been. 0:15:08.840 --> 0:15:10.200 You know, we really need to start looking at the 0:15:10.200 --> 0:15:13.360 evaluation indicators. A lot of the position the retail investor 0:15:13.440 --> 0:15:15.680 is clearly very important here. I think one of the 0:15:15.680 --> 0:15:18.120 things is is that there's been so much market complacency 0:15:18.200 --> 0:15:21.640 around this cyclical trade um that some of those concerns 0:15:21.680 --> 0:15:23.920 inevitably start creeping in. And that's what we're seeing at 0:15:23.920 --> 0:15:26.000 the moment. I think it may last for a few 0:15:26.000 --> 0:15:28.800 more weeks before we will probably be a little bit 0:15:28.840 --> 0:15:30.880 more confident about getting back into some of those more 0:15:30.920 --> 0:15:33.880 cyclical areas. When you say complacency, are you're looking at 0:15:33.960 --> 0:15:35.600 various trades here in the United States or on a 0:15:35.640 --> 0:15:39.400 global basis of regional story, Well, it's come to your 0:15:39.400 --> 0:15:42.120 point is that it's been there was so much consensus 0:15:42.200 --> 0:15:44.720 view coming into this year about which ones are gonna 0:15:44.720 --> 0:15:47.120 do well, about the cyclical trade, about the value trade, 0:15:47.480 --> 0:15:49.560 um and inevitably, when you've got a consent to such 0:15:49.600 --> 0:15:52.160 a significant consensus move, there is going to be a 0:15:52.160 --> 0:15:54.040 moment where things start to break down. And I think 0:15:54.080 --> 0:15:57.040 that's where we are. But you know, we we want 0:15:57.080 --> 0:15:59.040 to look at it as a long term investor. Generally, 0:15:59.240 --> 0:16:01.280 we want to be looking at the fundamentals, and to us, 0:16:01.480 --> 0:16:05.040 the fundamental story is still very strong for the US, 0:16:05.080 --> 0:16:07.960 but of course you need to start having a closer 0:16:07.960 --> 0:16:10.280 look at the regions that I think you're investing in 0:16:10.520 --> 0:16:12.240 that that's where the dispersion is going to show up. 0:16:12.240 --> 0:16:14.480 I've been asking the impossible question, Seema over the last 0:16:14.480 --> 0:16:16.000 couple of weeks, and Lisa, you and I have been 0:16:16.040 --> 0:16:18.680 talking about at LEASA where the growth expectations are peaking 0:16:19.280 --> 0:16:21.400 and you have no way of knowing that right now, 0:16:21.440 --> 0:16:23.160 But we've had a series of guests on this program 0:16:23.200 --> 0:16:25.200 who have said not yet. We think we can still 0:16:25.200 --> 0:16:27.040 surprise to the upside. And I've just seen a data 0:16:27.080 --> 0:16:30.720 point on US retail foot traffic rising fifty eight percent 0:16:31.240 --> 0:16:34.040 last week from a year earlier. This is the base effects. 0:16:34.040 --> 0:16:36.120 We're going to start to see this a whole lot more, 0:16:36.200 --> 0:16:38.520 least in the months ahead. The base effects will kick in. 0:16:38.880 --> 0:16:40.840 And even though a lot of this is highly predictable, 0:16:40.880 --> 0:16:42.920 I think a conversation you and I have had repeatedly 0:16:43.320 --> 0:16:45.880 is how surprised some people will be by some of 0:16:45.920 --> 0:16:48.200 the numbers we might see in the next two months. 0:16:50.040 --> 0:16:52.960 I'm saying that July four the sort of the key moment, Seema. 0:16:53.080 --> 0:16:55.840 Can you weigh in and where you think the expectations 0:16:55.880 --> 0:16:58.800 are based on equity pricing right now? Do you view 0:16:59.480 --> 0:17:02.840 that people have baked in all that optimism, that increase 0:17:02.920 --> 0:17:04.960 in that base effect that John is talking about, or 0:17:05.000 --> 0:17:07.480 do you think the equity treators will also be surprised 0:17:07.480 --> 0:17:10.639 by how good it is. I think there is actually 0:17:10.680 --> 0:17:13.160 some surprise yet to come on the upside. And I think, 0:17:13.320 --> 0:17:14.840 you know, if we just even turn our minds back 0:17:14.880 --> 0:17:16.720 to about two or three months ago, there is still 0:17:16.720 --> 0:17:19.040 a general view that some of the cruise liners would 0:17:19.080 --> 0:17:20.520 never get back up on ship. You know, where would 0:17:20.560 --> 0:17:23.160 the demand realistically come from. And what we're hearing more 0:17:23.160 --> 0:17:25.439 and more is that people are just desperate to go 0:17:25.520 --> 0:17:27.200 out and do the stuff that they were not able 0:17:27.240 --> 0:17:29.359 to do so. I think there could be certainly some 0:17:29.480 --> 0:17:31.320 upside surprises to come. Just to have a look at 0:17:31.320 --> 0:17:34.120 the price of flights domestically here in America through the summer, 0:17:34.160 --> 0:17:35.879 to get a view on where things are going. Seema 0:17:35.920 --> 0:17:38.880 good to see a Seema Chanda, Principal Global Investors Chief 0:17:38.880 --> 0:17:49.119 strategist Nathan sheets Page and fixed Income chief economist and 0:17:49.240 --> 0:17:53.040 had a global macroeconomic research Nathan, let's start here a 0:17:53.080 --> 0:17:55.600 conversation which we touched on about ten minutes ago, which 0:17:55.640 --> 0:17:58.160 I don't think we've talked about nearly enough. The previous 0:17:58.320 --> 0:18:01.880 administration when they talked about taxes, they weren't talking about 0:18:01.880 --> 0:18:04.600 the wealthy, although some people down in d C wish 0:18:04.640 --> 0:18:07.320 they had have done. They were talking about supply side issues, 0:18:07.400 --> 0:18:10.040 investment in America, and maybe that was coming, maybe it wasn't. 0:18:10.080 --> 0:18:11.720 I'm not in the position to talk about that enough 0:18:11.760 --> 0:18:13.480 of my opinion, Nathan, do you think we need to 0:18:13.480 --> 0:18:17.280 have that conversation right now? Again? I think at a minimum, 0:18:17.359 --> 0:18:20.480 what we need to do is be aware of the 0:18:20.640 --> 0:18:24.720 supply side, and I think the UH, the case to 0:18:24.840 --> 0:18:29.600 consider tax increases given where our fiscal position is is 0:18:29.840 --> 0:18:35.560 UH is compelling. There's also a case for various kinds 0:18:35.600 --> 0:18:39.439 of regulatory interventions. But as we do that, we also 0:18:39.520 --> 0:18:42.680 need to think about how business is going to respond 0:18:43.359 --> 0:18:48.600 and the implications of that for the business environment. And 0:18:48.680 --> 0:18:52.880 I very much here kind of a demand side perspective 0:18:52.880 --> 0:18:58.359 of the economy articulated frequently, and demand is critical, but 0:18:58.600 --> 0:19:02.359 in order for the demand and to be mad, we 0:19:02.440 --> 0:19:06.200 also need the supply side to be strong. And balancing 0:19:06.240 --> 0:19:10.359 those considerations I think is critical and I think would 0:19:10.359 --> 0:19:14.520 be helpful in our debates they have more of that 0:19:14.600 --> 0:19:18.000 kind of supply side perspective at the end of the day, 0:19:18.520 --> 0:19:22.240 affirms corporations or not the enemy. They've got to be 0:19:22.320 --> 0:19:24.439 part of the solution if we want to have the 0:19:24.600 --> 0:19:28.280 job creation and the growth that we all desire. Nathan, Unfortunately, 0:19:28.280 --> 0:19:30.840 that's not been part of the conversation on one side 0:19:30.880 --> 0:19:33.639 of the political for a long long time. And Algreaby 0:19:33.720 --> 0:19:36.399 that started with the former president back Obama, when he 0:19:36.440 --> 0:19:38.480 turned around to the business community and said, you didn't 0:19:38.480 --> 0:19:40.840 build this, so let's talk about that a little bit more. 0:19:41.320 --> 0:19:43.760 I want to understand what you saw as an outcome 0:19:43.800 --> 0:19:46.359 of the corporate tax cut from several years back, and 0:19:46.400 --> 0:19:49.919 whether it's simple as simple as reverse engineering that and 0:19:49.960 --> 0:19:52.119 saying this is what happened, will happen if you, Hi, Kick, 0:19:52.200 --> 0:19:54.679 can you help me understand that particular situation just a 0:19:54.680 --> 0:20:00.520 little bit better. The corporate text cut was a powerful 0:20:00.600 --> 0:20:06.360 experiment that I think was cut short. Through two thousand 0:20:06.400 --> 0:20:10.680 and eighteen, we were maybe starting to see a few 0:20:10.800 --> 0:20:17.040 hints of strengthening in investment and maybe some increases in 0:20:17.160 --> 0:20:20.919 corporate sentiment. But then President Trump came with the trade 0:20:20.960 --> 0:20:27.240 war and just quashed uh those uh, those early games, 0:20:27.680 --> 0:20:30.840 and so we never we never really found out. So 0:20:31.000 --> 0:20:33.640 in the event, we didn't get the investment that they 0:20:33.640 --> 0:20:37.080 were arguing. But it's not clear if they had had 0:20:37.080 --> 0:20:40.680 a different policy mix. More broadly, whether we might have 0:20:40.760 --> 0:20:43.680 where whether we might have seen that I I I 0:20:43.760 --> 0:20:48.280 think it is Uh. It was a huge missopportunity where 0:20:48.320 --> 0:20:52.440 President Trump implemented half of policy and then just basically 0:20:52.600 --> 0:20:56.720 killed it with the trade wars. Nathan, can you elaborate 0:20:56.760 --> 0:20:59.119 a little bit more, because at first, Blush, it is 0:20:59.200 --> 0:21:02.280