WEBVTT - Bloomberg Surveillance TV: August 23, 2024 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.200 Terminal and the Bloomberg Business App. Mike Wilson and Morgan 0:00:37.240 --> 0:00:39.880 Stanley joins us ahead of the most important earnings print 0:00:39.960 --> 0:00:40.440 in the years. 0:00:40.520 --> 0:00:41.920 I'm not sure, Mike, if you'd agree with that. 0:00:41.960 --> 0:00:44.159 I will ask you this though, What is more important, 0:00:44.159 --> 0:00:46.720 Mike to you this interest from Chairman Powell a little 0:00:46.720 --> 0:00:50.640 bit later this morning, or that payrolls print on September sixth? 0:00:52.159 --> 0:00:55.280 Yeah, good morning, John. I think in my mind it's 0:00:55.280 --> 0:00:58.720 about the payroll number. It's really about the labor data period. 0:00:59.080 --> 0:01:01.560 That's what's going to take tape, what the Fed does, 0:01:01.680 --> 0:01:03.840 They've said that, and that's what the market's going to 0:01:03.840 --> 0:01:04.480 trade off of. 0:01:05.080 --> 0:01:06.360 I mean, if you go back a month ago. 0:01:06.480 --> 0:01:09.640 That's when we had this correction, and it really did 0:01:09.720 --> 0:01:12.600 kick off with a weaker non farm payroll number. Now 0:01:12.600 --> 0:01:18.160 that has been somewhat refuted by better claims and also 0:01:18.600 --> 0:01:22.399 just you know the deal that the jobs are okay still, 0:01:22.400 --> 0:01:24.800 but then we got the revision. So the data is 0:01:24.800 --> 0:01:27.520 still very mixed in my view, and the market under 0:01:27.560 --> 0:01:29.680 the surface, as we like to look at it is 0:01:29.720 --> 0:01:33.960 still trading very defensively. It doesn't know, So I think 0:01:34.000 --> 0:01:37.399 it comes down to that payroll number, the federal reacts, 0:01:37.560 --> 0:01:39.440 and we'll see and we'll see how the market goes. 0:01:39.480 --> 0:01:42.000 I mean, my general view is if they cut twenty five, 0:01:42.040 --> 0:01:45.040 that's probably fine. If they cut fifty, historically that has 0:01:45.080 --> 0:01:47.560 been a bad signal for the equity markets. 0:01:47.840 --> 0:01:50.080 Mike, you say the markets traded pretty defensively. I want 0:01:50.120 --> 0:01:51.400 to pick up on that and just build on a 0:01:51.440 --> 0:01:53.760 little bit. In some places we start to see that 0:01:53.800 --> 0:01:57.000 breadth improve against small caps of studes perform. We've seen 0:01:57.040 --> 0:01:59.440 the record highst on an equal weight through this week 0:01:59.520 --> 0:01:59.920 so far. 0:02:00.520 --> 0:02:01.600 Mike. Do you think we're just. 0:02:01.640 --> 0:02:03.360 As vulnerable as we were at the start of the 0:02:03.400 --> 0:02:06.000 month to week data or if we reset things differently 0:02:06.000 --> 0:02:06.760 this time around. 0:02:08.160 --> 0:02:12.040 I think we're more vulnerable to another negative data point 0:02:12.080 --> 0:02:15.200 on the labor market. That was sort of a warning sign, 0:02:15.960 --> 0:02:18.000 and once again we don't know the result. But if 0:02:18.040 --> 0:02:20.720 we get a negative payroll number, I think the market 0:02:20.720 --> 0:02:23.480 could react just as bad at the index level. 0:02:23.480 --> 0:02:25.160 So let's talk about that under the surface. 0:02:25.200 --> 0:02:27.520 I mean you mentioned small caps have done better where 0:02:27.560 --> 0:02:30.440 they did better in July when the money rotated away 0:02:30.480 --> 0:02:34.200 from the Magnificent seven and some of the quality growth leaders, 0:02:34.280 --> 0:02:37.480 and it went into defensives quite frankly, so defensives of now. 0:02:37.560 --> 0:02:41.400 And when I say defensives, I mean utilities, healthcare, stables 0:02:41.480 --> 0:02:44.080 in real estate. Those four sectors have led on a 0:02:44.120 --> 0:02:46.880 five day basis, on a one month basis, and a 0:02:46.880 --> 0:02:50.240 three month basis, So it's been very consistent. And that's 0:02:50.240 --> 0:02:52.720 about the time we pivoted back in May to a 0:02:52.760 --> 0:02:55.840 more defensive book and I don't really see any reason 0:02:55.880 --> 0:02:56.960 to kind of deviate from that. 0:02:57.000 --> 0:02:57.160 Now. 0:02:57.200 --> 0:02:59.720 If we get a very strong payroll number, then that 0:03:00.000 --> 0:03:02.160 it's going to reverse sharply back to the more cyclical 0:03:02.200 --> 0:03:04.280 parts of the market. I think it's going to be 0:03:04.360 --> 0:03:08.359 very messy. I don't anticipate the labor data to improve dramatically. 0:03:09.040 --> 0:03:11.320 I don't know if it's going to deteriorate further, but 0:03:11.680 --> 0:03:14.239 given the signal from the stock market and the bond market, 0:03:14.320 --> 0:03:17.080 quite frankly, the markets are definitely paying attention to this. 0:03:17.160 --> 0:03:19.840 And this is a big number, Mike. 0:03:19.880 --> 0:03:22.680 If I can ask what probability of a recession do 0:03:22.760 --> 0:03:25.480 you think the equity market's essentially pricing and you can 0:03:25.520 --> 0:03:28.280 look at breadth there or you can look at aggregate. 0:03:28.400 --> 0:03:30.160 And the other question was on margins, how do you 0:03:30.200 --> 0:03:33.040 see that evolving? Because I felt margins had a nice 0:03:33.120 --> 0:03:37.000 tale wind with the fact that that essential cost of 0:03:37.080 --> 0:03:40.960 input prices were coming down. Does that change if prices 0:03:40.960 --> 0:03:42.720 are going to be more stable, it's all going to 0:03:42.760 --> 0:03:45.840 come down to those sales numbers. So I guess two questions. 0:03:46.440 --> 0:03:47.680 Yeah, we'll start with the second one. 0:03:47.680 --> 0:03:49.840 I mean, I think you're dead right on I mean, 0:03:49.840 --> 0:03:52.680 what the micro data has been definitely weaker than the 0:03:52.720 --> 0:03:53.360 macro data. 0:03:53.360 --> 0:03:55.119 And let me just take a minute on this. 0:03:55.120 --> 0:03:57.200 This kind of goes to my core thesis that we 0:03:57.320 --> 0:04:00.920 basically have a policy mix, call it fiscal dominance, where 0:04:01.240 --> 0:04:04.720 fiscal policy has been really the dominant lever for the 0:04:04.760 --> 0:04:07.680 last couple of years. That's what led to the inflation breakout. 0:04:07.680 --> 0:04:10.280 In my view, there was some supply constraints, sure, but 0:04:10.320 --> 0:04:14.120 basically had too much aggregate demand from fiscal stimulus. And 0:04:14.160 --> 0:04:18.039 now that's somewhat that is somewhat prevented the Fed from 0:04:18.080 --> 0:04:21.960 being more proactive with rate policy, and in effect, it's 0:04:21.960 --> 0:04:24.440 crowded out, as you were mentioning earlier, it's crowded out 0:04:24.560 --> 0:04:27.440 the middle class. It's crowded out the lower class, lower 0:04:27.520 --> 0:04:30.839 income class for sure, and even some of the wealthier 0:04:30.880 --> 0:04:32.200 investors now are being crowded out. 0:04:32.240 --> 0:04:34.720 And that's why small caps have underperformed so much. So 0:04:34.800 --> 0:04:36.560 that that's very much intact. 0:04:37.200 --> 0:04:39.720 And I think that you know that that policy mix 0:04:39.760 --> 0:04:41.160 has been unusual. 0:04:41.480 --> 0:04:42.800 It is also extended. 0:04:42.920 --> 0:04:45.839 I think the cycle longer than what it probably would 0:04:45.839 --> 0:04:47.760 have been, which has kept the Fed doing their job 0:04:47.800 --> 0:04:48.760 of keeping rates. 0:04:48.560 --> 0:04:51.880 Higher for longer. And they're and they're now it's working. 0:04:51.920 --> 0:04:54.599 Now it's really starting to bite any interest rates sensitive 0:04:54.600 --> 0:04:57.479 parts of the market, like housing, autos in some of 0:04:57.520 --> 0:04:58.120 those areas. 0:04:58.120 --> 0:04:59.000 So overall, I. 0:04:58.960 --> 0:05:01.640 Would say that the S and P level, it's not 0:05:01.720 --> 0:05:04.840 really pricing in a recession at all. I would say 0:05:04.920 --> 0:05:07.279 at the stock level, it's probably similar to where the 0:05:07.279 --> 0:05:09.960 bond market is. That's why we have defensive leadership. That's 0:05:09.960 --> 0:05:13.320 why small caps have and persistently underperforming. And it's probably 0:05:13.320 --> 0:05:16.120 in the twenty percent range or so, and that's what 0:05:16.160 --> 0:05:19.479 always happens, right until it's definitive. The stock market doesn't 0:05:19.480 --> 0:05:20.960 really want to go there, and it won't go there 0:05:21.000 --> 0:05:23.159 because it needs the hard data. 0:05:23.839 --> 0:05:25.680 Thank you, which actually makes a lot of sense to me. 0:05:25.720 --> 0:05:27.680 We all see the same data. So this idea that 0:05:27.720 --> 0:05:30.200 the bond market might be pricing is something very different 0:05:30.200 --> 0:05:32.480 from the equity market. When we're all looking at the data, 0:05:32.520 --> 0:05:35.480 we're all listening to the Fed. One point you made 0:05:35.560 --> 0:05:38.599 earlier that fifty basis points might be viewed negatively, and 0:05:38.640 --> 0:05:39.320 I see the point. 0:05:39.360 --> 0:05:40.960 What does the FED know that we don't know why 0:05:40.960 --> 0:05:41.240 are they. 0:05:41.240 --> 0:05:43.880 Cutting fifty but if we hear from chep Out and 0:05:43.920 --> 0:05:46.040 I don't know if we'll hear it today, but providing 0:05:46.080 --> 0:05:50.279 a context around potentially going faster initially that if Montree 0:05:50.320 --> 0:05:52.640 policy is restrictive, they're just trying to reduce the level 0:05:52.640 --> 0:05:55.560 of restrictiveness. You think the equity market might like it, 0:05:55.640 --> 0:05:58.040 that they can be a little more aggressive initially, so 0:05:58.640 --> 0:06:00.680 they're not behind the curve. I guess that was a 0:06:00.800 --> 0:06:03.040 learning from the hiking cycle. It would be to start 0:06:03.080 --> 0:06:05.000 earlier so you don't have to do as much. I 0:06:05.000 --> 0:06:07.039 think you can finess that message and keep it in 0:06:07.080 --> 0:06:09.440 the normalization of fifty basis point cut. 0:06:10.839 --> 0:06:12.280 Well, anything's possible, for sure. 0:06:12.320 --> 0:06:14.880 I'm just saying Historically speaking, when the FED is kicked 0:06:14.920 --> 0:06:18.400 off with a fifty basis point cut, it usually has 0:06:18.600 --> 0:06:21.880 led to, you know, not a great outcome that that 0:06:21.880 --> 0:06:23.919 that you know, basically were on the down swinging on 0:06:24.000 --> 0:06:26.440 the cycle. Now this cycle has been unique. They got 0:06:26.480 --> 0:06:29.680 they probably got higher than they initially planned. So maybe 0:06:29.720 --> 0:06:32.760 that that sort of situation doesn't apply this time. So 0:06:32.800 --> 0:06:35.080 I'm open minded to anything. All I'm saying is that 0:06:35.080 --> 0:06:37.240 if the FED were to do fifty, that means that 0:06:37.320 --> 0:06:41.120 data probably deteriorated more. Okay, that's really kind of where 0:06:41.160 --> 0:06:43.640 that comes from. And that would suggest that probably the 0:06:43.720 --> 0:06:47.159 labor market in particular deteriorated more. And that's how the 0:06:47.200 --> 0:06:49.000 bomb market's pricing it right now, right, I mean, they're 0:06:49.000 --> 0:06:52.560 basically saying it twenty five percent chance of a fifty 0:06:52.600 --> 0:06:55.159 basis point cut. That's not you know, that's much less 0:06:55.160 --> 0:06:56.360 than it was two weeks ago. 0:06:56.720 --> 0:06:59.120 My less squeeze and subsective preferences as well. I know 0:06:59.160 --> 0:07:00.560 you're not a big fan of can sum it's Christion. 0:07:00.720 --> 0:07:03.839 Based on the conversation we've just had, industrials, how do 0:07:03.880 --> 0:07:05.839 they fit in? Why do you like that's part of 0:07:05.839 --> 0:07:07.159 the market so much right now? 0:07:08.279 --> 0:07:11.360 Well, I would say, you know, we don't love industrials here, 0:07:11.400 --> 0:07:13.160 we're just sing in the consumer. 0:07:13.520 --> 0:07:13.880 I'm sorry. 0:07:13.920 --> 0:07:16.480 In the cyclical bucket, you've got to own something, right. 0:07:16.480 --> 0:07:20.560 You can't just be totally naked on cyclical exposure. And 0:07:20.960 --> 0:07:23.680 if there is one group that we would gravitate towards, 0:07:23.680 --> 0:07:26.760 it would be the industrial sector that that's cyclical preference. 0:07:26.840 --> 0:07:30.760 Is there within technology, which is a cyclical group, I 0:07:30.800 --> 0:07:33.800 would say we would skew more towards software rather than 0:07:33.880 --> 0:07:37.960 semiconductors or hardware, simply because they're more defensive, but it. 0:07:37.920 --> 0:07:38.840 Is cyclical still. 0:07:39.120 --> 0:07:40.560 So those would be the two cyclical groups that we 0:07:40.600 --> 0:07:46.120 would like in conjunction with our defensive bias, which is utilities, 0:07:46.400 --> 0:07:48.360 you know, healthcare, staples in real estate. 0:07:49.040 --> 0:07:51.160 My Wilson of Augustanding Mincha always cry to catch have 0:07:51.240 --> 0:08:03.160 with the set. So here's the latest this morning. Kamala Harris, 0:08:03.320 --> 0:08:07.000 formerly accepting the Democratic nomination, prioritizing a fight for America's 0:08:07.000 --> 0:08:10.480 middle class, Donald Trump zero again on immigration as his 0:08:10.560 --> 0:08:13.440 counter programming campaign made a stop at the UST Mexico border, 0:08:13.480 --> 0:08:17.720 threatening large tarris on countries that don't accept deported migrants 0:08:17.920 --> 0:08:19.480 joining us from the DNCA Chicago. 0:08:19.760 --> 0:08:22.360 It's Blimberg's and Marie. Let's get straight to it. 0:08:22.520 --> 0:08:24.559 The question that came from the former president, why didn't 0:08:24.560 --> 0:08:27.040 she do these things that she's complaining about. What's the 0:08:27.080 --> 0:08:28.840 response from the Democratic Party to that? 0:08:31.840 --> 0:08:34.280 Well, Jonathan, she gave this speech last night, which I 0:08:34.280 --> 0:08:37.240 think you nailed it. It was heavy on vibes and 0:08:37.320 --> 0:08:41.439 rhetoric and short on policy. That is normal for acceptance speeches. 0:08:41.480 --> 0:08:44.000 What Donald Trump is going to do now and when 0:08:44.040 --> 0:08:46.520 we're on a race seventy four days to this election, 0:08:47.080 --> 0:08:49.480 he is going to want to define her and tether 0:08:49.600 --> 0:08:53.439 her to Biden. Biden obviously was not polling well, not 0:08:53.559 --> 0:08:56.840 only because of things like inflation and his age, but 0:08:56.920 --> 0:09:00.360 also just you know, other things not happen under the 0:09:00.400 --> 0:09:03.600 surface brought her in the economy as well as immigration. 0:09:04.040 --> 0:09:07.120 So Donald Trump and his campaign has been trying to 0:09:07.360 --> 0:09:12.400 nail Kamala Harris on those specific policies yesterday was really 0:09:12.440 --> 0:09:16.080 her introducing herself to the American people at the top 0:09:16.120 --> 0:09:20.600 of the ticket, not just as the VP ticket VP slot. 0:09:21.160 --> 0:09:23.959 And when you look at some of the broad parts 0:09:24.000 --> 0:09:28.200 of policy, whether it's the economy, foreign policy, immigration, and 0:09:28.280 --> 0:09:32.160 reproductive rights, it really felt like a continuation, or at 0:09:32.240 --> 0:09:35.080 least she was cherry picking parts of the Biden menu 0:09:35.440 --> 0:09:38.400 that she would carry through to her administration. Not a 0:09:38.400 --> 0:09:41.040 lot of details, but broadly in line with what we've 0:09:41.080 --> 0:09:43.280 been seeing from President Joe Biden. 0:09:43.320 --> 0:09:44.040 Maybe she spent a. 0:09:44.000 --> 0:09:47.480 Little bit more time on reproductive rights, something that she 0:09:47.679 --> 0:09:50.840 really talked about when she was vice president already and 0:09:51.040 --> 0:09:53.480 Joe Biden stayed away from. But most of this felt 0:09:53.520 --> 0:09:55.760 like a continuation. And Donald Trump is going to try 0:09:55.800 --> 0:09:59.280 to really tether her to Joe Biden because he pulls 0:09:59.280 --> 0:10:01.840 well when it comes to things like the economy and immigration, 0:10:01.960 --> 0:10:04.320 and Joe Biden and Kamal Harris did not when it comes. 0:10:04.240 --> 0:10:04.760 To Donald Trump. 0:10:04.800 --> 0:10:07.040 Can we talk about one specific policy that's been mentioned 0:10:07.040 --> 0:10:09.200 in the last twenty four hours threatening launch Tarris some 0:10:09.240 --> 0:10:11.480 countries that don't accept deported migrants. 0:10:11.760 --> 0:10:13.000 What's been the reaction to that. 0:10:15.840 --> 0:10:18.520 Well, Jonathan, when it comes to the Democratic reaction to 0:10:19.080 --> 0:10:23.080 migration immigration Kamala Harris said yesterday this would be her 0:10:23.160 --> 0:10:28.040 policy position, which is to bring back the bipartisan immigration 0:10:28.200 --> 0:10:32.040 agreement that we're struck between a number of senators Knows, 0:10:32.120 --> 0:10:36.880 notably Senator James Langford of Oklahoma and Connecticut Senator Chris Murphy, 0:10:37.280 --> 0:10:40.000 and that Democrats have been hammering that. The reason why 0:10:40.040 --> 0:10:42.960 that deal did not go through because presidents said, I 0:10:43.000 --> 0:10:45.800 want that deal killed because I want the issue. So 0:10:45.960 --> 0:10:49.160 that is their current plan, which is more support for 0:10:49.200 --> 0:10:51.800 border security, the ability for the president to have his 0:10:51.880 --> 0:10:54.520 executive power to shut it down. When it comes to 0:10:54.600 --> 0:10:59.040 tariffs broadly, at the entire DNC, they have been talking 0:10:59.040 --> 0:11:01.800 about the fact that this is a sales tax. They 0:11:01.840 --> 0:11:04.360 don't want to say the word tariffs because remember Jonathan, 0:11:04.600 --> 0:11:08.520 this administration also kept terrors from the Trump era under 0:11:08.640 --> 0:11:12.400 Joe Biden's watch, some of those Chinese tariffs. But they 0:11:12.400 --> 0:11:14.000 are calling it a sales tax. 0:11:14.440 --> 0:11:14.640 MH. 0:11:14.679 --> 0:11:16.679 I appreciate the imper will catch over in about an 0:11:16.679 --> 0:11:19.800 hour's time from the DNC in Chicago. Speaking of the menu, 0:11:20.200 --> 0:11:23.400 vtig'sis at Botanski with this to say, the Harris campaign 0:11:23.480 --> 0:11:26.640 has treated Bidenomics like a buffet whereby they can embrace 0:11:26.679 --> 0:11:28.920 the issues the play well at the kitchen table well, 0:11:28.960 --> 0:11:33.000 hopefully leaving the less politically palatable provisions behind. Isaac joins us. 0:11:33.000 --> 0:11:35.600 Now for more so, Isaac, let's build on that. What's 0:11:35.640 --> 0:11:36.160 on the menu? 0:11:38.679 --> 0:11:42.440 Well, sure, thus far, it's whatever plays well with the vibes. 0:11:42.440 --> 0:11:44.440 As you said, right, like, all that we've learned over 0:11:44.520 --> 0:11:48.280 the past few days is that is that they have 0:11:48.400 --> 0:11:52.640 a triangulation play called here to do their best to 0:11:53.440 --> 0:11:58.040 a blunt the attacks that Vice President Harris is too 0:11:58.120 --> 0:12:03.920 liberal and b to to meaningfully separate Vice President Harris 0:12:03.920 --> 0:12:06.800 from some of the more contentious Biden issues, and to 0:12:06.840 --> 0:12:10.200 portray her as a change agent. And that's why you 0:12:10.240 --> 0:12:14.280 saw President Trump just last night trying to tag her 0:12:14.320 --> 0:12:16.800 as the incumbent. And that's what the next seventy. 0:12:16.400 --> 0:12:17.800 Four days is going to be about. 0:12:18.000 --> 0:12:21.880 Is Vice President Harris seen as a representation of the 0:12:21.920 --> 0:12:25.600 current administration and the incumbency, or is she seen as 0:12:25.640 --> 0:12:26.600 an agent of change? 0:12:26.679 --> 0:12:28.920 Isaac, When you sit down with clients, when you catch 0:12:28.960 --> 0:12:30.600 up with them in person over the phone, and they 0:12:30.640 --> 0:12:33.840 ask you, Isaac, which candidate is the pro market candidate? 0:12:33.960 --> 0:12:37.880 If you form strong ideas about that, yet you know. 0:12:37.960 --> 0:12:40.040 Look, I think what we tried to focus on is 0:12:40.280 --> 0:12:44.680 acute market themes, right, Like, we feel pretty strongly that 0:12:45.040 --> 0:12:47.040 Trump is good for M and A because he's going 0:12:47.080 --> 0:12:49.840 to change leadership at the FTC. Right, That's something that 0:12:49.880 --> 0:12:52.079 we can really sink our teeth into when clients ask 0:12:52.160 --> 0:12:55.120 who's good for the market broadly, I think that one's 0:12:55.120 --> 0:12:57.800 a lot tougher because when you look at Trump's policies, 0:12:57.840 --> 0:13:01.760 we're talking about tariffs, right, talking about uncertainty in the 0:13:01.800 --> 0:13:05.600 global economic regime that I don't think folks are really 0:13:05.640 --> 0:13:08.240 getting their arms around, especially since we're not going to 0:13:08.320 --> 0:13:11.160 have the sugar high of tax cuts that come along 0:13:11.280 --> 0:13:14.080 with that. And so I think that that's really the 0:13:14.160 --> 0:13:16.000 stinction that we've made and the point I've tried to 0:13:16.040 --> 0:13:17.600 make the clients, and the one that I think we 0:13:17.679 --> 0:13:20.240 really need to start understanding and sink Garan teeth into 0:13:20.360 --> 0:13:22.880 is no matter who is in the White House, we're 0:13:22.920 --> 0:13:26.360 going to have buckets and buckets of deficit spending coming 0:13:26.800 --> 0:13:29.680 through the tax reform effort that comes next year. 0:13:31.720 --> 0:13:34.840 I think, in terms of more detail on Harris's policies, 0:13:34.920 --> 0:13:36.959 do you think that's a when or if? Do you 0:13:37.000 --> 0:13:38.679 think she's going to try to go as long as 0:13:38.720 --> 0:13:41.319 possible without providing detail on that, or is she being 0:13:41.320 --> 0:13:42.439 sort of strategic about it. 0:13:43.360 --> 0:13:47.000 I've been surprised at how open Democrats at the convention 0:13:47.120 --> 0:13:52.400 have been in their belief and their hope that she 0:13:52.480 --> 0:13:55.920 will not offer much policy detail. I found it interesting 0:13:55.960 --> 0:13:57.960 that a number of top Democrats have said, do you 0:13:58.000 --> 0:14:01.480 remember that Elizabeth Warren when she in twenty twenty had 0:14:01.480 --> 0:14:04.520 a white paper for every policy? There were twenty pages, 0:14:04.600 --> 0:14:09.240 well vetted by academics and market experts for each policy, 0:14:09.280 --> 0:14:11.680 and she sure as heck didn't win, So why would 0:14:11.760 --> 0:14:14.040 Harris and so? Look, I think that this is again 0:14:14.160 --> 0:14:17.520 going to be something that they ride the vibes, which 0:14:17.679 --> 0:14:20.960 which John has outlined, for as long as they possibly can. 0:14:21.320 --> 0:14:23.480 The date that I have circled on my calendar is 0:14:23.560 --> 0:14:27.040 September tenth. That's the first and only debate between these two. 0:14:27.080 --> 0:14:29.920 And to me, that's the moment where perhaps the rubber 0:14:30.000 --> 0:14:31.560 can heat meet the road in terms of some of 0:14:31.600 --> 0:14:35.160 these policy specifics that I think we're all yearning for Isaac. 0:14:35.200 --> 0:14:36.000 We couldn't agree more. 0:14:36.080 --> 0:14:37.800 What is particularly striking to me, as well as how 0:14:37.880 --> 0:14:41.880 much room, how much space progressive like Warren Alexandro Acasso 0:14:42.000 --> 0:14:45.600 Cordez have given the Vice President Kamala Harris. They're not 0:14:45.760 --> 0:14:48.480 trying get to unpopular themes. If you think about where 0:14:48.480 --> 0:14:51.720 Harris was back in twenty nineteen gone into twenty twenty, 0:14:52.120 --> 0:14:54.560 if you were running in that primary, you had to 0:14:54.600 --> 0:14:57.000 make commitments to things that weren't going to be popular 0:14:57.280 --> 0:14:59.120 with the rest of the country. Do they continue to 0:14:59.120 --> 0:15:00.560 give her that kind of space, Isaac? 0:15:02.480 --> 0:15:04.320 I think they do until election day? 0:15:04.360 --> 0:15:06.320 And so those there are two points to make here. 0:15:06.440 --> 0:15:10.960 Number one is the one unifying issue for Democrats is 0:15:10.960 --> 0:15:13.520 that they are against Trump. So as long as they 0:15:13.520 --> 0:15:16.360 can keep this race about Trump, they will remain together. 0:15:16.840 --> 0:15:18.440 But the second point, and the one that I think 0:15:18.440 --> 0:15:23.560 that we should examine over time, is I truly think 0:15:23.600 --> 0:15:27.000 that if Democrats are in power, you're going to start 0:15:27.040 --> 0:15:29.920 to see those fissures re emerge. And Amh mentioned the 0:15:29.920 --> 0:15:33.360 immigration bill that failed. That immigration bill had a chance 0:15:33.360 --> 0:15:36.320 to become law this year in large part because of 0:15:36.360 --> 0:15:38.760 the election. Now, if Democrats win the White House and 0:15:38.760 --> 0:15:41.560 they're in power in Congress in some way, shape or form, 0:15:41.920 --> 0:15:44.560 I'm not sure that same immigration bill passes because at 0:15:44.560 --> 0:15:48.400 that point you see the progressive voices rise and become 0:15:48.440 --> 0:15:50.640 even louder. And so that's something we think about, that 0:15:50.800 --> 0:15:54.560 chasm between rhetoric and reality that warrants consideration. 0:15:54.800 --> 0:15:56.480 Is it when it comes to blue sweet red sweep? 0:15:57.120 --> 0:15:59.280 Formed any firm ideas on that one? Also, what's your 0:15:59.280 --> 0:15:59.760 base case? 0:15:59.800 --> 0:15:59.960 Now? 0:16:01.680 --> 0:16:04.600 Look at the moment I think that we're going through 0:16:04.720 --> 0:16:07.440 the presidential election. There seven on the presidential side, there 0:16:07.440 --> 0:16:10.160 the seven states that matter. I still think that you 0:16:10.240 --> 0:16:12.840 have to look at the issues that animate those voters. 0:16:13.160 --> 0:16:16.840 The top ones are the economy and immigration. Trump does 0:16:16.960 --> 0:16:19.400 better on average by eight and fifteen points in the 0:16:19.400 --> 0:16:22.960 swing states. As long as that maintains, I view Trump 0:16:22.960 --> 0:16:25.680 as a slight favorite. On the Senate side, I remain 0:16:25.720 --> 0:16:28.560 committed to our view eighty plus percent likelihood that the 0:16:28.560 --> 0:16:31.680 Senate is going to flip to Republican control. And I 0:16:31.720 --> 0:16:34.480 think that's something that investors in markets should really more 0:16:34.560 --> 0:16:38.520 themselves to, is that we will have a small Republican 0:16:40.800 --> 0:16:43.280 margin in the Senate that can then give us some 0:16:43.360 --> 0:16:45.680 sort of framework for thinking about what next year will 0:16:45.680 --> 0:16:46.000 look like. 0:16:46.160 --> 0:16:49.000 Interesting, Isaac, thank you, sir, appreciate the update. I suppotanski 0:16:49.080 --> 0:17:01.280 that a great Actually when begin with that top story, 0:17:01.480 --> 0:17:03.800 stocks arising as trade is a wait. FED Chair Jaypounce 0:17:03.880 --> 0:17:07.040 remarks at ten am Eastern Time. Bob Dollar crossmark right 0:17:07.080 --> 0:17:10.760 in the following. The global economic expansion remains intact and 0:17:10.840 --> 0:17:15.119 will benefit from rate cunning expectations. Equity valuation remains at risk, 0:17:15.680 --> 0:17:19.440 especially if growth continues to decelerate and the FED does 0:17:19.520 --> 0:17:23.040 not show urgency. Bob joined us now for more. But 0:17:23.119 --> 0:17:25.280 we want to talk about a gap, a spread, if 0:17:25.320 --> 0:17:27.840 you will, the difference between FED funds in the two 0:17:27.920 --> 0:17:30.560 year you've noted. That's the why this going all the 0:17:30.560 --> 0:17:32.480 way back to two thousand and eight. And when people 0:17:32.520 --> 0:17:35.760 say two thousand and eight, Bob, they get worried concerned. 0:17:35.920 --> 0:17:37.359 How worried and concern should they be? 0:17:38.320 --> 0:17:42.880 Well, look, the journey is out. The economy is slowing. 0:17:43.000 --> 0:17:45.320 I don't think people can dispute that anymore. But we 0:17:45.359 --> 0:17:47.240 don't know is it going to be a soft landing 0:17:47.320 --> 0:17:51.000 or a harder landing. And look, that's a mind view 0:17:51.119 --> 0:17:53.840 out of the Fed's control. The FED what he does 0:17:54.240 --> 0:17:57.040 in the next few meetings will impact the economy later. 0:17:57.160 --> 0:17:59.119 So it's already cooked and we just don't know. 0:17:59.880 --> 0:18:02.480 You want to be fearful, pretend there's going to be 0:18:02.480 --> 0:18:05.240 our hard landing not out of the question. The consumers 0:18:05.240 --> 0:18:07.879 slow and you're seeing it all over the place, but 0:18:07.920 --> 0:18:09.760 we just don't know how slow they're going to get. 0:18:09.880 --> 0:18:10.840 That's the problem. 0:18:11.080 --> 0:18:13.480 Well, play best guest with me. Now, let's take that spread. 0:18:13.880 --> 0:18:15.640 You've got FED funds up here and the two year 0:18:15.720 --> 0:18:17.760 down here. How do you expect that to close? Is 0:18:17.760 --> 0:18:19.600 it the two year yield coming up to FED funds, 0:18:19.800 --> 0:18:21.840 fed funds coming down, the two meeting each other. 0:18:21.880 --> 0:18:22.800 What's that going to look like? 0:18:23.480 --> 0:18:26.320 Look, the Fed's going to lower rates. The Chairman will 0:18:26.320 --> 0:18:29.400 make that clear today. But as you and Stewart talked 0:18:29.400 --> 0:18:30.800 about earlier, we just don't know the. 0:18:30.880 --> 0:18:32.399 Pace of that decline. 0:18:32.960 --> 0:18:36.560 You recollected appropriately January First, we're gonna get six cuts 0:18:36.560 --> 0:18:36.960 this year. 0:18:37.119 --> 0:18:40.360 Oh no, no, it's going to be seven. Well here 0:18:40.400 --> 0:18:40.600 we are. 0:18:40.760 --> 0:18:44.160 We haven't seen one yet, and so I think it'll 0:18:44.200 --> 0:18:48.560 be slow but deliberate, and the language will be will 0:18:48.600 --> 0:18:52.080 watch very carefully. Look, inflation, remember, is still two point eight, 0:18:52.119 --> 0:18:56.040 it's not two. So they have to have their one 0:18:56.080 --> 0:18:58.920 eye on that corner of the world too, as they 0:18:59.240 --> 0:19:02.360 on the other hand in the fight this emerging economic slowdown. 0:19:02.440 --> 0:19:04.080 But we've ran it into this story. 0:19:04.280 --> 0:19:07.040 We've noted that the equal Way s and P five 0:19:07.160 --> 0:19:09.080 hundred has printed a couple of all time high so 0:19:09.200 --> 0:19:11.520 far this week, we've seen the leadership come from the 0:19:11.520 --> 0:19:14.440 small caps at times. Once again, with that in mind, 0:19:14.560 --> 0:19:16.159 are we more at risk of this day to come 0:19:16.200 --> 0:19:18.680