WEBVTT - How the Election Could Impact Markets 0:00:02.440 --> 0:00:13.200 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.240 --> 0:00:17.520 Surveillance podcast. Catch just live weekdays at seven am Eastern 0:00:17.680 --> 0:00:21.240 on applecar Player or Android Auto with the Bloomberg Business app. 0:00:21.560 --> 0:00:24.800 Listen on demand wherever you get your podcasts, or watch 0:00:24.880 --> 0:00:26.119 us live on YouTube. 0:00:26.200 --> 0:00:28.200 Let's check out with Anika Gup that she's the director 0:00:28.440 --> 0:00:33.239 Macroeconomic Research at Wisdom Tree. Anico, as you sit back 0:00:33.280 --> 0:00:36.080 here and think about these markets here, what are some 0:00:36.120 --> 0:00:37.360 of the key drivers for you? 0:00:37.600 --> 0:00:40.800 Is it the FED? Is it the economy? Is it 0:00:40.880 --> 0:00:43.680 corporate earnings? What are you thinking about here? 0:00:45.479 --> 0:00:48.160 I think it's a combination of the three. I think, 0:00:48.240 --> 0:00:51.159 you know, we've we've moved from this goldilocks period of 0:00:52.440 --> 0:00:57.200 you know, progress on disinflation helping to drive you know, 0:00:57.240 --> 0:00:59.600 further monetary easing, and I think that's taken a bit 0:00:59.640 --> 0:01:04.240 of a especially in the US, since we've received much 0:01:04.280 --> 0:01:07.920 stronger economic data. We're now beginning to see that benefit 0:01:08.040 --> 0:01:12.160 from lower risk premiere being offset by rising bond deals. 0:01:13.240 --> 0:01:16.679 And that's you know, that's based essentially because investors are 0:01:16.720 --> 0:01:20.640 now reducing the amount of expected FED rate cuts, and 0:01:20.880 --> 0:01:24.279 that's having an imbackground equity markets and obviously the market 0:01:24.480 --> 0:01:26.840 does also remain on dender hooks because we have the 0:01:26.920 --> 0:01:31.400 upcoming US elections and you know, they're trying to figure 0:01:31.400 --> 0:01:36.040 out whether these improving odds of a Trump victory, you know, 0:01:36.080 --> 0:01:37.360 actually do come to fruition. 0:01:38.560 --> 0:01:41.200 No shortage of things for investors to worry about. Anka 0:01:41.319 --> 0:01:43.840 and the top of the show, so Paul mentioned that 0:01:44.080 --> 0:01:45.480 gold has come in a little bit, but still at 0:01:45.480 --> 0:01:47.319 twenty seven to thirty three, we've seen it hit records 0:01:47.319 --> 0:01:50.320 here almost day after day. How are you thinking about 0:01:50.360 --> 0:01:53.680 gold and what do you see as driving that asset. 0:01:53.720 --> 0:01:56.960 Is it simply maybe not fear, but concern about the 0:01:56.960 --> 0:01:58.560 election outcome? Is it something more than that? 0:02:00.480 --> 0:02:03.680 I mean, you know, over the past month, we've seen 0:02:03.760 --> 0:02:08.919 a strong, you know, disc correlation between the US dollar 0:02:09.000 --> 0:02:13.000 and gold, alongside really yields and gold. So despite the 0:02:13.000 --> 0:02:15.600 fact that the dollar has strengthened, despite the fact that 0:02:15.720 --> 0:02:20.000 real yields have increased, uh, you know, gold still continues 0:02:20.080 --> 0:02:25.800 to attain multiple record highs. And that's because we're seeing 0:02:25.800 --> 0:02:27.960 a lot of strength on the physical market. So we're 0:02:27.960 --> 0:02:32.880 actually seeing uh, central banks increase their purchases of gold, 0:02:33.320 --> 0:02:37.720 We're seeing you know, investors increase their purchases in gold, 0:02:38.480 --> 0:02:41.240 and that's that's been you know, one of the big drivers. 0:02:41.280 --> 0:02:46.680 Now since the Rush Ukraine War, we actually saw flows 0:02:46.720 --> 0:02:51.640 into gold linked ETF's decline. But since June we've had 0:02:52.720 --> 0:02:55.760 you know, about thirteen consecutive weeks of inflows into gold 0:02:55.800 --> 0:03:00.840 related ETFs actually increase. So that's been a new catlests 0:03:00.919 --> 0:03:06.240 in the horizon drive gold prices. And I think the reason, 0:03:06.400 --> 0:03:10.480 the overarching reason for why investors are you know, flocking 0:03:10.520 --> 0:03:14.720 towards gold is primarily because of rising geopolitical risks, you know, 0:03:14.720 --> 0:03:17.320 with the tensions in the Middle East still not looking 0:03:17.360 --> 0:03:19.680 like they've subsided. And at the same time, we have 0:03:20.200 --> 0:03:22.600 you know, the U S elections, the upcoming US elections, 0:03:22.600 --> 0:03:25.880 and that is also you know, triggering a lot of volatility. 0:03:27.120 --> 0:03:29.840 All right, So let's focus on the US equity market 0:03:29.840 --> 0:03:32.880 and anika. You know, we've seen this market that's been 0:03:32.960 --> 0:03:36.480 kind of driven by you know, great performance out of 0:03:36.480 --> 0:03:38.840 a handful of stocks called the Magnificent Seven and so 0:03:38.880 --> 0:03:41.040 on and so forth. A there's a lot of folks 0:03:41.040 --> 0:03:43.280 that say that that's not really healthy for the market. 0:03:43.640 --> 0:03:47.600 Are you concerned about that lack of breath or how 0:03:47.600 --> 0:03:50.080 do you think about this US equity markets just in general. 0:03:52.320 --> 0:03:55.320 Yeah, we still remain positive. You know, we've actually, we 0:03:55.400 --> 0:03:58.680 expect obviously the bar has been lured for Q three 0:03:58.680 --> 0:04:02.400 earning season now looking at average earnings growth of around 0:04:02.480 --> 0:04:07.640 four percent. However, if we look ahead, a lot of 0:04:07.680 --> 0:04:10.400 that margin expansion for the S and P five hundred 0:04:10.840 --> 0:04:14.280 is primarily being driven by the technology sector as well 0:04:14.280 --> 0:04:17.560 as the communications sector. I mean, for technology, it's accounting 0:04:17.560 --> 0:04:21.040 for around eighteen percent earnings growth for twenty twenty five 0:04:21.360 --> 0:04:24.800 and fifteen percent for communications services. So they are going 0:04:24.880 --> 0:04:28.640 to be the key drivers for earnings going forward. And 0:04:28.680 --> 0:04:31.119 I think given the fact that the bar is so low, 0:04:31.680 --> 0:04:34.400 already so low for Q three, we expect you know, 0:04:34.480 --> 0:04:39.159 quite a few companies to actually meet or exceed that bar, 0:04:39.600 --> 0:04:41.560 which should drive a performance higher. 0:04:42.400 --> 0:04:44.280 We've listened to a lot of interviews this week from 0:04:44.279 --> 0:04:46.320 our colleagues in Washington as the IMF and World Bank 0:04:46.360 --> 0:04:49.240 meetings take place, and Christine Legard, the ECB president, was 0:04:49.760 --> 0:04:52.320 one of them who came through our studios and spoke 0:04:52.360 --> 0:04:55.839 with Francine Lockwin. And something that she said. President Leguard 0:04:55.880 --> 0:04:58.480 said is that she's confident in the direction the ECB 0:04:58.600 --> 0:05:00.920 is taken here given and what we're seeing Germany and Italy, 0:05:01.640 --> 0:05:05.600 Germany on pace for yet another year of contraction. Are 0:05:05.600 --> 0:05:08.120 there opportunities in Europe right now? And where do you 0:05:08.160 --> 0:05:08.520 see them? 0:05:08.520 --> 0:05:08.760 Are there? 0:05:08.800 --> 0:05:11.000 Are there equities opportunities in Europe as you see them? 0:05:11.800 --> 0:05:15.440 Absolutely? I think, you know, the pessimism towards Europe is 0:05:15.640 --> 0:05:20.719 over overstated. We already saw the iPhone numbers today for Germany, 0:05:21.120 --> 0:05:25.520 you know, show a slight upward trajectory, very different from 0:05:25.560 --> 0:05:28.360 what we've been seeing over the past few months for 0:05:28.680 --> 0:05:32.480 the greater part of this year. The key opportunity right 0:05:32.520 --> 0:05:35.360 now is in the small caps segment for European equities. 0:05:36.160 --> 0:05:41.680 That's because earnings for European small caps and within the 0:05:41.760 --> 0:05:46.200 small caps primarily until towards of value is you know, 0:05:46.320 --> 0:05:52.880 is showing more than a sixteen percent earnings growth rise 0:05:53.279 --> 0:05:55.680 over the prior year. And if you compare that to 0:05:57.600 --> 0:06:00.000 MSCI Europe, which is representing you know, the lot more 0:06:00.120 --> 0:06:02.880 of the large cap segment of the market, we're looking 0:06:02.880 --> 0:06:06.600 at earnings expectation actually down eight percent. So the opportunity 0:06:06.640 --> 0:06:10.320 is primarily in the small cap space, timpted towards more 0:06:10.360 --> 0:06:13.960 value oriented sectors. And that's because the small caps were 0:06:13.960 --> 0:06:17.000 the most penalized when Bates rules. It's such a sharp 0:06:17.040 --> 0:06:19.599 base and now that we're going to see a much 0:06:20.080 --> 0:06:24.480 sharper unwind of easing from Europe as opposed to the US, 0:06:24.880 --> 0:06:27.800 that's going to asymmetrically benefit the smaller cap segment of 0:06:27.800 --> 0:06:30.719 the market in comparison to the large cap. 0:06:31.480 --> 0:06:33.160 Nika, thank you so much for joining us. I really 0:06:33.200 --> 0:06:35.480 appreciate getting a few minutes from your time a Nica Gupta. 0:06:35.880 --> 0:06:39.520 She's the director of macroeconomic research for the Equities and 0:06:39.600 --> 0:06:43.440 Commodities business at Wisdom Tree. She is in London, one 0:06:43.680 --> 0:06:47.040 King William Street, which is literally right around the corner 0:06:47.040 --> 0:06:50.520 from the Bloomberg headquarters in London and Queen Victoria Street. 0:06:55.440 --> 0:06:59.279 You're listening to the Bloomberg Surveillance podcast. Catch us live 0:06:59.400 --> 0:07:02.560 weekday after noons from seven to ten am. Easter Listen 0:07:02.640 --> 0:07:04.800 on Apple car Play and and Broyd Auto with a 0:07:04.800 --> 0:07:07.839 Bloomberg Business app, or watch us live on YouTube. 0:07:08.040 --> 0:07:10.520 Joe Matthew joins us here Balance of Power host. He's 0:07:10.560 --> 0:07:14.400 down in Washington, DC. He is hip deep in all 0:07:14.640 --> 0:07:18.679 the that is going on on both of these campaigns. Here, Joe, 0:07:19.040 --> 0:07:21.120 it looks like the Democrats are kind of trying to 0:07:21.120 --> 0:07:23.400 rely on some star power. But for me, I was 0:07:23.440 --> 0:07:26.680 just mentioned to Dave David Gera Joe, this star power thing, 0:07:26.720 --> 0:07:29.680 whether it's my boy Bruce Springsteen or whether it's Beyonce. 0:07:29.880 --> 0:07:33.920 I mean, does that even It's almost like that's so 0:07:34.160 --> 0:07:36.880 nineteen nineties or two thousands. I mean, is that even 0:07:36.960 --> 0:07:37.680 relevant anymore? 0:07:37.720 --> 0:07:38.080 Do you think? 0:07:39.080 --> 0:07:40.640 Well, I guess the bendz that you invite. 0:07:40.680 --> 0:07:44.760 But there's no evidence to suggest that celebrity endorsements move 0:07:44.800 --> 0:07:46.360 a needle when it comes to polling. 0:07:47.120 --> 0:07:48.679 But look, we're at a tied race. 0:07:48.760 --> 0:07:52.360 You saw Bloomberg's Swing state survey yesterday forty nine forty nine. 0:07:52.360 --> 0:07:55.520 Did you see today Siena College New York Times forty 0:07:55.560 --> 0:07:58.720 eight forty eight. This is as as tied up as 0:07:58.720 --> 0:08:01.920 it gets. So the campaign trying anything they can. And yeah, 0:08:01.960 --> 0:08:05.440 Kamala Harris is surrounding herself with some pretty heavy celebrity. 0:08:05.440 --> 0:08:07.760 Willie Nelson's going to be up there tonight as well. 0:08:08.840 --> 0:08:11.240 He had a big Cannabis for Kamala thing. The other 0:08:11.280 --> 0:08:14.880 I don't know if that helps either, but yeah, nuh, yeah, 0:08:14.880 --> 0:08:17.880 no surprise at all. Donald Trump is doing it himself, right. 0:08:17.960 --> 0:08:20.920 You got Eminem for Kamala Harris. He's got kid rock 0:08:20.960 --> 0:08:22.680 for Donald Trump. He's gonna be with Joe Rogan. 0:08:22.720 --> 0:08:24.239 He was with Tucker crosson the night before. 0:08:24.520 --> 0:08:28.160 Everybody's grabbing whomever they think has an audience that goes 0:08:28.200 --> 0:08:32.120 for influencers and all these podcasters getting interviews because they're 0:08:32.200 --> 0:08:35.440 flailing guys. They're throwing whatever they can at the wall 0:08:36.040 --> 0:08:38.200 to try to beat each other by what will be 0:08:39.000 --> 0:08:41.560 probably less than a point if these polls are true. 0:08:41.920 --> 0:08:43.599 Joe, Let's talk a bit about the rally that was 0:08:43.640 --> 0:08:45.960 held in Atlanta yesterday. So yes, Free Springsteen was there. 0:08:46.000 --> 0:08:48.520 President Obama was there as well with Kamala Harris, the 0:08:48.520 --> 0:08:50.880 first time the two of them appeared on the trail together. 0:08:51.600 --> 0:08:53.680 The campaign saying, this is the largest crowd that they've 0:08:53.679 --> 0:08:55.800 had for a rally yet, I think twenty three thousand 0:08:55.840 --> 0:08:59.600 people in that venue. What was the message? What is 0:08:59.640 --> 0:09:02.840 the message from the Harris campaign? Let's start there with 0:09:02.920 --> 0:09:05.520 eleven days to go till election day? Is it simply 0:09:05.520 --> 0:09:08.040 focused on making sure you get to the polls, but 0:09:08.080 --> 0:09:09.600 more so than that, voting early if you can. 0:09:10.760 --> 0:09:13.040 There's a lot of that, and you know, look, there's 0:09:13.520 --> 0:09:16.079 I don't know that they have crystallized a closing message. 0:09:16.120 --> 0:09:18.719 Both sides have really just been kind of shooting from 0:09:18.720 --> 0:09:20.760 the hip, and we've seen these messages evolving. 0:09:21.040 --> 0:09:22.520 Here's the best I'll do for you. 0:09:22.800 --> 0:09:25.959 What we're hearing from the Harris campaign. He has an 0:09:26.040 --> 0:09:28.880 enemy's list, we have a to do list. That's what 0:09:29.000 --> 0:09:31.480 we're hearing a lot about. But also going back to 0:09:31.520 --> 0:09:34.679 this threat to democracy idea that Joe Biden frankly never 0:09:34.720 --> 0:09:36.640 really connected on, and a lot of people are wondering 0:09:36.640 --> 0:09:40.960 why Kamala Harris isn't talking more about the economy than democracy. 0:09:41.040 --> 0:09:43.480 She's going to be back in Washington next week, one 0:09:43.520 --> 0:09:46.440 week before the election on Tuesday, standing on the ellipse 0:09:46.880 --> 0:09:49.240 where we all remember Donald Trump holding that speech in 0:09:49.240 --> 0:09:51.559 that rally on January sixth, to try to bring people 0:09:51.600 --> 0:09:53.360 back to that moment. So I think there are a 0:09:53.440 --> 0:09:58.120 lot of different closing arguments coming from both campaigns. Last night, 0:09:58.360 --> 0:10:01.240 Tyler Perry, Samuel L. Je Jacks, and Spike Lee. I 0:10:01.280 --> 0:10:03.160 could keep going with the names. They all got up 0:10:03.160 --> 0:10:05.160 to the podium to reinforce those points. 0:10:05.720 --> 0:10:06.000 Joe. 0:10:06.200 --> 0:10:08.120 A lot of folks are saying that what's going to 0:10:08.160 --> 0:10:11.200 be really key to this election is getting out the vote. 0:10:11.200 --> 0:10:14.559 And participation. What do we know about maybe turnout? What 0:10:14.960 --> 0:10:16.480 do we think turnout is going to be in this election? 0:10:17.880 --> 0:10:21.040 Probably an all time high based on what we're seeing 0:10:21.040 --> 0:10:23.679 the campaigns certainly hope so. And I'm saying that because 0:10:23.880 --> 0:10:26.920 of just the incredible closeness in the race, the amount 0:10:26.960 --> 0:10:29.079 of engagement that we're seeing, but also the early voting 0:10:29.080 --> 0:10:31.880 has been setting records, and it's been setting records in 0:10:31.920 --> 0:10:37.319 states that have not always been fully leaning into early voting, 0:10:37.360 --> 0:10:42.600 with Republicans specifically in states like Arizona pull in ballots 0:10:42.880 --> 0:10:44.520 more often than Democrats are. 0:10:44.600 --> 0:10:46.440 So there's a bit of noise out there. 0:10:46.480 --> 0:10:48.280 But I can tell you guys, people are voting early 0:10:48.320 --> 0:10:51.960 in person, by absentee, by mail, and that's also going 0:10:52.040 --> 0:10:53.560 to be a big reason why we have to wait 0:10:53.600 --> 0:10:55.640 a long time before this race is called. I mean, 0:10:55.640 --> 0:10:57.880 we're really going out of our way to the warrant 0:10:57.880 --> 0:11:00.520 our viewers and listeners that it could be if not 0:11:00.600 --> 0:11:01.439 a week before we know. 0:11:01.440 --> 0:11:03.560 A while, Joe, we've talked a lot about the role 0:11:03.600 --> 0:11:06.520 Elon Musk is playing in Pennsylvania in particular, and there 0:11:06.559 --> 0:11:08.400 was this blockbuster piece in the Wall Street Journal that 0:11:08.400 --> 0:11:11.720 Trump last night indicating that Elon Musk has talked repeatedly 0:11:11.720 --> 0:11:14.920 continues to talk. I think it alleged, Yeah, with Vladimir Putin, 0:11:14.920 --> 0:11:18.400 the president of Russia. Walk us through the implications of that. 0:11:18.520 --> 0:11:21.520 So we've got Elon Musk who's reportedly in regular contact 0:11:21.559 --> 0:11:24.120 with the Russian president, Donald Trump, who's reportedly in regular 0:11:24.120 --> 0:11:26.839 contact with the Russian president. And I don't need the 0:11:26.880 --> 0:11:28.560 reportedly here when I say that these two met are 0:11:28.559 --> 0:11:30.320 talking to each other all the time. Elon Muskin and 0:11:30.360 --> 0:11:33.160 Donald Trump are walk us through why this is such 0:11:33.160 --> 0:11:35.560 a significant story. Again, this is something the journal has reported, 0:11:35.600 --> 0:11:38.559 we haven't we haven't confirmed, but certainly made some seismic 0:11:38.600 --> 0:11:39.640 waves over the course of the night. 0:11:40.320 --> 0:11:42.160 Well, look, I mean this goes back to what Donald 0:11:42.160 --> 0:11:45.800 Trump likes to call Russia Russia Russia, suggesting that this 0:11:45.960 --> 0:11:49.680 was all a hoax, the idea that he was colluding 0:11:49.720 --> 0:11:53.480 somehow with Russia or Vladimir Putin, or at least enjoying 0:11:53.480 --> 0:11:57.600 the benefits of some interference. We know that his relationship 0:11:57.640 --> 0:11:59.400 is something that has rubbed people the wrong way. He 0:11:59.440 --> 0:12:01.000 says that it's it's a good thing that it in 0:12:01.040 --> 0:12:04.920 fact strengthens our nation to have a leader with relationships 0:12:05.240 --> 0:12:08.200 with other world leaders. But look, we don't really have 0:12:08.280 --> 0:12:10.199 to go to the degrees of separation here. 0:12:10.640 --> 0:12:12.239 If it's Elon Musk, Donald. 0:12:12.000 --> 0:12:14.720 Trump, and Vladimir Putin and a triangle of communication, that's 0:12:14.720 --> 0:12:18.360 a big deal. Elon Musk, according to these reports, in fact, 0:12:19.000 --> 0:12:21.760 was asked to do a favor by Vladimir Putin and 0:12:21.800 --> 0:12:25.280 not turn on the Starlink satellite service over Taiwan as 0:12:25.320 --> 0:12:26.280 a favorite decision. 0:12:26.360 --> 0:12:26.600 Ping. 0:12:27.600 --> 0:12:29.680 So you know, it's not like they're trading recipes on 0:12:29.720 --> 0:12:33.559 the phone here, guys. This actually could have major geopolitical implications. 0:12:34.640 --> 0:12:36.960 What do we know, Joe about down ballot? 0:12:36.960 --> 0:12:40.040 I'm kind of thinking about, you know, we really have 0:12:40.080 --> 0:12:41.320 to get a handle on who's going to be in 0:12:41.320 --> 0:12:42.480 the House, who's going to be in a Senate. 0:12:42.600 --> 0:12:44.480 What's the thinking with DC these days? 0:12:45.160 --> 0:12:46.839 You know, the conventional wisdom for some time, and I 0:12:46.880 --> 0:12:48.880 don't think it's any different right now, is that the 0:12:48.920 --> 0:12:53.240 Senate flips from Democrat to Republican, the House flips from 0:12:53.240 --> 0:12:56.880 Republican to Democrat, and then we'll see what happens in 0:12:56.920 --> 0:13:00.720 the White House. Both are, of course, dealing with such 0:13:00.760 --> 0:13:02.600 thin majorities that it wouldn't take a lot for either 0:13:02.679 --> 0:13:05.920 to happen. This is a tough map for Democrats in 0:13:05.960 --> 0:13:09.160 the Senate this year. There's some very difficult races when 0:13:09.200 --> 0:13:11.800 you look across the swing states in particular, whether we're 0:13:11.800 --> 0:13:15.800 talking about Pennsylvania, Ohio's a big one with shared brown Wisconsin. 0:13:15.840 --> 0:13:18.760 The Senate race has us wondering if Democrats can keep 0:13:18.800 --> 0:13:20.760 the majority the House. You know, it would take four 0:13:20.800 --> 0:13:24.440 seats essentially to flip here, but it's going to take 0:13:24.480 --> 0:13:28.320 some time. We might actually know the Senate on election night, 0:13:28.360 --> 0:13:29.760 and I don't want to predict that, but there's a 0:13:29.800 --> 0:13:31.600 good chance that we will or the following morning. 0:13:31.640 --> 0:13:33.520 The House is going to take some time. 0:13:33.880 --> 0:13:37.040 It states like New York and more specifically states out 0:13:37.040 --> 0:13:41.440 west California that are going to take probably days to count. 0:13:41.960 --> 0:13:44.120 And when we're only talking about a couple of seats here, 0:13:44.360 --> 0:13:46.120 it's ironic to think that we will have to wait 0:13:46.200 --> 0:13:49.360 days to know who controls the House of Representatives. But look, 0:13:49.600 --> 0:13:51.280 we're coming up to New York, guys. I don't think 0:13:51.280 --> 0:13:52.680 they're letting us go home until all this. 0:13:52.679 --> 0:13:55.120 Stuff is called. So we're going to experience this together. 0:13:55.480 --> 0:13:58.720 Paul Joe bringing up that Senate race in Ohio and 0:13:58.760 --> 0:14:00.480 just the amount of money that's been poured into that 0:14:00.640 --> 0:14:03.319 race in particular is just so extraordinary that we've become 0:14:03.360 --> 0:14:06.040 kind of inured to how much he's fueling all of 0:14:06.040 --> 0:14:08.560 these all of these campaigns and races. Joe, you mentioned 0:14:08.600 --> 0:14:10.720 you're coming to New York. Donald Trump is coming here 0:14:10.760 --> 0:14:13.000 as well on Sunday. He's going to be a Madison 0:14:13.000 --> 0:14:15.880 Square Garden. Elon Musk reportedly is going to be there 0:14:15.960 --> 0:14:18.320 as well. We've talked a lot about the Harris messaging 0:14:18.320 --> 0:14:19.640 that we heard in Atlanta that we're going to hear 0:14:19.640 --> 0:14:22.720 in Houston, where she goes today. What is his messaging being, 0:14:22.800 --> 0:14:24.760 Ben and so you mentioned those those house races here 0:14:24.760 --> 0:14:28.200 in New York. My guess my sense is that's that's 0:14:28.320 --> 0:14:31.400 aside from the ego boost of playing Madison Square Garden 0:14:31.440 --> 0:14:33.680 for Donald Trump, that's the importance of him coming here 0:14:33.720 --> 0:14:35.200 to kind of see if he can keep arrest some 0:14:35.240 --> 0:14:37.560 of those house seats away from Democrats in New York. 0:14:38.040 --> 0:14:39.240 Well, that's one way to look at it. 0:14:39.320 --> 0:14:41.920 I'm not sure that has any reason to do with 0:14:41.960 --> 0:14:43.800 why he's actually going. To your point, he wanted to 0:14:43.840 --> 0:14:45.840 play Madison Square Garden and look, it might be a 0:14:45.880 --> 0:14:48.480 smart strategy. It's going to get all kinds of coverage. Yeah, 0:14:48.520 --> 0:14:50.920 Elon will be there, even Mike Johnson on stage. Can 0:14:50.920 --> 0:14:53.520 you imagine a year ago telling Mike Johnson he was 0:14:53.560 --> 0:14:55.760 going to be playing Madison Square Gardening. 0:14:56.360 --> 0:14:57.800 But yeah, it's a big deal. 0:14:57.840 --> 0:15:00.000 I don't look, you know, I keep conjuring up image 0:15:00.200 --> 0:15:02.240 of Led Zeppelin, and I think I'm showing my age 0:15:02.280 --> 0:15:04.640 here because nobody I sit with in my row has 0:15:04.680 --> 0:15:06.400 ever heard of the song remains the same, and they 0:15:06.440 --> 0:15:08.560 keep telling me, no, it's Billy Joel. He wants to 0:15:08.560 --> 0:15:11.880 be Billy Joel. Everybody wants to play Madison Square Garden. 0:15:11.920 --> 0:15:13.520 So they're going to pay a million dollars to do it. 0:15:13.560 --> 0:15:16.200 By the way, they're basically renting the plays out. And 0:15:16.240 --> 0:15:18.080 I'll be honest, with the amount of coverage that will 0:15:18.120 --> 0:15:20.360 probably generate, I suspect to be worth a lot more 0:15:20.600 --> 0:15:21.440 than a million dollars. 0:15:21.480 --> 0:15:23.440 So maybe it's not that silly. 0:15:23.360 --> 0:15:24.560 Bad playing the garden. Why not? 0:15:24.760 --> 0:15:27.360 Joe Matthew, Thank you so much, Joe Matthew. He is 0:15:27.400 --> 0:15:30.320 a host of balance of power. He is in Washington, DC, 0:15:30.440 --> 0:15:32.240 he is right in the middle of it. Appreciate getting 0:15:32.440 --> 0:15:33.800 a few minutes of his time. 0:15:34.000 --> 0:15:38.280 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:15:38.360 --> 0:15:41.560 starting at seven am Eastern on applecar Play and Android 0:15:41.600 --> 0:15:44.440 Auto with the Bloomberg Business app. You can also listen 0:15:44.560 --> 0:15:47.640 live on Amazon Alexa from our flagship New York station, 0:15:48.040 --> 0:15:50.760 Just say Alexa play Bloomberg eleven thirty. 0:15:50.880 --> 0:15:52.520 Back in the day when I was a sell side analysts, 0:15:52.560 --> 0:15:55.920 he went to Boston three four times a year to 0:15:56.000 --> 0:15:58.760 shill for your II votes, which I got, by the way, 0:15:59.480 --> 0:16:02.000 I own that town for a long time. One of 0:16:02.040 --> 0:16:05.840 the places you went was Wellington Management. I mean solid 0:16:06.000 --> 0:16:10.000 old money, crusty New York money. That's where you went. 0:16:10.280 --> 0:16:12.600 Some smart people there. I never got off on the 0:16:12.640 --> 0:16:14.880 fixed income floor. I went straight to the equity elevator 0:16:14.880 --> 0:16:15.400 to the top there. 0:16:15.480 --> 0:16:15.720 Yeah. 0:16:15.720 --> 0:16:17.760 No, it's too much math. Bridge Kurana Joints is. 0:16:17.800 --> 0:16:20.120 He's a senior managing director and he's a fixed income 0:16:20.120 --> 0:16:23.560 portfolio manager at Wellington Management. Hey, Bridge, is our Federal 0:16:23.560 --> 0:16:26.160 Reserve going to cut interest rates in November? Because I'm 0:16:26.160 --> 0:16:27.920 looking at some of this economic David, even like the 0:16:28.280 --> 0:16:32.400 industrial production numbers that came out today pretty solid across 0:16:32.400 --> 0:16:32.640 the board. 0:16:32.680 --> 0:16:33.680 What do you think our Fed's going to do? 0:16:34.080 --> 0:16:35.840 Thanks for having me back. Yeah, I do think they 0:16:35.880 --> 0:16:38.120 are going to cut about another twenty five basis points 0:16:38.160 --> 0:16:41.080 in November. You know why has the Fed changed its 0:16:41.160 --> 0:16:43.680 rhetoric to focus so much on the unemployment rate from 0:16:43.720 --> 0:16:46.960 focusing on inflation. I really think it comes from their 0:16:47.080 --> 0:16:49.240 change in view. They have this line that they've been 0:16:49.240 --> 0:16:51.840 repeating quite often that the labor market is not the 0:16:51.880 --> 0:16:54.320 source of the inflation in the economy, and that is 0:16:54.360 --> 0:16:57.160 their biggest fear because that's what the nineteen seventies was about, 0:16:57.160 --> 0:17:00.840 the wage price spiral, and now they don't believe in 0:17:01.000 --> 0:17:03.320 they're right about that. I think that the leads speak 0:17:03.360 --> 0:17:06.000 to the labor market not being the reason we have 0:17:06.040 --> 0:17:08.080 inflation in the economy, and that means that they can 0:17:08.119 --> 0:17:11.359 go back to their pre COVID policy of targeting the 0:17:11.400 --> 0:17:13.920 neutral rate for the economy, which they think is about 0:17:13.960 --> 0:17:16.360 three percent. That's the level where they don't think policy 0:17:16.440 --> 0:17:19.840 is expansionary, they don't think it's contractionary. And they're looking 0:17:19.840 --> 0:17:21.880 at the economy and they say, look, we're interest rates 0:17:21.880 --> 0:17:24.320 are at five percent. We think three percent is neutral. 0:17:24.560 --> 0:17:27.000 We have a lot of room to cut and we're still. 0:17:26.800 --> 0:17:27.880 In restrictive territory. 0:17:27.880 --> 0:17:29.639 So I think they're going to continue along this path 0:17:29.800 --> 0:17:31.280 with that twenty five basis point cut. 0:17:31.320 --> 0:17:33.320 For a neophyte like myself who has heard of our 0:17:33.400 --> 0:17:36.760 star but just doesn't understand the intricacies of it, how 0:17:36.760 --> 0:17:38.760 difficult is it for them to target this and how 0:17:38.840 --> 0:17:42.120 much disagreement is there among policymakers on that committee about 0:17:42.400 --> 0:17:42.919 what it is? 0:17:43.520 --> 0:17:46.359 So there's there, It's very hard to know. You only 0:17:46.400 --> 0:17:48.760 know when you're either below it right. You don't know 0:17:48.800 --> 0:17:50.679 in a real time. What you can do is you 0:17:50.680 --> 0:17:52.320 can look at their estimates. So you go to that 0:17:52.440 --> 0:17:54.680 dot plot that we all talk about, look at where 0:17:54.720 --> 0:17:57.199 their long term dot is. It's around three percent, and 0:17:57.200 --> 0:17:59.840 there's actually a lot of that's the spot where there's 0:18:00.280 --> 0:18:03.200 consensus on So they think it's around three percent. But 0:18:03.240 --> 0:18:05.080 I don't think that really matters whether or it's three, 0:18:05.240 --> 0:18:07.080 three and a half or two and a half. The 0:18:07.080 --> 0:18:09.280 point is that they're at five and they're dealing with 0:18:09.320 --> 0:18:11.760 the inflation story, which is less pronounce than it was 0:18:11.760 --> 0:18:14.840 two years ago, and so they're basically saying, Okay, maybe 0:18:14.840 --> 0:18:16.360 it's three and a half. Let's see what the economy 0:18:16.400 --> 0:18:18.159 looks like when we get down to that three and 0:18:18.200 --> 0:18:21.080 a half level. If it's still accelerating at that point. 0:18:21.240 --> 0:18:23.639 Then yes, maybe the neutral rate is higher, but we 0:18:23.760 --> 0:18:26.399 just know that we're much higher than that at this point. 0:18:27.000 --> 0:18:27.360 All right. 0:18:27.400 --> 0:18:30.560 So if I'm in a fix and come business today, 0:18:31.080 --> 0:18:32.480 I know I don't have to be a rock star. 0:18:32.520 --> 0:18:33.879 I can sit in a two year treasury and get 0:18:33.880 --> 0:18:34.960 you could get off on that floor. 0:18:35.000 --> 0:18:35.800 I can get off on that floor. 0:18:35.880 --> 0:18:38.240 Say hey, kids, I'm long the two year treasury. I'm 0:18:38.240 --> 0:18:41.919 clipping a four point zero five percent coupon. Should I 0:18:41.960 --> 0:18:43.680 just do that or should I take some credit risk? 0:18:44.200 --> 0:18:44.480 Yeah? 0:18:44.520 --> 0:18:47.920 I mean I do think that I think bonds are attractive. 0:18:47.920 --> 0:18:49.800 I do think that when you look at credit spreads, 0:18:49.840 --> 0:18:53.639 they are are quite tight right now. So investment grade spreads, 0:18:53.680 --> 0:18:55.639 you know, looking at the bloombergency is less than one 0:18:55.680 --> 0:18:56.520 hundred basis points. 0:18:56.560 --> 0:18:59.200 Highield spreads below three hundred basis. 0:18:58.880 --> 0:19:01.520 Points, you know, that is not a lot of compensation 0:19:01.720 --> 0:19:03.800 for the riskser that are out there. I mean, we 0:19:03.840 --> 0:19:07.520 are in the first quintile of spreads, and historically over 0:19:07.560 --> 0:19:09.640 the next three to four years, that does mean negative 0:19:09.640 --> 0:19:12.240 excess returns for credit sectors. And I do think we 0:19:12.320 --> 0:19:16.560 actually are seeing defaults and the distressed exchange ratio, which 0:19:16.560 --> 0:19:20.320