Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and a Marie Hortenn. Join us each
Speaker 2: day for insight from the best in markets, economics, and
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Speaker 2: Bloomberg Terminal and the Bloomberg Business App. Rob Casey of
Speaker 2: Signum Global Advisors joins us now for more. Rob, we'd
Speaker 2: love your thoughts on this. Millions of people have already voted.
Speaker 2: Do we have any clarity whatsoever on how that vote
Speaker 2: has been breaking?
Speaker 3: Yeah?
Speaker 4: John, ten really good to be with you. I mean,
Speaker 4: we have clarity in the sense that we have really
Speaker 4: good data coming out of the early vote. A number
Speaker 4: of states report, you know, partisanship, gender race breakdown.
Speaker 3: We can see it by county.
Speaker 4: The thing is with in that data, even though it's
Speaker 4: good data, we haven't seen a lot of clear trends.
Speaker 4: So women are turning out more than men. That's a
Speaker 4: good sign for Harris, but they're turning out about where
Speaker 4: they were turning out in twenty twenty, So so not
Speaker 4: a clear better or worse than the Biden Trump matchups.
Speaker 1: You know, Rob, just to jump in there.
Speaker 5: NBC News Decision Desk has new female Democratic voters in Pennsylvania.
Speaker 5: They're seeing that in flux. But the flip side of
Speaker 5: this is what about the male vote, because they see
Speaker 5: new male Republican voters in Arizona, two critical swing states.
Speaker 4: Yeah, Frankly, I think Arizona is where Harris is running weakest,
Speaker 4: and that's for two reasons. We're seeing her running weaker
Speaker 4: among Latino voters and much weaker among male voters, which
Speaker 4: is really a national trend in the blue Wall. Though
Speaker 4: Harris is less impacted by both of those, primarily because
Speaker 4: of the white women who David was just discussing.
Speaker 3: White women turning out.
Speaker 4: In droves for Harris at a higher percentage and with
Speaker 4: a better margin for Harris than in twenty twenty.
Speaker 5: They're both going to be in Wisconsin today, Rob, how
Speaker 5: tight does that raise?
Speaker 3: It's really tight, really tight.
Speaker 4: At Sigmam, we feel good in our call that Harris
Speaker 4: will win the presidency. A lot of that is because
Speaker 4: we feel as though she's running clearly ahead in Michigan
Speaker 4: and Wisconsin, but across all of the swing states, you know,
Speaker 4: the point today doesn't show.
Speaker 3: Clearly that they're tied. At every pole that we're seeing
Speaker 3: is within the four points, which.
Speaker 4: Is the average margin of varia in presidential cycles between
Speaker 4: two thousand and today.
Speaker 3: So all of these races are incredibly tight.
Speaker 4: But I do think it's fair to say Harris is
Speaker 4: leading if anywhere in Wisconsin and Michigan.
Speaker 6: Rob We keep talking about how tight these poles are,
Speaker 6: how it's really not connecting. Yet there seems to be
Speaker 6: a growing conviction in the investors who we speak with
Speaker 6: that it's not going to be a contested election, that
Speaker 6: it's not going to drag on for a significant amount
Speaker 6: of time. And you can see this in the options
Speaker 6: market or basically the volatility peaks a day after the
Speaker 6: election and then it peters off with this idea that
Speaker 6: we'll have some sort of clear outcome. Er sense, how
Speaker 6: is that correct?
Speaker 7: Is that your base case?
Speaker 2: Also?
Speaker 3: It is our base case.
Speaker 4: We think we get a very clear result in the
Speaker 4: first forty eight hours post election. It may not be
Speaker 4: that the Associated Press is calling the election within forty
Speaker 4: eight hours. But we do think that markets and most
Speaker 4: who are looking at the election most closely will have
Speaker 4: a very good sense. As we did in twenty twenty,
Speaker 4: right betting markets moved to Biden about eighty percent as
Speaker 4: of Wednesday morning, So even though it took until Saturday
Speaker 4: for the Associated Press to call the twenty twenty election,
Speaker 4: markets essentially priced in the Biden wins starting on Wednesday.
Speaker 4: We expect to see a similar result. I mean, you
Speaker 4: have to remember in twenty sixteen and in twenty twenty,
Speaker 4: all of the swing states, essentially all of the swing
Speaker 4: states broke for one candidate or the other.
Speaker 3: It was Trump and then it was Biden.
Speaker 4: And we think very likely that there will be some
Speaker 4: polling air it will affect most of the swing states
Speaker 4: almost equally. And that's that most of the swing states
Speaker 4: will break for one candidate or the other. So even
Speaker 4: if there are outstanding legal challenges, et cetera, they're probably
Speaker 4: not going to be significant enough and the margin won't
Speaker 4: be tight enough for them to matter a whole lot.
Speaker 6: Robbie said something there that was really important to me
Speaker 6: because I've heard it echoed by other people that there
Speaker 6: probably is a polling air. What could that polling air
Speaker 6: be because a lot of people have been saying it
Speaker 6: feels like maybe something is just off of these polls.
Speaker 4: Yeah, Unfortunately, I don't have a very good answer in
Speaker 4: terms of direction, because we really feel as though there
Speaker 4: will be polling air. I mean, there always is polling air.
Speaker 4: Polling was very good in twenty twenty two. There was
Speaker 4: still some era two to four points. We have heard
Speaker 4: from clients as very strong belief that Poland will underestimate
Speaker 4: Trump because it underestimated him in twenty sixteen, it underestimated
Speaker 4: him in twenty twenty. I mean, we all remember that.
Speaker 4: The thing is, we've seen posters make a number of
Speaker 4: changes both to their collection process and to their sampling process,
Speaker 4: and so we really think that, you know, we probably
Speaker 4: will see a polling air if we're lucky, two to
Speaker 4: four points. If we're unlucky, you know, four to eight points.
Speaker 4: But it's really hard at this point to predict in
Speaker 4: what direction that polling air is going to land.
Speaker 5: Web I think of twenty sixteen in Michigan and how
Speaker 5: Hillary Clinton lost that vote by about ten thousand votes.
Speaker 5: So if the independent Jill Stein wasn't on the ballot,
Speaker 5: Hillary Clinton could have clinged Michigan. Is that what gives
Speaker 5: you confidence about Wisconsin and Michigan because OURFK is still
Speaker 5: on the battle in those two key states.
Speaker 4: Yeah, the third party question is really interesting. Third party
Speaker 4: candidates did hurt Clinton in twenty sixteen. They came back
Speaker 4: and hurt Trump in twenty twenty. It is true that
Speaker 4: Joe Sign especially in Michigan, is probably going to run
Speaker 4: beyond polling it, and that's because she sort of serves
Speaker 4: as a proxy for Air American voters and progressive Democrats
Speaker 4: who are very unhappy with the Biden administration's handling of
Speaker 4: the Middle East. Nonetheless anmiory to your point, I mean,
Speaker 4: RFK remains on the ballot in Michigan and Wisconsin.
Speaker 3: As hard as he's tried to get.
Speaker 4: Off of the ballot, he's pulling it between one and
Speaker 4: a half to three percentage points nationally still today. So
Speaker 4: I don't know who those people are who think they're
Speaker 4: still going to vote for RFK. They're certainly not paying
Speaker 4: attention to the newsfolk, given he's clearly dropped out and
Speaker 4: supported Trump even though he remains.
Speaker 3: On the ballot.
Speaker 4: I think It's also important to consider that the only
Speaker 4: third party candidate who is on the ballot in all
Speaker 4: seven of the swing states is chased all over the libertarians,
Speaker 4: so he's going to pull more votes from the right
Speaker 4: wing as well.
Speaker 3: I don't want to overstate it. It's not a lot.
Speaker 4: I think third party candidates are unlikely to make a
Speaker 4: huge impact in this race. But we're hearing a lot
Speaker 4: about Jill Stein, and I think it's important to look
Speaker 4: on the other side of the aisle on the ticket
Speaker 4: as well.
Speaker 1: Rob.
Speaker 2: Just quickly, a final word from you, sir on election night.
Speaker 2: If there's one thing to watch your election night guide
Speaker 2: was the one thing you'll look here.
Speaker 4: Well, we're really hoping to get results from North Carolina early,
Speaker 4: most of the results from Georgia early.
Speaker 3: But if there's sort of one other thing I.
Speaker 4: Would look at, is Kamala Harris outperforming in urban areas
Speaker 4: among all voters, but primarily black and Latino voters and
Speaker 4: young voters. If she can outperform there as well as
Speaker 4: I perform among white women.
Speaker 3: The election as hers.
Speaker 2: Okay, the signal globifizis thank you. Let Mohammad into the
Speaker 2: conversation as well. Mohammad and Evan of Queen's College Camp
Speaker 2: which joins us. Now, Mohammed, we'd love your early reaction
Speaker 2: to this and just tell us is this noise? Is
Speaker 2: this weakness we can look through?
Speaker 1: So my free takeaways and the first one speaks to
Speaker 1: is it noise? Is it signal? Three elements on noise,
Speaker 1: we should look through them pay rolls, labor force participation,
Speaker 1: and earnings. The fourth one unemployment. I agree with Jeff
Speaker 1: that has more information. Content two is if you want
Speaker 1: to make more of this data, then go beyond the
Speaker 1: big four headline numbers and go into the details. And
Speaker 1: you need to do that if you're going to derive
Speaker 1: any economic and policy implications from this report. And then finally,
Speaker 1: the reaction of the bond market has to do with
Speaker 1: two things. One, as Mike noted, the Wisper number was
Speaker 1: even higher than the consensus on hundred thousand, and as
Speaker 1: you noted earlier, the balance of risk was on the
Speaker 1: upside for the market. So what you're seeing is a
Speaker 1: repositioning that people were hedging a little bit because the
Speaker 1: one thing that would have really moved things is a
Speaker 1: much stronger number, not a much weaker number, and that's
Speaker 1: something that you noted earlier today, John.
Speaker 6: Mohammed, I obstruck by the fact that we've gotten so
Speaker 6: many revisions and so many unclear numbers that we can't
Speaker 6: fully rely on. How much are you really taking more
Speaker 6: signal still from what corporate executives say and from the
Speaker 6: page book and some of that commentary, then some of
Speaker 6: the numbers that we've been getting out that show and
Speaker 6: really have led this expectation in markets that there should
Speaker 6: have been an upside surprise.
Speaker 1: So, Lisa, this is a time when you've got to
Speaker 1: take a very holistic view and also have a pencil
Speaker 1: of salt added to all that because we have some
Speaker 1: major events coming up. Look on the whole, I think
Speaker 1: the data are consistent with an economy that's still robust,
Speaker 1: an inflation weight that is proving somewhat more sticky than
Speaker 1: you would like, and a major call for the FED
Speaker 1: to exit this notion of fine tuning and go into
Speaker 1: a world where it has a steady steer on interest rates.
Speaker 1: It should be cutting by twenty five basis points for
Speaker 1: the next few meetings and then revisiting after that. It
Speaker 1: should not be looking to react like it had in
Speaker 1: July by not cutting like it did last time by
Speaker 1: cutting fifty to every basis points. It should just be
Speaker 1: steady because this data is going to be noisy, and
Speaker 1: that's what happens at inflection points.
Speaker 6: Jeff to that point, and a number of different people
Speaker 6: who've come on the show today and in the past
Speaker 6: few weeks have pointed to this idea that maybe they
Speaker 6: Fed could frontload rate cuts because they are on sort
Speaker 6: of this steady steer right now that they do have
Speaker 6: room to make rates less restrictive in tangent with inflation
Speaker 6: coming down based on these numbers. Is that basically your
Speaker 6: base case too, that they're going to take this window
Speaker 6: to front load.
Speaker 1: Yeah.
Speaker 7: You know, if you look at where the market has
Speaker 7: been moving, it's not really been in the November and
Speaker 7: December expectation. The Fed's kind of done a pretty good
Speaker 7: job saying we're going to front load. There's a debate
Speaker 7: about whether fifty was a mistake or not. Okay, let's
Speaker 7: put that to the side. That's behind us. So it's
Speaker 7: really about the forward looking twenty twenty five twenty twenty
Speaker 7: six path that's been repriced. And I think the story
Speaker 7: going into next year will be the FED talking about, hey,
Speaker 7: we've gotten off of we've gotten started here in terms
Speaker 7: of normalization, we don't have to go quite as fast
Speaker 7: because away from today's data, the economic data, yesterday's data,
Speaker 7: you know, is much stronger than the kind of fears
Speaker 7: over a very restrictive FED policy would otherwise say. So
Speaker 7: they can kind of pull back, maybe they start to
Speaker 7: talk about every other meeting that's kind of in the
Speaker 7: price and so I think the Fed's got itself in
Speaker 7: a better place. We're going to get the front loaded
Speaker 7: cuts fifty last time, twenty five to twenty five, and
Speaker 7: then every other meeting that's kind of a ligne, and
Speaker 7: then we'll see where the data goes and where the
Speaker 7: debate on our star and how restrictive are we really.
Speaker 7: The economic data is held up pretty well. Yes, this
Speaker 7: is a down side disappointment, but the broader message is
Speaker 7: labor markets have been normalizing. They're not collapsing, they're normalizing.
Speaker 7: They're still trying to stick the soft landing, and I
Speaker 7: think the soft landing is still the message.
Speaker 2: If you are just joining us, welcome to the program.
Speaker 2: Just moments ago, twelve minutes ago, we've got a big
Speaker 2: downside surprise on a payrolls report came into twelve k.
Speaker 2: The media estimate was one hundred. I want to remind
Speaker 2: you of some words from a speech from Governor Waller
Speaker 2: in the middle of October ahead of this number. Governor
Speaker 2: Waller said this at a federal reserve, this report will
Speaker 2: most likely show a significant but temporary loss of jobs
Speaker 2: from two recent hurricanes and a strike at Boeing. I
Speaker 2: expect these factors may reduce employment growth by more than
Speaker 2: one hundred thousand this month. He went up to say,
Speaker 2: since the job's report will come during the usual blackout
Speaker 2: period for policymakers commenting on the economy, you won't have
Speaker 2: any of us trying to put this low reading into perspective,
Speaker 2: though I hope others will. So let's do that right now,
Speaker 2: my McKee, we've got some more.
Speaker 8: Yeah. Looking again at the hurricane impact. According to the BLS,
Speaker 8: the Establishment survey was affected for two reasons. They say
Speaker 8: one is that the hurricanes probably prevented people from answering,
Speaker 8: and also the survey period. The way they phrase it
Speaker 8: is it ended several days before the end of the
Speaker 8: month because of the timing of the month, and so
Speaker 8: they may not have gotten all the surveys in that
Speaker 8: even were answered, so we're going to have to look
Speaker 8: at next month to do it. The survey, as Lisa
Speaker 8: points out, as the lower survey response rate lowis since
Speaker 8: nineteen ninety one, and when you look at what the
Speaker 8: weather is overall, it's understandable.
Speaker 1: Now.
Speaker 8: The other part of it is the household survey, and
Speaker 8: the BLS specifically says that was not affected by the storms.
Speaker 8: So the number you can trust is the four point
Speaker 8: one Jeff Rosenberg was pointing out, and the number you
Speaker 8: got a hold in abeyance is the twelve thousand.
Speaker 2: In some ways, do you think this makes the fence
Speaker 2: life just a little bit easier next week? A stronger
Speaker 2: number have been the bigger problem in the news coming.
Speaker 8: Oh, a very strong number would have been something that
Speaker 8: they would have to have talked around. Now they can say, well,
Speaker 8: this just we seem to be on the same path.
Speaker 8: And unemployment's not going up, and average hourly earnings on
Speaker 8: a year over year basis haven't changed, so we don't
Speaker 8: have a problem.
Speaker 2: We can cut an employment's not going out. Bond yields
Speaker 2: down either. This morning they're down by nine basis points
Speaker 2: on a two year. On a ten year, we're down
Speaker 2: five just moments ago, fifteen minutes ago, we saw four
Speaker 2: thirty on tens, on twoes, we saw four twenty. Muhammad,
Speaker 2: I want to bring you into the conversation on fixed
Speaker 2: income because you wrote earlier this week in Bloomberg Opinion
Speaker 2: the importance of understanding what's behind this move, and we've
Speaker 2: heard a bunch of people give a bunch of reasons
Speaker 2: as to what's behind it. It might be the data,
Speaker 2: it might be definicite concerns, it might be policy concerns
Speaker 2: going into next week. Have you decided on which one
Speaker 2: it is at the moment, Muhammad, what do you think
Speaker 2: the dominant factor is going into next week?
Speaker 1: I have not gone. I don't think you can because
Speaker 1: there are at least four influencers and it's very difficult
Speaker 1: to determine the weight of each. Over the next few days,
Speaker 1: we're going to have some major developments. We're going to
Speaker 1: have the FED recalibrating again. We're going to have the
Speaker 1: results or at least we'll know how the vote went
Speaker 1: for the elections, so we're going to get some important
Speaker 1: data point. I'm really glad you read out Chris Waller
Speaker 1: speech because he has emerged as the best FED policy
Speaker 1: maker in terms of not only assessing what has happened,
Speaker 1: but telling us what to look at. And I thought
Speaker 1: what you read out was really interesting. Of course, we
Speaker 1: may always get a newspaper leak during the blackout period,
Speaker 1: but I think the FED right now is looking at this,
Speaker 1: and I agree with what was said is that they'll say,
Speaker 1: you know what, this is not going to influence what
Speaker 1: we're going to do, and we're going to We're going
Speaker 1: to cut by twenty five basis points next week.
Speaker 6: Of course, yields are lower, so they might not need
Speaker 6: a particular person to weak anything out to the market
Speaker 6: to correct the impression. Jeff, what do you think in
Speaker 6: terms of the main drivers of the yield rise that
Speaker 6: we've seen over the past month, the fifty basis points
Speaker 6: increase across the curve.
Speaker 7: Yeah, I'll agree with Muhammad. I mean, there's a lot
Speaker 7: of cross currents in there, but I would say a
Speaker 7: big one not to ignore. And it's hard because we're obviously,
Speaker 7: you know, very focused on the prospects of post election
Speaker 7: fiscal policy. Is that the economic data got much better,
Speaker 7: and you had a very negative, very extreme level of
Speaker 7: FED expectations priced into the bond market. So it's a
Speaker 7: little bit of combination of the bond market kind of
Speaker 7: getting over as skis in terms of fifties and consecutive fifties,
Speaker 7: and the accelerating the expectations into pricing on the weakness,
Speaker 7: and then when you started to pull some of that
Speaker 7: weakness back in terms of the economic data that started
Speaker 7: to come in, then you had a reaction to that.
Speaker 7: So I think, you know, that's kind of probably the
Speaker 7: main thrust. There's a lot of other stuff, as Muhammad's
Speaker 7: talking about in there, and Jonathan, yeah, absolutely, you know,
Speaker 7: I think this makes their life easier and harder if
Speaker 7: this was a big upside surprise. Certainly the number is
Speaker 7: overstated in terms of its weakness because of strikes and hurricanes,
Speaker 7: and I think everyone knows that it makes it easier
Speaker 7: for them to deliver on the twenty five cut, which
Speaker 7: they want, which they certainly want to do, and I
Speaker 7: think that's an important point to highlight.
Speaker 5: There's also revisions to the downsign for the prior month,
Speaker 5: So Jeff, is there a possibility that fifties back on
Speaker 5: the table.
Speaker 7: You know, I would say for November that's still a
Speaker 7: pretty high bar. The revisions are part of the noise
Speaker 7: and I think the signal is the establishment is the
Speaker 7: household survey, the four point one percent, the ECI number,
Speaker 7: the GDP numbers, although you know they have their own
Speaker 7: revision problems, but overall you have you have a K
Speaker 7: shaped recovery. But in aggregate, despite the distributional differences, the
Speaker 7: aggregate is doing very well, and I think that's driven
Speaker 7: by the ease in financial conditions, the support for consumption.
Speaker 3: What we saw in terms of the.
Speaker 7: Revisions and GDI and savings rate, the consumption side is
Speaker 7: still an aggregate very well supported here and so that,
Speaker 7: more than the noise out of the payroll reports and
Speaker 7: the difficulty in measuring that on a month to month basis,
Speaker 7: is going to drive the outlook for FED policy going forward.
Speaker 5: Well, Mohammad, when the Fed meets next week, Jonathan is right,
Speaker 5: this may actually help them and make their job easier.
Speaker 5: What might make their job very difficult is the presidential election.
Speaker 5: And already we are seeing this number be politicized. The
Speaker 5: Trump camp is coming out calling it quote brutal. What
Speaker 5: does the Harris camp need to come out and explain
Speaker 5: about this job's report to an electorate that says the
Speaker 5: economy is their number one concern.
Speaker 1: And Marie, they need to explain that the numbers have
Speaker 1: been heavily influenced by one off effects, painful one off effects,
Speaker 1: especially with respect to the hurricanes, but they're one off
Speaker 1: effects for now, and also by the strikes, and they
Speaker 1: need to do that because they have not taken sufficient
Speaker 1: control of the narrative. We talk day after day of
Speaker 1: economic exceptionalism. That's not what the narrative is out there is,
Speaker 1: you know. The narrative is out there is about the
Speaker 1: cost of living, about inflation, and people don't realize that
Speaker 1: this economy has been outperforming not just expectations, but has
Speaker 1: been outperforming to the rest of the world. And this
Speaker 1: is really important as to the FED. Look, it goes
Speaker 1: down to two numbers. One mentioned by Jeff Eci the
Speaker 1: point eight percent increase the quarterly increase in employment cost.
Speaker 1: You look at that and you're relaxed. The other number
Speaker 1: is the PC inflated inflation, the monthly point three percent increase.
Speaker 1: You look at that, you're not so relaxed, and they're
Speaker 1: going to have to balance that. And I think if
Speaker 1: you balance that, you end up with a twenty five
Speaker 1: basis point cut. You certainly do not go to fifty.
Speaker 2: Muhammed, November just feels like an easy decision for them
Speaker 2: if they don't have a result to the election. If
Speaker 2: you get the jettison markets is another reason to count
Speaker 2: buy twenty five basis points. December is where things get
Speaker 2: a little bit harder. A question we've gone back to
Speaker 2: on the program a few times. We've had this succession
Speaker 2: with you two, and i'd love your thoughts going into
Speaker 2: the weekend whether you really believe next week's election has
Speaker 2: the real potential to redefine the economic bank drop, not
Speaker 2: just in America but worldwide, and whether by the time
Speaker 2: we get to December, the Federal Reserve will really have
Speaker 2: to think about the policy initiatives on the table, even
Speaker 2: if they are not yet reality.
Speaker 1: In Washington, DC, John, I've been bemused by how confidence
Speaker 1: some people have been in predicting what will happen here,
Speaker 1: what will happen there. Look, you're trying to solve Think
Speaker 1: of it as a four plus by three plus two
Speaker 1: matrix about it. There are four potential outcomes in Congress.
Speaker 1: There are two potential outcomes for who wins the presidential
Speaker 1: election and the third one, which is no one for
Speaker 1: a while, and then even when you solve for Congress
Speaker 1: and yourself for the president, you've got to solve for
Speaker 1: a third issue, which is how much of what is
Speaker 1: being said will actually be implemented. I remember what happened
Speaker 1: in twenty sixteen. I remember how the market turned on
Speaker 1: a dime when the winning candidate at that time came
Speaker 1: out with a completely different narrative than what was said
Speaker 1: during the election campaign. So the Fed on Wednesday morning
Speaker 1: is not going to be able to solve for this
Speaker 1: four by three by two matrix. So I think what
Speaker 1: they're going to do is say, we put this aside,
Speaker 1: we will react based on what we know, and then
Speaker 1: we will revisit this issue.
Speaker 2: Jeff, That's what it feels like, just to build up
Speaker 2: what Muhammad was saying. Phil'sit, we're an also pilot to
Speaker 2: the high estimate of neutral, which could be around four.
Speaker 2: So you get a few more cuts, you get closer
Speaker 2: to four, and the decision gets harder because I think
Speaker 2: for many people we are truly flying blind into twenty
Speaker 2: five and perhaps even beyond based on the outcome of
Speaker 2: next week. Can Jeff, I'd love you view on that,
Speaker 2: and whether you agree with that view.
Speaker 7: Well, I think the key observation is we've gotten a
Speaker 7: little bit closer in terms of a more reasonable expectation
Speaker 7: of the level of FED cuts relative to the debate
Speaker 7: or the distribution around where is neutral? Whereas a month
Speaker 7: ago you were very much weighted to one side of
Speaker 7: that debate, which is we're very far away from neutral.
Speaker 7: We got to cut quite a bit. And what is
Speaker 7: the data that sort of pushes against that excessive amount
Speaker 7: of cut the very low level of neutral economic growth? Right,
Speaker 7: we know what you don't know where neutral is, so
Speaker 7: you know where you see it and where you see
Speaker 7: it is in the data. And so the piece that
Speaker 7: has kind of been missing here for a while is
Speaker 7: where is the slow down? Yes, the payroll Yes, the
Speaker 7: labor markets are slowing, but they're not tightening and they're
Speaker 7: certainly not eroding to the level of degree that would screen, oh,
Speaker 7: we need to cut fifty basis points at each meeting
Speaker 7: because this economy is hard landing. So it's really come back.
Speaker 7: It really comes back to this kind of basic fundamental,
Speaker 7: which is you see it in the economic growth data.
Speaker 7: There's lots of inputs to that. We can look at earnings,
Speaker 7: we can look at payrolls, we can look at layoffs,
Speaker 7: you can look at the leading indicators for the job market,
Speaker 7: and not much in their screams that this is excessively tight.
Speaker 7: The only thing that screens that you're excessively tight is
Speaker 7: a historical comparison of the real rate relative to past
Speaker 7: real rates. Outside of that, the economic data says financial
Speaker 7: conditions are how monetary policy transmits. It's much easier than
Speaker 7: the rate or the real rate would imply, and so
Speaker 7: you don't need to cut as aggressive, and that's kind
Speaker 7: of recognized in the bond market. So there's less disagreement
Speaker 7: and so therefore less potential volatility from realizing that disagreement.
Speaker 2: Mohammed, just before you go and find a word, please
Speaker 2: go and get the next week. How would you navigate
Speaker 2: next week?
Speaker 1: John, I would wait, and mentally I would change the paradigm.
Speaker 1: For a very long time, we looked at the stage,
Speaker 1: the economic and policy stage, and we looked at the
Speaker 1: FED as the principal actor. Going forward, we should think
Speaker 1: of the FED as stepping back, and there'll be three
Speaker 1: other principal actors. One is fiscal policy, the second is tariffs,
Speaker 1: and the third is in the combination of reforms, the
Speaker 1: regulation and industrial policy. So mentally, John, we're going to
Speaker 1: have to evolve, and it's really hard because we have
Speaker 1: been conditioned to look at the FED as the only
Speaker 1: game in town. But we're coming into a world, as
Speaker 1: Jeff said, where the FED is going to be going backward,
Speaker 1: going to the side, and allowing three other actors to
Speaker 1: determine where this.
Speaker 3: Economy is going.
Speaker 1: And we just need to change our mindset to make
Speaker 1: sure we allow for them to enter our mind and
Speaker 1: assess them better. And it's going to be hard, John.
Speaker 2: I'm going to be kind to you both because that's
Speaker 2: hard enough. I'm not going to ask for election guesses. Mohammed,
Speaker 2: you can go. I appreciate your time, Sir Mohammed al
Speaker 2: Aeron of Quain's College, Cambridge, alongside Jeff Rosenberg of Black Rock.
Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best
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