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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
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Speaker 2: Terminal and the Bloomberg Business app. We begin this sour
Speaker 2: with stocks extending losses following a very volatile session. Steve
Speaker 2: Chevrod federated call and get the storm before the calm,
Speaker 2: writing to be clear, we would see any volatility as
Speaker 2: a buying opportunity. Steve joins us now from what Steve,
Speaker 2: Good morning, See what do you think is behind the
Speaker 2: latest fragility, the latest wild swings the tank stocks?
Speaker 3: Yeah, let me just say I'm not coming from either
Speaker 3: rio or court side of.
Speaker 4: The next game.
Speaker 3: Rush off to New Jersey Turnpipe, where our traffic has
Speaker 3: been insane coming into the city, which is I think
Speaker 3: a sign of actually strong consumer demand. But look, I
Speaker 3: think there are a lot of non fundamental factors that
Speaker 3: are going to interfere with markets and cause volatility over
Speaker 3: the summer. People need to make room in their portfolios
Speaker 3: for all the equity capital that's being raised, including SpaceX,
Speaker 3: pension funds, and kind of investors that are targeting allocations.
Speaker 3: Equities have run so hard over the last quarter, fixed
Speaker 3: income has struggled so much that there's going to be
Speaker 3: a rebalancing trade very likely that I think we'll interfere
Speaker 3: with markets.
Speaker 4: Inflation.
Speaker 3: I think today's inflation report is going to mark the
Speaker 3: worst of the worst. This is going to be the
Speaker 3: biggest jump on a month of a month. I think
Speaker 3: we kind of stabilize from here.
Speaker 4: Than this is the peak.
Speaker 3: I think, well, not necessarily the peak, you could get
Speaker 3: a report that's hotter, but the jump. I think we're
Speaker 3: going to go from you know, three eight to four
Speaker 3: to two likely today.
Speaker 4: I think that's the biggest jump.
Speaker 3: So after this report, I think things will get bad
Speaker 3: at a less bad rate, which is usually what markets
Speaker 3: look to to have an inflection point. You've got uncertainty
Speaker 3: around the midterms, it'll start to come in the con
Speaker 3: and then you have a new fed share that's going
Speaker 3: to get challenged, so I think you could see volatility
Speaker 3: over the course of the summer. Our anchoring point, though,
Speaker 3: is that we still sit in what is at worst
Speaker 3: the middle of the biggest infrastructure build out since the railroads,
Speaker 3: and margins that are growing at the fastest pace in
Speaker 3: my lifetime, and it's not as short as it was
Speaker 3: you can see from the gray hairs. So we want
Speaker 3: to own that. And if we see volatility on some
Speaker 3: of these non fundamental factors, we're likely to buy it.
Speaker 1: Own it what price. And this is the key issue
Speaker 1: because everybody has their handout. Everybody wants to raise money,
Speaker 1: and the sums of money are getting bigger and bigger
Speaker 1: to pay for it higher and higher cost items because
Speaker 1: inflation is going up as quickly as people can raise
Speaker 1: money to pay it.
Speaker 4: I think prices are up.
Speaker 3: I don't think inflation is in place, and I think
Speaker 3: that that's a key element. I don't think what we
Speaker 3: have is a self reinforcing upward cycle and prices. And
Speaker 3: the reason I don't think we have that is we
Speaker 3: don't see it in wage gains, which are still pretty
Speaker 3: modest at three and a half percent, and what you're
Speaker 3: seeing is pockets of weakness in parts of the consumer
Speaker 3: basket that's offsetting the strength that you see in energy commodities.
Speaker 4: What we have is a straight of horror moves.
Speaker 3: It's closed, and if energy is not flowing, prices are
Speaker 3: going to be higher. But what we don't have that
Speaker 3: we had in kind of twenty two and twenty three
Speaker 3: was just more and more money getting pumped into the system,
Speaker 3: whether it was through government stimulus or rates that are zero.
Speaker 4: And so I think what you're going to.
Speaker 3: See is on a year of a year basis the
Speaker 3: biggest jump this kind of four percent number, and then
Speaker 3: I think we'll see a string of four percent numbers.
Speaker 3: But then all of a sudden, when you get to
Speaker 3: the back half of the year, you've lapped the tariffs.
Speaker 3: Even if energy prices stay exactly where they are once
Speaker 3: you get to next March, energy inflation zero at that point, right, So,
Speaker 3: and I think what we're likely to see is energy
Speaker 3: prices that ease some, not necessarily go back to where
Speaker 3: they were a pre conflict, but ease some.
Speaker 4: So I think we have higher prices.
Speaker 3: I think it's hurting some people, but I don't think
Speaker 3: that this is that self reinforcing inflation cycle.
Speaker 1: I would take issue with one thing, and this is
Speaker 1: something that I was hearing.
Speaker 4: Would like to listen, that's kind of where we do.
Speaker 1: By the way, you're off to a fantastic fatation next week.
Speaker 1: So don't exactly crib me a river about ur. You know,
Speaker 1: let's not go there. But I will say one thing
Speaker 1: that as I was talking to different CEOs, they're talking
Speaker 1: about how much money they have and that their margins
Speaker 1: have been increasing, not decreasing. And you said that fiscal
Speaker 1: isn't necessarily coming in the same way that it did
Speaker 1: during the pandemic. Maybe so, but you're getting tax breaks
Speaker 1: that are giving them a lot of cash. At what
Speaker 1: point will companies have to raise wages in a commensurate
Speaker 1: way because they have so much money they need to
Speaker 1: build their business. They are all investing in capex. I mean,
Speaker 1: why isn't that a likely outcome?
Speaker 4: So let's talk about the margins first.
Speaker 3: And this is really important because in a high inflation environment,
Speaker 3: usually stocks don't do as well as they do in
Speaker 3: a low inflation er environment unless earnings are growing above trend,
Speaker 3: and they do particularly well when margins are growing. So
Speaker 3: what the history shows is that stocks can do as
Speaker 3: well in a high inflation environment as they do in
Speaker 3: a low inflation environment if margins are growing, and that's
Speaker 3: why you see the stock market as resilient as it is.
Speaker 4: As it relates to wages, wages are growing.
Speaker 3: They're growing at about three and a half percent, and
Speaker 3: that's about where you want it right. When it gets
Speaker 3: over four, that generally becomes a self sustaining kind of problem.
Speaker 3: That's twenty twenty two three and a half percent, with
Speaker 3: inflation kind of around three. Let's say that's been the average.
Speaker 3: That's real wage growth. And again that's very different than
Speaker 3: what we were seeing with the inflation of twenty two
Speaker 3: to twenty three, when we had a record period of
Speaker 3: negative real wage growth for the consumers. So the consumer here,
Speaker 3: and I think this is the biggest contrarian call. We
Speaker 3: all know how difficult the consumer's been, how K shaped
Speaker 3: it's been, but look at the bottom part of the k.
Speaker 3: All of a sudden, instead of adding ten thousand jobs
Speaker 3: a month, we're adding one hundred and eighty thousand jobs
Speaker 3: a month.
Speaker 4: And the biggest decline.
Speaker 3: In the unemployment rate so far this year is folks,
Speaker 3: some college degree, high school diploma, less than a high
Speaker 3: school diploma. I think that bottom part of the k
Speaker 3: is set to do a little bit better than what
Speaker 3: we've seen over the last year.
Speaker 4: See what do you think the FED does next week?
Speaker 4: With all of this, I think you're going to see
Speaker 4: the Fed likely on hold.
Speaker 3: What I expect to hear from Warsh is how he's
Speaker 3: going to look at things. He's not going to come
Speaker 3: out and say, hey, we're not hiking, or we're hiking.
Speaker 3: I think he's going to maybe reiterate that he's going
Speaker 3: to look at trim mean measures of inflation. I think
Speaker 3: he's going to lay out a framework or a series
Speaker 3: of breadcrumbs that will communicate to the market that this
Speaker 3: Fed is not going to hike.
Speaker 4: And I really think that's.
Speaker 3: Going to hike this year because here's why.
Speaker 4: What is it going to do?
Speaker 3: The parts of the economy that are rates sensitive have
Speaker 3: already been in a recession. That's been what we've talked
Speaker 3: about around this table. So are we going to punish
Speaker 3: the low end consumer more? Are we going to punish
Speaker 3: small businesses more? Because you can raise rates all you want,
Speaker 3: it's not lowering a chip price, it's not lowering a
Speaker 3: price of a gas turbine because the buyers don't need
Speaker 3: debt and their price in sensitive. So what you don't
Speaker 3: want to do is hike rates and destroy those interest
Speaker 3: rates sensitive parts of the market, so that if AI
Speaker 3: Capac slows down, you find yourself in a negative cycle.
Speaker 3: So I think this FED will understand that. I hope
Speaker 3: that they'll understand that. I think it'd be a real
Speaker 3: policy or to get too aggressive.
Speaker 2: On it's say you look if it's something duvish relative
Speaker 2: to Mohok shanks BacT tent.
Speaker 3: I'm expecting him to drop some bread crumbs, and the
Speaker 3: bread crumbs would be things like I'm going to focus
Speaker 3: on trim mean inflation.
Speaker 4: I on, Wait, what's up?
Speaker 2: I'm going to all wag on si.
Speaker 3: That's the question, right, because he does have the hardest
Speaker 3: management role I think of any FED share in a while,
Speaker 3: particularly with his predecessor sitting there apparently keeping a low profile,
Speaker 3: but then giving speeches that aren't so low profile. So
Speaker 3: we're gonna see We've always assumed that even though it's
Speaker 3: a committee, the FED share sets the direction. I would
Speaker 3: expect that Warsh, being well prepared and very interested in
Speaker 3: this job for a long time, will be able to
Speaker 3: navigate that we will see if it really is a
Speaker 3: committee strap in.
Speaker 2: He's had ten years to think about it, that's for sure.
Speaker 4: He's very well prepared.
Speaker 2: For this out of town stay with us multiple impex
Speaker 2: Savana's coming up off to this, Dons went Bush writes
Speaker 2: in the following while there will be somewhere race that
Speaker 2: the mamm of SpaceX will take away some oxygen from
Speaker 2: the tech semi trade. This will be a short term
Speaker 2: bump in a road. Dan joints a snap for.
Speaker 5: More Dankamonic greed to be here.
Speaker 2: The eppetite for this IPO, I think makes it makes
Speaker 2: a fantastic point. A lot of people talking about the
Speaker 2: same thing, just trying to get ahead of the index inclusion,
Speaker 2: aren't they.
Speaker 5: Look, I think that that's definitely a play, and I
Speaker 5: think to say it's not would be wrong because of
Speaker 5: just the unique situation here from the indexing coming out
Speaker 5: of the gates. But look, at the end of the day,
Speaker 5: it does come down to it's viewed as a derivative
Speaker 5: of the AI revolution in terms of like how you're
Speaker 5: going to play space data AI. And look, this is
Speaker 5: it's a test for the market in terms of not
Speaker 5: just SpaceX. But the ripple effect a cross the rise offact,
Speaker 5: and I think that's what you're seeing you're starting last
Speaker 5: week in terms of the sell off that we've seen
Speaker 5: in semi is. I think it's playing in the just
Speaker 5: it's a little white knuckle moment that we're going through
Speaker 5: in tech just to see how this is the reception
Speaker 5: ultimately is going to be.
Speaker 2: But it's not just this, it's pushback to equity capital
Speaker 2: raises elsewhere. The report of maybe Meta doing the same thing,
Speaker 2: We've had another player this morning suggests they're going to
Speaker 2: do the same thing, pushback in the equity market.
Speaker 4: Do we have the space for these names?
Speaker 5: Look, I believe you do. And I think even if
Speaker 5: you look like Google after they did the offering, the
Speaker 5: view that you were going to have a big sell off,
Speaker 5: but instead I think actually took it pretty well. In
Speaker 5: terms of this talk, Look, it's four trillion dollars that's
Speaker 5: going to be spent over the coming years. This is
Speaker 5: an arms race playing out. I don't care whether it's
Speaker 5: SpaceX anthrop it go up in the AI in terms
Speaker 5: of the CAPA rays that we're seeing, and I think
Speaker 5: these companies understand the demands there. The difference is if
Speaker 5: we go back six months ago, it's like show demonization.
Speaker 5: Is Capax going to accelerate?
Speaker 4: It's happening.
Speaker 5: And I think now that there's more of a green light,
Speaker 5: I think that just give further confidence. I think investors
Speaker 5: now are able to see around the corner because we
Speaker 5: just saw this weekend like our Taiwan chack like further
Speaker 5: just tighter supply, which is just more bullish or chips
Speaker 5: more bullish for what we see, you know across semis
Speaker 5: in obviously cross memory.
Speaker 4: That's it.
Speaker 1: I mean a lot of people can buy into the
Speaker 1: story and say this truly is a revolution, but say
Speaker 1: that the pricing is already pretty full, especially because as
Speaker 1: the supply becomes constrained, people are paying more and more
Speaker 1: for it, and they're raising debt that they have to
Speaker 1: pay back later with future revenues that go to that.
Speaker 1: At what point do you see that as having a
Speaker 1: viable argument.
Speaker 5: Yeah, Look, it all comes down to like monization on
Speaker 5: the use cases.
Speaker 4: Not just on the enterprise.
Speaker 5: We're on the consumer side, because look, you build it,
Speaker 5: will they come. So now it's all built, you see
Speaker 5: the demand there. But now it comes down to the
Speaker 5: next phase and you got to see an earnings. The
Speaker 5: big thing that the big reason we saw the rally
Speaker 5: that we have. It goes back to like obviously the
Speaker 5: negative sentiment in March, but then you go through earnings
Speaker 5: in April and may I mean those were you know,
Speaker 5: I think Jalen Brunson like in terms of what we
Speaker 5: saw in terms of numbers now come down there. It's
Speaker 5: setting up for what I believe is going to be
Speaker 5: earnings over the coming quarters that will further support tech stocks.
Speaker 5: You know, we continue to think NAZAC thirty thousand the
Speaker 5: next six months.
Speaker 1: You talk about the consumer facing side, you have to
Speaker 1: see it there. Does that mean that you like Chinese
Speaker 1: tech stocks better than the US that's catering more to.
Speaker 5: Corporate look, but it's also why I like in Cupertino
Speaker 5: what Apple's doing now the start at least having an
Speaker 5: adequate AI strategy because on the consumer side it will
Speaker 5: come and go through App. I continue to view them
Speaker 5: as a toll collector on the on the AI highway
Speaker 5: book in China, robotics is where they're winning. And I
Speaker 5: think you cannot just view this market. It's not just
Speaker 5: US China. There's gonna be a lot of winners, and
Speaker 5: we continue view Iebob with some others in terms of
Speaker 5: big tech in China and where that continues to really be.
Speaker 5: I think just start the next phase.
Speaker 1: Dan, speaking of China, what do you make of the
Speaker 1: US looking at potentially nationalizing parts of these companies similar
Speaker 1: to what China does.
Speaker 5: Look, it's this is balancing out, and I think it
Speaker 5: speaks to like, you're not going to see this sort
Speaker 5: of like when I'd be like nationalization, because the reality
Speaker 5: there is that it further I think stumps from a
Speaker 5: regulatory perspective.
Speaker 4: But what you do think we're going to see that
Speaker 4: I started to do it.
Speaker 5: So I don't think in the US you're going to
Speaker 5: see nationally, but I do think you will see steaks
Speaker 5: just like Intel.
Speaker 4: Well, how is that not nationalization?
Speaker 5: Look, I think that's you know the problem is is
Speaker 5: that a big part of where Intel is today it's
Speaker 5: because of the investment that you saw from Trump administration.
Speaker 5: Then it comes down to like, was that the right move?
Speaker 5: I'd argue in that situation, I think it was the
Speaker 5: right move because you can't have Intel basically being a
Speaker 5: blockbuster video of the of tech. But I think selectively
Speaker 5: they're going to take steaks in different companies because look,
Speaker 5: it is true, like in what's happening in China, that
Speaker 5: is an all stalk.
Speaker 2: About what we're buying, what happens to demand for the
Speaker 2: products that open a ionthropic at distributing right now, when
Speaker 2: they start changing, what it actually costs, what happens to
Speaker 2: the amount and what are we saying already happen in
Speaker 2: C suites around this country.
Speaker 5: Okay, I think you're gonna you're gonna have to see
Speaker 5: the cost of tokenization continue to go down. You will
Speaker 5: see limits in terms of you know what we see
Speaker 5: on caps in some companies. But I think it also
Speaker 5: is going to come down to like as companies monetize that,
Speaker 5: and as they know that those dollars are being spent
Speaker 5: for revenue that's accelerating within these companies. That's where all
Speaker 5: of a sudden, the two charts start to cross.
Speaker 2: Where do you see revenue acceleration because of AI adoption?
Speaker 2: Why do you see that right now?
Speaker 5: Well, I think it's it's already started happening in the
Speaker 5: data layer. I mean, if you look at snowflake, you
Speaker 5: get data, dog, you get into a.
Speaker 4: Data So we just start off. It was just chips
Speaker 4: now data layer. Then it's going to be software.
Speaker 5: Oracle obviously is going to be key in terms of
Speaker 5: what we see from them. Hyper scours that continue to
Speaker 5: think are not being factor in terms of the true
Speaker 5: moanization like a Microsoft.
Speaker 4: Being which one for example, Microsoft and who else?
Speaker 5: Look I think, I mean, if I look at go
Speaker 5: back to like what's happened in Google and a year
Speaker 5: ago New York City cab drivers parish nowfbat now what
Speaker 5: they're monetizing on hyperscour on search, on Gemini narratives are
Speaker 5: very easy where there was change. And I just think
Speaker 5: I continue to think this is third inning one out relative.
Speaker 2: To aim more confident on that NaSTA color the next gun.
Speaker 4: It's game four, Well I can do that.
Speaker 5: I think nixt game for by Ultimately, do you think
Speaker 5: Nixon five? Now's that thirty?
Speaker 4: They went in San Antonio?
Speaker 5: I think they win in Sanntorio.
Speaker 2: Okay, maybe we should go you going never know?
Speaker 4: Okay, considering it, considering, Okay.
Speaker 2: Stay with us, multil impag Savannah's coming up after this,
Speaker 2: joining us now to discuss Tefanie Wilding of Pimcot Tifaney.
Speaker 2: Welcome to the program. Four handle on inflation, what anticipated
Speaker 2: haven't seen that for three years, Tiffany, Can this FED
Speaker 2: look through this?
Speaker 6: Yeah? I think the key question right now is, you know,
Speaker 6: is inflation elevated as a result of negative supply shocks
Speaker 6: or a positive demand in the economy that's lifting inflation.
Speaker 6: And clearly what you're seeing from the headline story and
Speaker 6: the higher energy prices is that is being driven by
Speaker 6: you know, the negative supply shocks that we're seeing coming
Speaker 6: out of the Middle East and high gasoline prices as
Speaker 6: a result. You know, Now if we look at core,
Speaker 6: you know, I think that you know, there's a there's
Speaker 6: more of a question there, and I think that's why
Speaker 6: you're starting to see some FED officials that are charking
Speaker 6: talking about interest rate hikes.
Speaker 3: You know.
Speaker 4: But at the same.
Speaker 6: Time, we know that we've had some pass through of
Speaker 6: tariff higher higher costs as a result of tariffs, and
Speaker 6: you had the AI story as well, which is has
Speaker 6: been bleeding over into inflation a bit. So there's some
Speaker 6: supply shocks on that side as well or kind of
Speaker 6: one off things, you know, and we think out side
Speaker 6: of that, you know, core inflation in the US still
Speaker 6: looks like you know, it's on a trajectory that you
Speaker 6: know that that eventually should be okay for the Fed.
Speaker 6: Now again, well we'll get some of the energy that
Speaker 6: is bleeding into uh the core, airfares elevated and things
Speaker 6: like that, you know. But ultimately, we do think they
Speaker 6: have room here to look through and and wait and
Speaker 6: see how this plays out.
Speaker 2: Definitely, we've heard that for five years, and inflation has
Speaker 2: been a puff target for five years, and the incoming
Speaker 2: FED chair in his own words that inflation is a choice.
Speaker 2: Do they need to do something care just to anchor credibility?
Speaker 4: Yeah? I mean well so as of right now.
Speaker 6: You know, if you look at a range of estimates
Speaker 6: for inflation expectations, you know, they they look pretty well anchored.
Speaker 6: You know, the markets certainly are giving the Fed a
Speaker 6: lot of credibility. And if you look across the surveys,
Speaker 6: you know, we would argue the surveys, you know, look
Speaker 6: pretty well anchored as well. Of course, one year inflation
Speaker 6: expectations from very survey have gone up, but they always
Speaker 6: sort of tend to lag inflationary pressures, you know, so
Speaker 6: I think they again, the Fed has some room here
Speaker 6: to take a look and see and see what's going on.
Speaker 6: You know, the other thing about negative supply shocks is,
Speaker 6: you know, it's kind of a it's a more difficult
Speaker 6: or tricky choice in terms of the dual mandate. So
Speaker 6: although it's putting upward pressure on inflation, it's it's putting
Speaker 6: downward pressure on activity, potentially some upward pressure on the
Speaker 6: unemployment rates. So they're going to absolutely weigh that piece
Speaker 6: of this as well. We do think at the next
Speaker 6: f o MC meeting that they will drop the forward guidance.
Speaker 6: Most likely there was you know, the so called easing
Speaker 6: bias in the language and the statement. If you sort
Speaker 6: of squinted, maybe you could see that, and it's a nuance.
Speaker 6: We think they probably will drop just a signal you
Speaker 6: know that there are more two sided risks here. But
Speaker 6: at the end of the day, we think the FED
Speaker 6: is you know, is going to be careful, you know,
Speaker 6: not to overreact to what could be supply shocks that
Speaker 6: are pushing up inflation and could be temporary.
Speaker 1: Tiffany, when did they move their target to three percent
Speaker 1: rather than two percent?
Speaker 6: Well, certainly that's a you know, that will be a
Speaker 6: question for for the new FED chair orsh when he
Speaker 6: gets in there. As as we heard from from hell.
Speaker 6: He said that he was not going to change the
Speaker 6: inflation target during his tenure. You know, they just had
Speaker 6: a review of their long term strategy that you know
Speaker 6: that they that they discussed last fall, and in that
Speaker 6: in that longer term review, they you know, they sort
Speaker 6: of move the asymmetric language in terms of how they're
Speaker 6: thinking about inflation out. So now you're you're kind of
Speaker 6: back to just an you know, inflation targeting, flexible inflation
Speaker 6: targeting central bank type of strategy. You know, so at
Speaker 6: all of that sort of signals to us that they're
Speaker 6: not going to move their inflation target of two percent officially.
Speaker 6: You know. Now having said that, though, you know, in
Speaker 6: terms of FED strategy, you know, we can we can
Speaker 6: kind of think of it like the you know, the
Speaker 6: ninety strategy, the opportunistic disinflation strategy, where you know, we've
Speaker 6: had a series of supply shocks that keeps inflation slightly
Speaker 6: above target, and the FED sort of knows at some point,
Speaker 6: you know, we could fall into recession. We all hope
Speaker 6: that we don't, but in that case, we'll have below
Speaker 6: target inflation, you know, and so you know, they don't
Speaker 6: really want to overreact to get inflation to target now,
Speaker 6: just given the cost of higher unemployment that that could result.
Speaker 6: So some tolerance for above target inflation for a little bit,
Speaker 6: you know, knowing that at some point you probably will,
Speaker 6: you know, get some of those recessionary forces that bring
Speaker 6: it below.
Speaker 4: I don't envy the FED right now, Tiffany.
Speaker 1: I mean, there are all these geopolitical choke points that
Speaker 1: are creating a series of sequential supply side shocks that
Speaker 1: on one hand, you could say they want to look through.
Speaker 1: On the other hand, there is a secular overlay of
Speaker 1: what we're seeing with artificial intelligence, this incredible demand for
Speaker 1: assets of all types, and it seems to be a
Speaker 1: price inelastic I'm just wondering, from your vantage point, how
Speaker 1: you view that in the inflation story. Should that be
Speaker 1: concerning given the fact that electricity is rising at about
Speaker 1: six percent year when it comes to just the inflationary.
Speaker 6: Pressures, Yeah, I mean so, I think that's the tricky
Speaker 6: thing as well, right, I mean, there is certainly a
Speaker 6: piece of this that is demand related, you know. And
Speaker 6: again the Federal Reserve monetary policy more generally, you know,
Speaker 6: has has more of an ability to impact demand, you know,
Speaker 6: and they also want to try to understand, you know,
Speaker 6: how you know, how persistent is is this demand impulse
Speaker 6: going to be? You know, and certainly the AI demand
Speaker 6: impulses is absolutely there, and we've seen it accelerate at
Speaker 6: the beginning of this year, you know, coinciding with the
Speaker 6: you know, the Iran events. You know, so I think
Speaker 6: that's certainly something they're going to weigh. And we're seeing
Speaker 6: the prices of components related to the infrastructure build out
Speaker 6: really skyrocket and that is spilling over into into the
Speaker 6: price components of those into the consumer price components. In
Speaker 6: those categories, it's impacting PCE more than CPI. Not to
Speaker 6: get too wonky, but the PCE is their preferred measure. Yeah,
Speaker 6: I mean, so there's definitely you know, some demand driven
Speaker 6: inflationary pressures here. But but we've been talking about this
Speaker 6: two speed economy for quite some time, and you know,
Speaker 6: there's certainly another part of the economy outside of AI
Speaker 6: and maybe outside of the you know, top twenty percent
Speaker 6: of households that hold you know a lot of their
Speaker 6: wealth and stocks, you know, that isn't doing as well
Speaker 6: as a result of these economic fundamentals. So you know,
Speaker 6: they're the labor market for example, does not look like
Speaker 6: a source of inflationary pressures at the moment, you know,
Speaker 6: So the FED has to weigh all of these factors,
Speaker 6: you know. And again, what monetary policy theory would suggest
Speaker 6: when there's a lot of uncertainty is you go slow
Speaker 6: and you wait and see and again. We think as
Speaker 6: of right now, that means, you know, they are on
Speaker 6: hold for the next little bit.
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