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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bank of America's Capital

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Speaker 1: Markets conference underway in Paris. Join I Guess now is

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Speaker 1: Blimberg's francin Laqua with a special guess skim on if Fran.

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Speaker 2: Good morning, John. I'm so happy to speak to Michael

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Speaker 2: Hartnet of Bank of America. Michael, thank you for joining us. Look,

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Speaker 2: you've said the markets are starting to resemble the run

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Speaker 2: up to eight. What do you mean and what are

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Speaker 2: you looking at? Well?

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Speaker 1: One big difference, of course with OA is that the

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Speaker 1: oil shot there was demand lead. You know, it wasn't

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Speaker 1: supply lead. It was China or India. So yeah, you

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Speaker 1: definitely have an environment where oil prices are arising to

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Speaker 1: you know, high levels you know back then. You know.

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Speaker 1: The similarity perhaps is that you have these you know,

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Speaker 1: credit tremors sort of bubbling away in the in the

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Speaker 1: in the background. So that's the similarity. And certainly the

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Speaker 1: price action year today is fairly similar. But you know,

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Speaker 1: the supply shocks are more sort of seventy three, seventy nine,

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Speaker 1: twenty twenty two. And I think that the market generally

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Speaker 1: has been coming into this thinking it's supply shock, it's

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Speaker 1: short term and therefore it's going to be over pretty quickly.

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Speaker 1: And I think that's the kind of revision that the

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Speaker 1: market's going through in the last couple of days.

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Speaker 2: Is that complacency or are they too complacent? At what

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Speaker 2: point does it sort of feeding through earnings?

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Speaker 1: Well, I mean it will feed into earnings without a question.

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Speaker 1: But I think that coming into this, you know people

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Speaker 1: are long equity, is that they're hedged, but they are long.

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Speaker 1: But I wouldn't say it's complacency. But everyone thought it

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Speaker 1: was a short war. Yeah, everyone thought it would be

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Speaker 1: folded earlier. And you know, there's an election for Trump

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Speaker 1: to win. You know, the market's too big to fail.

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Speaker 1: You know, we've seen this script before. We don't want

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Speaker 1: to sell, we're all so I think what's hamdened the

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Speaker 1: last couple of days. It's going to like people have said,

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Speaker 1: I don't want to sell because the policy will change, right,

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Speaker 1: And it's now actually we're going to have to sell

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Speaker 1: to change the policy. Do you see what I mean?

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Speaker 1: So it's kind of like it's flip flopped a little bit.

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Speaker 2: But I mean what was I thought was striking is

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Speaker 2: that the market was pricing in some kind of short

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Speaker 2: sort of resolution in the order term. But actually, if

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Speaker 2: you read the geopolitics, and if you read all the transcripts,

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Speaker 2: that just wasn't there. So it's a market looking for something.

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Speaker 1: Yes, I mean, look, look, the market's looking for an

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Speaker 1: off ramp. The market's looking for a ceasefire, the market's

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Speaker 1: looking for an end. The market's desperate for the oil

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Speaker 1: price to not move in an exponential way to the upside.

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Speaker 1: But actually, you know, back down, because you know the

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Speaker 1: other thing that's been happening before this is that you've

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Speaker 1: been having this tightening of financial conditions. Yeah, and so

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Speaker 1: the market needs an easing of financial conditions, but the

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Speaker 1: Fed finds it tough to deliver that if oils at

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Speaker 1: you one hundred and fifty two hundred, you know, but

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Speaker 1: I think ultimately you will get that easing of financial conditions,

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Speaker 1: but this obviously delays it somewhat.

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Speaker 2: What do you think is most being mispriced right now?

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Speaker 1: Well, I think that if you look at the you know,

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Speaker 1: the broader markets, I would say that equities still look rich,

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Speaker 1: you know, relative to where they could do in a

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Speaker 1: genuine shock where the FED is not able to cut

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Speaker 1: interest rates. I think that we've gone on record saying

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Speaker 1: sixty six hundred, you probably want to start nibbling at

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Speaker 1: the S and P. I'd be buying the thirty year

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Speaker 1: treasury above five percent. I'd probably be fading the DXY

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Speaker 1: Dollar Index above one hundred. But as I said earlier,

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Speaker 1: the risk right now is it kind of those numbers

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Speaker 1: need to get worse before they get better. Because you

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Speaker 1: look at the Bank of American fund managers surveying last week,

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Speaker 1: people are not sure. You know, they're still bullish, certainly on.

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Speaker 2: Equisyes, So do you think oil does go to one

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Speaker 2: hundred and fifty and possibly two hundred? Those are the

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Speaker 2: levels you mentioned.

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Speaker 1: No, they'll go No, I mean those are levels predicated

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Speaker 1: basically on this is ended in weeks, not months, if

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Speaker 1: it's protracted or do you get an additional sort of

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Speaker 1: twenty thirty forty percent. No, those levels are breaking. You're

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Speaker 1: going to have to wait for much level lower levels

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Speaker 1: to engage, certainly in stocks.

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Speaker 2: I mean, what's the risk of a passing mistake by

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Speaker 2: central banks? I know you've also said there was you know,

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Speaker 2: a hike in two thousand and eight by the ECB

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Speaker 2: that you said was the worst possible policy mistake.

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Speaker 1: Yeah, Look, we have this sort of catchphrase sort of

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Speaker 1: market stop panicking when policymakers and central bankers start panicking.

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Speaker 1: I don't think the FED. I don't think the idea

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Speaker 1: of the FED is going to hike. I think is nonsense.

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Speaker 1: I don't I don't think that's going to happen. Well,

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Speaker 1: they cut, I don't think they're going to I think

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Speaker 1: they will eventually cut. And again I think that you know,

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Speaker 1: Bill's there with a high all the price, they can't

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Speaker 1: cut six months ago they cut with the stock market

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Speaker 1: and all time high, and corporate bonds at all time high.

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Speaker 1: So that but this is the history that we've all

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Speaker 1: got in. It's the DNA. We're all the QE. Generally,

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Speaker 1: we're all jen QE. Do you know what I mean

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Speaker 1: In that we're all used to central banks wading in

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Speaker 1: whenever there's a market, you know, problem, and hey, ho

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Speaker 1: off we go again. So I think again, maybe you

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Speaker 1: have to sort of like break that expectation a little

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Speaker 1: bit first. But I think no doubt the put now

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Speaker 1: in the markets moving like. We need an easing of

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Speaker 1: financial conditions, whether it's oil, whether it's yields, whether it's fed,

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Speaker 1: whether it's the dollar and we're going to go down

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Speaker 1: until the policy makers hear that and deliver that.

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Speaker 2: So where do you put your money right now?

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Speaker 1: Well, I think broader terms. As I said, I think

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Speaker 1: the consumer ironically is what I would be nibbling at

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Speaker 1: at this particular moment. No one loves the consumer oils up,

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Speaker 1: you know, unemployments rising, you know all the But to me,

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Speaker 1: the consumer stocks are the ones that are really discounted stagflation. Yeah,

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Speaker 1: and if you think poster Iran, you know what has

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Speaker 1: Trump got to do. He's got to win the midterms

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Speaker 1: and you're not going to win the midterms by you. You

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Speaker 1: got to win the midterms by addressing affordability. Really, he

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Speaker 1: has to pivot to that, just you know, in a

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Speaker 1: really dramatic way. And again I think that affordability, you know,

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Speaker 1: lower income consumer that everyone dislikes at that moment. That's

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Speaker 1: probably whereas a trade from a trade in perspective, I

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Speaker 1: think the best you know, trading opportunity is longer term. However,

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Speaker 1: I still think international commodities, you know, these are the

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Speaker 1: true sort of secular ball markets of an inflationary in

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Speaker 1: twenty twenties.

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Speaker 2: Michael, Thanks so much, Michael Hartner and they're from Bank

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Speaker 2: of America,