00:00:02 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at seven am Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube. 00:00:27 Speaker 2: Eric Wuiningrad here wrapped around CPI Chief Economists Alliance Bernstein. So the rub is that lower inflation is wrapped around reduce real estate, reduce this, reduce that. Is it just those odd things that could draw down US towards disinflation or is there more going. 00:00:45 Speaker 3: On than that. 00:00:46 Speaker 4: Well that's what we're going to find out in a little bit, right Tom. You know, I think that last month's softprint was largely due to some unusual factors all sort of pointing soft in the same month. But I know your Collie gan Awong has been out with a piece arguing that in that today's number is likely to be lower because of some of these things. 00:01:03 Speaker 5: I think she's largely right. 00:01:04 Speaker 4: I can't say for sure whether it'll happen with this month's print or next month's print, but the things she's pointing to are likely to point lower in our view over the course of the next few months. 00:01:13 Speaker 6: Eric, I'm just looking at in notes which are very helpful. Because Chair Warsh has not been willing to tell us about his reaction function. 00:01:20 Speaker 5: He's left the impression that the market. 00:01:22 Speaker 6: Is in charge of determining whether the Fed hikes in September or not. So if that's the case, we need to pay attention to this, I guess for sure. 00:01:29 Speaker 4: Look, I think because Worsh has left a vacuum, an analytical vacuum, in the way that he talks about the economy, which is to say, he basically doesn't talk about the economy. He hasn't told us what he thinks about it. He hasn't told us what would trigger a rate hike in his mind, or even if he's willing to raise rates. And so the impression here that he has left is that if the market prices it, then he'll probably do it. That does make today's data point particularly important. I would say, though, that it's not determinant. There is another CPI print, there is another payrolls print, and Chairworsh has another chance in the form of his Jackson Hole speech, to guide the market before the next FED meeting. 00:02:04 Speaker 2: You what's our audience See inflation because I get you know, Paul, and I get mail. 00:02:10 Speaker 3: There's frankly no other topic in America. 00:02:13 Speaker 4: Yeah, you know again, it's a difficult topic for individual households to assess because all of us, none of us really face inflation. We face the price level, right, we don't face the rate of change, which is what inflation's measuring. What we have in our mind is a memory of what the price of something should be. And even if inflation is only two percent, the price level is way more than that. 00:02:32 Speaker 5: So households still experience this. 00:02:34 Speaker 2: Well, I decided to be healthy yesterday, that right, and I was going to buy some fancy wild caught salmon. 00:02:41 Speaker 3: Okay, the price is X dollars above any recollection I have, So you went to that's that's the inflation report. 00:02:50 Speaker 4: Right, And that's what I mean, right, the price level. You're remembering that salmon should cost a certain price, and it doesn't. It might only be two percent more than it was a year ago, but it might be ten percent more than it was three years ago. So you know, the price level is what households feel. That's what all of us feel on a daily basis, feel that they do. They just can't do anything about it. They can't go back and undo price increases from two, three, four years ago. What they can influence is what the rate of change will be going forward, and so that's why they focus on inflation rather than the price level. 00:03:19 Speaker 3: Paul get another question in her two year field comes in right now four three percent. Only Bloomberg surveillance goes to four decimal points. 00:03:27 Speaker 5: Oh boy, there we go. And it's not just today. 00:03:29 Speaker 6: We still have another inflation report, we still have another payrolls. There's more data that the Fed will be able to see, and that will presumably influence what they're. 00:03:38 Speaker 5: Doing, you would think. 00:03:38 Speaker 4: So I suspect that the reaction to today's data is likely to be overdone in the grand scheme of things, because we have these other numbers. If the FED were meeting next week, if this were the last word, then that would be one thing. But it isn't, and I expect that the market will respond. You know, in shorthand terms, the key number to watch is the core CPI month over month, and if it's three tenths of a percent or higher, the market will price a RaSE hi ken. If it's two point two percent month over month or lower, it won't. 00:04:05 Speaker 5: There's another print between here, usually vantaged. 00:04:07 Speaker 2: Eric Winnigrad with a chief Economists Alliance Burn Senior coming up on this. 00:04:11 Speaker 3: Report for America Futures EBB up a little. 00:04:14 Speaker 2: Bit, I should say, just a slight lit Futures up twenty nine, NASSAC up eight tens of a percent. It advances VIX fifteen point three five in the yel space four point six four percent on the ten year thirty year bond comes in from a five twenty two to a five point two zero. But what you watch is that fed friendly two year yield to four decimal points for those don't write on a freeway folks, four. 00:04:40 Speaker 3: Point one eight zero two percent. But always anticipated after the analog report, we shall see. 00:04:51 Speaker 5: This is breaking news from Bloomberg. 00:04:56 Speaker 7: And after an unexpected decline in June, consumer prices rose modestly in July, up a tenth of a percent after dropping four tenths of a percent in June. That is right in line with estimates. Core CPI, which excludes volatile food and energy, up two tenths of a percent for the month after remaining flat in June. Again right in line with estimates. We've got year over year CPI rising three point four percent after increasing three and a half percent year over year in June, again right in line with those estimates. And taking a look at core CPI a year over year coming in up two and a half percent, a little bit softer than the two point six percent we saw the prior month, and again right in line with economous estimates. An early July decline in gas prices looks like it kept a lid on overall inflation, despite a bit of a bounce later in the month. So once again CPI month over month coming in a tenth of a percent year over year three point four percent. So still price pressures remain above the Fed's two percent target and stocks remaining higher. 00:05:58 Speaker 3: Here. 00:05:59 Speaker 7: Futures a little changed after this report, Tom and Paul. 00:06:02 Speaker 3: Boring, So it came in pretty much, yeah, just taking so much king right in on target. 00:06:08 Speaker 2: But the market reaction is their equities pull back a little bit, up twenty nine on futures up twenty two right now, and we do get Paul some yield movement here. 00:06:18 Speaker 3: Ten year yield comes in two bases places. I think people were sort of looking for worser. Yeah, if you have to go to Dartmouth. 00:06:27 Speaker 2: Ye, yes, exactly economic concept, but I think they were looking worser and it came in boring and that it's boring. 00:06:34 Speaker 5: That's fine. Price up, yield down, that's fine. Eric. 00:06:37 Speaker 6: It seems like inflation is kind of coming in lined with expectations. No big movement here. Again, we don't really know how the Fed's going to look at this, do we. 00:06:47 Speaker 4: Yeah, this leaves the ball in play, right, This doesn't really change the situation. We're running two tenths of a percent month over month. It was actually point two one five. I know that you were going to a lot of decimals on the numbers. I'm going to use decimals too, So really a point two point two not one that rounded up or down. It leaves you sort of uncertain it. Let's the Fed. You can make the argument either way. You know, when you look through the details of this, and obviously there's a lot more to do on it, it looks a little bit more encouraging than the headline. Shelter inflation was only one tenth of a percent month over month for the second consecutive month. We think there is more decline coming there as the as rent prices slow, as housing prices have slowed their increase, so that's encouraging. Going the other direction, medical care services bounced this month, so there's always some back and forth in there. But net net, we've landed at the same place where we started five minutes ago, and as Tom correctly said, we're going to spend the next you know, however long it is analyzing this when he did it in one word, which is boring, you know, it's let's go back to as you were, Let's go back to focusing on other things, and we'll see what the next month brings. 00:07:51 Speaker 6: On the other side of the equation for this federal reserve is the labor market. What's your view given some of the recent data points. 00:07:57 Speaker 4: So I don't take very seriously the decline and employe that was reported for July. You know, July is a difficult month seasonally because of the school calendar. There's been that sort of volatility the last couple of years in July. I think the labor market is stable. I don't think you would say it is strong necessarily, it's still this idea of low churn. It's low higher low fire. That's definitely better than it looked late last year. You know, late last year I was here, we were talking about the possibility of rate cuts because the labor market was weakening. That's certainly not the case. Now it has inflected upward. It's not up, up and away in a way that forces rate hikes, but it's stable enough to allow rate hikes if the Fed wants to do it. 00:08:36 Speaker 3: One final question, do you have visibility out? I remember the charming moments where economists would have on page nine of the report a three year perspective. Nobody does that anymore. We're just true. Do you have a Q one twenty seven view? 00:08:52 Speaker 4: If I felt like I could have a three year forecast that I could rely on, I'd put it on page one of my slide deck, not on page three. You know, I think all of us have sort of been beaten down by the events of the past few years. If you think about all the shocks, well, that's the kind of thing you can almost always put on page four, and that's not unpredictable. 00:09:12 Speaker 5: Necessarily put it up there with the Mets. 00:09:14 Speaker 4: But look, the world has thrown so many curveballs at us over the past few years. To stick with the baseball metaphors, you know, even it was starting with the pandemic, but geopolitics just every day, a steady drumbeat of it. Tariffs, the trade war, the volatility around politics. All of these things I think have made all of us, myself included, very hesitant to look into what I would call an interim window. I think there are things we can say about a three to ten year view when you get past you know, when you say absent shocks, where would you be? But over one to three years, it's really tough. 00:09:48 Speaker 3: Stay with us. More from Bloomberg's Surveillance coming up after this. 00:10:00 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am Eastern Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube. 00:10:12 Speaker 3: Pard you're denning with us. We just had Ben Laidler on, who nailed the Christmas Eve twoenty eighteen call. Then there was a pandemic and mister Uranian climbed on board October of twenty two and said it is the Roaring twenties. John Templeton I mentioned this week on my Twitter thing. 00:10:30 Speaker 2: Bull markets are born in pessimism, grow in skepticism. Mature an optimism and die on euphoria. 00:10:38 Speaker 3: Not close to euphori euphoria, how are we doctor here? 00:10:42 Speaker 8: Yeah, I mean, clearly we're closer to euphoria now than we were at the beginning of what I still think will be called the Roaring twenty twenties. And I think we're saying that though this time around. The euphoria is what I call FEMO, which is fabulous. Earning is momentum. It's it's not fullmo. The pe is actually hung around at twenty for a while. It's earnings have been phenomenal. And then this morning we just heard that some of these AI companies are continuing to you know, have home runs. 00:11:16 Speaker 5: Have my home runs absolutely with core Weave last night. Yea, yeah, I'm looking at the SPX. 00:11:21 Speaker 6: You know, the weight the normal weighted up twelve thirteen percent, but the. 00:11:25 Speaker 5: Equal weighted, Yeah, it's up fifteen percent. 00:11:27 Speaker 3: That's right. 00:11:28 Speaker 5: That's a good sign. 00:11:29 Speaker 3: Right, it's very very good sign. It's very healthy. 00:11:32 Speaker 8: And you know I call the four ninety three. You know, there's a magnificent seven and then there's the impressive four ninety three and this so far this year they're doing very well, which really shows that the market's broadening, and I think, you know, I think people have AI fatigue to a large extent. They don't really know which companies are going to be the winners of the losers. So they're kind of maybe take buying indexes and technology, but the other companies in financials, industrial, healthcare, those sectors are at all time record highs. And that's because people understand their businesses and they also figure they might actually benefit from AI. 00:12:11 Speaker 5: Yeah. I think everybody's trying to figure out the winners and losers. 00:12:13 Speaker 6: It doesn't appear that the Fed's going to help the market here. I guess this question of will they potentially hurt the market by aggressively raising rates. 00:12:22 Speaker 3: I don't think it's going to be aggressive. 00:12:25 Speaker 8: I think the markets were sort of surprised when during the first FOMC meeting that was chaired by the new FED chair and that is Kevin Warsh, where he came out so hawkish and said that his number one priority was to have price stability because he admitted that the FED has failed to get down to two percent for over five years. And then in July he said it again and the market said, well, you said that in June now, why don't you do something in July? And so I think the markets are expecting us September rate. 00:13:01 Speaker 3: I can look. 00:13:02 Speaker 8: I think the bond market would react positively to it, which then would be a positive for the stock market. 00:13:08 Speaker 3: You thank you so much for joining Bloomberg Money. Sure weeks ago. We had a huge response to that in the single year. 00:13:13 Speaker 2: Denny sentence Paul that stopped traffic on a Friday afternoon was rates are normal. 00:13:20 Speaker 3: Where rates are now is what they're supposed to supposed to be companies. This is important concept. 00:13:26 Speaker 2: I want you to take it back to Yale dynamics, linking economics into investment in finance. Companies can operate in a legitimate real interest rate nominal interest rate environment. Yeah, A lot of the younger who don't think that, they don't believe that. 00:13:41 Speaker 3: Yeah. 00:13:41 Speaker 8: Well, something that this kind of get get my my attention is these days is when people say that, oh, interest rates are going to stay higher for longer, which implies that they should be lower. 00:13:55 Speaker 3: You know, it's just we're going to say that'd be frustrated. 00:13:57 Speaker 8: So what do you mean higher for longer? The forty five percent is normal, This is where they should be. This is where they were. The tenure was before the Great Financial Crisis, it was between four and five percent. Before the inflation crisis of the seventies, it was four to five percent. Forty five percent is actually a vote of confidence. It shows that the economy can function very well. And by the way, it's kind of refreshing to see that the capital markets have been liberated from quantitative easing so that they can actually vote on what where rates should actually be. And right now I think forty five percent is a positive sign. 00:14:33 Speaker 6: And we're seeing these the new issuance in the investment. Great bond market is off the charts. 00:14:37 Speaker 3: And it's been absorbed very very well. 00:14:40 Speaker 5: How about US versus non US. 00:14:42 Speaker 6: I'm looking at my WEI function and there's good returns out there around the world, and maybe some better valuations outside the US, so much better. 00:14:50 Speaker 3: Yeah. 00:14:50 Speaker 8: Well, we were pushing the idea of stay home over weight the US from twenty ten until late last year, so we missed the rotation to go global, but we kind of I think we caught up. 00:15:07 Speaker 3: We'll see, maybe I got whipsode. 00:15:09 Speaker 8: But in December of last year, I said, you know what, I can't really recommend overwaiting the US when it accounts for sixty five percent of the market cap of the global MSCI. So I said, let's let's talk about looking for opportunities overseas. And so far this year has kind of been even steven. I mean, you know it has been one or the others. Well, I mean, look, we got a global bullmarkt in stocks. That's certainly what's going on. 00:15:32 Speaker 3: I want you to address as I did. I think it was Friday the glass half empty crew. They need to participate, they need to retire. Yeah, they need to be in the game. But their mental framework from childhood whatever, just isn't your Denny like, yeah, well how did they participate? 00:15:52 Speaker 8: Didn't have a happy childhood to a loge extent, Look, I think they have to stop listening to the perma bears. The perma bears will get them out at the top up, they'll get them out of the middle, and they'll get them out of the bottom. You'll never be in the market if you kind of constantly get scared by the perma bears with stocks. If it's if your day jobs not trading, you've got to be long doctor. 00:16:14 Speaker 2: Your Dennis says, there never be in the market. I would rephrase it broader, Paul, and say, never participate in the American experiment. Correct to me, it's a broad as a broader. Yes, it's like almost a Robert Schiller. 00:16:26 Speaker 3: Kind thing exactly that. 00:16:28 Speaker 6: If people are looking for opportunities outside of the AI trade, where do you kind of send them these days? 00:16:35 Speaker 3: Well, I'm not that original. 00:16:36 Speaker 8: I mean I just kind of look at all the sectors and see which ones are new eyes. So I kind of let the market guide me. In financials, industrials, healthcare are alid record highs. At the end of last year. We raised healthcare to a market overweight, and that's because we figured if any sector badly needs to manage information better needs AI, it's got to be healthcare. Tell me, but financials are spending billions of dollars on fintech. Know, I'm really tired of getting checks from my clients. I mean, I love get getting the money, but you know, why don't I just get Venmo for everybody by now? So I think there's a lot of productivity gains and industrials of course, you're just benefiting from the ongoing AI boom, which I think is the real deal. 00:17:23 Speaker 6: What's your concern out there? I know, you've been bullish and you've been right. What's the concern out there for you? Well, you know, I mean geopolitics. 00:17:30 Speaker 5: It seems like the market's plowed through. Yeah. 00:17:33 Speaker 8: Well, you know, I think those of us who've been doing it for a while and those newbies who haven't, uh and are getting instructed in history. History shows the geopolitical crises are buying opportunities. The stock market actually bottom a few months after Pearl Harbor when we bleasted the Japanese navy in Midway, and that was way before the war was over, and yet the market already Look what happened this time around? The market bottom on March thirtieth. Then we haven't really looked back. 00:18:04 Speaker 3: Missus Keene emails and can you ask ed, how are the dogs in the heat? You get four dogs? Do you take them out in this heat? Yeah? 00:18:12 Speaker 8: Well we take them out for like five minutes and then they knock on the door and beg to come back in. But you know it's it's the uh. The dogs are couch potato dogs. They are a keen Charles Cavaliers, so they like to be home in the indi air conditioning for sure. 00:18:29 Speaker 3: The vet. I mean, how do you, I mean, how many guys can you see that? 00:18:34 Speaker 9: Well? 00:18:35 Speaker 8: I've really, I've recually been reaching out trying to get a vet who was an expert in sleep apnea, because Bailey snores and it's very hard to fall asleep when she's snoring. 00:18:47 Speaker 3: Stay with us. More from Bloomberg Surveillance coming up after this. 00:18:58 Speaker 1: You're listening to the Blue Work Surveillance podcast. Catch us live weekday afternoons from seven to ten am E's durn. Listen on Applecarplay and Android Auto with the Bloomberg Business app, or watch us live on YouTube. 00:19:11 Speaker 3: I've been dying to talk to amandoliin I mean, this is where to go fixing Kim one to one. 00:19:16 Speaker 2: Everyone else was out in the green at Villanova years ago, and she actually took CDs one oh one. 00:19:23 Speaker 3: The gloom Crew turns to credit default swaps, which are less. 00:19:27 Speaker 2: Liquid, more chunky, more clunky than quote unquote the bond market. 00:19:33 Speaker 3: Is CDs a good indicator of a company's stress? 00:19:38 Speaker 9: Good morning, Thank you for having me. It's a directional barometer on sentiment, But I do not think that it is indicative of a company. 00:19:46 Speaker 3: More people are so mental about it. 00:19:48 Speaker 9: I think it's easy to put a position on in the CDs market because you don't have to go and locate the bond to trade it, which is different. So if you want to buy or sell a bond, you actually need to either short the bond if you want to sell, or find the bond to buy it. CDs allows you to put on additional size quickly in the synthetic market, and the notional, as we say, is a bit unbounded. It is moving with sentiment though, Tom, I think it's important to track in terms of a directional barometer on sentiment. But you also have to keep in mind that these synthetic indices, they're equal weighted, they don't include every name in the bond market. So when you look at kind of the broader CDXIG index, sometimes it's not reflecting what is actually happening across the broader market of the bonds that we trade, which is upwards of nine trillion index using your Bloomberg index, yes. 00:20:38 Speaker 6: See Bloomberg Index, Boombeck new issuance this year. I mean, the bankers have been busy pushing stuff out that door. 00:20:46 Speaker 5: A lot of it's the tech stuff. What do you make of that? 00:20:49 Speaker 9: Sure has been a very busy year more than one and a half trillion. We're on pace to surpass the pandemic era record, which was an incredibly active year for new issuance activity. We've been flagging upside risks to our forecast. We're calling for two point one trillion. There are a couple things that are interesting here, and we actually see a lot of differences between prior periods of active releveraging. 00:21:12 Speaker 10: In the credit market. 00:21:13 Speaker 5: Maybe the most important one that. 00:21:14 Speaker 9: I would note is that a lot of these jumbo deals that are being priced. You had mentioned sixty percent of the deals that are ten billion or more so far this year have been concentrated in the tech sector, and importantly, they haven't been telegraphed in advance like we typically see with M and A transactions with debt, So that's what's causing some of the indigestion in our market. We looked at the largest M and A related debt financing since the financial crisis. There's typically a five month lag between when an M and A transaction is announced and when the debt deal to fund that transaction is priced. Gives investors time to prepare, talk to management teams, position their portfolios. By contrast, what we've seen in twenty twenty six is a more frequent pace of deals that are not related to M and A. They're related to the AI build out, and so they're not coming in such a well telegraphed manner, and so it's causing some indigestion. That's the key difference. 00:22:05 Speaker 6: And a lot of these issuers, I mean, tech is not a big issue in the IG market historically, so they're not like names. Oh I know, well, I've invested with this company for a long time. I know what's going on here. So these are new names that analysts and portfolio managers have to get smart on quickly. 00:22:23 Speaker 5: Does that get reflected in pricing, like, Hey, you're kind of a newish issuer. 00:22:26 Speaker 6: I know you've got a ton of equity supporting this debt, but we haven't really seen you too often. 00:22:30 Speaker 9: I think investors have gotten I think investors have done that work. I think they have gotten comfortable with the fundamentals of the tech sector. This sector started issuing debt. Some of them had their first debt deals several years ago. Issuants did PEP pick up in twenty twenty five. I think what you are referring to, though, Paul is there's a multi year nature to this where investors are participating in these debt deals at given new issue concessions, but they're expecting a few more years of this, and so that's what's contributing to the digestion. The other key point to note is that as significant as the capex needs from the hyperscalers are, it's the broader AI ecosystem that is competing for capital here, and so investors are trying to manage how much exposure do they want to the AI theme, and that is I think the key point they I feel like most of the widening has been technical related, not because of fundamental concerns or a lack of familiarity with these with these companies, do. 00:23:26 Speaker 3: The fundamental ratios matter in the present tense of analysis of these hyperscalers out three years or five years. 00:23:37 Speaker 5: Out, they for sure do. 00:23:39 Speaker 9: This reminds me a lot of actually when I covered the pharmaceutical sector right after the financial crisis, when there was a wave of debt funded M and A and many of those companies CFOs of those companies realized they were under levered and there was scope to add debt to their balance sheets. The way we are expecting it to proceed tom is that over time, this sector, so tech broadly, will likely add debt to its capital structure, stay well within the guardrails of IG ratings, and maintain ample access to capital. 00:24:08 Speaker 5: I think that is we've seen. 00:24:09 Speaker 9: That before in areas like pharma, where the sector moved down kind of methodically four or five rating notches over the span of a couple of years, and it was fine. They were still ALGI rated. I don't view the credit metrics as the binding constraint to this build out. There's a significant amount of debt capacity. We estimate more than two trillion of debt capacity just in the hyperscalers. If they push their leverage to something very reasonable like three times gross leverage, well within the bounds of IG ratings, I actually don't think that's going to be the limiting factor on the debt issuance and the syndicated market. Rather, it will be market staturation and issuer concentration constraints, and that's why we expect the private infrastructure and real estate markets to play Alergeral do. 00:24:48 Speaker 5: You think, I mean, is market still open for more of this stuff? For sure? 00:24:52 Speaker 9: Yes? I mean so if you just do a simple exercise where you bring say the five hyperscalers up to the level of the largest issuers and the USIG market today. That implies around five hundred billion of additional debt issuance in just the USIG market. Just that, just the traditional USIG market. But the capex estimates are significant, we will estimate that we will need more than that. We're assuming that at its peak thirty five percent of capex will be definanced. And so when our view, a wide range of markets and structures need to participate here, not just the USIG market. 00:25:24 Speaker 3: I mean it, Aliance and thank us so much, glob and Sachs. We're having all of their credit strategy this morning again features up twenty one down, features up seventy three, nice seven tenths of a percent popped to the NASAK, all centered around twenty minutes from now. The important CPI report right now with leverage shares Vilta Tutorovi joins us. Now looking at the structures of the market, what is the key distinction you see in technical analysis within the American equity markets? 00:26:01 Speaker 11: Hi, Paul and Tommy, thank you for having me on the show. Yes, you're making a very good point here, and I've been asked a lot of questions, especially to compare what the technical setup is in twenty twenty six and compare. 00:26:16 Speaker 10: It with two thousand. 00:26:18 Speaker 11: So there are a couple of things that are very similar. Back in nineteen ninety six we started getting this and P five hundred getting into over both territory, and interest rates were similarly sitting where the long end of the. 00:26:35 Speaker 10: Treasury yield is right now. 00:26:39 Speaker 11: However, instead of getting a pullback or a correction, the bull market extended for another four years before we've seen the dot dot com crash. So I think today we are at nineteen ninety six if we compare the charts the longer term charts. I'm looking at the monthly movement indicators, which are telling me the internal strength of momentum conditions of the S ANDP. So we are getting into overbot territory, which is telling me that the market is very expensive. However, this doesn't call for immediate better markets unfolding, and I think there is a very very good probability of the market staying quite expensive for an over both territory for number of years before we get to see this deep correction. 00:27:31 Speaker 10: Everyone is talking in town. 00:27:33 Speaker 6: And we've seen just some really strong strong earnings. First quarter was very good, second quarter even better. Here is the earnings profile the S and P five hundred. Is it not to keep this market moving? 00:27:46 Speaker 5: Do you think? 00:27:48 Speaker 10: Yes? I think the earnings are very strong. 00:27:51 Speaker 11: Can have been the major driver of the almost fourteen percent rally in the ICMP in twenty twenty six alone. However, we shouldn't ignore that there are some outside risks which can spoil the party, and the main one will be inflation. I mean, if we look at what's happening in the Middle East, the situation in Hormus, it's far from resolved. We've seen that brand prices significantly declined from the one hundred and twenty six dollars a barrel a few months ago. However, tension between Tehran and Washington it's still there. We don't see firm sciences that it will be a resolution of the conflict. We are getting somewdata that shipping through Hormouse is still very limited. So the major risk here is if brand prices remain above ninety dollars, potentially hire for extended period of time and that will fuel straight into inflation. 00:28:53 Speaker 1: This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcast. Listen live each weekday, seven to ten am Eastern on Bloomberg dot Com, the iHeartRadio app tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal