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 Hordern. Join us each
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Speaker 2: Alpi Saxon Words writing Investors scene positioned for positive earning
Speaker 2: surprises into twenty six, but we expect higher volatility as
Speaker 2: summer gives way to four. Sarah joins Usnaff for Marcom
Speaker 2: One is Sarah, good morning, it's going to see you.
Speaker 2: What's the source of that volatility going to be?
Speaker 1: I think the uncertainty that's coming around the timing of
Speaker 1: what's happening in tariffs, the timing. There was an announcement
Speaker 1: today that aluminum and steel in different products was going
Speaker 1: to be taxed at a different rate, and that did
Speaker 1: not include it did include goods in transit. I think
Speaker 1: all those kinds of things make for problems for potential earnings.
Speaker 1: I think the uncertainty around what spending is going to happen,
Speaker 1: something like what's going on with home depot not such
Speaker 1: a huge thing, not a big surprise, a lot of
Speaker 1: big ticket items, not so much people bought ahead of tariffs.
Speaker 1: But I think that there is some concern about what
Speaker 1: this is going to do to margins and what it's
Speaker 1: going to do to earnings, and that's going to I think,
Speaker 1: add to.
Speaker 2: All, Well, let's slay on this, which way do you
Speaker 2: think it breaks. Let's say we've got a company right
Speaker 2: now in America that was importing a lot of goods,
Speaker 2: a lot of pre tariff inventory of the goods they
Speaker 2: imported that were tariffed, they were absorbing that on margin.
Speaker 2: Do you believe that's going to lead to say, cost cutting,
Speaker 2: a labor market hit, or do you believe it leads
Speaker 2: to higher prices they're going to pass it on to
Speaker 2: the consumer.
Speaker 1: I think they're going to try to do both. I
Speaker 1: think they're going to try to get their costs in
Speaker 1: line as much as they can, and I think they're
Speaker 1: going to try to push price to the extent that
Speaker 1: they can. And the question really is, as these targets
Speaker 1: have been moving all year, did we get such a
Speaker 1: backup in demand that we pulled for a lot of
Speaker 1: activity And are we therefore going to see some softness anyway,
Speaker 1: or is this going to be so gradual that it's
Speaker 1: that it doesn't have as big an impact as a
Speaker 1: big one day slam dunk situation. And I think that's
Speaker 1: the question and how this plays into PPI and CPI
Speaker 1: because a tariff isn't really inflation itself. It's a tax,
Speaker 1: but it doesn't matter because if the price levels are
Speaker 1: moving higher, it doesn't matter to the consumer. It feels
Speaker 1: like a problem because prices are higher.
Speaker 3: I remember a long time ago at the end of
Speaker 3: July when people said August tends to be volatile. Watch out,
Speaker 3: it tends to be the witching month. Well, we're up,
Speaker 3: you know, one point seven percent on the S and P.
Speaker 3: We've reached new high after new high. Sure we've been
Speaker 3: down for a couple of days, but down as sort
Speaker 3: of a relative statement, given that we're going nowhere, at
Speaker 3: what point are we just pushing off this volatility showing
Speaker 3: that the pain trade still is higher.
Speaker 1: So I think that right now we've got Jackson Hole
Speaker 1: coming up this week. If you recalled last year, it
Speaker 1: was the labor numbers in August that came in that
Speaker 1: really threw things off for the FED and people started
Speaker 1: to worry about the labor market day. It is uncertain
Speaker 1: enough that right now it's like it needs a push
Speaker 1: one way or the other. The fact that there is
Speaker 1: talks with Russia and Ukraine, whether they get to piece
Speaker 1: or not, that's probably a netpet benefit to most things,
Speaker 1: except potentially energy, which is not the worst thing in
Speaker 1: the world either, because that helps everybody else with lower
Speaker 1: energy prices. I think the question's really going to be
Speaker 1: where do we end up in terms of the consumer,
Speaker 1: and where do we end up in terms of inflation,
Speaker 1: and what happens to companies and are they laying people off?
Speaker 1: Does that affect the labor market? All those interplays are
Speaker 1: uncertain now, and I don't know how much clarity we
Speaker 1: get in three or four weeks, but you could see
Speaker 1: some money even data right now.
Speaker 3: A number of people are talking about trying to just
Speaker 3: get a little bit more defensive. We see that in
Speaker 3: the investment grades market, with US spreads getting to the
Speaker 3: lowest levels going back to nineteen ninety eight. And the
Speaker 3: theory here is there's going to be some weakness and
Speaker 3: potentially you could see it in a stiflationary type of feel.
Speaker 3: Are we getting to a place where the high flyers,
Speaker 3: the tech exposed stocks will continue to perform even as
Speaker 3: the rest of the market continues to just kind of
Speaker 3: grind nowhere because of that type of dynamic of sacflation.
Speaker 1: And because of the dynamic that there's still a lot
Speaker 1: of growth in that sector. There's still a lot of
Speaker 1: cash flow, and they're not being impacted as negatively as
Speaker 1: some of the companies that don't have the technology aspect.
Speaker 1: So as that technology throws through flows through, maybe you
Speaker 1: do get some margin expansion from that, right because that's
Speaker 1: the big argument about AI is that it's going to
Speaker 1: help us and it's going to help productivity, and that's
Speaker 1: going to help margin. So there's a little bit of
Speaker 1: an offset whether or not we get that. The big
Speaker 1: spend right now is still in technology. So those stocks
Speaker 1: are at a premium valuation for a reason because people
Speaker 1: can see through and see forward.
Speaker 2: At least I mentioned the investment great credit spreads. Let's
Speaker 2: find a compliment it's on that this is important, super
Speaker 2: tight tightiest level since when was it ninety eight d
Speaker 2: eight this side of this century, which is absolutely bone
Speaker 2: cause do you think that tells you more about confidence
Speaker 2: in corporate America or a lack of confidence in the treasury,
Speaker 2: in the US government and in fact for selvereigns worldwide.
Speaker 1: I think it probably has to do more with the
Speaker 1: confidence in the companies themselves and the balancees of the
Speaker 1: company themselves. I think there's a little bit of that
Speaker 1: on the sovereign side, because as debt levels rise globally,
Speaker 1: there is concern on the sovereign side that we hadn't
Speaker 1: seen prior to those massive increases in debt posts to
Speaker 1: financial crisis.
Speaker 2: But if you look at the way.
Speaker 1: That public companies at least have been managing their cash
Speaker 1: flows and balance sheets, there's a reason those spreads are
Speaker 1: so tight when it was a yield chasing operation. And
Speaker 1: the other one is they're in pretty good financial shape.
Speaker 1: There isn't a lot of credit weakness on a lot
Speaker 1: of the publicly traded stuff, so the IG and those
Speaker 1: spreads are very very narrow because there isn't a lot
Speaker 1: of daylight between that.
Speaker 3: Right now, there's another way of asking what John asked,
Speaker 3: which is, even with spreads at the narrowest since nineteen
Speaker 3: ninety eight, is there still value because there is any
Speaker 3: spread above benchmark government rates, given that their credit worthiness
Speaker 3: on some level might be better in some respects than
Speaker 3: the US government.
Speaker 1: I think that's one of the reasons that you saw
Speaker 1: some of those corporates be able to borrow at ridiculously
Speaker 1: low rates right because people looked at them and said,
Speaker 1: those stabilities of cash flow are way better than some
Speaker 1: governments that I've seen. I think in the end, there's
Speaker 1: always a place for fixed income when it has finally
Speaker 1: a yield, which it does if you're matching portfolios, if
Speaker 1: you're matching exposure, or if you're just looking for safety
Speaker 1: and preservation of capital. There's always a space for that.
Speaker 1: And I think that right now it's not a bad
Speaker 1: place to be if you know that you need that
Speaker 1: money in a short period of time. Longer term, do
Speaker 1: we think that rates maybe go higher on the long end,
Speaker 1: they could, it's unusual to stay this low for this long.
Speaker 3: A Corporate bonds a better hedge right now, a better
Speaker 3: safety play than government bonds, given the facts that they
Speaker 3: also have these strong balance sheets behind them.
Speaker 1: I think that the volatility in governments is much more
Speaker 1: policy driven than it would be for corporate so to
Speaker 1: the extent that you might see more volatility in the
Speaker 1: government market, and we have over the last year, which
Speaker 1: is more the last couple of years, it's more surprising
Speaker 1: to see that much volatility in government spreads, so to
Speaker 1: the extent that there's less vow in the IG market,
Speaker 1: I think that's not a wrong thought.
Speaker 2: Sarah, good to see you. Thanks for dropping by, Folful staff.
Speaker 2: Sarah Hanna of VAMPI Saxson Wood joining us not to
Speaker 2: build on the conversation. Retired Lieutenant General Robert Welsh of
Speaker 2: Academy Securities. Lieutenant General, Welcome back to the program, sir.
Speaker 2: We've been tracking the diplomatic effort in the United States
Speaker 2: in Alaska than down in Washington. Can you tell us
Speaker 2: what the realities are of this conflict on the ground.
Speaker 4: Yeah, thank you, John. You know, this is war's been
Speaker 4: going on obviously for a long time, and when we
Speaker 4: talk about a stalemate, Russia has been making slow progress
Speaker 4: on the ground. There's no question about that. It's a
Speaker 4: much larger country, it has a lot more military power,
Speaker 4: but it's been very slow progress. And the real challenge
Speaker 4: for Russia is that in today's modern warfare, the defense
Speaker 4: is more to an advantage than the offense, and Russia
Speaker 4: is running into that against the Ukraine belts of defense.
Speaker 4: And what we see clearly here is they're getting closer
Speaker 4: to the Ukrainian main defensive belts or their fortified belts.
Speaker 4: Is that's the area of the Dunesk region that Russia
Speaker 4: really would like to get their hands on for a
Speaker 4: number of reasons. It's part of the industrialized area of Dunesque,
Speaker 4: It's got a lot of key minerals that are in
Speaker 4: that area. But from a military standpoint, and that's where
Speaker 4: Putin is really focused. From a military standpoint, it has
Speaker 4: the key defensive areas around four major cities, and urban conflict,
Speaker 4: as military members know, is the toughest warfare to go through,
Speaker 4: and that's where Russia or Ukraine has their forces entrenched
Speaker 4: in this defensive belt.
Speaker 3: Lieutenant General, how much of a win, then, is it
Speaker 3: for Vladimir Putin to not have a ceasefire as some
Speaker 3: of the details of this potential trilateral meeting take place.
Speaker 4: That's a great question, Lisa. I think both the US
Speaker 4: and the Europeans did want to cease fire. In the
Speaker 4: situation is the Europeans and Ukraine, certainly in the US
Speaker 4: would like to end the war more than Vladimir Putin
Speaker 4: would like to end the war. So a sea fire
Speaker 4: helps end the war, stop the fighting right now, and
Speaker 4: stop the killing. As Donald Trump has put out, in
Speaker 4: the case of Putin, he would like to just continue.
Speaker 4: So these talks he continues to kind of slowly drag
Speaker 4: out because he wants these battlefield gains. The more gains
Speaker 4: he gets on the battlefield, the more leverage he has,
Speaker 4: and the possibility of a breakthrough that could happen, and
Speaker 4: he could even gain more gains and threaten more of
Speaker 4: the heart or the interior of Ukraine.
Speaker 3: As we hear more about security guarantees, it's some sort
Speaker 3: of agreement between the US and Europe to guarantee is
Speaker 3: some sort of support to Ukraine. Do you feel more
Speaker 3: encouraged or less encouraged? Do you still kind of feel
Speaker 3: like the jury's out.
Speaker 4: Now? I think very encouraged after what's happened over the
Speaker 4: last few weeks. There's no question that the meeting yesterday
Speaker 4: at the White House was historic. I don't think we've
Speaker 4: ever seen that many national leaders along with the leader
Speaker 4: from the EU and the NATO secretary, we haven't seen
Speaker 4: anything like that the White House. That really shows is
Speaker 4: the power, the unity, the strength that NATO is bringing
Speaker 4: and the ability to kind of call less power for
Speaker 4: collective security. And that's a key thing here that Vladimir Putin,
Speaker 4: throughout this conflict has tried to break the NATO alliance,
Speaker 4: tried to break the US from NATO. And if anything
Speaker 4: with this showed around that table yesterday is those leaders,
Speaker 4: as Ali had said, have really kind of come around
Speaker 4: the table to show Putin that there is a lot
Speaker 4: of strength here. And it's not only military strength that's here.
Speaker 4: We know Russia has continued their wartime economy to build
Speaker 4: their military, but the economic strength that you see from
Speaker 4: the group that goes around the table it is much
Speaker 4: larger than Russia is, and Putin knows that.
Speaker 2: Lieutenant General. Just a final question, you mentioned NATO the
Speaker 2: details of this security agreement. In your opinion, why does
Speaker 2: it need to live outside of NATO, Why is that
Speaker 2: so important and what does that tell you about really
Speaker 2: the nature and strength of that overall agreement in the future.
Speaker 4: Now, John's great question. I think the key thing is
Speaker 4: is if you look at Putin's objective from the very beginning,
Speaker 4: is to rebuild the former Soviet Union and break NATO.
Speaker 4: That's his goal, that's an objective and a red line
Speaker 4: for him from the very very beginning was Ukrainie and
Speaker 4: not joining NATO. And from the beginning President Trump as
Speaker 4: he came into office, laid that down that he knew
Speaker 4: that would be a red line and took that off
Speaker 4: the table, and the Europeans supported that. And so now
Speaker 4: when you get to some type of security measures, it
Speaker 4: is so important to have security measures that when the
Speaker 4: fighting stops that there were security guarantees, and that is
Speaker 4: going to be the devil in the details as we
Speaker 4: go forward, and Putin will not want to have an
Speaker 4: Article five type security arrangement. And what that means is
Speaker 4: that we would be supporting Ukraine through the European countries,
Speaker 4: those that are in NATO with the same type of
Speaker 4: support that they would get as if Ukraine was in NATO.
Speaker 4: It was a very interesting approach that Trump took and
Speaker 4: pulled that out of his hat, and Vladimir Putin listened
Speaker 4: to that and initially said he would take a hard
Speaker 4: look at that. So I think that is going to
Speaker 4: be the key thing. And Zelenski is going to push
Speaker 4: you very very hard to get those type of disservances
Speaker 4: from the large militaries.
Speaker 2: Of the bright. True, and we all wanted to say,
Speaker 2: Lieutenant General, we appreciate its time. Kit jokes of self
Speaker 2: gen writing. The more prices rise in the data, the
Speaker 2: worse it will be for the economy, and the feed
Speaker 2: should focus more on the labor market as a result.
Speaker 2: If they do that, the dollar will be vulnerable. Kit
Speaker 2: joined us now for more, Kit, welcome to the program.
Speaker 2: So let's talk about this FX market driven in the
Speaker 2: first half of this year by perceived capital flows. Do
Speaker 2: you believe that in the second half of this year
Speaker 2: it will be driven by rate differentials? And why.
Speaker 5: Rate differentials up to appoint expectations about growth which are
Speaker 5: which are often the same thing. But but yes, I think.
Speaker 5: But people are genuinely uncertain and sense of at the
Speaker 5: moment they're uncertain, but aware of the fact that the
Speaker 5: world is very long dollars because we've all put so
Speaker 5: much money into the US equity market, because money is
Speaker 5: gone to the US treasury market, because the US has
Speaker 5: been out performing for so long, and that if the
Speaker 5: economy slows, rates need to come down significantly, then then
Speaker 5: some of those some of the returns people have enjoyed
Speaker 5: are pretty vulnerable. I think the market's confused about the
Speaker 5: short term rate story, but confident that the bit the
Speaker 5: answer is is the US economy slowing a little or
Speaker 5: is it in more danger of a more significant significant slowdown?
Speaker 5: And that means we're overreacting to every single piece of
Speaker 5: macroeconomic data, with the exception perhaps of the really sort
Speaker 5: of minded data we saw yesterday, but we're lining up
Speaker 5: to overreact to each piece we get going into September.
Speaker 3: Taking a step back kid Earlier this year, it seemed
Speaker 3: like a one way freight train of cell dollars sell
Speaker 3: the United States. That was the trade, and pretty much
Speaker 3: everyone lined up behind it.
Speaker 2: Is it over?
Speaker 3: We've kind of plateaued and kind of shifted around this
Speaker 3: level for a couple of months. Now, are we seeing
Speaker 3: sort of the end of the cell the America trade
Speaker 3: and going back to this sort of nuance to overreacting
Speaker 3: to every data point, type of landscape.
Speaker 5: I think the data will decide that. I think the
Speaker 5: question then is whether the US economy is slowing significantly.
Speaker 5: You know, a currency can't go down as fast as
Speaker 5: the dollar did, or go up as fast as currencies
Speaker 5: like the euro did for very long. An inflation targeting
Speaker 5: central bank reacts to fast currency moves, and economy reacts
Speaker 5: to fast currency moves. So the move we had in
Speaker 5: euro dollar from one o two up to one eighteen
Speaker 5: was too fast. We have to take time out. Whether
Speaker 5: that takes us to one twenty five or we get
Speaker 5: stuck here depends on how much or how little the
Speaker 5: US economy slows in the next three months. I would
Speaker 5: have said, and if we got a repeat of last
Speaker 5: month's payroll numbers, if we've got something genuinely soft, then
Speaker 5: I think we're going to head off into the middle
Speaker 5: of the one twenties for eur dollar. We've got another
Speaker 5: five to ten percent weakness in the dollar in this
Speaker 5: cycle to come. But you know, I wouldn't want to
Speaker 5: overinterpret some of the data that we've had in the
Speaker 5: summer and extrapolate it out blindly as saying that is
Speaker 5: what's definitely going to happen again. If the inflation hit
Speaker 5: from tariffs isn't too big, the economy is not going
Speaker 5: to slow too much, and are very gentle easing in
Speaker 5: US growth doesn't justify much dollar weakness at all.
Speaker 3: So let's build on that. Right now, we're looking at
Speaker 3: one sixteen eighty eight on the euro dollar cross. You're
Speaker 3: saying it could go into the mid one twenties if
Speaker 3: you do see some sort of significant weakening in the
Speaker 3: US economy heading.
Speaker 2: Into the fall.
Speaker 3: What are the key data prints that you're looking at.
Speaker 3: What would constitute that type of weekakness that would really
Speaker 3: cause that type of depreciation in the dollar.
Speaker 5: So we would set ourselves on that route if we
Speaker 5: saw weakness that suggested not recession or anything, but that
Speaker 5: the Fed's got significant rate cuts to make that we're
Speaker 5: going to get yields down, that the things that have
Speaker 5: made people pour them poor their money into US assets
Speaker 5: need to be questioned, at least temporarily. So if we saw,
Speaker 5: you know, if we saw a player le number in
Speaker 5: the United States that was I don't know, say only
Speaker 5: up one hundred thousand or weaker than that at the
Speaker 5: beginning of September, I think that would concern people. If
Speaker 5: you saw weakness in the housing market beyond a small correction,
Speaker 5: if you saw softness in real personal spending as consumers
Speaker 5: scale back in the face of higher prices, then I
Speaker 5: think you'd be sort of forming that that kind of backdrop.
Speaker 5: The advantage for the consumer who's critical in this is
Speaker 5: if the inflation data continues to be held back by
Speaker 5: lower energy prices. So if low energy prices offset tariff increases,
Speaker 5: or if tariff increases aren't fed through to US consumers,
Speaker 5: it all softens the economic blow and the downside of
Speaker 5: the dollar is reduced.
Speaker 2: We're all still wrestling with this, and I imagine many
Speaker 2: on the committee that Federal Reserve are wrestling with the
Speaker 2: very same thing, which begs the question going into Jackson Hole,
Speaker 2: just how much can we expect NEIL data. Renmack, don't
Speaker 2: expect a strong signal at Jackson Hole. Jonathan Pinglely ubs
Speaker 2: if you're looking for ray cuts, he says, quote, I
Speaker 2: don't think he's going to lock it in.
Speaker 4: Kit.
Speaker 2: Do you think he's going to lock it in in
Speaker 2: a few days time.
Speaker 5: I'd be surprised if he locks it in. But the topic,
Speaker 5: the topic of the symposium is the labor market. The
Speaker 5: labor market is going to be the thing that tells
Speaker 5: us what's happened to the economy. So we should hear
Speaker 5: a really interesting set of discussions about how they feel
Speaker 5: about the labor market and how they feel about labor
Speaker 5: market tightness relative to softness and employment gains. And if
Speaker 5: I get any hints from that, will I will jump
Speaker 5: on them to provide me with a clue to what
Speaker 5: they'll do. But you know, I think that again, if
Speaker 5: the job's numbers are week at the beginning of September
Speaker 5: after what we saw last month, frankly, the game's up.
Speaker 5: So that'll tell us what happens, But it'll be it'll
Speaker 5: be a very interesting supposion on the labor market.
Speaker 2: Okay, just before you go, what's more likely over the
Speaker 2: next twelve months or so that we get three four
Speaker 2: five rate cuts from the Federal serve or Arsenal win
Speaker 2: the league.
Speaker 5: Three four five. I think Arsenal I've got a decent
Speaker 5: chance of winning the league. Probably, it's probably I'm slightly
Speaker 5: more optimistic about that than about anything in the US economy,
Speaker 5: which is all up for graps.
Speaker 2: Okay, thank you, sir, kit Chu's there a sebchen Okay,
Speaker 2: thank you very much. On the FX market and a
Speaker 2: little bit of Premier League football, pre amisserer of JP
Speaker 2: Morgan writing the dual mandate is intention but we think
Speaker 2: a September twenty five basis point rate cut is likely
Speaker 2: and a sign or for more cuts to come as
Speaker 2: the feder removes the level of restriction in monetary policy.
Speaker 2: For more pre adjoints round a table, pray, good morning,
Speaker 2: it's going to see RBC has talked about this. A
Speaker 2: lot of people are focused on. It is the long
Speaker 2: end becoming unanchored from the front end, not just domestically
Speaker 2: but worldwide when you look at the bond market at
Speaker 2: the moment.
Speaker 6: So I'm glad you bring up the global side because
Speaker 6: I think that's absolutely important. Global term premiums are correlated
Speaker 6: the fact that we have fiscal expansion globally, the fact
Speaker 6: that there isn't that much demand for long duration is
Speaker 6: the reason why UK, German, Japanese long end yields arising,
Speaker 6: and that's raising US rates as well. But I mean,
Speaker 6: talking about the long end getting unanchored Sell America or
Speaker 6: the deficit, that's like very April. I mean, I know
Speaker 6: it was only a few months ago, only a few
Speaker 6: months ago, but you look at the tariff revenues they
Speaker 6: are coming in, they're actually offsetting the trip will be
Speaker 6: the one big beautiful bill. I think it's going to
Speaker 6: largely offset it. You look at the Cell America trade,
Speaker 6: we're not seeing evidence that foreign investors have stayed away.
Speaker 6: Now there is a longer term question how much should
Speaker 6: treasury And I love your question to Secretary Vesson, how
Speaker 6: much should you issue in the long end? I think
Speaker 6: all Treasury departments have to think about that and maybe
Speaker 6: not issue as much in the long end. And that
Speaker 6: might be happening issue where the demand is the demand,
Speaker 6: and you see it in the credit market, the mortgage market,
Speaker 6: the treasury market demands on the bellue of the curve
Speaker 6: five to ten, and that's where they can issue. So yes,
Speaker 6: it's a little unanchored. You can trade the curve on
Speaker 6: that front. But I don't think we're looking at a
Speaker 6: scenario that bears steepener. Which is a nightmare scenario for
Speaker 6: risk assets as well, is when all rates rise led
Speaker 6: by the long end. We're not seeing that. I think
Speaker 6: the curve is steepening for different reasons.
Speaker 3: Now, are we going to see the opposite? You said
Speaker 3: that Cell America is so April, Okay, are we actually
Speaker 3: outright into buy America again? As we see the dollar
Speaker 3: firm up in a couple of different pockets, and the
Speaker 3: long end, Yes, yields have been rising, but not necessarily
Speaker 3: unmoored in the way a lot of people were worried
Speaker 3: about exactly.
Speaker 6: So, I do think that US exceptionalism, Remember we talked
Speaker 6: about it just a few months ago. Is that over
Speaker 6: look at the economic data. We're pricing it. Look at
Speaker 6: financial markets, you know, I know the financial market is
Speaker 6: not the economy, but it is pricing in. I think
Speaker 6: markets across the board are pricing in a soft landing
Speaker 6: and what government Waller called good news rate cuts that
Speaker 6: maybe the Fed can reduce accommodation, those rates can fall
Speaker 6: a little bit, allowing the broadening out of the recovery.
Speaker 6: I mean, we have the structural AI tech capex in there,
Speaker 6: but maybe this can broaden up. That's what the market's pricing.
Speaker 6: And so to your question, is the rest of the
Speaker 6: world buying US assets? They are, They're buying credit, they're
Speaker 6: buying equities, they're buying treasuries, fixed income because they are
Speaker 6: seeing that the US is still growing the best.
Speaker 3: Are you going a long duration? Is this a time
Speaker 3: to buy even at a time or potentially there is
Speaker 3: inflationary pressure coming down the pike.
Speaker 6: So we are long duration. We've looked for any opportunity.
Speaker 6: If we've been in this three seventy five four and
Speaker 6: a half fair value in our mind, that's the soft
Speaker 6: landing fair value. There's an asymmetry though, if things slow down.
Speaker 6: We have a lot of policy shocks that have hit
Speaker 6: the economy. If things slow down, we can absolutely rally more.
Speaker 6: But if we stay in the soft landing. By rally
Speaker 6: more I mean lower rates. But if we see in
Speaker 6: the soft landing four p thirty on tens is cheap,
Speaker 6: you're near the upper end of the range. So absolutely
Speaker 6: we've been buying some duration. Are we max long?
Speaker 4: Know?
Speaker 6: You know there's to your point the treasure amount. Interest
Speaker 6: rates are driven by this fear of inflation, fear of growth.
Speaker 6: There are shades of stagflation in the data right now.
Speaker 6: I don't think Chepool is going to commit to a
Speaker 6: rate cut. I think it's going to just signal the
Speaker 6: easing bias. So we might hang around here. But what
Speaker 6: happens if this I think the labor market's on edge,
Speaker 6: and if things actually slow down, as companies say, we
Speaker 6: can't absorb all of this in margins, We're going to
Speaker 6: have to cut costs. That's a fear. That's what keeps
Speaker 6: me up at night, and at that point, duration's your
Speaker 6: only friend.
Speaker 2: Do you think it's for disappointment on Friday?
Speaker 6: I think we get a lot on Friday, so becaus
Speaker 6: I always think of the economic outlook in the reaction function.
Speaker 6: If you're looking for chap Owel to signal imminent rate
Speaker 6: cuts or a dubbish reaction function, I don't think we're
Speaker 6: going to get that. I think it's going to depend
Speaker 6: on So where the disappointment might come in is we
Speaker 6: didn't commit to September. We still left the door open
Speaker 6: because we have another payroll report revisions. Now, I think
Speaker 6: the market might make pay more attention to revisions along
Speaker 6: with that number. Something that's frustrated me for years that
Speaker 6: you get both sets of data and the market always
Speaker 6: looks at the headline. Maybe we will look at both.
Speaker 6: You have another CPI report, So I think where the
Speaker 6: disappointment will come in is no commitment. But I'm going
Speaker 6: to be watching that framework review. That's going to sound
Speaker 6: maybe a little bit hawkish. They're going to talk about
Speaker 6: symmetry to the unemployment rates, symmetry to inflation. That might
Speaker 6: sound a little hawkish, but I'm watching the economic outlook.
Speaker 6: How nervous is he that consumer spending has slown? That
Speaker 6: PDFP the private domestic finance sales, That number is slowing
Speaker 6: without the rise that much rise in inflation. So why
Speaker 6: is the consumer pulling back if companies are not passing
Speaker 6: on costs? This there's some under maybe some underlying sloaning.
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