WEBVTT - Surveillance: Fed Cycle with Calvasina 0:00:05.120 --> 0:00:08.440 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.480 --> 0:00:12.000 with Jonathan Farrell and Lisa A. Bramowitz. Join us each 0:00:12.080 --> 0:00:16.040 day for insight from the best and economics, geopolitics, finance 0:00:16.120 --> 0:00:20.640 and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 0:00:20.920 --> 0:00:25.480 Spotify and anywhere you get your podcasts, and always I'm 0:00:25.480 --> 0:00:29.760 Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. 0:00:30.000 --> 0:00:32.080 Lord Calvastina joins us. Now, heady, you say, could he 0:00:32.080 --> 0:00:34.640 strategy OBC Capital Markets? Let me, let's just start with 0:00:34.640 --> 0:00:37.520 a job support on Friday. It follows through into Monday 0:00:37.520 --> 0:00:40.479 at Kurticlowa. What did that change for you? If anything? 0:00:40.479 --> 0:00:43.920 It's ill. So look, I think it's one data point, 0:00:44.000 --> 0:00:45.720 you know. I think there was a view that emerged 0:00:45.760 --> 0:00:48.720 over the weekend in Friday trading um that the Fed 0:00:48.760 --> 0:00:50.519 may have to stay higher for longer. We may not 0:00:50.560 --> 0:00:52.600 get the pause, we may not get the cuts. I'm 0:00:52.640 --> 0:00:54.480 still in the camp that thinks we are closer to 0:00:54.520 --> 0:00:56.080 the end of this hiking cycle and we're going to 0:00:56.160 --> 0:00:59.520 get the pause. And for me, it really underscores the 0:00:59.560 --> 0:01:02.920 idea that this economy is very resilient Um, I think 0:01:02.920 --> 0:01:05.440 there could have been some labor hoarding. UM. You know, 0:01:05.520 --> 0:01:07.360 I think that there are things that could explain that 0:01:07.440 --> 0:01:09.440 hot number. But I think we just see this time 0:01:09.480 --> 0:01:12.200 and time again, just evidence that the labor market is 0:01:12.280 --> 0:01:14.720 tight and that we are seeing, you know, if you 0:01:14.720 --> 0:01:16.880 look at some other reports, we're seeing some indications that 0:01:16.920 --> 0:01:19.440 wage growth is slowing. I think that's probably enough to 0:01:19.480 --> 0:01:23.400 help inflation come down. So I'm not overreacting to Friday's report. 0:01:23.440 --> 0:01:26.199 For me, the broader thesis is still intact for now. Laurie, 0:01:26.240 --> 0:01:28.720 when I find fascinating, I thought of you this weekend 0:01:28.720 --> 0:01:32.800 Bloomberg reporting that danaher is looking at a service company 0:01:32.840 --> 0:01:36.039 in the medical field. It's a MidCap, smaller cap kind 0:01:36.040 --> 0:01:38.880 of thing, not a zombie roll up. But are we 0:01:38.920 --> 0:01:41.080 just going to see a roll up in years small 0:01:41.200 --> 0:01:45.960 MidCap space because money finally costs something. I think it's 0:01:46.120 --> 0:01:49.360 a potential catalyst for markets going forward, in the small 0:01:49.440 --> 0:01:52.240 MidCap space in particular. So one of the things we 0:01:52.320 --> 0:01:54.800 know about small cap companies is the hot quality is 0:01:54.920 --> 0:01:57.520 higher than it used to be. Um. What we also 0:01:57.600 --> 0:01:59.880 know is that the price we're gonna pay for, you know, 0:02:00.040 --> 0:02:02.960 either skirting the recession or a short shallow recession or 0:02:02.960 --> 0:02:04.800 a growth scare, or whatever we end up calling. This 0:02:05.240 --> 0:02:07.640 is probably going to be that economic growth is subpar 0:02:07.800 --> 0:02:10.120 for a little bit in percentage terms. And I think 0:02:10.160 --> 0:02:12.440 that incense companies who have a lot of cash still 0:02:12.440 --> 0:02:14.880 sitting on their balance sheets, who have very good, you know, 0:02:14.919 --> 0:02:17.600 structures in terms of their debt profiles, I think this 0:02:17.720 --> 0:02:19.399 is going to incent them to go out and buy 0:02:19.440 --> 0:02:22.239 some growth. And when you're looking at historically cheap valuations 0:02:22.280 --> 0:02:25.480 in small relative to large, it's something that simply makes sense. 0:02:25.520 --> 0:02:27.000 So I think it's you know, it's something that we 0:02:27.040 --> 0:02:29.200 have to watch going forward, and I think it argues 0:02:29.240 --> 0:02:32.120 against a deeply barished narrative in markets. At the same time, 0:02:32.639 --> 0:02:35.520 if you talk about tourists and slots narrative about no landing. 0:02:35.800 --> 0:02:39.240 Is that positive for equity valuations if that means higher 0:02:39.280 --> 0:02:43.120 rates for longer and companies having to justify their capital 0:02:43.160 --> 0:02:46.760 structures in a much higher rate regime. I think it 0:02:46.840 --> 0:02:49.280 depends on exactly what you mean by higher rates. Now, 0:02:49.280 --> 0:02:51.160 if we're going back to something that we saw in 0:02:51.200 --> 0:02:54.200 the seventies, of course that's gonna slaughter pe multiples. Um 0:02:54.280 --> 0:02:56.760 we actually have a model where we make in inflation, 0:02:57.240 --> 0:03:00.280 FED funds and also the ten year yield, and we 0:03:00.320 --> 0:03:02.400 published an update on that this morning. We do have 0:03:02.480 --> 0:03:04.480 a couple of cuts baked in for the FED at 0:03:04.520 --> 0:03:06.560 year end, and it gets us to a twenty two 0:03:06.600 --> 0:03:08.720 times multiple. We also have, you know, the ten year 0:03:08.800 --> 0:03:11.720 treasury at around three point four percent in inflation moderating 0:03:11.760 --> 0:03:13.800 to around three percent. But let's say I just go 0:03:13.880 --> 0:03:16.480 and Lisa and flex those interest rate assumptions and kind 0:03:16.520 --> 0:03:19.280 of take the FED number up and just leave it there, 0:03:19.320 --> 0:03:21.720 so don't bake any cuts and keep that higher for longer. 0:03:22.000 --> 0:03:24.360 I'm still looking at a twenty plus pe multiple on 0:03:24.400 --> 0:03:27.160 a trailing basis on this year's earnings. So it hurts 0:03:27.160 --> 0:03:28.920 a little bit, but it doesn't hurt as much as 0:03:28.960 --> 0:03:31.320 people think. If you go in and do the map, Laurie, 0:03:31.320 --> 0:03:32.800 I just want to finish on the rest of the world. 0:03:33.280 --> 0:03:37.040 China has gone from uninvestable to unavoidable and then seemingly 0:03:37.120 --> 0:03:39.160 in the last forty hours that swung back to something 0:03:39.160 --> 0:03:41.839 in between. Laurie. How much interest is there from your 0:03:41.840 --> 0:03:46.000 clients to invest abroad this year? So it's been huge, John, 0:03:46.000 --> 0:03:47.760 and we've talked about this in the past, but I 0:03:47.760 --> 0:03:51.240 think investors came into three just wanting to do something new, 0:03:51.480 --> 0:03:53.280 and one of the new things that people wanted to 0:03:53.280 --> 0:03:55.800 do was play the China reopening thesis. And I think 0:03:56.160 --> 0:03:59.680 raising the geopolitical angst and talking about worsening relations between 0:03:59.800 --> 0:04:01.680 China and in the US, I think it complicates the 0:04:01.720 --> 0:04:04.080 ability to play that trade. So as we sit here 0:04:04.080 --> 0:04:06.200 and think about things that could push markets down in 0:04:06.200 --> 0:04:08.520 the short term or cause you know, things to just 0:04:08.560 --> 0:04:10.840 lose a little bit momentum. To me, frankly, that's you know, 0:04:10.960 --> 0:04:14.240 a more legitimate downside catalyst than say, oh, earnings need 0:04:14.280 --> 0:04:15.600 to come down a little bit more. I think the 0:04:15.600 --> 0:04:19.400 market understands the ladder. I think the China issue is 0:04:19.480 --> 0:04:22.480 it's challenging something that had gotten people very excited coming 0:04:22.520 --> 0:04:25.200 into this year. Laurie wonderful as elwise, it's going to 0:04:25.240 --> 0:04:26.880 catch up and kick off to try and with you, 0:04:27.080 --> 0:04:34.200 Laurie campus that if i'll b C Capital Markets right now. 0:04:34.240 --> 0:04:38.839 Michael Shall joins US chief executive Officer market Field Asset 0:04:38.960 --> 0:04:43.400 Management with a very very nuanced note there, How did 0:04:43.400 --> 0:04:48.159 your view change the market field view after five seventeen 0:04:48.240 --> 0:04:52.279 thousand plus fifty four thousand revisions? How did the labor 0:04:52.320 --> 0:04:56.600 economy of the United States. Adjust your view. I mean 0:04:56.600 --> 0:04:59.400 I thought it was strong, and Friday's numbers told you 0:04:59.400 --> 0:05:00.960 it was strong. I do think it's one of those 0:05:01.000 --> 0:05:04.520 reports for it looks like a bit of a statistical aberration. 0:05:05.200 --> 0:05:07.440 It's sort of strong across the board. It's a weird 0:05:07.440 --> 0:05:09.840 time a year, and you had all of the two 0:05:09.880 --> 0:05:13.680 adjustments phone into that. So you know, I think probably 0:05:13.720 --> 0:05:16.320 we're still creating about two hundred thousand jobs a month. 0:05:16.760 --> 0:05:20.080 All of the labor metrics look okay, and in Friday's number, 0:05:20.120 --> 0:05:22.640 particularly in the household serve a you know, you discovered 0:05:22.640 --> 0:05:24.520 a bunch of a missing jobs that j Pale have 0:05:24.640 --> 0:05:28.880 been talking about, which it's it's not shocking the labor 0:05:28.920 --> 0:05:31.359 data strong. The market field view is a is a 0:05:31.440 --> 0:05:36.360 more long term view. We're now backed where money costs something? Yes, 0:05:36.560 --> 0:05:39.600 how much? Speak to people that have never enjoyed with 0:05:39.640 --> 0:05:43.680 Michael Shore and enjoyed hers. Speak to how we're back 0:05:43.720 --> 0:05:47.880 to now where money costs something? How does my life change? Well, 0:05:47.920 --> 0:05:51.280 I mean the question is are you operating in a 0:05:51.360 --> 0:05:53.960 kind of business that can generate enough cash flow? But 0:05:54.080 --> 0:05:57.680 money at five is unimportant. I think for a lot 0:05:57.720 --> 0:06:00.720 of the economy. You know, it's it's really still okay. 0:06:00.800 --> 0:06:02.960 I don't think the sort of what we would call 0:06:03.000 --> 0:06:06.080 the sort of old economy has really been devastated by 0:06:06.160 --> 0:06:10.080 interest rates. Um. I think the problem is much more 0:06:10.120 --> 0:06:13.600 in people who have been very, very creative with financial 0:06:13.640 --> 0:06:17.800 engineering attached to a business and and there, you know, 0:06:17.800 --> 0:06:20.880 which is a lot of a sort of PEVC portion 0:06:20.960 --> 0:06:24.040 of the economy there. I think five percent is gonna matter. 0:06:24.320 --> 0:06:28.320 I think we're going to be added around five for 0:06:28.400 --> 0:06:30.920 a while. Thank that we're going to be added around 0:06:30.960 --> 0:06:34.080 five pc until things start to fall apart. This talk, 0:06:34.120 --> 0:06:36.760 of course of going abroad. Only a year or so 0:06:36.880 --> 0:06:41.000 ago China was totally uninvestable. We start and I'm told 0:06:41.000 --> 0:06:44.200 repeatedly it's unavoidable. The events of Friday and over the 0:06:44.240 --> 0:06:46.480 weekend does it change how we want to be invested 0:06:46.680 --> 0:06:51.080 in the China story. Look, I think there's two big issues. 0:06:51.320 --> 0:06:54.400 One is that the Chinese have switched from you know, 0:06:54.520 --> 0:06:58.760 really a very bad COVID policy to a more manageable 0:06:58.760 --> 0:07:02.279 COVID policy. And monetarily they've gone from tight to loose. 0:07:02.560 --> 0:07:05.280 So that's really really positive. I think that hasn't changed. 0:07:05.360 --> 0:07:08.440 It's been true really since two thousand and eighteen is 0:07:08.839 --> 0:07:12.600 the sort of geopolitical geopolitical aggravation of investing in China. 0:07:13.560 --> 0:07:16.680 You know, it's not a lot of fun um. I mean, 0:07:16.800 --> 0:07:19.520 we we found that out in Russia last year, where 0:07:19.560 --> 0:07:22.560 where everything we had there, which wasn't much, you know, 0:07:22.720 --> 0:07:26.240 was wiped over a weekend. I don't think China itself 0:07:26.320 --> 0:07:29.160 is that attractive for those reasons, but that whole region 0:07:29.240 --> 0:07:31.440 is now much much more attractive. I think some of 0:07:31.480 --> 0:07:35.440 the markets surrounding China are investable. Um. I think the 0:07:35.520 --> 0:07:39.480 Japanese as a as a byproduct of yield curve control, 0:07:39.600 --> 0:07:42.960 have also sort of involuntary switched to a very loose 0:07:43.320 --> 0:07:45.960 you know, to a very loose monetary monetary policy. So 0:07:46.000 --> 0:07:49.680 I think Asia and the portions of the US market 0:07:49.720 --> 0:07:52.200 that feed into that, you know, are suddenly doing quite 0:07:52.200 --> 0:07:54.760 a lot better. Does this extend to Europe? To London 0:07:55.200 --> 0:07:57.360 minus listed on the foot seat, does extend to them? 0:07:57.400 --> 0:07:59.120 You know? The foot see made an all time high 0:07:59.120 --> 0:08:05.160 on Friday record no one's talking about, yeah time high, um, 0:08:05.160 --> 0:08:07.800 and it's been struggling, you know, struggling with this level 0:08:07.840 --> 0:08:10.560 force you know, since and so it does for that 0:08:10.640 --> 0:08:13.240 portion of the London market I think it does for 0:08:13.360 --> 0:08:15.720 the German economy, which is still tied you know, which 0:08:15.800 --> 0:08:18.280 is still tied into that. So I think for you know, 0:08:18.320 --> 0:08:21.600 a portion of global economically sensitive equities, the news has 0:08:21.680 --> 0:08:23.760 got materially better in the last four months. How do 0:08:23.800 --> 0:08:26.000 you decipher the signal from the noise at a time 0:08:26.040 --> 0:08:29.000 of such noise, particularly short covering. It's some of the 0:08:29.080 --> 0:08:32.640 volatility that we saw last week. I think it's really hard. 0:08:33.240 --> 0:08:35.720 You know, my my phone didn't stop bringing like Thursday 0:08:35.720 --> 0:08:37.720 and thirty last week from people trying to work out 0:08:37.720 --> 0:08:41.120 what what what one on earth is really going on. Look, 0:08:41.160 --> 0:08:44.280 some of the technicians I respect, I think they've seen 0:08:44.400 --> 0:08:48.040 enough to call this a new bull market. I don't, 0:08:48.880 --> 0:08:51.680 um you know, I think that the change of monetary 0:08:51.679 --> 0:08:56.000 policy last year still matters. Um you know. I think 0:08:56.040 --> 0:08:58.680 that that we might be in this really weird situation 0:08:58.760 --> 0:09:01.839 that an index light V some P equal weight might 0:09:01.840 --> 0:09:04.400 have finished its bare market last year, but the index 0:09:04.440 --> 0:09:06.640 we actually follow, which is the headline index, which is 0:09:06.679 --> 0:09:09.720 dominated by large cap tech, I think it is still 0:09:09.840 --> 0:09:12.040 is still in the bare market. I want to build 0:09:12.040 --> 0:09:14.400 on that, and just to give this color that Thursday's 0:09:14.400 --> 0:09:17.120 short covering with the largest is November fift according to 0:09:17.160 --> 0:09:19.560 Goldman's Trading tak to give you a sense of just 0:09:19.640 --> 0:09:23.760 how violent it really was in a historical perspective, Big Tech, 0:09:24.000 --> 0:09:26.280 You don't think it can recover from here, even with 0:09:26.320 --> 0:09:28.920 all of the job cuts. Is that what you're saying? Yeah, 0:09:29.080 --> 0:09:31.360 I don't think Manasa one hundred is going to make 0:09:31.400 --> 0:09:35.880 a new high. I'd be shocked if it did. Why 0:09:36.480 --> 0:09:39.480 Because I think it was grotesquely overvalued when it did 0:09:39.480 --> 0:09:42.040 make it's all time high. Um, And I think the 0:09:42.160 --> 0:09:45.080 sort of tenure bull markets when they end take a 0:09:45.120 --> 0:09:46.840 long time to give you a new high. But it 0:09:46.880 --> 0:09:50.400 doesn't happen in ten months. You studied commodity cycles. You 0:09:50.480 --> 0:09:54.920 mentioned some optimism Pacific remix, China. Yeah, this is how 0:09:54.960 --> 0:09:57.280 I put it. Is that enough to get oil above 0:09:57.280 --> 0:10:00.640 a hundred dollar brand? Is that something that's more probable 0:10:00.960 --> 0:10:03.920 than many would think? Yeah, I mean I think it's 0:10:03.920 --> 0:10:05.920 got a much better chance of being a hundred and 0:10:05.960 --> 0:10:12.400 sixty at eighty dollars today. I mean, I'm conciding, do 0:10:12.440 --> 0:10:15.160 I need two barrels in my living room? Like Lisa Ahead, No, 0:10:15.320 --> 0:10:17.080 I don't think it's crazy, but I think you have 0:10:17.120 --> 0:10:19.640 to realize that the weakness in crude oil prices since 0:10:19.760 --> 0:10:23.360 last summer was caused partly by what was going on 0:10:23.400 --> 0:10:25.360 in China, which we assume is getting better, but it 0:10:25.400 --> 0:10:29.120 was also caused by massive releases from the strategic portroleums 0:10:29.200 --> 0:10:32.480 of And I think one thing is for sure, we're 0:10:32.480 --> 0:10:35.040 not going to see that happen again. They can't repeat 0:10:35.080 --> 0:10:38.080 the act that's for sure. No, we can't of market 0:10:38.080 --> 0:10:39.880 field acid management, how can you repeat the acts on? 0:10:39.880 --> 0:10:52.240 They're looking to rebuild the thing right now? This is 0:10:52.240 --> 0:10:55.600 a joy. And Lisa is gonna launch on other broader 0:10:55.880 --> 0:10:58.559 US political affairs. But with Julie Norman, who is co 0:10:58.679 --> 0:11:01.640 director of the Unit Versity College of London Center on 0:11:01.880 --> 0:11:06.040 US Politics, I have to go to her younger academic 0:11:06.200 --> 0:11:10.360 years of trapes sitting around the Levan. You have not been, Julie, 0:11:10.440 --> 0:11:15.200 in the earthquake region directly above Damascus, directly above Lebanon, 0:11:15.679 --> 0:11:19.440 in that northeast corner of the Mediterranean. But you have 0:11:19.559 --> 0:11:24.520 been northeast of there as well. It's pretty remote, isn't it. 0:11:25.960 --> 0:11:29.760 So it's not it's not as super populated area tomb, 0:11:29.800 --> 0:11:31.800 but it's not. I wouldn't described it as remote either. 0:11:31.840 --> 0:11:34.800 I mean, these are still populated areas and obviously we've 0:11:34.840 --> 0:11:37.360 seen that from Uh, from the death toll that is 0:11:37.400 --> 0:11:40.960 just climbing as as we speak, at least people killed. 0:11:41.040 --> 0:11:44.040 So Um, I would say it's a ghazion Tep for example, 0:11:44.160 --> 0:11:47.280 the closest city to where the epicenter was is Um, 0:11:47.440 --> 0:11:50.760 one of the centers where many Syrian refugees were fleeing 0:11:50.840 --> 0:11:52.800 for a number of years during the core years of 0:11:52.800 --> 0:11:56.040 the Syrian crisis. So these are areas where many people 0:11:56.080 --> 0:11:59.600 have already faced extreme hardship in life, forced displacement, have 0:11:59.760 --> 0:12:03.199 been gathering and are now facing this devastating crisis as well. 0:12:03.360 --> 0:12:06.440 Aleppo directly selt and we've all seen the horror of 0:12:06.480 --> 0:12:09.080 the bomb. The leveling of Aleppo is how I would 0:12:09.080 --> 0:12:12.640 put it. How does the tension, the terrorism that you 0:12:12.760 --> 0:12:16.679 follow of the war of there of Syria in various parties, 0:12:16.800 --> 0:12:22.280 how does that obstruct earthquake relief efforts? It's on any 0:12:22.280 --> 0:12:25.320 time that you have conflict ongoing, when you have a 0:12:25.640 --> 0:12:29.520 unstable government and governing system in a place like Aleppo 0:12:29.600 --> 0:12:32.800 where there has been holed out from rebels resistance to 0:12:32.800 --> 0:12:35.800 the state taking back over for obvious reasons. Uh, it's 0:12:35.880 --> 0:12:38.880 it's very difficult to coordinate any kind of relief. It's 0:12:38.880 --> 0:12:41.559 one reason that we've seen the group called the White Helmets, 0:12:41.559 --> 0:12:44.200 which again got a lot of press during during the 0:12:44.200 --> 0:12:47.000 Syrian conflict, have been some of the responders at this. 0:12:47.120 --> 0:12:48.800 You know, they're really the first to the scene. But 0:12:48.840 --> 0:12:51.880 in terms of reconstruction, terms rebuilding after this, it's going 0:12:51.920 --> 0:12:54.000 to be tough in places like that that are, you know, 0:12:54.080 --> 0:12:56.240 be set with many other challenges even when there aren't 0:12:56.280 --> 0:13:00.199 natural disasters. Will keep giving updates throughout the morning as 0:13:00.200 --> 0:13:03.160 we get more on this developing situation, a tragedy where 0:13:03.240 --> 0:13:06.040 hundreds of people are dying. July, there is a question 0:13:06.400 --> 0:13:08.880 in the morning and the sort of mood about what 0:13:08.920 --> 0:13:12.120 the relationship between US and China really is on the 0:13:12.120 --> 0:13:15.520 heels of that balloon that got shot down, the surveillance balloon, 0:13:15.720 --> 0:13:18.000 maybe the weather balloon, that's what China is claiming. What 0:13:18.040 --> 0:13:21.160 did you make of the Chinese response to the US 0:13:21.120 --> 0:13:24.400 shooting down the balloon? Yeah, so at least it's interesting. 0:13:24.440 --> 0:13:26.199 I mean, I don't think it was a shocked to 0:13:26.320 --> 0:13:29.960 any one following US China that that there's espionage going 0:13:30.000 --> 0:13:31.760 back and forth on both ways. So the fact that 0:13:31.800 --> 0:13:34.960 there are these kinds of surveillance tools themselves was not 0:13:35.360 --> 0:13:37.840 the main story as much as it was just the 0:13:37.880 --> 0:13:40.640 brazeness of having it so visible. And I think it's 0:13:40.679 --> 0:13:43.920 still unclear with how intentional that was to have it 0:13:44.040 --> 0:13:47.400 be that visible. Was it intentional across the Chinese government, 0:13:47.440 --> 0:13:49.600 was it one part of the Chinese government, or was 0:13:49.640 --> 0:13:52.840 this just a complete um mess up on somebody's part. 0:13:53.280 --> 0:13:56.479 I do think it was interesting that China's response initially 0:13:56.800 --> 0:13:59.800 did seem to be a sort of crisis of damage control. 0:14:00.160 --> 0:14:02.839 Wasn't just sitting back with the popcorn and watching to 0:14:02.880 --> 0:14:05.000 see how the US responds to this. It really did 0:14:05.040 --> 0:14:08.439 seem alarm that this was happening and playing out as 0:14:08.480 --> 0:14:11.280 it was. Obviously, since then we've seen some of the 0:14:11.360 --> 0:14:15.040 usual rhetoric of the US is blowing us out of proportion. Um, 0:14:15.080 --> 0:14:17.760 you know, this was, you know, unnecessary to shoot down 0:14:17.800 --> 0:14:19.480 the balloon of these kinds of things. But I think 0:14:19.520 --> 0:14:22.600 the initial reaction said at all that that something did 0:14:22.600 --> 0:14:24.640 not go right here, and it put China on the 0:14:24.640 --> 0:14:26.480 back foot and on the defensive, I think more than 0:14:26.520 --> 0:14:29.320 the US. We've been talking this morning, Julia about what 0:14:29.440 --> 0:14:33.320 the mood among the populations of the US and China 0:14:33.480 --> 0:14:35.800 have in terms of an effect on the response from 0:14:35.840 --> 0:14:39.520 both President Biden and Jesan Paying in China. How much 0:14:39.520 --> 0:14:41.680 are people looking for Jijian Pink to take a hard 0:14:41.720 --> 0:14:45.720 stance against the US. Well, I think there's obviously that 0:14:45.720 --> 0:14:47.640 that look in there always has been. But at the 0:14:47.680 --> 0:14:50.880 same time, you know, China is coming out of a 0:14:50.920 --> 0:14:55.760 really unsteady period trying to come back after COVID restabilize 0:14:55.800 --> 0:14:58.880 the economy, and part of that means coordinating in some 0:14:59.000 --> 0:15:00.880 kind of way with the were So I think there 0:15:00.880 --> 0:15:03.400 were at least some in China who were seeing this, 0:15:03.560 --> 0:15:06.320 you know, the Blinken visit that got canceled. This kind 0:15:06.320 --> 0:15:09.480 of open communication is okay, let's at least stabilize things, 0:15:09.520 --> 0:15:12.320 get things back to some kind of normal, and instead, 0:15:12.320 --> 0:15:15.360 when you see a crisis like this send things into 0:15:15.440 --> 0:15:19.600 kind of unpredictable directions, that's not something that those who 0:15:19.640 --> 0:15:22.000 are just wanted to get back to stability want to see. 0:15:22.320 --> 0:15:24.720 So obviously there's some support for that tough talk, but 0:15:24.720 --> 0:15:26.640 at the same time, the sense of we don't want 0:15:26.640 --> 0:15:29.280 things going off the rails more than necessary either. Julie, 0:15:29.280 --> 0:15:30.920 the team here at Blimberg did a great right up 0:15:30.920 --> 0:15:33.400 over at the weekend if the F twenty two. This 0:15:33.480 --> 0:15:35.800 was Damon Shepherd and Toni Capacho the F twenty two 0:15:35.840 --> 0:15:38.920 raptive fighter. They indicated this was the first heir to 0:15:39.040 --> 0:15:42.360 wear kill by that Yet Julia made me wonder, what 0:15:42.400 --> 0:15:44.200 do you think the Chinese learned from how the US 0:15:44.280 --> 0:15:48.440 responded to this event. Yeah, so obviously there was going 0:15:48.480 --> 0:15:50.400 to be watching of that. But I do think it's 0:15:50.400 --> 0:15:54.320 important that the US is also learning from the technology 0:15:54.320 --> 0:15:55.760 that they will get from this as well. And that 0:15:55.840 --> 0:15:58.760 was part of the administration's calculation. You know, we've known 0:15:58.800 --> 0:16:01.960 from before that China has been able to UM to 0:16:02.080 --> 0:16:05.080 learn from our aircraft UM. That was one of the 0:16:05.240 --> 0:16:07.800 reverse technologies that was was seen as a real win 0:16:07.880 --> 0:16:09.720 for China, and I think the US is trying to 0:16:09.960 --> 0:16:11.960 see if they can do the same thing with unpacking 0:16:11.960 --> 0:16:14.920 some of these intelligence UM apparatus is that they do 0:16:14.960 --> 0:16:17.960 now have hands on. But but you're right, both sides 0:16:17.960 --> 0:16:20.600 are always I think watching the other to see what 0:16:20.680 --> 0:16:22.760 are they using, how are they using it, and what 0:16:22.800 --> 0:16:24.960 can we learn from it to adapt on our own systems. 0:16:25.280 --> 0:16:26.840 Judy Gray as a wise thanks with him, and this 0:16:26.960 --> 0:16:29.400 just perfect time. Jenny Norman that if you see how 0:16:34.000 --> 0:16:37.640 Sarah Human is one of the most interesting people in 0:16:37.680 --> 0:16:41.720 the economics racket. She's out of Joan Robinson's College gertn 0:16:41.760 --> 0:16:45.400 at Cambridge, which is truly one of the toughest admits 0:16:45.560 --> 0:16:49.040 in the world. She's with Standard Charter head of Europe 0:16:49.040 --> 0:16:54.280 and America's research. Sarah, what was your first completely overwhelming 0:16:54.400 --> 0:16:58.360 day like at the University of Cambridge. The heritage of 0:16:58.400 --> 0:17:02.280 that program is stunning. What was it like your first 0:17:02.400 --> 0:17:08.760 day in the classroom? It was fantastic, but I was 0:17:08.800 --> 0:17:11.360 amazed at how many men were in the lecture hall. 0:17:11.400 --> 0:17:14.080 To be honest, when I've been at school it had 0:17:14.119 --> 0:17:18.160 been equal women men, and economics were still very much 0:17:18.680 --> 0:17:21.600 a male type of subject at that time. Things have changed, 0:17:21.640 --> 0:17:23.560 of course, things have changed a lot, and you've been 0:17:23.960 --> 0:17:26.239 a real leader on that with your coverage here of 0:17:26.280 --> 0:17:30.600 Europe and now of essentially the Western hemisphere of Standard Charter. 0:17:31.080 --> 0:17:34.639 What is your theme taking Standard Charters expertise in the 0:17:34.680 --> 0:17:39.400 Pacific of a China recovery and how will that affect 0:17:39.440 --> 0:17:44.600 the Sarah Human world? Well, I think it's I think 0:17:44.600 --> 0:17:49.040 it's pretty hopeful. Really, we're looking for growth of five 0:17:49.040 --> 0:17:52.960 point eight percent this year in China and that's above consensus, 0:17:52.960 --> 0:17:55.520 but we're pretty confident that we're going to see a 0:17:55.560 --> 0:17:58.439 real surgeon consumer spending. And if we look back at 0:17:58.440 --> 0:18:00.960 what happened in the US and what happened in Europe 0:18:01.280 --> 0:18:04.600 in the immediate aftermath of the first pandemic wave, helped 0:18:04.640 --> 0:18:07.159 of course by a lot of government spending, particularly in 0:18:07.200 --> 0:18:11.679 the US, there was a huge search real terms increase 0:18:11.720 --> 0:18:15.480 in consumer spending from trough to peak in the first 0:18:15.520 --> 0:18:18.280 twelve months after that first pandemic wave in the US 0:18:18.480 --> 0:18:22.120 around fifteen percent in Europe, and I think we're going 0:18:22.200 --> 0:18:26.000 to see similarly large increases in spending that's going to 0:18:26.160 --> 0:18:30.280 drive the Chinese economy forward UM. In terms of what 0:18:30.280 --> 0:18:32.080 it means for our part of the world, it's great 0:18:32.119 --> 0:18:35.800 for exporters. It's been a sort of difficult year trade wise, 0:18:36.240 --> 0:18:39.159 and we think that there's a lot of opportunities in 0:18:39.320 --> 0:18:43.000 China this year. UM. Question is what happens to inflation. 0:18:43.720 --> 0:18:47.000 There are concerns that we could see commodity prices picking 0:18:47.080 --> 0:18:50.080 up again. Our our own view is that the thought 0:18:50.080 --> 0:18:51.639 of growth we're going to see in China is not 0:18:51.720 --> 0:18:56.720 necessarily going to be driving commodity prices substantially higher. UM 0:18:56.760 --> 0:18:58.879 it's not going to be construction lead, it's not going 0:18:58.880 --> 0:19:01.560 to be investment lad, very much a consumer lead and 0:19:01.680 --> 0:19:05.800 probably consumer services lead boom. Meanwhile, people are also looking 0:19:05.920 --> 0:19:09.919 at resilient labor markets, perhaps helped out by some of 0:19:09.960 --> 0:19:13.200 the demand from China, but very much domestically driven, both 0:19:13.280 --> 0:19:16.240 in Europe as well as in the US. How much 0:19:16.280 --> 0:19:19.199 dissonance is there between the strong labor markets that we 0:19:19.280 --> 0:19:22.480 see and there's disinflationary push that a lot of people 0:19:22.480 --> 0:19:28.399 are feeling. Perhaps as a linear nature, I think there's 0:19:28.480 --> 0:19:31.760 a lot of dissonance, because it's true that typically look 0:19:31.760 --> 0:19:33.800 at the US, if we look at the euro Area, 0:19:33.840 --> 0:19:37.280 if we look at UK, we have strong labor markets everywhere, 0:19:37.720 --> 0:19:42.119 and certainly here in Europe there are real concerns about 0:19:42.160 --> 0:19:45.920 what that means for wages. We're seeing wages rising pretty rapidly. 0:19:46.200 --> 0:19:48.840 In the UK, we have strike action which is likely 0:19:48.920 --> 0:19:54.240 to further advance that, and in the euro Area no 0:19:54.600 --> 0:20:01.160 particular war signs yet of in wages becoming out of control, 0:20:01.560 --> 0:20:04.479 but some concern that with the unemployment rate as low 0:20:04.520 --> 0:20:07.160 as it is the lowest on record, that it's only 0:20:07.160 --> 0:20:10.360 amount of time before you see wages catching up. Um 0:20:10.600 --> 0:20:14.680 so that does really question what happens to inflation, particularly 0:20:14.760 --> 0:20:17.760 the services part of inflation. We know that that's a 0:20:17.800 --> 0:20:21.280 concern for the FED and that Chair Powell has talked 0:20:21.280 --> 0:20:25.520 about the imbalances in the labor market being potentially a 0:20:25.600 --> 0:20:32.440 driver of services inflation x X housing. So this there 0:20:32.520 --> 0:20:36.320 is this dissonance between what is undoubtedly a decline in 0:20:36.560 --> 0:20:40.400 headline inflation UM and certainly a decline in core inflation 0:20:40.480 --> 0:20:44.199 in the US less so in Europe, and what we 0:20:44.280 --> 0:20:47.760 see the real strength that we're seeing on the employment side. 0:20:48.240 --> 0:20:50.280 What was the big takeaway for you from what we 0:20:50.280 --> 0:20:52.119 saw on Friday from the labor market report in the 0:20:52.200 --> 0:20:54.359 US that a lot of people thought was something of 0:20:54.359 --> 0:20:59.480 a head scratcher simply because of its strength. To be fair, 0:21:00.119 --> 0:21:03.199 there was little to suggest that the labor market is 0:21:03.240 --> 0:21:05.960 weak in those data. I mean, we had had some 0:21:06.040 --> 0:21:10.960 signs earlier in the week layoffs were rising pretty rapidly 0:21:11.640 --> 0:21:14.480 UM and we know that a lot of the jobs 0:21:14.480 --> 0:21:18.119 that have been created a part time. That said, the 0:21:18.240 --> 0:21:23.600