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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hortern. Join us each day
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Speaker 2: terminal and the Bloomberg Business app. Buzy joins us now
Speaker 2: for more. Lizzy, Welcome to the program. Do you think
Speaker 2: this economy is reaccelerating and do you think we're very
Speaker 2: close to this FED skip and a meeting.
Speaker 3: Well, I do think that yesterday's number showing this ongoing
Speaker 3: resilience and strength of the consumer reinforces the notion that
Speaker 3: we are on very solid footing. And when we look
Speaker 3: at what the retail sales numbers are likely to do
Speaker 3: to three third quarter growth would be an acceleration above
Speaker 3: three percent from what we saw even in the second quarter.
Speaker 3: So this does, I think, do two things. First, it
Speaker 3: calls into question the fed's decision to make that outsized
Speaker 3: rate cut in September, that fifty basis point production, but
Speaker 3: it also now calls into question the need for additional
Speaker 3: rate cuts, at least in the near term as we
Speaker 3: look out to that November policy decision. I do think
Speaker 3: any further indications, as I said, with a few data
Speaker 3: points between now and then, any further indications of ongoing strength,
Speaker 3: further strength in the labor market on the consumer, a
Speaker 3: reacceleration and inflation does give the FED and out to
Speaker 3: potentially bypass that November meeting.
Speaker 2: So lindsay, as you know, that's talking about removing restriction,
Speaker 2: not providing accommodation. And you can tell me if that's
Speaker 2: a distinction without a difference or not in just a moment.
Speaker 2: But ultimately, when they say recalibration, it feels like they
Speaker 2: mean autopilot on the way down to neutral. Is that
Speaker 2: the wrong way of thinking about this?
Speaker 3: Well, I do think there's a very important distinction, and unfortunately,
Speaker 3: I think the FED sent the wrong message with a
Speaker 3: fifty basis point cut. It was an inappropriate message to
Speaker 3: the market to suggest that they were in a rush
Speaker 3: to not only get back to neutral, but potentially below
Speaker 3: to provide support to an ailing economy, as opposed to
Speaker 3: a softer twenty five basis point cut, which would have
Speaker 3: indicated that the Fed is simply removing policy, firming at
Speaker 3: a slow and tempered pace back towards neutral as the
Speaker 3: data neutralize. So even if the Fed intended the latter,
Speaker 3: the message was muddled with that outsized rate reduction of
Speaker 3: fifty basis points, And now the Fed is caught in
Speaker 3: a position where they're trying to backpeddal and not only
Speaker 3: recalibrate market expectations, but now determine what the appropriate next
Speaker 3: step will be after that outsized and that outsized cuts.
Speaker 1: That's said Lindsay, a lot of people are looking at
Speaker 1: the growth and potential reacceleration of the US economy and
Speaker 1: not seeing it get accompanied with inflation really picking up
Speaker 1: in a material way. We're not seeing that in break
Speaker 1: even rates, We're not seeing that in a whole host
Speaker 1: of other metrics. At what point do you actually see
Speaker 1: inflation reaccelerating in tandem with growth, given the fact that
Speaker 1: there are some reasons for inflation to keep declining, Well.
Speaker 3: We are seeing some underlying metrics reaccelerate push further away
Speaker 3: from the fed's two percent target. The core PCEE, for example,
Speaker 3: tick tire. The super co also tick Tire. But you're right,
Speaker 3: one tenth of a percentage point is not necessarily an
Speaker 3: indication of a massive reacceleration of inflation. That being said,
Speaker 3: we're not at two percent yet, so I think the
Speaker 3: onus is still on the FED, not necessarily to avoid
Speaker 3: a reacceleration, but to foster further improvement in inflation. The
Speaker 3: Fed's job is not yet done, and a resurgence back
Speaker 3: to a reversion seis way back to two percent is
Speaker 3: not a foregone conclusion. So the FED, motivated by this
Speaker 3: fear of impending weakness in the labor market, shifted their
Speaker 3: focus away from inflation. Now we see that the labor
Speaker 3: market's strength appears to be well founded, and the focus
Speaker 3: of the FED should go back to getting inflation under control. Remember,
Speaker 3: a soft landing is not just about maintaining positive growth,
Speaker 3: but reinstating price stability at two percent, and we still
Speaker 3: have quite a ways to go before we can achieve
Speaker 3: that goal.
Speaker 1: This is so interesting, Lindsay because essentially making the argument
Speaker 1: that maybe the fedge take more of a page from
Speaker 1: the ECB and having more of a single mandate in
Speaker 1: terms of inflation, rather than focus so much on avoiding
Speaker 1: some sort of weakening in the labor market. I just
Speaker 1: wonder how often we've seen this. Whereas basically experiments.
Speaker 4: On either side of the Atlantic.
Speaker 1: We're one the ECB pledges to just focus purely on
Speaker 1: bringing inflation down even in the face of economic weakness,
Speaker 1: and the Federal Reserve to avoid any further weakness says,
Speaker 1: inflation's coming down, that's good enough for us, We're cutting rates.
Speaker 3: Well, I do think that the FED decided to move
Speaker 3: its focus away from inflation prematurely. Remember, when we look
Speaker 3: at it historical cycles, the Fed has been forced to
Speaker 3: raise the Fed Funds rate above historically significantly above that
Speaker 3: peak and inflation. So at five point six percent, five
Speaker 3: and a half on the Fed funds rate was really
Speaker 3: the bare minimum that we should have expected in terms
Speaker 3: of this rate hike cycle. But given the massive amount
Speaker 3: of liquidity and stimulus and cash pumped into the market,
Speaker 3: it was really unreasonable to expect that the bare minim
Speaker 3: would be the appropriate amount of policy restriction to reinstate
Speaker 3: price stability. So I do think that the Fed stops
Speaker 3: short of where we need it to be and now
Speaker 3: to add fuel to the fire. They've reverted to this
Speaker 3: policy pivot prematurely before really seeing that underlying disinflationary trend
Speaker 3: take hold, and that leaves us in a very uncomfortable
Speaker 3: position as growth it remained solid for now. If we
Speaker 3: do start to lose momentum looking out to twenty five
Speaker 3: twenty six, and the FED continues to tolerate above target inflation,
Speaker 3: the biggest risk for the US AICO ONNY longer term
Speaker 3: then is not a downturn like we're seeing necessarily in
Speaker 3: our developed counterparts abroad, but a period of stagflation.
Speaker 5: So lindsay, though, is there a chance if we continue
Speaker 5: to grow and we do see inflation come down, continue
Speaker 5: to come down, even though you do have concerns about
Speaker 5: maybe a reacceleration, is there a chance we could just
Speaker 5: grow bigger and not hotter.
Speaker 3: Absolutely, And I think that's the utopic scenario that the
Speaker 3: FET is looking for, that we continue to see this
Speaker 3: acceleration and underlying growth resilience in the consumer, positive spending,
Speaker 3: and positive acceleration in the labor market at the same
Speaker 3: time that price pressures begin to wane back to two percent.
Speaker 3: But again, that's a big gamble a big bet when
Speaker 3: we haven't seen that established downward trend in price pressures.
Speaker 3: We're still seeing very sticky components, sideways movement in the
Speaker 3: core for one month that as I mentioned, a reacceleration
Speaker 3: more recently, and we're also seeing some of these upside
Speaker 3: risks to inflation that are still.
Speaker 4: Hanging out there.
Speaker 3: International factors that could disrupt commodity markets and lead to
Speaker 3: higher prices, energy prices, fertilizer prices, factors that are outside
Speaker 3: of the Fed's purview. Not to mention, a very contentious
Speaker 3: election coming up in November, and regardless of which side
Speaker 3: of the aisle we find ourselves on, either candidate is
Speaker 3: proposing expansionary fiscal policy, which will continue to complicate the
Speaker 3: Fed's ability to get back to that two percent level
Speaker 3: of inflation.
Speaker 2: And possibly contribute to high yields. Lindsay, We've got to
Speaker 2: leave it there, Thank you, Lindsay, PX the of State.
Speaker 6: Four.
Speaker 4: Let's talk about foreign exchange.
Speaker 2: The US dollar heading towards a third week of gains
Speaker 2: after getting a boost from stronger than expected US retail
Speaker 2: sales and an ECP rate cut. Kit Juice of solt
Speaker 2: Gen writing, the market has been fed a steady diet
Speaker 2: of stronger than expected US data are of late more
Speaker 2: of the same will keep it bid, but perhaps mostly
Speaker 2: against the China sensitive currencies. We're concerned about US tariffs
Speaker 2: and dissip appointment at fiscal easing.
Speaker 4: Aren't going away.
Speaker 2: Kit joined US.
Speaker 4: Now for more.
Speaker 2: Kit, welcome to the program. We caught it with Jeff
Speaker 2: you someone you know well a little bit earlier this morning.
Speaker 2: He's looking for parity next year. Can you get on
Speaker 2: board with that?
Speaker 7: I had this sense that we would get somewhere closer
Speaker 7: to one twenty, not that far on this bounce on
Speaker 7: a US slowdown followed by possibly.
Speaker 4: A move to parity.
Speaker 7: Then, because the long run story is difficult. That the
Speaker 7: challenge right now is that the market has bought so
Speaker 7: many dollars. And when I mean the market and has
Speaker 7: been the fire exchange market, I mean the capital inflows
Speaker 7: from everybody sucked in by US yield by US tech talks,
Speaker 7: by US exceptionalism, US outperformance overall over the last couple
Speaker 7: of years. So you know, the world savings have gone
Speaker 7: to the United States. And I mean I certainly thought
Speaker 7: two months ago that once you started seeing people forced
Speaker 7: to hedge those or reduce their risk that that would
Speaker 7: give the euroor bounce or it wouldn't be anybody's favorite currency,
Speaker 7: but it is the world's biggest net investor abroad, so
Speaker 7: it makes a difference there, and that then the problem
Speaker 7: would come back in two. Three is down the road.
Speaker 7: I'm now utterly confused. Jeff much cleverer than me, But
Speaker 7: I don't think we're going to get to parity on
Speaker 7: the way down now. I think we have to clean
Speaker 7: out some of the positioning at some point and get
Speaker 7: a more meaningful dollar sell off before the US economic
Speaker 7: outperformance can drive us lower. So in my mind it's
Speaker 7: still a couple of years away. What we are now
Speaker 7: is I think the market completely wrong footed by the
Speaker 7: US economy. I mean, along with the Fed and everybody else.
Speaker 2: Sure, so, Kit, let's talk about the difference between the
Speaker 2: Federal Reserve and the ECP. The ECB has also been
Speaker 2: surprised the other way. The ECB has been talking about
Speaker 2: data dependence meeting by meeting. Do you get the sense
Speaker 2: of markets just in the driving seat making the decisions
Speaker 2: now for them?
Speaker 7: The market certainly bullies them to some degree in the
Speaker 7: sense that you know, you can kind of say you know,
Speaker 7: did the Fed go fifty because the market was talking fifty,
Speaker 7: or did the go fifty because because they were really
Speaker 7: shocked by the data at the beginning of August. You know,
Speaker 7: it's a bit of both. In one hopes it's more
Speaker 7: the data that are doing it, but they might now say, yeah,
Speaker 7: if we'd seen the data since then, we wouldn't have acted.
Speaker 7: The Europe is a bit the same thing, but they've got,
Speaker 7: you know, the ECB's big differences. It's only focusing on
Speaker 7: inflation at least in principle, and to that extent, what
Speaker 7: it was getting what it's now had is a surprising
Speaker 7: slowdown inflation, but by its standards, and so it doesn't
Speaker 7: really have an excuse not to get on with with easy.
Speaker 4: We've had one month of that.
Speaker 7: But you'd have to say we're going to get more
Speaker 7: rate cuts down the road because I suspect inflation will
Speaker 7: continue to fall because there is many growth and the
Speaker 7: global back crops change. But they are all you know, yes,
Speaker 7: the market is pushing because that's what the market does,
Speaker 7: and the central banks are finding that when they get
Speaker 7: data that support what the market does, that they can't
Speaker 7: really resist the temptation of going with it.
Speaker 1: As you said, very diplomatically, Kit, we haven't really learn
Speaker 1: that much from ACB news conferences, and whether it's being
Speaker 1: bullied by the market or the data, either way, they've
Speaker 1: been sort of flipping and flopping in terms of their
Speaker 1: overall message. That said, there seems like there was a shift.
Speaker 1: And yesterday what I thought was interesting was it not
Speaker 1: only was Christine Leguard talking about potential weakness, but she
Speaker 1: made it political. She said that the potential of tariffs
Speaker 1: in the United States actually increase the risk of downside
Speaker 1: surprises to the area's struggling economy. How much do you
Speaker 1: see the ECB cutting rates aggressively to get ahead of
Speaker 1: whatever might be coming down the pike.
Speaker 7: It's hard to imagine the ECB cutting rates aggressively. It's
Speaker 7: not in that DNA to do anything other than react
Speaker 7: to inflation. It's still, you know, the job is, the
Speaker 7: job is to hit the inflation target. But I do
Speaker 7: think they can pick up the pace from possibly, let's
Speaker 7: put it this way, from what a lot of economists
Speaker 7: that expected, while not quite keeping up with the pace,
Speaker 7: that's priced end of the front end of the curve.
Speaker 7: Because they are they are, It wouldn't take much more soli.
Speaker 7: Doesn't they expect inflation data to push them into feeling that, yeah, look,
Speaker 7: we have no reason not to get a move on.
Speaker 1: At the same time, Kit on the flip side, there
Speaker 1: seems to be this assumption that if the US puts
Speaker 1: up its walls and does increase terraff substantially, that will
Speaker 1: end up with a stronger dollar and a weaker everyone else.
Speaker 1: And especially giving your opinion about how much of an
Speaker 1: overweight there is in dollar assets, it.
Speaker 4: Seems like you disagree.
Speaker 1: Do you think that people are underprising the worst the
Speaker 1: US economy in that type of scenario.
Speaker 7: I think people are looking at the US economy in
Speaker 7: all scenarios in a state of saying, we know the
Speaker 7: US economy's done phenomenally well. We understand part of it
Speaker 7: was the size of the fiscal easing that we saw
Speaker 7: during the pandemic and immediately as the pandemic was ending.
Speaker 7: We don't understand why the tightening that came after that
Speaker 7: didn't slow the economy more. We don't understand how the
Speaker 7: economy is reaccelerated in the last six weeks. Hell's bells,
Speaker 7: let's stay with US assets because all the good stuff
Speaker 7: comes out of this place. And I think that's there's
Speaker 7: there's that kind of there's that kind of reluctance to
Speaker 7: turn out and say, well where else can I where
Speaker 7: else can I.
Speaker 4: Put my money?
Speaker 7: And you know, I mean the Japanese were selling were
Speaker 7: selling US debt, you know, like crazy in in you know,
Speaker 7: back in July, as they were trying to get out
Speaker 7: of some of their trades. They're right back in there.
Speaker 7: They're buying with Gusto again and probably US equities and
Speaker 7: so on. So you know, there's no I think, I
Speaker 7: think the market, you know, investors are as much caught
Speaker 7: out by this unique economic cycle as economists or or
Speaker 7: central bankers or all the rest of US. And and
Speaker 7: the default is US is a Morazonian economy. It's growing faster,
Speaker 7: There more investment opportunities, It's.
Speaker 4: Got high yield.
Speaker 7: You know, if I'm there, why should I Why should
Speaker 7: I cut back pair hedge my currency too much? I
Speaker 7: know I'm going to end up going back in later anyway, Kip.
Speaker 5: Ahead of the US election, more people are talking about parody,
Speaker 5: even though I know you think it's a few years away,
Speaker 5: but you do say there is one trade that is
Speaker 5: definitely perceived to be safe pre election, meaning regardless of
Speaker 5: either candidate.
Speaker 4: What is it.
Speaker 7: Safe trades briers? You might have to tell me now,
Speaker 7: I'm feeling nervous this morning that Nunny said. No, I
Speaker 7: think people see the people see the safe trades as
Speaker 7: being still to be short the Euro against various things,
Speaker 7: and a lot of people see the political trade to
Speaker 7: be short the UN against everything short.
Speaker 5: To you on because either Harris or Trump is going
Speaker 5: to be tough on China.
Speaker 7: Yeah, I mean, I think the piece in markets thinking
Speaker 7: about about election trades at the moment is that you
Speaker 7: get bigger moves on a Trump event. So Trump is
Speaker 7: he's more outspoken, and he's got clear he's got clear
Speaker 7: intentions on things like Tarris. So if you think the
Speaker 7: odds of them are fifty to fifty, for the sake
Speaker 7: of argument, you get bigger moves on Trump. You don't
Speaker 7: get moves the other way on Harris because she's less
Speaker 7: likely to get a clean sweep apart from anything else.
Speaker 7: So the market ends up concluding I'll have my I'll
Speaker 7: have my Trump tar off trade now because I'm not
Speaker 7: going to get hurt for heaven, and rightly or wrongly,
Speaker 7: that that is a very popular track Kit.
Speaker 2: I appreciate the update from you, sir. We're all confused
Speaker 2: Kit jokes is such. Appreciate it, Thank you, sir. At
Speaker 2: a Stagia Amarosai Capital writing. Some risks and unease, like
Speaker 2: the rebounded yields and US dollar are still percolating in
Speaker 2: the background, but given the positive economic momentum, we stay invested.
Speaker 2: At A Stagia joins us now for more Anastagia, Good monk,
Speaker 2: good morning.
Speaker 4: What do you think is in the.
Speaker 2: Driving seat Reecord expectations Ronics, Which one is it?
Speaker 4: I think it's a little bit of both.
Speaker 6: I mean, first of all, I think what's really truly
Speaker 6: in the driving seat is the fact that the economy
Speaker 6: is resilient, and that has been on full display this
Speaker 6: week actually for the last couple of weeks. You know,
Speaker 6: if you look at the Atlanta Fed GDP, now it's
Speaker 6: actually tracking three point four percent. If you look at
Speaker 6: the City Economic Surprise Index, which has been negative for
Speaker 6: the ball of Q two and maybe even you know
Speaker 6: start of Q three, that's actually turned positive in the
Speaker 6: last couple of weeks. And then we've got retail sales
Speaker 6: that you pointed out point seven percent core core print
Speaker 6: that's really strong too, So I think that's what's truly
Speaker 6: in the driving sea. But I also do think there's
Speaker 6: this extension to the rate cut story, which is the
Speaker 6: rate relief is being felled by the economy. It is
Speaker 6: being felled by companies across corporates and consumers, and that's
Speaker 6: starting to support the economy as well.
Speaker 4: And then John Tie last point financials earnings.
Speaker 6: I think that's been a really really key development in
Speaker 6: the last week, and that's why we've seen financials breakout
Speaker 6: to the upside.
Speaker 2: The coast is clear for the financials. Let's talk about
Speaker 2: tech SML says there's a problem. TYSEMC says there's no problem.
Speaker 2: It's the coast cliff for tech gun into NIX.
Speaker 6: Well, first of all, tech arnies have actually been revised higher,
Speaker 6: you know, unlike the rest of the sectors that actually
Speaker 6: have been revised lower. I do think that the setup
Speaker 6: is constructive for technology. Look, if you look at ASML company,
Speaker 6: that's a particular technology that goes into semiconductive manufacturing, and
Speaker 6: you could see why there may be some delays and
Speaker 6: capex for those. But if you look at TSMC, that
Speaker 6: is the pulse of what is happening with semiconductive production
Speaker 6: right here, right now.
Speaker 4: And the couple of things that I heard from that report.
Speaker 6: First of all is that AI demand is rock solid
Speaker 6: and is accelerating. But John, the really really key thing
Speaker 6: for semiconductors what's happening with non AI demand. And that's
Speaker 6: where TSMC was also more constructive, saying that they do
Speaker 6: expect to pick up and things like smartphone chips and
Speaker 6: other things. So I think that sets it up nicely
Speaker 6: for semiconductors.
Speaker 1: So that secular changes, which is the AI trend, and
Speaker 1: then there are the cyclical changes which we see. You
Speaker 1: said something that I want to pick up on that
Speaker 1: you're already seeing the rate cuts filter into increased economic activity.
Speaker 1: How is it that so many people say the corporate
Speaker 1: America did not feel the rate hikes, but that so
Speaker 1: quickly the rate cuts are getting filtered into the economy.
Speaker 6: Well, part of corporate America did feel the rate increases.
Speaker 6: And that part is, for example, if you had a
Speaker 6: leverage loan, if you issued a leverage loan, you were
Speaker 6: paying much more to service at loan. If you took
Speaker 6: on a private credit loan as well, you were paying
Speaker 6: much more to service at debt as well, and that's where.
Speaker 4: We see some of the resets.
Speaker 6: And of course commercial real estate, you know, a big
Speaker 6: portion of commercial real estate loans have been floating rate,
Speaker 6: and there's a small fracture of the consumers have felt it.
Speaker 4: But that's where I see the first recess.
Speaker 6: So for example, in some of the big five banks
Speaker 6: results that we saw, we see debt underieting really spike,
Speaker 6: and that means companies are issuing more debt, they're refinancing
Speaker 6: prior debt, and those dead costs are starting to reset
Speaker 6: lower for part of corporate America. And then on the
Speaker 6: consumer side, Lisa, you know, if you look at mortgage rates,
Speaker 6: for example, they have pulled back obviously quite a bit
Speaker 6: from the peaks, and we are starting to see an
Speaker 6: uptick in refinancings and the banks are talking about that.
Speaker 6: So those are the early indicators that I see.
Speaker 1: For a while, in the high rate period which lasted,
Speaker 1: it seems like a heartbeat relative to the zero rate
Speaker 1: period that we had. For a very long time, people
Speaker 1: felt like the bond market had precedence over stocks, that
Speaker 1: essentially you could earn more and have less risk by
Speaker 1: going into bonds. Is that equation increasingly shifting as we're
Speaker 1: seeing currently in performance, but also just in terms of
Speaker 1: if you can borrow more easily, doesn't that lift equity
Speaker 1: valuations and increase the potential growth and sustainability?
Speaker 4: It does?
Speaker 7: It does?
Speaker 6: There's so many pieces to pick up on there. You know,
Speaker 6: first of all, now the yields have reset a little
Speaker 6: bit higher to four percent or a little bit above that.
Speaker 6: I do think going back into the bond trade might
Speaker 6: be more compelling, But we're exactly into the bon trede.
Speaker 4: Do you go?
Speaker 6: Because if you look at high yield spreads, if you
Speaker 6: look at investment grades spreads, they're really really tight.
Speaker 4: So I don't know how compelling that is, especially.
Speaker 6: If you are individual and you have to adjust for taxes.
Speaker 4: So but on the flip.
Speaker 6: Side, I do agree with you, and I'll kind of
Speaker 6: extend this to private markets a little bit. The reason
Speaker 6: why I think some of the private equity managers are
Speaker 6: going to have strong results this quarter in the next.
Speaker 4: Couple of quarters is because their debt that they.
Speaker 6: May have taken out to finance some of their by
Speaker 6: our companies that is starting to move lower. The cost
Speaker 6: is starting to move lower, so therefore the profitability is
Speaker 6: starting to improve, So I think that's really important.
Speaker 2: Just how easy are financial conditions given everything you've just said,
Speaker 2: Now in my private markets, how you spreads investment great spreads.
Speaker 2: They are ridiculously tight, ridiculously tight.
Speaker 4: Yeah, financial conditions are easy.
Speaker 6: But to kind of go back to the point that
Speaker 6: you made about restrictive policy versus easier monitory policy, I
Speaker 6: mean we are still in restrictive monetary policy time frame.
Speaker 6: I mean if you look at five percent nominal FED
Speaker 6: funds rate and inflation, that's let's say somewhere around two
Speaker 6: and a half percent, that's two hundred and fifty basis
Speaker 6: points of restriction give or takes versus that. So as
Speaker 6: easy as the financial market conditions are, I think the
Speaker 6: Fed can still get easier.
Speaker 2: So let's say they go another hundred at financial conditions
Speaker 2: of this easy, is there a real risk of a
Speaker 2: reacceleration in this economy? And do you think we can
Speaker 2: achieve that without having a spike another one of inflation?
Speaker 4: Look? I do, I do.
Speaker 6: I do think the US economy can accelerate. And that's
Speaker 6: what it's doing, by the way, in the third quarter.
Speaker 6: And as you think about it, the more cores go
Speaker 6: on the more benefits will accrue from lower rates across corporates,
Speaker 6: real estate, and consumer. So I do think that for
Speaker 6: twenty twenty five, we're setting ourselves south for the reacceleration.
Speaker 4: The reason why I don't think.
Speaker 6: This is going to cause this massive wave of inflation
Speaker 6: that some people worry about is we don't have the
Speaker 6: imbalances as we did coming out of the pandemic.
Speaker 4: We don't have supply chain challenges. We don't have as
Speaker 4: massive of a shortage of labor.
Speaker 6: We don't have vacancies that were you know, two times
Speaker 6: you know to vacancies per unemployed person, So we don't
Speaker 6: have those major imbalances.
Speaker 4: Can inflation stay stickier? Can it stay above two percent? Yeah?
Speaker 4: I think so. But we're not talking about a search
Speaker 4: to four.
Speaker 1: So you're not a goldbug.
Speaker 4: I'm not. Look, obviously gold has done quite well.
Speaker 6: Gold has done quite well, which makes sense is real
Speaker 6: interest rates fall.
Speaker 4: But at the same time, look at equities.
Speaker 6: Look at equities, Look at financials, and this has been
Speaker 6: one of our favorite sectors, you know, to play this
Speaker 6: pickup in cyclical activity. Look at technology, Look at by
Speaker 6: the way, at some of the AI names. I know
Speaker 6: I've talked to you about picking up the AI semiconductor companies,
Speaker 6: But actually one of the interestring trades for next year
Speaker 6: may be the rest of the MAC seven, which I
Speaker 6: recently not liked because they're the ones that are spending
Speaker 6: on AI capax. But if you look at the iqebex
Speaker 6: numbers for some of the hyperscalers, they grew about forty
Speaker 6: or fifty percent this year. They're likely to grow about
Speaker 6: eleven percent next year. So I think the cappex spending
Speaker 6: may be tapering off, but the monetization can actually be
Speaker 6: picking up.
Speaker 4: So that's why I look for opportunities.
Speaker 5: Given what we know about the former president, do you
Speaker 5: think he's a threat to the semiconductor AI trade?
Speaker 6: Yes, yes, I think that is a risk to monitor
Speaker 6: for sure.
Speaker 5: Why is that not being priced in while everyone is,
Speaker 5: you know, really going in on the Trump trade right
Speaker 5: now Republican baskets out performing.
Speaker 6: Yeah. I mean, look, you focus on this secular momentum,
Speaker 6: which I don't think any president is ultimately going to derail.
Speaker 6: But I do think that if we do move closer
Speaker 6: to the possibility of a red sweep, you do have
Speaker 6: to think long and hard about what.
Speaker 4: That means for semiconductors.
Speaker 6: You know, look in companies like Nvidia, for example, have
Speaker 6: obviously already paired back some of their sales to foreign stakeholders.
Speaker 6: But I do think that the headline risk for for you.
Speaker 4: Know, think about the huge exposure that we.
Speaker 6: Have in the semiconductor space from the fact that most
Speaker 6: of the production is done in Taiwan, you know, think
Speaker 6: about some of the other linkages to foreign countries. So
Speaker 6: I do think it's a headline risk that should be monitored.
Speaker 6: So I would be aware of that, I would be
Speaker 6: quick to react to that. But in the meantime, I
Speaker 6: think you have to focus on the trade that's there,
Speaker 6: which is ai.
Speaker 2: Things could change a lot in a few weeks time.
Speaker 2: Anastas going to see it. Thank you, Anna Stagia amoso
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