WEBVTT - Surveillance: IMF Boosts World Growth Outlook 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm term Keene Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.240 Bloomberg dot Com, and of course on the Bloomberg. The 0:00:27.280 --> 0:00:30.000 IMF out with this outlook, lifting the forecast for the 0:00:30.040 --> 0:00:34.040 global economy. But it's the story within regions that I 0:00:34.080 --> 0:00:37.199 think gets a little bit more interesting. Downgrading Europe and 0:00:37.280 --> 0:00:39.400 upgrading the United States get to go up and f 0:00:39.560 --> 0:00:42.040 the IMF chief economists right in the following Much now 0:00:42.080 --> 0:00:44.560 depends on the outcome of this race between a mutating 0:00:44.640 --> 0:00:47.280 virus and vaccines to when the pandemic and on the 0:00:47.320 --> 0:00:51.320 ability of policies to provide effective support until that happens. 0:00:51.400 --> 0:00:53.960 Get around, please to say joins us now get it. 0:00:54.000 --> 0:00:56.200 Thankful you time this morning. I know you're exceptionally busy. 0:00:56.280 --> 0:00:58.640 Let's just start with that breakdown on the regional side. 0:00:58.920 --> 0:01:01.000 What was behind the upgrade for the United States and 0:01:01.000 --> 0:01:04.360 the down grade for Europe. Firstly, it's a pleasure to 0:01:04.680 --> 0:01:08.320 join you. What we have is that in the case 0:01:08.400 --> 0:01:12.919 of the US, we ended twenty twenty with an additional 0:01:13.520 --> 0:01:17.160 uh stimulus that was provided and that is an important 0:01:17.200 --> 0:01:20.200 factor for the upgrade for the US by almost a 0:01:20.240 --> 0:01:25.080 percentage point in twenty also ended in some way in 0:01:25.319 --> 0:01:27.440 a you know, less worse place than what we had 0:01:27.760 --> 0:01:31.080 projected for the US. In the case of the Euro Area, 0:01:31.560 --> 0:01:35.160 we still have a strict containment measures in place. This 0:01:35.520 --> 0:01:39.120 virus resurgence is leading to a decline and mobility, which 0:01:39.200 --> 0:01:42.240 is much more than what we're seeing in the US, 0:01:42.280 --> 0:01:44.679 and that's part of the reason why because we have 0:01:45.560 --> 0:01:49.160 a downgrade for the first quarter in the Euro Area. 0:01:49.480 --> 0:01:51.120 For the year as a whole, we have a down 0:01:51.160 --> 0:01:54.120 grade for twenty twenty one. So I'd like to start 0:01:54.160 --> 0:01:56.560 in the United States and the stimulus effort and then 0:01:56.560 --> 0:01:58.560 we can turn to vaccines. It's what's happening in Europe. 0:01:58.560 --> 0:02:01.200 So I want to stimulus effort. N billion is what 0:02:01.240 --> 0:02:04.720 you baked into the outlook the one point nine trillion. 0:02:05.320 --> 0:02:07.520 Is that just a little bit extra for you gatsor 0:02:07.560 --> 0:02:09.239 what would that actually do to the outlook? And is 0:02:09.280 --> 0:02:13.200 it targeted enough? So of course the details, I mean, 0:02:13.240 --> 0:02:15.920 it still has to be completely settled, so it's not 0:02:16.080 --> 0:02:20.800 in our focus. We have a very preliminary estimate that 0:02:20.840 --> 0:02:24.760 says that about one point nine trillion stimulus would raise 0:02:25.080 --> 0:02:28.000 the level of US g d P by five pcent 0:02:28.320 --> 0:02:33.359 over three years, So that's between twenty one and twenty three. UM. 0:02:33.400 --> 0:02:35.760 I mean our view is that, of course we are 0:02:35.800 --> 0:02:38.240 still in the midst of this health crisis. There is 0:02:38.360 --> 0:02:43.480 need for much more faster vaccine rollout, force health spending 0:02:43.520 --> 0:02:47.160 including and testing, UH, and also for providing support to 0:02:47.560 --> 0:02:51.440 vulnerable households and businesses and so you know, all of 0:02:51.480 --> 0:02:55.320 those are important pieces that have to be addressed still. UH. 0:02:55.400 --> 0:02:58.040 And so so you know that those are support measures 0:02:58.040 --> 0:03:00.839 that should be provided five over the next three years 0:03:00.840 --> 0:03:03.800 that decent numbers, But get basis on the size of 0:03:03.800 --> 0:03:06.160 the program one point nine or is there some specifics 0:03:06.200 --> 0:03:08.720 about the composition of it the I M F likes 0:03:08.720 --> 0:03:12.600 and would like to see more of. So this is uh, 0:03:12.840 --> 0:03:15.480 you know where you know, I'm just making a statement 0:03:15.480 --> 0:03:18.880 about our estimate impact of one point i triuly and 0:03:18.880 --> 0:03:20.680 would be able three years. I mean, that's a fiscal 0:03:20.680 --> 0:03:23.560 wants to player point six just taking into account what 0:03:23.720 --> 0:03:26.480 we know from a previous data on how much of 0:03:26.480 --> 0:03:28.639 it tends to get saved based on the package that 0:03:28.800 --> 0:03:32.640 was was you know, was talked about, but again the 0:03:32.680 --> 0:03:34.680 details still have to be worked out, and so we'll 0:03:34.680 --> 0:03:37.600 see what exact shape that finally takes. One thing you've 0:03:37.600 --> 0:03:40.120 said in the outlook is the mutations the new strains, 0:03:40.120 --> 0:03:42.160 And I just wander from your perspective, whether the strains 0:03:42.200 --> 0:03:45.160 that we're seeing in the United Kingdom, Brazil, South Africa 0:03:45.600 --> 0:03:49.200 actually raised the bar to reopen these economies gets So 0:03:49.240 --> 0:03:52.800 how do you think about those things at the moment. Yeah, 0:03:52.800 --> 0:03:55.040 I think what it tells us that, you know, while 0:03:55.120 --> 0:03:58.080 stay at home is difficult and social distancing is difficult, 0:03:58.480 --> 0:04:01.640 we know that the the chances of the various mutiating 0:04:01.720 --> 0:04:03.840 is higher when all of us are out there and 0:04:04.400 --> 0:04:06.400 you know, mixing, and so I think this is an 0:04:06.440 --> 0:04:10.280 additional reason for for you know, kind of being very 0:04:10.320 --> 0:04:13.640 cautious about going out and very and very important to 0:04:13.640 --> 0:04:16.920 wear masks and so on. So yes, I think we 0:04:17.000 --> 0:04:19.960 have to, you know, continue to vaccinate a very high 0:04:19.960 --> 0:04:21.440 basic It doesn't change what we need to do. I 0:04:21.440 --> 0:04:23.520 think we'll we still need to do is simply to 0:04:23.600 --> 0:04:26.440 exhilerate the pace of vaccine rollout, but also now we 0:04:26.520 --> 0:04:28.240 have to just make it available to the world as 0:04:28.279 --> 0:04:30.120 a whole. I mean, the way it is right now 0:04:30.240 --> 0:04:33.000 is terribly inequitive, and we know that the virus mutication 0:04:33.080 --> 0:04:35.719 can come from anywhere in the world. What you're building 0:04:35.720 --> 0:04:38.480 them right now, the gator is absolutely critical. The conversation 0:04:38.480 --> 0:04:40.920 of having at the moment almost every day with market participants. 0:04:40.920 --> 0:04:44.320 It's just relative growth differentials between Europe the United States. 0:04:44.320 --> 0:04:47.520 The vaccine rollout is good here, it's bad there. One 0:04:47.520 --> 0:04:49.520 will do okay, one we'll do better, the other one 0:04:49.560 --> 0:04:52.039 will do terribly. Would you be willing to make the 0:04:52.120 --> 0:04:54.520 argument now that if we don't make a bigger effort 0:04:54.880 --> 0:04:58.680 to vaccinate those outside the developed world, that that ultimately 0:04:58.680 --> 0:05:02.720 will drag down the global econom at some point anyway? Well, absolutely, 0:05:02.760 --> 0:05:05.200 I mean the arguments are obviousible on the health side, 0:05:05.240 --> 0:05:08.240 on the economic side. On the health side, because of 0:05:08.279 --> 0:05:10.919 these new variants, we just know that the pandemic is 0:05:10.960 --> 0:05:13.520 not over until it's over everywhere. But there's also a 0:05:13.560 --> 0:05:17.120 strong economic argument. I mean, we estimate that if you 0:05:17.160 --> 0:05:20.360 can get to a faster into this health crisis by 0:05:20.520 --> 0:05:23.599 much more widespread rollout of vaccinism and therapies, you know, 0:05:23.640 --> 0:05:26.640 we would add nine trillion dollars to the global economy 0:05:26.680 --> 0:05:30.440 between twenty twenty and twenty five and everybody benefits, including 0:05:30.480 --> 0:05:33.480 the advanced economies who stand to gain four trillion dollars 0:05:33.520 --> 0:05:36.479 around four trillion dollars. So this is, you know, a 0:05:36.640 --> 0:05:40.159 very strong economic case for doing much more. Now, final 0:05:40.240 --> 0:05:42.720 question gates there is a take amongst some people, especially 0:05:42.760 --> 0:05:44.920 at markets. It seems to be a belief that if 0:05:44.920 --> 0:05:47.240 we have to delay reopenings by an extra quarter or so, 0:05:47.320 --> 0:05:49.560 it doesn't matter, it won't be growth loss will make 0:05:49.640 --> 0:05:50.920 up for it at the back end of the year 0:05:50.960 --> 0:05:54.240 into two as well. Do you see it that way? 0:05:54.680 --> 0:05:57.680 So there's a couple of things. Even if you just 0:05:57.720 --> 0:06:00.760 look at when you have a lockdowns, the effect of 0:06:00.800 --> 0:06:03.479 that on economic activity is much lower than what we 0:06:03.560 --> 0:06:06.760 had in the spring last spring. You know, if you 0:06:06.760 --> 0:06:09.360 look at, for instance, relation moving in mobility and economic 0:06:09.400 --> 0:06:11.880 activity in the U S. Mobility has barely knew that much, 0:06:12.200 --> 0:06:15.440 but economic activity has continued to recover. So countries have 0:06:15.560 --> 0:06:19.560 gotten used to functioning with social distancing in place, so 0:06:19.560 --> 0:06:22.920 the effect is going to be less severe. And indeed, 0:06:22.960 --> 0:06:26.159 I mean, for many economies were wanting your higher savings 0:06:26.240 --> 0:06:29.200 rates in the among households so you could rebound. But 0:06:29.240 --> 0:06:32.520 again I just cannot emphasize enough the uncertain team. There 0:06:32.600 --> 0:06:34.679 is so much more we still need to know about 0:06:34.680 --> 0:06:37.120 how this pandemic evolves. I think that's a message that 0:06:37.120 --> 0:06:39.280 resonites with a lot of our audience. Kata, thank you 0:06:39.279 --> 0:06:41.640 for your time. It's precious getting golopment at there. The 0:06:41.680 --> 0:06:47.600 I m f Chief economist right now. And this is 0:06:47.640 --> 0:06:50.360 a joy, folks for those of you that aren't speed 0:06:50.360 --> 0:06:53.680 on United Kingdom academics. If you're John Pharaoh, there's a 0:06:53.720 --> 0:06:57.800 point where you must learn rawsy injustice. It's what they 0:06:57.839 --> 0:07:01.159 do in terms of theory in the United Kingdom. And 0:07:01.240 --> 0:07:04.120 right now, one of our experts on human rights and 0:07:04.200 --> 0:07:07.520 its application to our public health in our law, Lawrence 0:07:07.520 --> 0:07:11.160 Gonston joins us where Georgetown University. I want to go 0:07:11.200 --> 0:07:14.160 back to your book Human Rights, Professor Gonston, and I 0:07:14.200 --> 0:07:18.560 want to talk about the shocking change in philosophy without 0:07:18.720 --> 0:07:23.440 saying Republican or Democrat, but this tectonic shift we're having 0:07:23.560 --> 0:07:27.840 right now in the perception of American human rights on 0:07:27.960 --> 0:07:33.200 this transfer of government. Your observation, please, wow, it's like 0:07:33.360 --> 0:07:35.680 not in day, isn't it. Um. You know, all of 0:07:35.760 --> 0:07:39.120 a sudden, we're you know, we're back to the truth. 0:07:39.200 --> 0:07:43.640 We're back to freedom of expression. Um, we've rejoined the 0:07:43.680 --> 0:07:47.840 World Health Organization. UM, We've rejoined the Climate Change Agreement 0:07:47.880 --> 0:07:51.520 in Paris. UM. So there. It's really been a tectonic 0:07:51.680 --> 0:07:55.560 change from the last administration. It's kind of almost like 0:07:55.600 --> 0:07:58.040 a whip saw, you you know, go ego from one 0:07:58.080 --> 0:08:00.360 to the other. I think that the big thing is, 0:08:00.400 --> 0:08:04.120 you know, whether American allies are going to think, well, gosh, 0:08:04.240 --> 0:08:07.720 you know, is America here? Is this one America? Or 0:08:07.800 --> 0:08:11.120 is this two America's where we see the old America again? 0:08:11.160 --> 0:08:14.080 And it's you know, we don't know that. Well, this 0:08:14.160 --> 0:08:17.680 is vitally important. And this spans your career of the 0:08:17.760 --> 0:08:22.600 Reagan and the Trumpian individualism of less government or indeed 0:08:22.680 --> 0:08:27.640 no government, uh somewhat outitorialized, Professor Gunston, Do you see 0:08:27.640 --> 0:08:31.920 a shift here in an end or diminution of what 0:08:31.960 --> 0:08:36.200 we got from Ronald Reagan? Yeah, I mean, you know, 0:08:36.679 --> 0:08:39.040 if we're we're in the middle of we're all kind 0:08:39.040 --> 0:08:41.200 of suffering. During the break, we were just having a 0:08:41.280 --> 0:08:45.400 laugh about how COVID has completely gripped and changed our lives, 0:08:46.040 --> 0:08:47.920 you know, and if there was ever a time that 0:08:48.000 --> 0:08:51.880 really government has come through for us, the government failed 0:08:51.960 --> 0:08:55.640 for sure in the United States we were no match 0:08:55.720 --> 0:08:59.959 for the virus. But then you know, government public private 0:09:00.120 --> 0:09:06.360 partnerships through science pharmaceutical companies, the nih UM we ended 0:09:06.440 --> 0:09:11.000 up with. You know, we we we the science was 0:09:11.040 --> 0:09:16.280 the match for the coronavirus. We've got this vaccine um 0:09:16.320 --> 0:09:21.359 in we've never seen it this quick um and we're 0:09:21.400 --> 0:09:24.680 now poised by the end of the year um to 0:09:24.800 --> 0:09:27.240 think that we might climb our way out of that. 0:09:27.240 --> 0:09:30.719 That was that was a partnership about what government can 0:09:30.760 --> 0:09:33.160 do with the private sector. I think that the new 0:09:34.000 --> 0:09:37.880 way that we move forward in America and globally are 0:09:38.000 --> 0:09:42.320 really public private partnerships. Their nimble um they get the 0:09:42.320 --> 0:09:45.040 best of both worlds. And you know, the proof of 0:09:45.040 --> 0:09:47.600 the pudding is is that now we're starting to get 0:09:47.880 --> 0:09:51.360 you know, vaccines and people's arms way too slowly, but 0:09:51.440 --> 0:09:53.160 that will improve. That's what I was going to ask 0:09:53.160 --> 0:09:56.280 Professor Gostin. How do we turbocharge getting vaccines and people's arms. 0:09:57.480 --> 0:09:59.480 You know, we we've been able to do it before. 0:09:59.520 --> 0:10:02.240 It's really kind of shocking to see how badly we've 0:10:02.240 --> 0:10:05.120 done in the United States thus far. But you know, 0:10:05.160 --> 0:10:08.439 if you think about you know, polio in the United States, 0:10:08.440 --> 0:10:11.599 where we went through a massive campaign, or if you 0:10:11.679 --> 0:10:17.080 think about UM the current polio eradication UM which the 0:10:17.160 --> 0:10:22.319 United States UH is spearheading, or that we eradicated smallpox. 0:10:22.600 --> 0:10:25.520 I mean the way to do it is you open 0:10:25.640 --> 0:10:28.960 up a lot of vaccine clinics. You get mobile units 0:10:29.000 --> 0:10:33.480 to go into rural areas, into elderly vulnerable people's homes, 0:10:33.480 --> 0:10:38.920 into prisons, nursing homes. UM. You have UM drives right now. 0:10:39.800 --> 0:10:43.400 What's the real problem with the American rollout is is 0:10:43.440 --> 0:10:46.680 that it's just far too complicated. You have you know, 0:10:46.679 --> 0:10:49.240 you just talk to any of your friends and they'll say, well, 0:10:49.559 --> 0:10:51.480 you know, have you called this number, have you been 0:10:51.520 --> 0:10:55.199 on this website, did you try you know this pharmacy, 0:10:56.080 --> 0:11:00.280 are you in this county, this state? UM. So it 0:11:00.400 --> 0:11:03.440 privileges the people that are tech savvy, that kind of 0:11:03.440 --> 0:11:06.320 know their way around, but the people who really need 0:11:06.400 --> 0:11:09.920 the vaccines really really can't compete in that kind of 0:11:09.920 --> 0:11:11.880 a way to search for them. So we know we 0:11:11.960 --> 0:11:14.720 need to search for them, they don't need to search 0:11:14.800 --> 0:11:17.760 for the vaccine. Looking forward, Professor Gossa, there's a question 0:11:17.760 --> 0:11:20.720 of whether what we have seen over the past two years, 0:11:20.840 --> 0:11:24.600 year and a half will turbo charge investment in pharmaceutical 0:11:24.640 --> 0:11:29.400 companies in the development of new drugs and new biological research. 0:11:29.480 --> 0:11:32.200 And this comes as Israel gets a headstart in part 0:11:32.280 --> 0:11:35.200 because of their production of some of these vaccines. Do 0:11:35.240 --> 0:11:38.000 you already see the groundwork being laid for more investment, 0:11:38.080 --> 0:11:40.320 both on the public side as well as the private side, 0:11:40.600 --> 0:11:44.360 for this type of development. It's a really interesting question, 0:11:44.440 --> 0:11:46.880 you know, I mean, I think, I think pharma is 0:11:47.040 --> 0:11:51.000 you know, you know, certainly come come through for us 0:11:51.040 --> 0:11:54.600 on this UM. But on the other hand, you know, 0:11:54.720 --> 0:11:58.559 pandemics are funny things from an economic point of view. UM. 0:11:58.600 --> 0:12:01.240 The reason companies don't invest in them, and the reason 0:12:01.360 --> 0:12:03.880 that the public doesn't invest in them is because they're 0:12:03.880 --> 0:12:07.160 so unpredictable. Um. You know, it's very possible that you 0:12:07.200 --> 0:12:13.319 know that the next uh novel coronavirus or novel influenza, UM, 0:12:13.360 --> 0:12:16.040 and we'll we'll we'll jump from an animal to a 0:12:16.120 --> 0:12:18.920 human and then we'll just get it right under control. 0:12:19.040 --> 0:12:22.559 We're and and a lot of money putting into vaccines 0:12:23.000 --> 0:12:26.480 won't work. And so what what what the new thinking 0:12:26.679 --> 0:12:31.600 is is is that we develop with public private partnerships. 0:12:31.679 --> 0:12:35.800 You you need public investment for this platforms, and so 0:12:35.880 --> 0:12:40.520 the platform can be there, and then when the pathogen comes, 0:12:41.120 --> 0:12:44.200 you've already got kind of a way to a tackle it. 0:12:44.559 --> 0:12:48.079 That's exactly what Fiser and Maderna have done with their 0:12:48.120 --> 0:12:52.400 messenger RNA vaccines. You know, they started out as platforms. 0:12:52.880 --> 0:12:55.680 We were looking at them for things like um the 0:12:55.760 --> 0:12:59.880 stars virus, and then when this came, we were all 0:13:00.040 --> 0:13:03.080 ready in the way ahead. And I think that's the future. 0:13:03.440 --> 0:13:07.040 Professor come back saying, great to catch up. Professor of Georgetown, 0:13:07.280 --> 0:13:13.280 Thank you very much. Let's stuff tell this together with 0:13:13.360 --> 0:13:16.080 Mr Burlin's comments with Fiser and bring it over to 0:13:16.120 --> 0:13:19.720 Tina Fordham, Avener's partner and ahead of Global political strategy. 0:13:19.760 --> 0:13:21.680 We do this and welcome all of you on Bloomberg 0:13:21.800 --> 0:13:25.640 Radio and Bloomberg Television. Tina, I love how you address 0:13:25.720 --> 0:13:29.200 in your note the walls of worry of January, and 0:13:29.200 --> 0:13:31.160 you make very clear they're not going to be the 0:13:31.240 --> 0:13:34.280 same as the walls of worry of Q three. The 0:13:34.320 --> 0:13:37.960 market right now is looking out at the politics of 0:13:38.000 --> 0:13:40.199 the third and fourth quarter of this year. What will 0:13:40.240 --> 0:13:44.320 it look like? Well, I think your previous speakers have 0:13:44.520 --> 0:13:48.240 have already taken us through some of the obstacles to 0:13:48.440 --> 0:13:52.840 the rollout. Um. I've been talking about my VACS popular 0:13:53.000 --> 0:13:55.240 thesis for a while. I think there's phase one and 0:13:55.280 --> 0:13:58.160 phase two. The phase one is the logistics, the government 0:13:58.200 --> 0:14:02.679 capacity that the like willingness UM plus the risk of 0:14:02.760 --> 0:14:06.360 mutant strainings. But I think the second phase is that 0:14:06.559 --> 0:14:11.960 periods um following pandemics tend to see more political disruption 0:14:12.240 --> 0:14:16.520 and extremism. And whether we're thinking about the capital riots 0:14:16.559 --> 0:14:20.920 and Black Lives Matter or that we're anti curfew protests 0:14:20.920 --> 0:14:23.560 in the Netherlands yesterday, this is going to be a 0:14:23.640 --> 0:14:28.120 volatile period as we look to get this under control. Tina, 0:14:28.200 --> 0:14:30.240 let's talk a little bit about the politics of getting 0:14:30.280 --> 0:14:33.040 the vaccine out. There is a question of what went 0:14:33.240 --> 0:14:35.360 so wrong in the European Union that they are so 0:14:35.520 --> 0:14:38.880 delayed there so behind the United Kingdom, the US and 0:14:38.960 --> 0:14:43.479 places like Israel. Does this raise questions about the integrity 0:14:43.520 --> 0:14:46.160 of the EU as a social experiment if they are 0:14:46.240 --> 0:14:49.720 unable to plan on a routine and mass basis for 0:14:49.760 --> 0:14:54.120 their population to be inoculated. Well, I think that's a 0:14:54.440 --> 0:14:58.600 particularly American point of view. Um. The US has just 0:14:58.840 --> 0:15:02.160 started its role out and UM, you know, it's kind 0:15:02.200 --> 0:15:06.520 of starting from from nothing. The UK here where I'm 0:15:06.560 --> 0:15:10.960 based is is very pleased that it's out doing Europe 0:15:11.200 --> 0:15:14.840 UM so far, part of the logistics, part of its 0:15:14.880 --> 0:15:20.480 government capacity, part of its federal universus, regional infrastructure. UM. 0:15:20.520 --> 0:15:22.240 I do think the EU will get there. I think 0:15:22.240 --> 0:15:25.400 there's not any reflection on the EU as a as 0:15:25.480 --> 0:15:30.160 a social experiment. UM. As you suggested, UM, the U 0:15:30.280 --> 0:15:32.720 S and the UK still have the highest death rates 0:15:32.800 --> 0:15:37.000 out of the countries that we mentioned. UM. The UK, 0:15:37.200 --> 0:15:39.640 out of all of the countries that we're talking about, 0:15:40.040 --> 0:15:43.120 also has one big advantage, and that is a higher 0:15:43.200 --> 0:15:46.680 rate of willingness to take the vaccine, which is helping 0:15:46.840 --> 0:15:50.280 and approval it approved before the EU did well. There's 0:15:50.280 --> 0:15:53.560 a question though, Tina, about the conservatism in the European 0:15:53.640 --> 0:15:56.760 Union approach and not necessarily going as aggressively after the 0:15:56.840 --> 0:16:00.880 vaccines as early in prioritizing the price and trying to 0:16:00.920 --> 0:16:04.080 be sort of more democratic about the whole situation in 0:16:04.160 --> 0:16:07.120 terms of who gets the vaccine, and it isn't necessarily 0:16:07.160 --> 0:16:09.800 working in the same way. What kind of political reckoning 0:16:10.000 --> 0:16:12.320 will there be in Europe as a result of this? 0:16:15.040 --> 0:16:18.360 I think when I you know, my conception of this vaccs. 0:16:18.360 --> 0:16:21.960 Popular risk idea is where there is a combination of 0:16:22.560 --> 0:16:27.320 high futalities um a slow rollout plus or minus this 0:16:27.480 --> 0:16:31.440 vaccine hesitancy factor and elections coming up. So if we 0:16:31.480 --> 0:16:36.160 put that kind of lens over countries at risk, France 0:16:36.200 --> 0:16:39.920 obviously comes out, you know, quite quite near the top 0:16:39.960 --> 0:16:46.000 with parliamentary elections this year, presidential next, Italy always because 0:16:46.200 --> 0:16:48.600 Italy has got kind of all of the risk factors 0:16:48.760 --> 0:16:52.920 and the government there is certainly starting to to wobble. 0:16:53.000 --> 0:16:56.720 So it is imperative that governments find the capacity to 0:16:56.720 --> 0:16:59.680 to roll this out and they regain the advantage on 0:17:00.000 --> 0:17:03.640 competence because that's the biggest political risk factor in the 0:17:03.680 --> 0:17:07.560 government incompetence. Tuna Fordham, thank you so much. With Evan Hurst, 0:17:07.680 --> 0:17:14.320 partner and head of Global Political Strategy, worked Green on 0:17:14.359 --> 0:17:17.679 the screen today, Tom and why not the Federal Reserve 0:17:18.000 --> 0:17:20.400 back stopping this market. A lot of folks are saying, 0:17:20.520 --> 0:17:22.280 have I missed my entry point? I've talked to a 0:17:22.280 --> 0:17:28.560 few little have I missed my I'm getting solo Chris. 0:17:28.600 --> 0:17:32.760 Heisie Meryl and Bank of America Private Bank Chief Investment Officer. Chris, 0:17:32.840 --> 0:17:34.480 thanks so much for joining us here. You know you 0:17:34.560 --> 0:17:38.080 take a look at this market. You see Tom's favorite 0:17:38.080 --> 0:17:41.960 investment vehicle, SPACs almost on a daily basis, coming to 0:17:42.000 --> 0:17:46.560 the market. You see Robin Hood retail traders pushing stocks 0:17:46.600 --> 0:17:49.760 all around the board like game stop. Give us a 0:17:49.800 --> 0:17:52.280 sense of how you view this market in terms of 0:17:52.320 --> 0:17:56.040 the frothiness if you will, in this market. Yeah, I 0:17:56.040 --> 0:17:58.960 think it's a subject that it really started to take 0:17:59.000 --> 0:18:02.040 off in no member of last year when small caps 0:18:02.080 --> 0:18:06.560 had their best month ever and the whole head fake, 0:18:06.680 --> 0:18:09.919 you know, the Michael Jordan's head fake of investing started 0:18:09.960 --> 0:18:13.440 to go away, and people started to believe that cyclical 0:18:13.800 --> 0:18:16.480 can actually extend some of their rally. And then now 0:18:16.640 --> 0:18:20.800 we talk about offering three, four or five six a week. 0:18:21.359 --> 0:18:23.239 We talk about, you know, what's going on in the 0:18:23.240 --> 0:18:26.120 big story, little profit stocks that are out there being 0:18:26.160 --> 0:18:29.119 bit up, the high enterprise value to sales companies that 0:18:29.160 --> 0:18:32.919 are about a quarter of trading volume in the US. 0:18:32.960 --> 0:18:35.919 And everybody remembers when or at least some of us 0:18:36.000 --> 0:18:40.200 remember when right um fall in terms of but I 0:18:40.240 --> 0:18:42.840 would point to this, you have to look at policy, 0:18:42.920 --> 0:18:44.679 You have to look at what are the tail winds 0:18:44.720 --> 0:18:48.240 that are driving not just the thin parts of the 0:18:48.320 --> 0:18:51.919 market that the risk areas that are suggesting, you know, 0:18:52.040 --> 0:18:55.160 quite frankly flashing orange as you As you pointed out, 0:18:55.240 --> 0:18:59.520 the sentiment indicators are clearly at highs right now. For 0:18:59.600 --> 0:19:02.760 all this is out there, there's a lot of discussion 0:19:02.800 --> 0:19:06.760 as to did I miss it? Valuations are high, but 0:19:08.000 --> 0:19:11.000 earnings are low, and mathematics tells you that when earnings 0:19:11.000 --> 0:19:14.159 are at a trough, many times valuations are going to 0:19:14.240 --> 0:19:17.320 be high. That's where we are right now. I would 0:19:17.359 --> 0:19:20.920 think differently if earnings were at a peak and valuations 0:19:20.920 --> 0:19:24.480 were high, and thank you so much for that analysis. 0:19:24.480 --> 0:19:27.280 I would point out, folks, Microsoft, Paul taught me the 0:19:27.359 --> 0:19:30.760 symbol and the break Microsoft here with a jump condition 0:19:30.800 --> 0:19:33.240 out to two thirty two. I believe that's out to 0:19:33.320 --> 0:19:39.720 a record high Dow well over SPX were on watch, Chris. 0:19:39.760 --> 0:19:42.840 That's all great and well, but the way this always 0:19:43.000 --> 0:19:47.520 ends is a cathartic move. Do you see an emotional 0:19:47.600 --> 0:19:51.159 catharsis right now that leads you to say tippy tippy 0:19:51.200 --> 0:19:55.080 top yea not yet, not yet Tom. It feels that 0:19:55.160 --> 0:19:57.720 way because of headlines. It feels that way because of 0:19:57.840 --> 0:20:01.560 focus that we read and whether you're talking about the 0:20:01.600 --> 0:20:04.520 short squeezes that are going on. But actually, when you 0:20:04.600 --> 0:20:08.240 talk to individual investors, and you talked to to folks 0:20:08.240 --> 0:20:11.400 out there that are in the market already but not 0:20:11.680 --> 0:20:16.120 participating as much, they don't believe that there are no 0:20:16.320 --> 0:20:19.680 risks out there. They still build the five top risks. 0:20:19.720 --> 0:20:25.040 They're still worried, they're concerned, and they're marching too risks. Still, 0:20:25.480 --> 0:20:28.760 they're not coming into the market blindly, and that to 0:20:28.920 --> 0:20:32.480 me means that whatever pause is coming at whatever time 0:20:33.160 --> 0:20:37.120 is a temporary pause and it's not the tippy top alright. So, 0:20:37.320 --> 0:20:40.320 as you talked to the thundering herd at Mary Lynch, 0:20:40.400 --> 0:20:44.919 that huge retail brokerage force across the country, here, what 0:20:45.119 --> 0:20:49.280 is the risk appetite here? Um, Chris? Are they willing 0:20:49.320 --> 0:20:51.719 to continue to take risk in this market that they 0:20:51.800 --> 0:20:55.040 are they playing that reopening trade in the back half 0:20:55.040 --> 0:20:58.880 of this year. It's a fantastic question because it does 0:20:59.000 --> 0:21:01.119 give you a really good feel for not only the 0:21:01.160 --> 0:21:04.359 client side, but the advisors side. And from my perspective, 0:21:04.440 --> 0:21:06.119 what we have done and we always do on a 0:21:06.200 --> 0:21:08.800 quarter basis, as we we write down what are the 0:21:08.800 --> 0:21:12.640 big questions out there and what's the mood. The mood 0:21:12.760 --> 0:21:19.240 is cautiously optimistic on the economy, but cautious on the market, 0:21:20.080 --> 0:21:24.600 so they're waiting for that. Things are not only okay, 0:21:24.640 --> 0:21:28.000 but we're not walking into a pullback of say ten percent, 0:21:28.720 --> 0:21:31.600 So there's still a little bit of trepidation out there. 0:21:31.920 --> 0:21:34.800 There's cash on the sidelines, and I know cash has 0:21:34.840 --> 0:21:37.720 come into the markets. We saw the record flows go in, 0:21:38.040 --> 0:21:39.760 but if you go back to oh eight and even 0:21:39.760 --> 0:21:43.360 two eighteen, more than of all flows are still into 0:21:43.400 --> 0:21:47.119 fixed income. So on a relative basis, you know, in 0:21:47.160 --> 0:21:49.959 about six percent eight percent or so into equities, So 0:21:50.000 --> 0:21:52.200 we have a ways to go here. On a longer 0:21:52.320 --> 0:21:55.880 term basis, shorter term, I would paint the mood as 0:21:56.240 --> 0:22:00.240 there's cash out there waiting to invest. Advisors and callience 0:22:00.280 --> 0:22:05.520 are cautious, but they're optimistic on the economy. So Chris, 0:22:05.520 --> 0:22:07.600 what do you think about this rotation trade? It's really 0:22:07.680 --> 0:22:09.760 becoming to vote here, and it's you know, we're kind 0:22:09.760 --> 0:22:12.240 of four to five months into this trade where people 0:22:12.280 --> 0:22:14.240 are willing to look to the other side of this pandemic, 0:22:14.280 --> 0:22:17.160 look to an opening of this economy and saying, hey, 0:22:17.160 --> 0:22:19.720 I'm gonna take some cyclical risk here. I may even 0:22:19.720 --> 0:22:23.960 go small cap here, looking for value and looking for performance. 0:22:24.240 --> 0:22:26.240 How do you view that trade is? Is it something 0:22:26.240 --> 0:22:30.320 we can depend upon you know going forward? We believe so. 0:22:30.640 --> 0:22:34.720 We we just upgraded in January small caps two more 0:22:34.760 --> 0:22:37.040 of an overweight. We had a slight overweight. We were 0:22:37.080 --> 0:22:39.200 waiting for some data to come through to make sure 0:22:39.240 --> 0:22:41.560 that there was more of a secular trend at play, 0:22:41.680 --> 0:22:44.920 not just an ultra cyclical trend that we saw to 0:22:45.000 --> 0:22:49.919 close the year. UM, we upgraded, UH, Financials and industrials 0:22:49.920 --> 0:22:53.560 and materials as well. UH, those areas you know, provide 0:22:53.600 --> 0:22:56.960 a little bit more cyclical value and growth quite frankly 0:22:57.000 --> 0:22:59.320 in those areas, and we are upgraded, and you know, 0:22:59.359 --> 0:23:01.800 we closed out of merging markets underweight and we went 0:23:01.840 --> 0:23:05.040