1 00:00:00,120 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,640 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,480 --> 00:00:18,680 Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day 4 00:00:18,720 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,400 --> 00:00:24,920 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,920 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,280 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:37,560 Speaker 2: Terminal and the Bloomberg Business app. Towson' slock of Apollo 10 00:00:37,640 --> 00:00:39,760 Speaker 2: got two benefits there. One he got an extra twelve 11 00:00:39,840 --> 00:00:41,400 Speaker 2: minutes to go over all of this, and two might 12 00:00:41,400 --> 00:00:43,479 Speaker 2: be Key set him up perfectly because Torston New just 13 00:00:43,520 --> 00:00:44,160 Speaker 2: out there nodding. 14 00:00:44,400 --> 00:00:46,720 Speaker 1: You agree, don't you, Hunter Resent. I mean, let's look 15 00:00:46,720 --> 00:00:49,440 Speaker 1: at the numbers. Non fine pay roles in August was 16 00:00:49,520 --> 00:00:52,519 Speaker 1: better than in July. The unemployment RATI in August was 17 00:00:52,560 --> 00:00:55,960 Speaker 1: better than in July. Average arlie earnings higher than in July. 18 00:00:56,280 --> 00:00:59,000 Speaker 1: And you look at average medio hours also better than 19 00:00:59,000 --> 00:01:01,480 Speaker 1: in July. I mean, this is better than in July. 20 00:01:01,800 --> 00:01:03,880 Speaker 1: This economy is not slowing down. In the way that 21 00:01:03,960 --> 00:01:07,200 Speaker 1: markets anticipating we will not get eight cuts over the 22 00:01:07,200 --> 00:01:09,840 Speaker 1: next twelve months. Here you should instead look at this 23 00:01:10,000 --> 00:01:12,319 Speaker 1: report as this is really telling you that there is 24 00:01:12,319 --> 00:01:13,080 Speaker 1: a soft lending. 25 00:01:13,240 --> 00:01:15,360 Speaker 2: So help me with this. In October, when we look 26 00:01:15,400 --> 00:01:17,640 Speaker 2: back at this report and we get another revision, a 27 00:01:17,760 --> 00:01:20,120 Speaker 2: downward revision, don't we have to reframe some of this 28 00:01:20,160 --> 00:01:23,400 Speaker 2: conversation and just say everything gets keeps getting revised lower. 29 00:01:23,440 --> 00:01:26,440 Speaker 2: This is Least's point over the last few days. This economy, 30 00:01:26,600 --> 00:01:29,160 Speaker 2: this labor market is weaker than we initially thought. 31 00:01:29,160 --> 00:01:31,640 Speaker 1: It was GDP in the second quarter verse three percent. 32 00:01:31,680 --> 00:01:34,560 Speaker 1: It was just revised up. Jobless claims continues to be 33 00:01:34,560 --> 00:01:37,160 Speaker 1: a good. Continuing claims was also good. If you look 34 00:01:37,200 --> 00:01:39,680 Speaker 1: at the daily data for how many people go to restaurants, 35 00:01:39,840 --> 00:01:42,200 Speaker 1: how many people's fly on airplanes, the weekly data from 36 00:01:42,200 --> 00:01:46,000 Speaker 1: Redbook on retail sales, if we're across the board on bankruptcies, 37 00:01:46,240 --> 00:01:49,000 Speaker 1: if we're across the board on credit card spending. In 38 00:01:49,080 --> 00:01:52,280 Speaker 1: the aggregate, the growth data is just not showing signs 39 00:01:52,280 --> 00:01:54,400 Speaker 1: of a slowdown. It is true that the labor market 40 00:01:54,480 --> 00:01:56,880 Speaker 1: is weakening, and yes, the duels data has bidding a 41 00:01:56,960 --> 00:01:59,360 Speaker 1: little bit, maybe more in balance as the fit would 42 00:01:59,400 --> 00:02:02,200 Speaker 1: be saying, but this whole notion that the economy is 43 00:02:02,200 --> 00:02:04,480 Speaker 1: slowing down rapidly, it is completely misguided. 44 00:02:04,600 --> 00:02:06,360 Speaker 3: What I thought was fascinating. I was speaking to a 45 00:02:06,400 --> 00:02:09,720 Speaker 3: number of retail executives at this conference this week, and 46 00:02:10,040 --> 00:02:12,840 Speaker 3: their biggest question was what's going to happen with the consumer? 47 00:02:13,000 --> 00:02:16,000 Speaker 3: They didn't know, They had zero visibility. Even though you 48 00:02:16,080 --> 00:02:18,960 Speaker 3: are seeing some trends and signs of robustness, some signs 49 00:02:18,960 --> 00:02:21,680 Speaker 3: of weakness, they said, ultimately, it just depends on whether 50 00:02:21,720 --> 00:02:24,760 Speaker 3: they have the money to spend. These labor market reports 51 00:02:24,840 --> 00:02:26,840 Speaker 3: are raising a red flag for a lot of people, 52 00:02:26,880 --> 00:02:30,200 Speaker 3: saying if they lose their jobs, they won't How fragile 53 00:02:30,480 --> 00:02:33,960 Speaker 3: is that sort of happiness that you're describing to a 54 00:02:34,000 --> 00:02:34,800 Speaker 3: scenario like that. 55 00:02:35,240 --> 00:02:37,360 Speaker 1: Certainly, if we do have a rise in the unemployer rate, 56 00:02:37,440 --> 00:02:39,200 Speaker 1: so that's not what happened there, impliner ray and down, 57 00:02:39,280 --> 00:02:41,600 Speaker 1: it would become a problem. But if you also exactly 58 00:02:41,680 --> 00:02:43,640 Speaker 1: as you know too well, look at what they did 59 00:02:43,720 --> 00:02:46,840 Speaker 1: say the retailers during this earning season. Target Set, no 60 00:02:46,960 --> 00:02:49,480 Speaker 1: sign of a lowdown, Walnut, no sign of a s lowdown, 61 00:02:49,680 --> 00:02:51,760 Speaker 1: and also Costco, no sign of a lowdown. You saw 62 00:02:51,840 --> 00:02:55,320 Speaker 1: dollar general, some parts of consumers are on the mont distress, 63 00:02:55,560 --> 00:02:58,720 Speaker 1: but broadly speaking, looking at retail sales, both the monthly, 64 00:02:59,120 --> 00:03:01,399 Speaker 1: the weekly, and cross the boat on credit card data, 65 00:03:01,680 --> 00:03:03,400 Speaker 1: there's just no sign of a shop slowdown. 66 00:03:03,560 --> 00:03:04,440 Speaker 2: So the bottom line in this. 67 00:03:04,480 --> 00:03:07,760 Speaker 1: Discussion is that you only get a recession when you 68 00:03:07,880 --> 00:03:10,079 Speaker 1: have a really big shock to the economy, and that 69 00:03:10,200 --> 00:03:12,920 Speaker 1: makes sense of course with COVID human Brothers going under, 70 00:03:13,280 --> 00:03:16,360 Speaker 1: of course, the bust of the IT bubble in two thousand. 71 00:03:16,720 --> 00:03:19,359 Speaker 1: But this is not an exogynous shock with something coming 72 00:03:19,400 --> 00:03:21,959 Speaker 1: from the outside. This is all engineered by the FED 73 00:03:22,200 --> 00:03:23,880 Speaker 1: trying to slow things down. And now the FED is 74 00:03:23,919 --> 00:03:26,600 Speaker 1: telling us that they're about to lower rates, so that's 75 00:03:26,639 --> 00:03:28,840 Speaker 1: about to counter some of those negative things. 76 00:03:28,880 --> 00:03:31,480 Speaker 2: Well, let's weigh. We get another headline from the Federal 77 00:03:31,480 --> 00:03:34,320 Speaker 2: Reserve Mi McKay from the neo FED President John Williams. 78 00:03:34,720 --> 00:03:37,120 Speaker 4: Yeah, John Williams is saying it is time now to 79 00:03:37,360 --> 00:03:40,440 Speaker 4: join the party. He is not commenting in his prepared 80 00:03:40,600 --> 00:03:42,600 Speaker 4: remarks about today's numbers. 81 00:03:42,680 --> 00:03:43,360 Speaker 2: Of course he. 82 00:03:43,360 --> 00:03:46,040 Speaker 4: Wouldn't have had them ahead of time, but he does 83 00:03:46,080 --> 00:03:47,240 Speaker 4: say it's time to cut rates. 84 00:03:48,360 --> 00:03:48,840 Speaker 5: Excuse me. 85 00:03:48,960 --> 00:03:51,480 Speaker 4: With the economy now in equa poise, which he titled 86 00:03:51,840 --> 00:03:55,960 Speaker 4: his speech that means in balance and inflation on a 87 00:03:56,000 --> 00:03:58,920 Speaker 4: path to two percent, it is now appropriate to dial 88 00:03:59,040 --> 00:04:01,760 Speaker 4: down the degree of strictiveness in the stance of policy 89 00:04:02,040 --> 00:04:04,880 Speaker 4: by reducing the target range for the federal funds rate. 90 00:04:05,000 --> 00:04:07,560 Speaker 4: So the guy who's vice chairman of the Open Market 91 00:04:07,600 --> 00:04:10,960 Speaker 4: Committee is saying we're gonna cut rates. He's not yet 92 00:04:11,280 --> 00:04:13,120 Speaker 4: talking about by how much, But there. 93 00:04:13,080 --> 00:04:14,440 Speaker 2: Is a Q and A, so we'll keep an eye 94 00:04:14,480 --> 00:04:17,400 Speaker 2: on and apparently unser thesaurus too for the New York 95 00:04:17,480 --> 00:04:19,760 Speaker 2: fact torsan sluck. What do you make of that? And 96 00:04:19,839 --> 00:04:21,279 Speaker 2: what are you looking for from Governor Waller? 97 00:04:21,520 --> 00:04:24,480 Speaker 1: So I do think Waller will also give some more 98 00:04:24,560 --> 00:04:27,200 Speaker 1: guidance in terms of what's going on, at least with 99 00:04:27,279 --> 00:04:29,120 Speaker 1: a bigger economic picture. But I don't think that he 100 00:04:29,200 --> 00:04:31,120 Speaker 1: will tell us much about whether this is twenty five 101 00:04:31,240 --> 00:04:34,160 Speaker 1: or fifty. It requires probably a very important debate given 102 00:04:34,240 --> 00:04:37,320 Speaker 1: the spectrum of where if I'MC members have been recently 103 00:04:37,400 --> 00:04:40,080 Speaker 1: in the speetures, some are clearly saying some are even 104 00:04:40,120 --> 00:04:43,000 Speaker 1: suggesting we should have much fewer cuts over the next 105 00:04:43,000 --> 00:04:45,640 Speaker 1: seven quarters, and others, of course are suggesting that we 106 00:04:45,720 --> 00:04:47,640 Speaker 1: should go much faster. So I do think that they 107 00:04:47,760 --> 00:04:50,080 Speaker 1: need to gather in the room and think hard about 108 00:04:50,320 --> 00:04:52,159 Speaker 1: do we want to go towards twenty five or fifty? 109 00:04:52,200 --> 00:04:53,880 Speaker 1: I would say, and I would agree with Mike that 110 00:04:53,960 --> 00:04:55,800 Speaker 1: twenty five is the right now. But given that literally 111 00:04:55,880 --> 00:04:58,560 Speaker 1: everything in this report was better than in July. 112 00:04:58,640 --> 00:05:00,760 Speaker 3: Would it be a policy error though to go by fifty? 113 00:05:01,440 --> 00:05:03,440 Speaker 1: See that opens up the debate about our sty and 114 00:05:03,560 --> 00:05:05,360 Speaker 1: how far do we need to go down if our 115 00:05:05,440 --> 00:05:07,800 Speaker 1: star and where we need to go to And ultimately 116 00:05:08,080 --> 00:05:10,080 Speaker 1: so real rates plus inflation, if we only need to 117 00:05:10,160 --> 00:05:12,680 Speaker 1: go to four and a half, we're not far away 118 00:05:12,720 --> 00:05:15,320 Speaker 1: from that, so there's no rush to lower rates. If 119 00:05:15,360 --> 00:05:16,600 Speaker 1: we do need to go all the way down to 120 00:05:16,640 --> 00:05:18,559 Speaker 1: two and a half or three, then there is certainly 121 00:05:18,600 --> 00:05:20,400 Speaker 1: more of a rush. But give me the incoming data 122 00:05:20,680 --> 00:05:23,320 Speaker 1: across the boat is still good. Why is there this 123 00:05:23,520 --> 00:05:25,640 Speaker 1: rush to cut rate so traumatic? Other than the our 124 00:05:25,680 --> 00:05:27,839 Speaker 1: Star framework which says that we got to get going. 125 00:05:28,600 --> 00:05:33,080 Speaker 3: Jackson Hall speech was all about understanding the effect that 126 00:05:33,160 --> 00:05:35,600 Speaker 3: FED policy has in the overall economy. The conclusion was, 127 00:05:35,640 --> 00:05:37,520 Speaker 3: we still don't know. We don't have a sense of 128 00:05:37,600 --> 00:05:40,440 Speaker 3: exactly how quickly it gets sort of transmitted in how 129 00:05:40,520 --> 00:05:42,400 Speaker 3: much of the lag effects that we're starting to see. 130 00:05:42,800 --> 00:05:45,000 Speaker 3: There is an argument if you cut rates more aggressively 131 00:05:45,080 --> 00:05:46,400 Speaker 3: now you can get ahead of some of the lag 132 00:05:46,440 --> 00:05:49,440 Speaker 3: effects that we haven't yet even seen. Why don't you 133 00:05:49,520 --> 00:05:50,520 Speaker 3: give credence. 134 00:05:50,160 --> 00:05:53,160 Speaker 1: To that, because there are three very important reasons why 135 00:05:53,279 --> 00:05:55,240 Speaker 1: we did not get that slow down that we all 136 00:05:55,279 --> 00:05:58,279 Speaker 1: anticipated for so long throughout twenty twenty three. Remember they 137 00:05:58,279 --> 00:06:00,800 Speaker 1: started hiking rates in mants of twenty twenty to. First 138 00:06:00,839 --> 00:06:03,360 Speaker 1: of all, consumers and firms had locked in low interest rates, 139 00:06:03,680 --> 00:06:06,640 Speaker 1: AI investment has been very strong, and fiscal policy has 140 00:06:06,640 --> 00:06:09,400 Speaker 1: been a huge tailwind. All these things combined have been 141 00:06:09,440 --> 00:06:11,640 Speaker 1: the key reason why the economy has not slowed down, 142 00:06:12,040 --> 00:06:14,320 Speaker 1: and those things actually still in place. A lot of 143 00:06:14,360 --> 00:06:16,600 Speaker 1: people still, of course have low interest rates in mortgages, 144 00:06:16,880 --> 00:06:20,000 Speaker 1: IT investment, greade, credit fixed rate also very locked. 145 00:06:19,800 --> 00:06:20,600 Speaker 2: In for a long time. 146 00:06:20,880 --> 00:06:22,840 Speaker 1: So that means that if you do start cutting rates, 147 00:06:23,080 --> 00:06:25,440 Speaker 1: it's actually the transmission is also going to be weaker. 148 00:06:25,760 --> 00:06:28,360 Speaker 1: On the downside, it was weak when you were raising rates, 149 00:06:28,440 --> 00:06:30,840 Speaker 1: it's also weak when you're cutting rates. So because of that, 150 00:06:31,240 --> 00:06:34,480 Speaker 1: AI investments still strong, fiscal policy from Chips Act, Inflation 151 00:06:34,560 --> 00:06:37,400 Speaker 1: Reduction Act, and infrastructure acts still strong. All this argues 152 00:06:37,480 --> 00:06:39,800 Speaker 1: that the data will just continue to be steady over 153 00:06:39,839 --> 00:06:42,320 Speaker 1: the next several quarters. There is no reason to expect 154 00:06:42,360 --> 00:06:44,640 Speaker 1: this to be a hard landing. There is no exactantess 155 00:06:44,680 --> 00:06:47,640 Speaker 1: shock similar to what we have seen during previous recessions. 156 00:06:47,720 --> 00:06:50,279 Speaker 6: Christen klugabuks the revision for a second. If you take 157 00:06:50,360 --> 00:06:52,680 Speaker 6: off the twenty five thousand we took off last month 158 00:06:52,720 --> 00:06:55,520 Speaker 6: and you do here for August, you'd get one seventeen. 159 00:06:55,600 --> 00:06:58,480 Speaker 6: Would you still feel this way if it printed one seventeen? 160 00:06:59,040 --> 00:07:01,880 Speaker 1: Sure? Of course, revisions are very important because we have 161 00:07:02,000 --> 00:07:04,760 Speaker 1: seen some MDEST slow down, But broadly speaking, the data 162 00:07:04,880 --> 00:07:06,840 Speaker 1: was still better than what it was in July. So 163 00:07:07,080 --> 00:07:09,480 Speaker 1: taken as the overall picture of him, particularly with the 164 00:07:09,560 --> 00:07:12,600 Speaker 1: unemployment rate, which is especially important when you put that 165 00:07:12,920 --> 00:07:15,160 Speaker 1: into your tailor rules and try to figure out what 166 00:07:15,200 --> 00:07:17,120 Speaker 1: should the reaction function be from the fit. And that's 167 00:07:17,160 --> 00:07:19,600 Speaker 1: how all the regional fits prepare the forecast. And if 168 00:07:19,640 --> 00:07:22,000 Speaker 1: the unempliner rate goes down, it's hard to argue why 169 00:07:22,040 --> 00:07:24,280 Speaker 1: they should be going fifty. To go fifty, you need 170 00:07:24,360 --> 00:07:27,640 Speaker 1: some very excuse me, academic argument about our star, and 171 00:07:27,720 --> 00:07:30,440 Speaker 1: you've got to get going with lowering rates very very quickly. 172 00:07:30,680 --> 00:07:32,960 Speaker 1: And the question is, with the incoming data being so strong, 173 00:07:33,000 --> 00:07:35,760 Speaker 1: it's monaps saraposia really so restrictive, it doesn't look like 174 00:07:35,840 --> 00:07:38,800 Speaker 1: it's restrictive. If it was really restrictive, the important report 175 00:07:38,840 --> 00:07:39,640 Speaker 1: would be a lot weaker. 176 00:07:39,800 --> 00:07:42,040 Speaker 2: Pause, because this is exactly where I wanted to finish 177 00:07:42,120 --> 00:07:44,160 Speaker 2: with you. You're saying five point fifty is still not 178 00:07:44,240 --> 00:07:45,520 Speaker 2: that restrictive for this economy. 179 00:07:46,160 --> 00:07:48,920 Speaker 1: So if ASDA, if where we're going in the terminal 180 00:07:49,000 --> 00:07:51,160 Speaker 1: rate is four and a half, it's five and a 181 00:07:51,200 --> 00:07:53,280 Speaker 1: half far away from four and a half. I know, we, 182 00:07:53,560 --> 00:07:57,960 Speaker 1: excuse me, have been somewhat not quite brainwashed, but very 183 00:07:58,000 --> 00:08:00,880 Speaker 1: distorted by a lot of fmcment was seriously saying we've 184 00:08:00,880 --> 00:08:03,520 Speaker 1: got a normalized raise, normalized raise, normalized rates. But let 185 00:08:03,560 --> 00:08:06,600 Speaker 1: me ask you this, John, if we really had restrictive 186 00:08:06,640 --> 00:08:09,360 Speaker 1: manetary policy, why have we for two and a half 187 00:08:09,480 --> 00:08:12,920 Speaker 1: years and counting, still been getting very good economic data, 188 00:08:12,960 --> 00:08:15,160 Speaker 1: including GDP in the second quarter at three percent. 189 00:08:15,320 --> 00:08:17,480 Speaker 2: The lassage is so longer, they might say, the lags 190 00:08:17,520 --> 00:08:17,960 Speaker 2: are just long. 191 00:08:17,960 --> 00:08:19,800 Speaker 1: What should be the reason for that. The tailwinds from 192 00:08:19,840 --> 00:08:22,320 Speaker 1: AI continue to be strong, the tails from fiscal policy 193 00:08:22,320 --> 00:08:24,320 Speaker 1: is still strong. We have locked in low interest rates 194 00:08:24,360 --> 00:08:27,240 Speaker 1: for the consumer and for corporates. Where is this very 195 00:08:27,280 --> 00:08:29,120 Speaker 1: significant transmission of margetary policy. 196 00:08:29,240 --> 00:08:31,000 Speaker 2: When we sit here and do this again a year 197 00:08:31,040 --> 00:08:33,160 Speaker 2: from now, we'll do it before then, don't worry. In 198 00:08:33,240 --> 00:08:35,600 Speaker 2: twelve months time, where do you think rights are. They've 199 00:08:35,600 --> 00:08:37,120 Speaker 2: got a four handle, they still got a five. 200 00:08:37,440 --> 00:08:39,199 Speaker 1: I think that they will be much higher than what 201 00:08:39,280 --> 00:08:41,079 Speaker 1: the market is pricing at the moment, because this is 202 00:08:41,160 --> 00:08:44,120 Speaker 1: not a shock that is generating ever recession. Why haven't 203 00:08:44,160 --> 00:08:46,800 Speaker 1: we had a recession for now thirty six months in counting. 204 00:08:46,880 --> 00:08:49,040 Speaker 1: I mean, it is really the case that the economy 205 00:08:49,120 --> 00:08:51,520 Speaker 1: and the economic data has just been much better than 206 00:08:51,559 --> 00:08:54,040 Speaker 1: we literally any modelould have predicted for the reasons that 207 00:08:54,120 --> 00:08:55,920 Speaker 1: I just mentioned. Mayme be locked in low interest rates, 208 00:08:56,160 --> 00:08:59,559 Speaker 1: tales from fiscal policy and AI spending being completely independent 209 00:08:59,600 --> 00:09:01,120 Speaker 1: of whatever the FIT is doing. 210 00:09:01,440 --> 00:09:02,960 Speaker 2: This is box office and we should do it again 211 00:09:03,000 --> 00:09:06,920 Speaker 2: next week and looking forward to it. Toason' sluck of Apollo, 212 00:09:07,160 --> 00:09:18,520 Speaker 2: thank you very much. In the commercial blank We've were 213 00:09:18,559 --> 00:09:20,719 Speaker 2: debating with Jeff Rosenberg of Blank Rock what would be 214 00:09:20,760 --> 00:09:24,000 Speaker 2: the most confusing labor market report today for the Federal 215 00:09:24,000 --> 00:09:26,360 Speaker 2: Reserve and for market participants? And Jeff said something like 216 00:09:26,800 --> 00:09:31,120 Speaker 2: if you've got a slightly softer jobs report, but unemployment 217 00:09:31,160 --> 00:09:33,640 Speaker 2: actually dropped back from four point three to say four 218 00:09:33,679 --> 00:09:36,040 Speaker 2: point two. And Jeff, we've got a mix. That's the 219 00:09:36,080 --> 00:09:38,280 Speaker 2: mix we've got. So Jeff Rosenberg of Blank Rock, Jeff, 220 00:09:38,280 --> 00:09:42,679 Speaker 2: please make sense of this for us? Yeah, tough to 221 00:09:42,760 --> 00:09:43,400 Speaker 2: make sense of it. 222 00:09:43,840 --> 00:09:45,760 Speaker 7: It's a bit of that mixture. But I think the 223 00:09:45,880 --> 00:09:51,040 Speaker 7: headline reaction is to the slightly weaker payroll headline and 224 00:09:51,720 --> 00:09:55,319 Speaker 7: the revisions as Lisa was pointing out, So it's a 225 00:09:55,360 --> 00:09:57,679 Speaker 7: little bit weaker on margin. You know, the bond market 226 00:09:57,760 --> 00:10:01,000 Speaker 7: is very much behaving as if you know, if we 227 00:10:01,120 --> 00:10:05,199 Speaker 7: price it, they will cut, and so increasing the probability 228 00:10:05,360 --> 00:10:07,920 Speaker 7: or trying to push the probability to fifty. I don't 229 00:10:07,920 --> 00:10:11,840 Speaker 7: think this report is definitive on the twenty five versus fifty. 230 00:10:12,760 --> 00:10:16,040 Speaker 7: I think it's going to be Waller, What. 231 00:10:16,080 --> 00:10:18,199 Speaker 2: Do you want from Governor Waller? Jeff at eleven a 232 00:10:18,320 --> 00:10:20,319 Speaker 2: m Astern time? What are you looking for? You think 233 00:10:20,360 --> 00:10:22,040 Speaker 2: that's the final voice that sets up whether we go 234 00:10:22,120 --> 00:10:25,079 Speaker 2: twenty five or fifty. I think it is. 235 00:10:25,200 --> 00:10:27,240 Speaker 7: I mean, I think it's set up on the calendar 236 00:10:27,400 --> 00:10:30,839 Speaker 7: to give markets clarity on what the Fed's going to do. 237 00:10:30,920 --> 00:10:34,200 Speaker 7: He will have had the information, he would have had 238 00:10:34,240 --> 00:10:37,319 Speaker 7: a chance to talk to Powell, and so that you 239 00:10:37,480 --> 00:10:41,040 Speaker 7: don't get a big market reaction, you know, next not 240 00:10:41,160 --> 00:10:45,120 Speaker 7: next Wednesday, but the eighteenth, when they when the FMC meets. 241 00:10:45,520 --> 00:10:47,480 Speaker 7: So I think it is intended to, you know, provide 242 00:10:47,520 --> 00:10:49,439 Speaker 7: a little bit of a steer to the market. So 243 00:10:49,480 --> 00:10:51,840 Speaker 7: I think that's going to be you know, as important 244 00:10:51,960 --> 00:10:55,640 Speaker 7: as the number that just dropped. What we get in 245 00:10:55,800 --> 00:10:59,240 Speaker 7: terms of the reaction, you know, and it's hard to say, 246 00:10:59,360 --> 00:11:00,959 Speaker 7: you know, which way they go. I think you know, 247 00:11:01,080 --> 00:11:03,800 Speaker 7: the market is pushing from fifty. You know, this number 248 00:11:03,920 --> 00:11:06,800 Speaker 7: isn't you know, particularly weak. You have the potential of 249 00:11:06,920 --> 00:11:09,839 Speaker 7: the first print bias lower on the headline. Maybe that 250 00:11:09,920 --> 00:11:12,760 Speaker 7: gets revised, you know, up we're talking about revisions. This 251 00:11:12,880 --> 00:11:15,599 Speaker 7: is a weirdness in the data where August tends to 252 00:11:15,679 --> 00:11:18,760 Speaker 7: be weaker. You know, there's a slowing and there's an 253 00:11:18,880 --> 00:11:21,160 Speaker 7: argument you know, on both sides. You know, if they 254 00:11:21,240 --> 00:11:23,880 Speaker 7: do fifty, does that you know, kind of signal too 255 00:11:23,960 --> 00:11:26,800 Speaker 7: much concern. They can talk around that, They can talk 256 00:11:26,840 --> 00:11:29,800 Speaker 7: about fifty and talk about their confidence in the economy 257 00:11:29,800 --> 00:11:31,679 Speaker 7: and kind of ease some of that concern, you know, 258 00:11:31,800 --> 00:11:33,319 Speaker 7: so the market has been kind of right in the 259 00:11:33,360 --> 00:11:35,600 Speaker 7: middle between the two this morning. I think it's really 260 00:11:35,760 --> 00:11:38,760 Speaker 7: just about that revisions and a little bit weaker relative 261 00:11:38,800 --> 00:11:41,120 Speaker 7: to the expectations and consensus around one to sixty five 262 00:11:41,840 --> 00:11:43,000 Speaker 7: coming in a little bit below that. 263 00:11:43,360 --> 00:11:47,080 Speaker 3: As an investor, what's your response mechanism to a FED 264 00:11:47,120 --> 00:11:49,360 Speaker 3: that signals fifty basis points of a rate cut. Is 265 00:11:49,400 --> 00:11:52,160 Speaker 3: it basically just extrapolating out about one hundred and fifty 266 00:11:52,160 --> 00:11:55,400 Speaker 3: basis points of cuts this year and then essentially that's 267 00:11:55,440 --> 00:11:57,160 Speaker 3: going to be questionable for risk assets? 268 00:11:57,240 --> 00:11:58,360 Speaker 2: Or do you say this is. 269 00:11:58,360 --> 00:12:00,960 Speaker 3: Supportive because this means that they are going to adjust 270 00:12:01,040 --> 00:12:04,040 Speaker 3: quickly back to something that the market thinks is more neutral. 271 00:12:05,200 --> 00:12:07,959 Speaker 7: Yeah, you know, we had that debate yesterday and I 272 00:12:08,040 --> 00:12:12,240 Speaker 7: think it's it's a tough one. You know, typically when 273 00:12:12,320 --> 00:12:15,839 Speaker 7: the FED cuts fifty, they're cutting fifty because there's a 274 00:12:16,000 --> 00:12:20,120 Speaker 7: growing deceleration in the economic data. This is a tricky 275 00:12:20,200 --> 00:12:22,679 Speaker 7: period because you obviously have a lot of focus on 276 00:12:23,200 --> 00:12:27,000 Speaker 7: the labor markets and the labor market deceleration as being 277 00:12:27,160 --> 00:12:29,840 Speaker 7: the leading indicator. It's not really a leading indicator. It's 278 00:12:29,920 --> 00:12:32,559 Speaker 7: kind of coincidence. Some measures are lagging, you know. The 279 00:12:32,679 --> 00:12:35,400 Speaker 7: rest of the economy looks strong, but there's this fear 280 00:12:35,559 --> 00:12:38,000 Speaker 7: that the FED is behind the curve and that the 281 00:12:38,200 --> 00:12:41,079 Speaker 7: rest of the slowdown is coming. And the rise in 282 00:12:41,240 --> 00:12:44,960 Speaker 7: terms of kind of hard landing fears and so fifty 283 00:12:45,160 --> 00:12:48,080 Speaker 7: might you know, kind of push people along that direction. 284 00:12:48,320 --> 00:12:50,760 Speaker 7: So it's more negative rather than the Feds kind of 285 00:12:50,840 --> 00:12:54,120 Speaker 7: on the job. It's uh, oh, the Feds behind the curve. 286 00:12:54,240 --> 00:12:57,280 Speaker 7: The fifty basis points validates our fear. And then you 287 00:12:57,360 --> 00:13:01,880 Speaker 7: have all the other issues in terms of risks, high valuations, 288 00:13:02,000 --> 00:13:06,400 Speaker 7: concentration in terms of evaluation in the tech sector, all 289 00:13:06,559 --> 00:13:09,040 Speaker 7: kind of leading to a lot of angst. And then 290 00:13:09,120 --> 00:13:11,960 Speaker 7: even what we saw last month, you know, in terms 291 00:13:12,000 --> 00:13:16,199 Speaker 7: of the outsized market reaction positioning October not October, I'm 292 00:13:16,200 --> 00:13:18,280 Speaker 7: talking about August second and August fifth. So I think 293 00:13:18,320 --> 00:13:20,240 Speaker 7: the risk here is that fifty could be more of 294 00:13:20,320 --> 00:13:24,840 Speaker 7: a negative signal than a reassuring signal that the Fed's 295 00:13:24,880 --> 00:13:27,520 Speaker 7: on the case. But it's a tough call either way. 296 00:13:27,640 --> 00:13:30,040 Speaker 3: Well, you were having the debate yesterday, Jeff, not just 297 00:13:30,120 --> 00:13:32,680 Speaker 3: the market, more broadly, what was your reaction being given 298 00:13:32,720 --> 00:13:34,959 Speaker 3: the fact that the FED doesn't have proprietary data that 299 00:13:35,000 --> 00:13:38,440 Speaker 3: we don't see that points to a more conclusive signal 300 00:13:38,480 --> 00:13:40,000 Speaker 3: about where this economy is headed. 301 00:13:41,520 --> 00:13:45,520 Speaker 7: Yeah, it's really about the fed's shift. We saw it 302 00:13:45,640 --> 00:13:48,959 Speaker 7: from Jackson, Hole and Powell, and it's shifted this whole 303 00:13:49,640 --> 00:13:54,559 Speaker 7: narrative focus and really market reaction focus onto the growth 304 00:13:54,679 --> 00:13:58,319 Speaker 7: data away from the inflation data. And that shift means 305 00:13:58,440 --> 00:14:02,439 Speaker 7: the FED is worried now more about securing the benefits 306 00:14:02,960 --> 00:14:06,040 Speaker 7: of their past policy intervention to secure the benefits of 307 00:14:06,360 --> 00:14:10,240 Speaker 7: reducing inflation, and now focusing on you know, securing the 308 00:14:10,440 --> 00:14:14,160 Speaker 7: securing the soft landing, so all of any signals around 309 00:14:14,600 --> 00:14:18,160 Speaker 7: their sensitivity, any validation of that in terms of the data, 310 00:14:18,520 --> 00:14:22,240 Speaker 7: you know, makes people very much on edge that you're 311 00:14:22,520 --> 00:14:25,280 Speaker 7: you know, back not to the what but Powell called 312 00:14:25,320 --> 00:14:27,920 Speaker 7: the era of flouted rules that you know, you can't 313 00:14:27,960 --> 00:14:30,840 Speaker 7: rely on these rules like the PSALM rule, like labor 314 00:14:30,880 --> 00:14:34,000 Speaker 7: market differentials and other things that that that people point 315 00:14:34,040 --> 00:14:38,480 Speaker 7: to when you have recession signals that those may actually 316 00:14:38,680 --> 00:14:41,840 Speaker 7: in this time, UH, you know, be the right signal. 317 00:14:41,920 --> 00:14:45,080 Speaker 7: And that kind of concern that you see in many commentary, 318 00:14:45,200 --> 00:14:50,280 Speaker 7: many UH forecasts, you know, gets more validated under a 319 00:14:50,360 --> 00:14:53,080 Speaker 7: fifty basis point cut scenario. And I think that's the 320 00:14:53,160 --> 00:14:56,160 Speaker 7: concern that would be, you know, the pushback. They can 321 00:14:56,280 --> 00:14:58,640 Speaker 7: signal around that, they can use the language, they can 322 00:14:58,720 --> 00:15:01,680 Speaker 7: use the press conference to manage that. But you know, 323 00:15:01,720 --> 00:15:04,480 Speaker 7: it's a tricky it's a tricky needle. 324 00:15:04,520 --> 00:15:06,680 Speaker 2: The threat. He Jeff, this was great, Jeff Rosenberg of 325 00:15:06,720 --> 00:15:19,560 Speaker 2: Black Rock. So here's the latest. Donald Trump promising to 326 00:15:19,680 --> 00:15:22,960 Speaker 2: use tariff's as an economic weapon in a potential second term. 327 00:15:23,040 --> 00:15:25,880 Speaker 2: HiT's remarks coming ahead of Tuesday's debate with Vice President 328 00:15:25,960 --> 00:15:28,880 Speaker 2: Kamala Harris. Michael Jesus of Morgan Stanley right in the 329 00:15:28,920 --> 00:15:32,160 Speaker 2: following tariffs could pressure economic growth, but possibly more so 330 00:15:32,360 --> 00:15:35,960 Speaker 2: outside the US, potentially driving more dubbish central bank policies 331 00:15:36,080 --> 00:15:39,600 Speaker 2: overseas than that the Federal Reserve. Michael joins us for 332 00:15:39,680 --> 00:15:42,880 Speaker 2: more Michael Goodmornich. That's a thoughtful take on a situation 333 00:15:42,960 --> 00:15:44,680 Speaker 2: for global central banks. Do you think some of those 334 00:15:44,720 --> 00:15:48,080 Speaker 2: policies could be more damaging to countries abroad than maybe domestically. 335 00:15:49,040 --> 00:15:51,400 Speaker 5: Yeah, We'll say I think about the US's pasture in 336 00:15:51,520 --> 00:15:53,600 Speaker 5: terms of trede relationships with the rest of the world. 337 00:15:53,680 --> 00:15:56,360 Speaker 5: If it's terrifying more of its imports, then more the 338 00:15:56,400 --> 00:16:00,360 Speaker 5: pressure is going to be overseas. So this thing comes 339 00:16:00,440 --> 00:16:03,000 Speaker 5: up in the context of Wiznamy for the dollar, right, 340 00:16:03,280 --> 00:16:06,760 Speaker 5: and the Trump campaigns talked about the desire to have 341 00:16:06,840 --> 00:16:09,000 Speaker 5: a weaker dollar, but some of these policies we think 342 00:16:09,000 --> 00:16:11,640 Speaker 5: at least initially would manifest, and the stronger dollar because 343 00:16:11,760 --> 00:16:13,520 Speaker 5: it's putting more pressure on the rest of the world 344 00:16:14,200 --> 00:16:17,400 Speaker 5: than the central bank dubblishness you'd see overseas without weigh what. 345 00:16:17,440 --> 00:16:18,360 Speaker 2: It would do to the US. 346 00:16:18,720 --> 00:16:20,720 Speaker 6: Most people talk about also in the contacts, of what 347 00:16:20,800 --> 00:16:22,800 Speaker 6: it means for US consumers. If you look at the 348 00:16:22,800 --> 00:16:25,240 Speaker 6: rest of the world, who would win in that scenario. 349 00:16:26,640 --> 00:16:28,960 Speaker 5: Well, I think it's complicated to say that there are 350 00:16:29,040 --> 00:16:31,880 Speaker 5: specific kind of winners and losers. I'd say is if 351 00:16:32,120 --> 00:16:34,760 Speaker 5: over the long term, if the US is pursuing more 352 00:16:34,840 --> 00:16:37,640 Speaker 5: protectionist policies and the aggregate, which it probably is regardless 353 00:16:37,640 --> 00:16:40,080 Speaker 5: of who's present, it's just a matter of tactics. Republicans 354 00:16:40,120 --> 00:16:42,480 Speaker 5: clearly want to lean more on tariffs. But what it 355 00:16:42,520 --> 00:16:45,400 Speaker 5: does create this long term incentive towards nearshore and reshoring, 356 00:16:45,440 --> 00:16:48,240 Speaker 5: et cetera. And the places that are best set up 357 00:16:48,280 --> 00:16:49,400 Speaker 5: for that, I think are the ones that we know 358 00:16:49,600 --> 00:16:53,000 Speaker 5: from the most part, right Mexico. If you go into 359 00:16:53,080 --> 00:16:57,720 Speaker 5: Asia we're talking about Vietnam or maybe Turkey a Nina, 360 00:16:58,080 --> 00:16:59,680 Speaker 5: because these are areas where you have to kind of 361 00:16:59,720 --> 00:17:03,640 Speaker 5: re create the labor supply and the labor cost elements 362 00:17:03,640 --> 00:17:05,080 Speaker 5: that you have in China. But you can't do it 363 00:17:05,119 --> 00:17:07,080 Speaker 5: in one place. You have to if you're multinationally, you 364 00:17:07,119 --> 00:17:08,399 Speaker 5: have to kind of do in the aggregate in the 365 00:17:08,720 --> 00:17:09,679 Speaker 5: multiple different places. 366 00:17:09,840 --> 00:17:11,640 Speaker 3: You have a hard job, especially at a time where 367 00:17:11,640 --> 00:17:13,720 Speaker 3: people are saying it's basically a toss up and nobody 368 00:17:13,760 --> 00:17:15,400 Speaker 3: really knows what's going to happen, and people are coming 369 00:17:15,440 --> 00:17:17,200 Speaker 3: to you to explain what's going to happen, and you say, 370 00:17:17,240 --> 00:17:20,600 Speaker 3: I have no clue, but I am curious about whether 371 00:17:20,640 --> 00:17:23,399 Speaker 3: it's getting easier in this one sense that the two 372 00:17:23,480 --> 00:17:25,639 Speaker 3: parties are kind of coming to the same place that 373 00:17:25,800 --> 00:17:28,200 Speaker 3: increasingly it looks like the policies are very similar to 374 00:17:28,280 --> 00:17:29,840 Speaker 3: one another. You just talked about how they are going 375 00:17:29,920 --> 00:17:32,080 Speaker 3: to be protection as policies no matter what, is there 376 00:17:32,160 --> 00:17:35,200 Speaker 3: a baseline of how much this gets accelerated, regardless of 377 00:17:35,240 --> 00:17:36,280 Speaker 3: whether it's Harris or Trump. 378 00:17:36,600 --> 00:17:39,159 Speaker 5: Yeah, I mean so, if we're talking about trade, the 379 00:17:39,280 --> 00:17:41,720 Speaker 5: real difference is in the short term on whether or 380 00:17:41,720 --> 00:17:44,880 Speaker 5: not you're using tariffs right, And if that's true, then 381 00:17:44,960 --> 00:17:47,520 Speaker 5: what you're the real difference in twenty twenty five is 382 00:17:47,640 --> 00:17:50,879 Speaker 5: are we pursuing trade protectionist policies that have terriffs or don't. 383 00:17:51,600 --> 00:17:53,840 Speaker 5: The end state might be very much the same, but 384 00:17:54,000 --> 00:17:55,960 Speaker 5: in the short term, the tactic of using tariffs just 385 00:17:56,000 --> 00:17:58,280 Speaker 5: creates a lot more volatility, a lot more uncertainty of 386 00:17:58,280 --> 00:18:00,520 Speaker 5: your own growth. And then to the that you've got 387 00:18:00,640 --> 00:18:03,560 Speaker 5: a Republican pursuing those policies, maybe they're going to deliver 388 00:18:03,680 --> 00:18:05,720 Speaker 5: something on the back end in twenty twenty six that's 389 00:18:05,960 --> 00:18:08,760 Speaker 5: helpful to the economy in terms of greater fiscal expansion. 390 00:18:08,880 --> 00:18:12,239 Speaker 5: But the sequencing here is important because you might very 391 00:18:12,280 --> 00:18:14,560 Speaker 5: well go through the tougher and more risky stuff. 392 00:18:14,359 --> 00:18:16,840 Speaker 2: Upfront, and then you want to talk about corporate taxes. 393 00:18:16,920 --> 00:18:18,840 Speaker 2: Now we can have the tariff conversation. It's a bit 394 00:18:18,880 --> 00:18:20,440 Speaker 2: easier because we don't have to talk about the makeup 395 00:18:20,440 --> 00:18:21,719 Speaker 2: of Congress when it comes to taxes. 396 00:18:22,280 --> 00:18:22,480 Speaker 1: We do. 397 00:18:23,000 --> 00:18:25,480 Speaker 2: Let's talk about how workable things are. Harris is saying, 398 00:18:25,560 --> 00:18:28,080 Speaker 2: take things from twenty one to twenty eight. Trump is 399 00:18:28,119 --> 00:18:30,200 Speaker 2: saying take things from twenty one down to fifteen, but 400 00:18:30,280 --> 00:18:32,680 Speaker 2: with a lot of conditions. I imagine you filtered a 401 00:18:32,760 --> 00:18:34,920 Speaker 2: lot of calls yesterday from clients. What did you tell 402 00:18:34,960 --> 00:18:37,480 Speaker 2: them about how workable the Trump plan is for corporate 403 00:18:37,520 --> 00:18:37,960 Speaker 2: tax cut. 404 00:18:38,720 --> 00:18:41,800 Speaker 5: I mean, it's the workability of any of this is 405 00:18:41,960 --> 00:18:44,719 Speaker 5: really a function more of politics than anything else. Right 406 00:18:45,000 --> 00:18:46,400 Speaker 5: at the end of the day, all of these tax 407 00:18:46,480 --> 00:18:48,520 Speaker 5: plans are going to have to pass through a budget 408 00:18:48,560 --> 00:18:53,240 Speaker 5: reconciliation process that in some ways starts with party leadership 409 00:18:53,320 --> 00:18:56,879 Speaker 5: deciding what number on the deficit expansion are they comfortable with, 410 00:18:57,000 --> 00:18:59,040 Speaker 5: and then everything kind of fits inside of that. That's 411 00:18:59,080 --> 00:19:01,240 Speaker 5: effectively what happened and with the Tax Cuts and Jobs 412 00:19:01,280 --> 00:19:05,040 Speaker 5: Act in the negotiation in twenty seventeen where Senator Corker said, 413 00:19:05,040 --> 00:19:06,560 Speaker 5: we can do one and a half trillion dollars on 414 00:19:06,640 --> 00:19:09,040 Speaker 5: the deficit, and then everything kind of fit in from there. 415 00:19:09,400 --> 00:19:11,520 Speaker 5: So I think these proposals are important to talk about 416 00:19:11,560 --> 00:19:13,520 Speaker 5: and we have to pencil in assumptions for them. But 417 00:19:13,760 --> 00:19:15,920 Speaker 5: you know, how workable is twenty eight percent on cap 418 00:19:15,960 --> 00:19:18,480 Speaker 5: gains as opposed to something higher, Well, that's really a 419 00:19:18,560 --> 00:19:21,080 Speaker 5: function of was the party decide the aggregate they're willing 420 00:19:21,119 --> 00:19:23,720 Speaker 5: to do on the deficit, and then therefore, what is 421 00:19:23,720 --> 00:19:25,080 Speaker 5: it they feel like they need to pay for and 422 00:19:25,200 --> 00:19:26,320 Speaker 5: what levers they have to pull from. 423 00:19:26,359 --> 00:19:28,880 Speaker 6: There, there's a ton of proposals that are coming out 424 00:19:28,880 --> 00:19:32,800 Speaker 6: of both sides, contempting on Social Security taxes, expanding child 425 00:19:32,880 --> 00:19:35,320 Speaker 6: tax credit, which seems that both individuals want to do. 426 00:19:36,080 --> 00:19:38,320 Speaker 6: What do you think is your base case actually gets 427 00:19:38,400 --> 00:19:39,840 Speaker 6: done if we have a divided government. 428 00:19:40,440 --> 00:19:42,320 Speaker 5: Well, in dividing government, I think you can expect at 429 00:19:42,400 --> 00:19:46,680 Speaker 5: least some of the kind of commonly supported provisions that 430 00:19:46,800 --> 00:19:48,600 Speaker 5: are set to expire, and so of the Tax Cuts 431 00:19:48,640 --> 00:19:51,760 Speaker 5: and Jobs Act get extended, and then mostly kind of 432 00:19:51,760 --> 00:19:53,760 Speaker 5: everything else goes to the wayside. So when we add 433 00:19:53,960 --> 00:19:56,400 Speaker 5: up what we think are kind of commonly accepted provisions, 434 00:19:56,640 --> 00:19:59,359 Speaker 5: adds up to about a trillion dollars of incremental deficit 435 00:19:59,440 --> 00:20:02,560 Speaker 5: expansion for ten years starting in twenty twenty six. That's 436 00:20:02,600 --> 00:20:06,399 Speaker 5: where we think the bipartisan angle is. If Republicans sweep, 437 00:20:06,440 --> 00:20:07,840 Speaker 5: we think that number can get as high as one 438 00:20:07,880 --> 00:20:11,119 Speaker 5: point six trillion. If Democrats sweep, because they'd be more 439 00:20:11,160 --> 00:20:12,960 Speaker 5: willing to bring you revenue to the table on the 440 00:20:13,040 --> 00:20:15,240 Speaker 5: tax side, that number could be like five hundred to 441 00:20:15,280 --> 00:20:18,200 Speaker 5: seven hundred billion instead. So really, I think we have 442 00:20:18,240 --> 00:20:21,200 Speaker 5: to think more in terms of the values and the 443 00:20:21,240 --> 00:20:23,000 Speaker 5: principles each party is bringing to the table. 444 00:20:23,320 --> 00:20:24,199 Speaker 2: The precision on the. 445 00:20:24,280 --> 00:20:26,879 Speaker 5: Numbers is going to follow later after we get more details. 446 00:20:26,960 --> 00:20:28,280 Speaker 3: Okay, I want to build at this though, And this 447 00:20:28,359 --> 00:20:30,520 Speaker 3: is what we're talking about with Tobias Marcus too. I mean, 448 00:20:30,560 --> 00:20:32,840 Speaker 3: we talk about the lack of clarity around some of 449 00:20:32,920 --> 00:20:35,320 Speaker 3: these numbers that we get and the details that are 450 00:20:35,400 --> 00:20:37,720 Speaker 3: yet to be worked out, and yet house after houses 451 00:20:37,800 --> 00:20:39,760 Speaker 3: come out and said that Trump is going to increase 452 00:20:39,800 --> 00:20:43,240 Speaker 3: the deficit more than Kamala Harris. We have a number 453 00:20:43,400 --> 00:20:45,760 Speaker 3: of Republican strategis as well as people who could be 454 00:20:45,760 --> 00:20:47,560 Speaker 3: as advisors, who come on the show and get very 455 00:20:47,680 --> 00:20:49,920 Speaker 3: angry and they tell us that we're not accounting for 456 00:20:50,040 --> 00:20:51,639 Speaker 3: growth that will come on the heels of some of 457 00:20:51,720 --> 00:20:55,080 Speaker 3: these tax cuts, et cetera. What's the argument against that? 458 00:20:55,119 --> 00:20:56,680 Speaker 3: Why is that not being included in any of this? 459 00:20:57,320 --> 00:21:00,320 Speaker 5: Well, I think there's a technical argument and then there's 460 00:21:00,359 --> 00:21:03,520 Speaker 5: more speculative argument. The technical argument is that the way 461 00:21:03,560 --> 00:21:05,800 Speaker 5: the government's going to score any of these things typically 462 00:21:05,920 --> 00:21:08,400 Speaker 5: is not going to account for incremental growth or dynamic 463 00:21:08,480 --> 00:21:11,280 Speaker 5: scoring as they like to call it, and so investors 464 00:21:11,400 --> 00:21:14,280 Speaker 5: kind of not having certainty on that, particularly bond market 465 00:21:14,359 --> 00:21:16,960 Speaker 5: investors are really going to project for or sort to 466 00:21:17,520 --> 00:21:20,600 Speaker 5: discount to the present what is the expected depths of 467 00:21:20,640 --> 00:21:22,879 Speaker 5: projection that the government is telling them that's going the 468 00:21:22,920 --> 00:21:25,600 Speaker 5: factor into supply, and so the idea of sort of 469 00:21:25,680 --> 00:21:28,920 Speaker 5: future economic growth kind of mitigating that deficit impact to 470 00:21:29,160 --> 00:21:32,399 Speaker 5: T plus two, three, four or five years later feels 471 00:21:32,560 --> 00:21:35,400 Speaker 5: quite speculative and it's not something that you can work 472 00:21:35,480 --> 00:21:36,920 Speaker 5: with from an investment perspective. 473 00:21:37,119 --> 00:21:39,280 Speaker 6: Bank of America this morning. So the most important NFP 474 00:21:39,480 --> 00:21:42,040 Speaker 6: and most important debate of the year, that's what we're 475 00:21:42,080 --> 00:21:44,880 Speaker 6: waiting for. The debate is important because we still don't 476 00:21:44,960 --> 00:21:47,920 Speaker 6: know all of Kamala Harris's policy proposals. What are you 477 00:21:48,040 --> 00:21:51,159 Speaker 6: most interested in trying to understand from her economic plans? 478 00:21:51,640 --> 00:21:54,040 Speaker 5: Yeah, means I would love to hear more precision on 479 00:21:54,119 --> 00:21:57,399 Speaker 5: both the tax and the spending side. I don't think 480 00:21:57,400 --> 00:22:00,240 Speaker 5: you're going to get more of that from either candidate though, 481 00:22:01,200 --> 00:22:04,000 Speaker 5: And campaigns a lot of times are about putting your 482 00:22:04,080 --> 00:22:07,119 Speaker 5: values out and expressing them in statements as opposed to 483 00:22:07,200 --> 00:22:10,760 Speaker 5: specifical policies, because that's going to be more persuasive to voters. 484 00:22:10,800 --> 00:22:13,159 Speaker 5: So I'm obviously going to watch carefully what happens on 485 00:22:13,200 --> 00:22:15,520 Speaker 5: the debate station next week. I personally have low expectations 486 00:22:15,560 --> 00:22:18,600 Speaker 5: for us learning more precisely what each candidate wants to. 487 00:22:18,600 --> 00:22:20,680 Speaker 2: Have You developed much of a sective focus just yet 488 00:22:20,720 --> 00:22:21,560 Speaker 2: or is it still too early. 489 00:22:22,600 --> 00:22:25,560 Speaker 5: Well, I think there are some sectors that clearly sort 490 00:22:25,600 --> 00:22:28,879 Speaker 5: of you know, benefit or benefit less in either outcome. 491 00:22:30,080 --> 00:22:32,399 Speaker 5: To the extent Democrats have more control. A lot of 492 00:22:32,400 --> 00:22:35,080 Speaker 5: the sectors that benefit from the IRA, particularly clean tech, 493 00:22:35,119 --> 00:22:37,520 Speaker 5: are going to be more secure because that spending is 494 00:22:37,560 --> 00:22:41,600 Speaker 5: going to be more secure if you have Republicans sweep 495 00:22:41,640 --> 00:22:43,600 Speaker 5: and therefore more of a skew towards extending more of 496 00:22:43,640 --> 00:22:46,720 Speaker 5: those tax cuts. You know, that skews more towards domestic industries, 497 00:22:46,760 --> 00:22:48,840 Speaker 5: a little more towards small cap I think it's one 498 00:22:48,840 --> 00:22:50,960 Speaker 5: of the reasons that when it looked like Trump win 499 00:22:51,040 --> 00:22:53,680 Speaker 5: probabilities were going a lot higher following the June debate, 500 00:22:53,920 --> 00:22:56,000 Speaker 5: you started to see signs of life in small caps, 501 00:22:56,040 --> 00:22:57,680 Speaker 5: and that's kind of come back as things have gone 502 00:22:57,720 --> 00:22:58,480 Speaker 5: to more of a toss up. 503 00:22:58,680 --> 00:23:00,600 Speaker 2: This is what Dan Greenhouse said, yes that I on 504 00:23:00,680 --> 00:23:01,199 Speaker 2: this program. 505 00:23:01,359 --> 00:23:04,520 Speaker 3: Yeah, essentially that when you start to look underneath the hood, 506 00:23:04,560 --> 00:23:07,199 Speaker 3: and this is what we heard also from Trump's potential 507 00:23:07,240 --> 00:23:10,080 Speaker 3: advisor that they're going to free some of that funding 508 00:23:10,160 --> 00:23:12,960 Speaker 3: for the IRA and that could end up really hurting 509 00:23:13,080 --> 00:23:16,200 Speaker 3: particular areas, which is the reason why you're seeing some 510 00:23:16,480 --> 00:23:18,520 Speaker 3: sort of shifting around the candidate. 511 00:23:18,320 --> 00:23:21,159 Speaker 2: To speak almost exclusively for the investor class. I think 512 00:23:21,160 --> 00:23:22,680 Speaker 2: the way they view things at the moment is that 513 00:23:22,920 --> 00:23:25,080 Speaker 2: Harris needs Congress to do some of the bad stuff 514 00:23:25,760 --> 00:23:28,720 Speaker 2: high corporate taxes. Trump doesn't need Congress to do some 515 00:23:28,800 --> 00:23:30,359 Speaker 2: of the bad stuff. He needs Congress to do some 516 00:23:30,440 --> 00:23:32,920 Speaker 2: of the good stuff to offset the tariffs. So ultimately, 517 00:23:32,960 --> 00:23:35,680 Speaker 2: I think the things as they stand are Harris needs 518 00:23:36,200 --> 00:23:39,080 Speaker 2: a sweep and that means that's bad for markets, and 519 00:23:39,200 --> 00:23:42,600 Speaker 2: if Trump doesn't get sweep, that's also bad for markets. 520 00:23:42,680 --> 00:23:45,520 Speaker 3: Fair Enough, sure, I mean I think that right now. 521 00:23:45,800 --> 00:23:48,560 Speaker 3: What I find most interesting is that regardless of whether 522 00:23:48,640 --> 00:23:50,959 Speaker 3: that's good for markets or bad for markets, it's when 523 00:23:51,040 --> 00:23:52,760 Speaker 3: it will be good for markets are bad for markets. 524 00:23:52,760 --> 00:23:54,640 Speaker 3: And the fact that Michael Jesus is saying that essentially 525 00:23:54,960 --> 00:23:57,560 Speaker 3: the sweeteners will come later because it will take longer 526 00:23:57,880 --> 00:24:00,600 Speaker 3: to me is indicative of well, the Trump trade looked 527 00:24:00,720 --> 00:24:02,240 Speaker 3: different this time around. 528 00:24:02,440 --> 00:24:03,840 Speaker 2: Mike, this was great. It's going to see it's a 529 00:24:04,080 --> 00:24:07,840 Speaker 2: complex stuff. Mike Seest of Morgan Stanley. This is the 530 00:24:07,920 --> 00:24:12,080 Speaker 2: Bloomberg Surveillance Podcast, bringing you the best in markets, economics, 531 00:24:12,160 --> 00:24:15,120 Speaker 2: angio politics. You can watch the show live on Bloomberg 532 00:24:15,160 --> 00:24:18,320 Speaker 2: TV weekday mornings from six am to nine am Eastern. 533 00:24:18,600 --> 00:24:21,960 Speaker 2: Subscribe to the podcast on Apple, Spotify, or anywhere else 534 00:24:22,000 --> 00:24:24,600 Speaker 2: you listen, and as always, on the Bloomberg Terminal and 535 00:24:24,720 --> 00:24:25,880 Speaker 2: the Bloomberg Business app.