WEBVTT - Bloomberg Surveillance TV: September 6, 2024 0:00:00.120 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.920 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.560 Terminal and the Bloomberg Business app. Towson' slock of Apollo 0:00:37.640 --> 0:00:39.760 got two benefits there. One he got an extra twelve 0:00:39.840 --> 0:00:41.400 minutes to go over all of this, and two might 0:00:41.400 --> 0:00:43.479 be Key set him up perfectly because Torston New just 0:00:43.520 --> 0:00:44.160 out there nodding. 0:00:44.400 --> 0:00:46.720 You agree, don't you, Hunter Resent. I mean, let's look 0:00:46.720 --> 0:00:49.440 at the numbers. Non fine pay roles in August was 0:00:49.520 --> 0:00:52.519 better than in July. The unemployment RATI in August was 0:00:52.560 --> 0:00:55.960 better than in July. Average arlie earnings higher than in July. 0:00:56.280 --> 0:00:59.000 And you look at average medio hours also better than 0:00:59.000 --> 0:01:01.480 in July. I mean, this is better than in July. 0:01:01.800 --> 0:01:03.880 This economy is not slowing down. In the way that 0:01:03.960 --> 0:01:07.200 markets anticipating we will not get eight cuts over the 0:01:07.200 --> 0:01:09.840 next twelve months. Here you should instead look at this 0:01:10.000 --> 0:01:12.319 report as this is really telling you that there is 0:01:12.319 --> 0:01:13.080 a soft lending. 0:01:13.240 --> 0:01:15.360 So help me with this. In October, when we look 0:01:15.400 --> 0:01:17.640 back at this report and we get another revision, a 0:01:17.760 --> 0:01:20.120 downward revision, don't we have to reframe some of this 0:01:20.160 --> 0:01:23.400 conversation and just say everything gets keeps getting revised lower. 0:01:23.440 --> 0:01:26.440 This is Least's point over the last few days. This economy, 0:01:26.600 --> 0:01:29.160 this labor market is weaker than we initially thought. 0:01:29.160 --> 0:01:31.640 It was GDP in the second quarter verse three percent. 0:01:31.680 --> 0:01:34.560 It was just revised up. Jobless claims continues to be 0:01:34.560 --> 0:01:37.160 a good. Continuing claims was also good. If you look 0:01:37.200 --> 0:01:39.680 at the daily data for how many people go to restaurants, 0:01:39.840 --> 0:01:42.200 how many people's fly on airplanes, the weekly data from 0:01:42.200 --> 0:01:46.000 Redbook on retail sales, if we're across the board on bankruptcies, 0:01:46.240 --> 0:01:49.000 if we're across the board on credit card spending. In 0:01:49.080 --> 0:01:52.280 the aggregate, the growth data is just not showing signs 0:01:52.280 --> 0:01:54.400 of a slowdown. It is true that the labor market 0:01:54.480 --> 0:01:56.880 is weakening, and yes, the duels data has bidding a 0:01:56.960 --> 0:01:59.360 little bit, maybe more in balance as the fit would 0:01:59.400 --> 0:02:02.200 be saying, but this whole notion that the economy is 0:02:02.200 --> 0:02:04.480 slowing down rapidly, it is completely misguided. 0:02:04.600 --> 0:02:06.360 What I thought was fascinating. I was speaking to a 0:02:06.400 --> 0:02:09.720 number of retail executives at this conference this week, and 0:02:10.040 --> 0:02:12.840 their biggest question was what's going to happen with the consumer? 0:02:13.000 --> 0:02:16.000 They didn't know, They had zero visibility. Even though you 0:02:16.080 --> 0:02:18.960 are seeing some trends and signs of robustness, some signs 0:02:18.960 --> 0:02:21.680 of weakness, they said, ultimately, it just depends on whether 0:02:21.720 --> 0:02:24.760 they have the money to spend. These labor market reports 0:02:24.840 --> 0:02:26.840 are raising a red flag for a lot of people, 0:02:26.880 --> 0:02:30.200 saying if they lose their jobs, they won't How fragile 0:02:30.480 --> 0:02:33.960 is that sort of happiness that you're describing to a 0:02:34.000 --> 0:02:34.800 scenario like that. 0:02:35.240 --> 0:02:37.360 Certainly, if we do have a rise in the unemployer rate, 0:02:37.440 --> 0:02:39.200 so that's not what happened there, impliner ray and down, 0:02:39.280 --> 0:02:41.600 it would become a problem. But if you also exactly 0:02:41.680 --> 0:02:43.640 as you know too well, look at what they did 0:02:43.720 --> 0:02:46.840 say the retailers during this earning season. Target Set, no 0:02:46.960 --> 0:02:49.480 sign of a lowdown, Walnut, no sign of a s lowdown, 0:02:49.680 --> 0:02:51.760 and also Costco, no sign of a lowdown. You saw 0:02:51.840 --> 0:02:55.320 dollar general, some parts of consumers are on the mont distress, 0:02:55.560 --> 0:02:58.720 but broadly speaking, looking at retail sales, both the monthly, 0:02:59.120 --> 0:03:01.399 the weekly, and cross the boat on credit card data, 0:03:01.680 --> 0:03:03.400 there's just no sign of a shop slowdown. 0:03:03.560 --> 0:03:04.440 So the bottom line in this. 0:03:04.480 --> 0:03:07.760 Discussion is that you only get a recession when you 0:03:07.880 --> 0:03:10.079 have a really big shock to the economy, and that 0:03:10.200 --> 0:03:12.920 makes sense of course with COVID human Brothers going under, 0:03:13.280 --> 0:03:16.360 of course, the bust of the IT bubble in two thousand. 0:03:16.720 --> 0:03:19.359 But this is not an exogynous shock with something coming 0:03:19.400 --> 0:03:21.959 from the outside. This is all engineered by the FED 0:03:22.200 --> 0:03:23.880 trying to slow things down. And now the FED is 0:03:23.919 --> 0:03:26.600 telling us that they're about to lower rates, so that's 0:03:26.639 --> 0:03:28.840 about to counter some of those negative things. 0:03:28.880 --> 0:03:31.480 Well, let's weigh. We get another headline from the Federal 0:03:31.480 --> 0:03:34.320 Reserve Mi McKay from the neo FED President John Williams. 0:03:34.720 --> 0:03:37.120 Yeah, John Williams is saying it is time now to 0:03:37.360 --> 0:03:40.440 join the party. He is not commenting in his prepared 0:03:40.600 --> 0:03:42.600 remarks about today's numbers. 0:03:42.680 --> 0:03:43.360 Of course he. 0:03:43.360 --> 0:03:46.040 Wouldn't have had them ahead of time, but he does 0:03:46.080 --> 0:03:47.240 say it's time to cut rates. 0:03:48.360 --> 0:03:48.840 Excuse me. 0:03:48.960 --> 0:03:51.480 With the economy now in equa poise, which he titled 0:03:51.840 --> 0:03:55.960 his speech that means in balance and inflation on a 0:03:56.000 --> 0:03:58.920 path to two percent, it is now appropriate to dial 0:03:59.040 --> 0:04:01.760 down the degree of strictiveness in the stance of policy 0:04:02.040 --> 0:04:04.880 by reducing the target range for the federal funds rate. 0:04:05.000 --> 0:04:07.560 So the guy who's vice chairman of the Open Market 0:04:07.600 --> 0:04:10.960 Committee is saying we're gonna cut rates. He's not yet 0:04:11.280 --> 0:04:13.120 talking about by how much, But there. 0:04:13.080 --> 0:04:14.440 Is a Q and A, so we'll keep an eye 0:04:14.480 --> 0:04:17.400 on and apparently unser thesaurus too for the New York 0:04:17.480 --> 0:04:19.760 fact torsan sluck. What do you make of that? And 0:04:19.839 --> 0:04:21.279 what are you looking for from Governor Waller? 0:04:21.520 --> 0:04:24.480 So I do think Waller will also give some more 0:04:24.560 --> 0:04:27.200 guidance in terms of what's going on, at least with 0:04:27.279 --> 0:04:29.120 a bigger economic picture. But I don't think that he 0:04:29.200 --> 0:04:31.120 will tell us much about whether this is twenty five 0:04:31.240 --> 0:04:34.160 or fifty. It requires probably a very important debate given 0:04:34.240 --> 0:04:37.320 the spectrum of where if I'MC members have been recently 0:04:37.400 --> 0:04:40.080 in the speetures, some are clearly saying some are even 0:04:40.120 --> 0:04:43.000 suggesting we should have much fewer cuts over the next 0:04:43.000 --> 0:04:45.640 seven quarters, and others, of course are suggesting that we 0:04:45.720 --> 0:04:47.640 should go much faster. So I do think that they 0:04:47.760 --> 0:04:50.080 need to gather in the room and think hard about 0:04:50.320 --> 0:04:52.159 do we want to go towards twenty five or fifty? 0:04:52.200 --> 0:04:53.880 I would say, and I would agree with Mike that 0:04:53.960 --> 0:04:55.800 twenty five is the right now. But given that literally 0:04:55.880 --> 0:04:58.560 everything in this report was better than in July. 0:04:58.640 --> 0:05:00.760 Would it be a policy error though to go by fifty? 0:05:01.440 --> 0:05:03.440 See that opens up the debate about our sty and 0:05:03.560 --> 0:05:05.360 how far do we need to go down if our 0:05:05.440 --> 0:05:07.800 star and where we need to go to And ultimately 0:05:08.080 --> 0:05:10.080 so real rates plus inflation, if we only need to 0:05:10.160 --> 0:05:12.680 go to four and a half, we're not far away 0:05:12.720 --> 0:05:15.320 from that, so there's no rush to lower rates. If 0:05:15.360 --> 0:05:16.600 we do need to go all the way down to 0:05:16.640 --> 0:05:18.559 two and a half or three, then there is certainly 0:05:18.600 --> 0:05:20.400 more of a rush. But give me the incoming data 0:05:20.680 --> 0:05:23.320 across the boat is still good. Why is there this 0:05:23.520 --> 0:05:25.640 rush to cut rate so traumatic? Other than the our 0:05:25.680 --> 0:05:27.839 Star framework which says that we got to get going. 0:05:28.600 --> 0:05:33.080 Jackson Hall speech was all about understanding the effect that 0:05:33.160 --> 0:05:35.600 FED policy has in the overall economy. The conclusion was, 0:05:35.640 --> 0:05:37.520 we still don't know. We don't have a sense of 0:05:37.600 --> 0:05:40.440 exactly how quickly it gets sort of transmitted in how 0:05:40.520 --> 0:05:42.400 much of the lag effects that we're starting to see. 0:05:42.800 --> 0:05:45.000 There is an argument if you cut rates more aggressively 0:05:45.080 --> 0:05:46.400 now you can get ahead of some of the lag 0:05:46.440 --> 0:05:49.440 effects that we haven't yet even seen. Why don't you 0:05:49.520 --> 0:05:50.520 give credence. 0:05:50.160 --> 0:05:53.160 To that, because there are three very important reasons why 0:05:53.279 --> 0:05:55.240 we did not get that slow down that we all 0:05:55.279 --> 0:05:58.279 anticipated for so long throughout twenty twenty three. Remember they 0:05:58.279 --> 0:06:00.800 started hiking rates in mants of twenty twenty to. First 0:06:00.839 --> 0:06:03.360 of all, consumers and firms had locked in low interest rates, 0:06:03.680 --> 0:06:06.640 AI investment has been very strong, and fiscal policy has 0:06:06.640 --> 0:06:09.400 been a huge tailwind. All these things combined have been 0:06:09.440 --> 0:06:11.640 the key reason why the economy has not slowed down, 0:06:12.040 --> 0:06:14.320 and those things actually still in place. A lot of 0:06:14.360 --> 0:06:16.600 people still, of course have low interest rates in mortgages, 0:06:16.880 --> 0:06:20.000 IT investment, greade, credit fixed rate also very locked. 0:06:19.800 --> 0:06:20.600 In for a long time. 0:06:20.880 --> 0:06:22.840 So that means that if you do start cutting rates, 0:06:23.080 --> 0:06:25.440 it's actually the transmission is also going to be weaker. 0:06:25.760 --> 0:06:28.360 On the downside, it was weak when you were raising rates, 0:06:28.440 --> 0:06:30.840 it's also weak when you're cutting rates. So because of that, 0:06:31.240 --> 0:06:34.480 AI investments still strong, fiscal policy from Chips Act, Inflation 0:06:34.560 --> 0:06:37.400 Reduction Act, and infrastructure acts still strong. All this argues 0:06:37.480 --> 0:06:39.800 that the data will just continue to be steady over 0:06:39.839 --> 0:06:42.320 the next several quarters. There is no reason to expect 0:06:42.360 --> 0:06:44.640 this to be a hard landing. There is no exactantess 0:06:44.680 --> 0:06:47.640 shock similar to what we have seen during previous recessions. 0:06:47.720 --> 0:06:50.279 Christen klugabuks the revision for a second. If you take 0:06:50.360 --> 0:06:52.680 off the twenty five thousand we took off last month 0:06:52.720 --> 0:06:55.520 and you do here for August, you'd get one seventeen. 0:06:55.600 --> 0:06:58.480 Would you still feel this way if it printed one seventeen? 0:06:59.040 --> 0:07:01.880 Sure? Of course, revisions are very important because we have 0:07:02.000 --> 0:07:04.760 seen some MDEST slow down, But broadly speaking, the data 0:07:04.880 --> 0:07:06.840 was still better than what it was in July. So 0:07:07.080 --> 0:07:09.480 taken as the overall picture of him, particularly with the 0:07:09.560 --> 0:07:12.600 unemployment rate, which is especially important when you put that 0:07:12.920 --> 0:07:15.160 into your tailor rules and try to figure out what 0:07:15.200 --> 0:07:17.120 should the reaction function be from the fit. And that's 0:07:17.160 --> 0:07:19.600 how all the regional fits prepare the forecast. And if 0:07:19.640 --> 0:07:22.000 the unempliner rate goes down, it's hard to argue why 0:07:22.040 --> 0:07:24.280 they should be going fifty. To go fifty, you need 0:07:24.360 --> 0:07:27.640 some very excuse me, academic argument about our star, and 0:07:27.720 --> 0:07:30.440 you've got to get going with lowering rates very very quickly. 0:07:30.680 --> 0:07:32.960 And the question is, with the incoming data being so strong, 0:07:33.000 --> 0:07:35.760 it's monaps saraposia really so restrictive, it doesn't look like 0:07:35.840 --> 0:07:38.800 it's restrictive. If it was really restrictive, the important report 0:07:38.840 --> 0:07:39.640 would be a lot weaker. 0:07:39.800 --> 0:07:42.040 Pause, because this is exactly where I wanted to finish 0:07:42.120 --> 0:07:44.160 with you. You're saying five point fifty is still not 0:07:44.240 --> 0:07:45.520 that restrictive for this economy. 0:07:46.160 --> 0:07:48.920 So if ASDA, if where we're going in the terminal 0:07:49.000 --> 0:07:51.160 rate is four and a half, it's five and a 0:07:51.200 --> 0:07:53.280 half far away from four and a half. I know, we, 0:07:53.560 --> 0:07:57.960 excuse me, have been somewhat not quite brainwashed, but very 0:07:58.000 --> 0:08:00.880 distorted by a lot of fmcment was seriously saying we've 0:08:00.880 --> 0:08:03.520 got a normalized raise, normalized raise, normalized rates. But let 0:08:03.560 --> 0:08:06.600 me ask you this, John, if we really had restrictive 0:08:06.640 --> 0:08:09.360 manetary policy, why have we for two and a half 0:08:09.480 --> 0:08:12.920 years and counting, still been getting very good economic data, 0:08:12.960 --> 0:08:15.160 including GDP in the second quarter at three percent. 0:08:15.320 --> 0:08:17.480 The lassage is so longer, they might say, the lags 0:08:17.520 --> 0:08:17.960 are just long. 0:08:17.960 --> 0:08:19.800 What should be the reason for that. The tailwinds from 0:08:19.840 --> 0:08:22.320 AI continue to be strong, the tails from fiscal policy 0:08:22.320 --> 0:08:24.320 is still strong. We have locked in low interest rates 0:08:24.360 --> 0:08:27.240 for the consumer and for corporates. Where is this very 0:08:27.280 --> 0:08:29.120 significant transmission of margetary policy. 0:08:29.240 --> 0:08:31.000 When we sit here and do this again a year 0:08:31.040 --> 0:08:33.160 from now, we'll do it before then, don't worry. In 0:08:33.240 --> 0:08:35.600 twelve months time, where do you think rights are. They've 0:08:35.600 --> 0:08:37.120 got a four handle, they still got a five. 0:08:37.440 --> 0:08:39.199 I think that they will be much higher than what 0:08:39.280 --> 0:08:41.079 the market is pricing at the moment, because this is 0:08:41.160 --> 0:08:44.120 not a shock that is generating ever recession. Why haven't 0:08:44.160 --> 0:08:46.800 we had a recession for now thirty six months in counting. 0:08:46.880 --> 0:08:49.040 I mean, it is really the case that the economy 0:08:49.120 --> 0:08:51.520 and the economic data has just been much better than 0:08:51.559 --> 0:08:54.040 we literally any modelould have predicted for the reasons that 0:08:54.120 --> 0:08:55.920 I just mentioned. Mayme be locked in low interest rates, 0:08:56.160 --> 0:08:59.559 tales from fiscal policy and AI spending being completely independent 0:08:59.600 --> 0:09:01.120 of whatever the FIT is doing. 0:09:01.440 --> 0:09:02.960 This is box office and we should do it again 0:09:03.000 --> 0:09:06.920 next week and looking forward to it. Toason' sluck of Apollo, 0:09:07.160 --> 0:09:18.520 thank you very much. In the commercial blank We've were 0:09:18.559 --> 0:09:20.719 debating with Jeff Rosenberg of Blank Rock what would be 0:09:20.760 --> 0:09:24.000 the most confusing labor market report today for the Federal 0:09:24.000 --> 0:09:26.360 Reserve and for market participants? And Jeff said something like 0:09:26.800 --> 0:09:31.120 if you've got a slightly softer jobs report, but unemployment 0:09:31.160 --> 0:09:33.640 actually dropped back from four point three to say four 0:09:33.679 --> 0:09:36.040 point two. And Jeff, we've got a mix. That's the 0:09:36.080 --> 0:09:38.280 mix we've got. So Jeff Rosenberg of Blank Rock, Jeff, 0:09:38.280 --> 0:09:42.679 please make sense of this for us? Yeah, tough to 0:09:42.760 --> 0:09:43.400 make sense of it. 0:09:43.840 --> 0:09:45.760 It's a bit of that mixture. But I think the 0:09:45.880 --> 0:09:51.040 headline reaction is to the slightly weaker payroll headline and 0:09:51.720 --> 0:09:55.319 the revisions as Lisa was pointing out, So it's a 0:09:55.360 --> 0:09:57.679 little bit weaker on margin. You know, the bond market 0:09:57.760 --> 0:10:01.000 is very much behaving as if you know, if we 0:10:01.120 --> 0:10:05.199 price it, they will cut, and so increasing the probability 0:10:05.360 --> 0:10:07.920 or trying to push the probability to fifty. I don't 0:10:07.920 --> 0:10:11.840 think this report is definitive on the twenty five versus fifty. 0:10:12.760 --> 0:10:16.040 I think it's going to be Waller, What. 0:10:16.080 --> 0:10:18.199 Do you want from Governor Waller? Jeff at eleven a 0:10:18.320 --> 0:10:20.319 m Astern time? What are you looking for? You think 0:10:20.360 --> 0:10:22.040 that's the final voice that sets up whether we go 0:10:22.120 --> 0:10:25.079 twenty five or fifty. I think it is. 0:10:25.200 --> 0:10:27.240 I mean, I think it's set up on the calendar 0:10:27.400 --> 0:10:30.839 to give markets clarity on what the Fed's going to do. 0:10:30.920 --> 0:10:34.200 He will have had the information, he would have had 0:10:34.240 --> 0:10:37.319 a chance to talk to Powell, and so that you 0:10:37.480 --> 0:10:41.040 don't get a big market reaction, you know, next not 0:10:41.160 --> 0:10:45.120 next Wednesday, but the eighteenth, when they when the FMC meets. 0:10:45.520 --> 0:10:47.480 So I think it is intended to, you know, provide 0:10:47.520 --> 0:10:49.439 a little bit of a steer to the market. So 0:10:49.480 --> 0:10:51.840 I think that's going to be you know, as important 0:10:51.960 --> 0:10:55.640 as the number that just dropped. What we get in 0:10:55.800 --> 0:10:59.240 terms of the reaction, you know, and it's hard to say, 0:10:59.360 --> 0:11:00.959 you know, which way they go. I think you know, 0:11:01.080 --> 0:11:03.800 the market is pushing from fifty. You know, this number 0:11:03.920 --> 0:11:06.800 isn't you know, particularly weak. You have the potential of 0:11:06.920 --> 0:11:09.839 the first print bias lower on the headline. Maybe that 0:11:09.920 --> 0:11:12.760 gets revised, you know, up we're talking about revisions. This 0:11:12.880 --> 0:11:15.599 is a weirdness in the data where August tends to 0:11:15.679 --> 0:11:18.760 be weaker. You know, there's a slowing and there's an 0:11:18.880 --> 0:11:21.160 argument you know, on both sides. You know, if they 0:11:21.240 --> 0:11:23.880 do fifty, does that you know, kind of signal too 0:11:23.960 --> 0:11:26.800 much concern. They can talk around that, They can talk 0:11:26.840 --> 0:11:29.800 about fifty and talk about their confidence in the economy 0:11:29.800 --> 0:11:31.679 and kind of ease some of that concern, you know, 0:11:31.800 --> 0:11:33.319 so the market has been kind of right in the 0:11:33.360 --> 0:11:35.600 middle between the two this morning. I think it's really 0:11:35.760 --> 0:11:38.760 just about that revisions and a little bit weaker relative 0:11:38.800 --> 0:11:41.120 to the expectations and consensus around one to sixty five 0:11:41.840 --> 0:11:43.000 coming in a little bit below that. 0:11:43.360 --> 0:11:47.080 As an investor, what's your response mechanism to a FED 0:11:47.120 --> 0:11:49.360 that signals fifty basis points of a rate cut. Is 0:11:49.400 --> 0:11:52.160 it basically just extrapolating out about one hundred and fifty 0:11:52.160 --> 0:11:55.400 basis points of cuts this year and then essentially that's 0:11:55.440 --> 0:11:57.160 going to be questionable for risk assets? 0:11:57.240 --> 0:11:58.360 Or do you say this is. 0:11:58.360 --> 0:12:00.960 Supportive because this means that they are going to adjust 0:12:01.040 --> 0:12:04.040 quickly back to something that the market thinks is more neutral. 0:12:05.200 --> 0:12:07.959 Yeah, you know, we had that debate yesterday and I 0:12:08.040 --> 0:12:12.240 think it's it's a tough one. You know, typically when 0:12:12.320 --> 0:12:15.839 the FED cuts fifty, they're cutting fifty because there's a 0:12:16.000 --> 0:12:20.120 growing deceleration in the economic data. This is a tricky 0:12:20.200 --> 0:12:22.679 period because you obviously have a lot of focus on 0:12:23.200 --> 0:12:27.000 the labor markets and the labor market deceleration as being 0:12:27.160 --> 0:12:29.840 the leading indicator. It's not really a leading indicator. It's 0:12:29.920 --> 0:12:32.559 kind of coincidence. Some measures are lagging, you know. The 0:12:32.679 --> 0:12:35.400 rest of the economy looks strong, but there's this fear 0:12:35.559 --> 0:12:38.000 that the FED is behind the curve and that the 0:12:38.200 --> 0:12:41.079 rest of the slowdown is coming. And the rise in 0:12:41.240 --> 0:12:44.960 terms of kind of hard landing fears and so fifty 0:12:45.160 --> 0:12:48.080 might you know, kind of push people along that direction. 0:12:48.320 --> 0:12:50.760 So it's more negative rather than the Feds kind of 0:12:50.840 --> 0:12:54.120 on the job. It's uh, oh, the Feds behind the curve. 0:12:54.240 --> 0:12:57.280 The fifty basis points validates our fear. And then you 0:12:57.360 --> 0:13:01.880 have all the other issues in terms of risks, high valuations, 0:13:02.000 --> 0:13:06.400 concentration in terms of evaluation in the tech sector, all 0:13:06.559 --> 0:13:09.040 kind of leading to a lot of angst. And then 0:13:09.120 --> 0:13:11.960 even what we saw last month, you know, in terms 0:13:12.000 --> 0:13:16.199 of the outsized market reaction positioning October not October, I'm 0:13:16.200 --> 0:13:18.280 talking about August second and August fifth. So I think 0:13:18.320 --> 0:13:20.240 the risk here is that fifty could be more of 0:13:20.320 --> 0:13:24.840 a negative signal than a reassuring signal that the Fed's 0:13:24.880 --> 0:13:27.520 on the case. But it's a tough call either way. 0:13:27.640 --> 0:13:30.040 Well, you were having the debate yesterday, Jeff, not just 0:13:30.120 --> 0:13:32.680 the market, more broadly, what was your reaction being given 0:13:32.720 --> 0:13:34.959 the fact that the FED doesn't have proprietary data that 0:13:35.000 --> 0:13:38.440 we don't see that points to a more conclusive signal 0:13:38.480 --> 0:13:40.000 about where this economy is headed. 0:13:41.520 --> 0:13:45.520 Yeah, it's really about the fed's shift. We saw it 0:13:45.640 --> 0:13:48.959 from Jackson, Hole and Powell, and it's shifted this whole 0:13:49.640 --> 0:13:54.559 narrative focus and really market reaction focus onto the growth 0:13:54.679 --> 0:13:58.319 data away from the inflation data. And that shift means 0:13:58.440 --> 0:14:02.439 the FED is worried now more about securing the benefits 0:14:02.960 --> 0:14:06.040 of their past policy intervention to secure the benefits of 0:14:06.360 --> 0:14:10.240 reducing inflation, and now focusing on you know, securing the 0:14:10.440 --> 0:14:14.160 securing the soft landing, so all of any signals around 0:14:14.600 --> 0:14:18.160 their sensitivity, any validation of that in terms of the data, 0:14:18.520 --> 0:14:22.240 you know, makes people very much on edge that you're 0:14:22.520 --> 0:14:25.280 you know, back not to the what but Powell called 0:14:25.320 --> 0:14:27.920 the era of flouted rules that you know, you can't 0:14:27.960 --> 0:14:30.840 rely on these rules like the PSALM rule, like labor 0:14:30.880 --> 0:14:34.000 market differentials and other things that that that people point 0:14:34.040 --> 0:14:38.480 to when you have recession signals that those may actually 0:14:38.680 --> 0:14:41.840 in this time, UH, you know, be the right signal. 0:14:41.920 --> 0:14:45.080 And that kind of concern that you see in many commentary, 0:14:45.200 --> 0:14:50.280 many UH forecasts, you know, gets more validated under a 0:14:50.360 --> 0:14:53.080 fifty basis point cut scenario. And I think that's the 0:14:53.160 --> 0:14:56.160 concern that would be, you know, the pushback. They can 0:14:56.280 --> 0:14:58.640 signal around that, they can use the language, they can 0:14:58.720 --> 0:15:01.680 use the press conference to manage that. But you know, 0:15:01.720 --> 0:15:04.480 it's a tricky it's a tricky needle. 0:15:04.520 --> 0:15:06.680 The threat. He Jeff, this was great, Jeff Rosenberg of 0:15:06.720 --> 0:15:19.560 Black Rock. So here's the latest. Donald Trump promising to 0:15:19.680 --> 0:15:22.960 use tariff's as an economic weapon in a potential second term. 0:15:23.040 --> 0:15:25.880 HiT's remarks coming ahead of Tuesday's debate with Vice President 0:15:25.960 --> 0:15:28.880 Kamala Harris. Michael Jesus of Morgan Stanley right in the 0:15:28.920 --> 0:15:32.160 following tariffs could pressure economic growth, but possibly more so 0:15:32.360 --> 0:15:35.960 outside the US, potentially driving more dubbish central bank policies 0:15:36.080 --> 0:15:39.600 overseas than that the Federal Reserve. Michael joins us for 0:15:39.680 --> 0:15:42.880 more Michael Goodmornich. That's a thoughtful take on a situation 0:15:42.960 --> 0:15:44.680 for global central banks. Do you think some of those 0:15:44.720 --> 0:15:48.080 policies could be more damaging to countries abroad than maybe domestically. 0:15:49.040 --> 0:15:51.400 Yeah, We'll say I think about the US's pasture in 0:15:51.520 --> 0:15:53.600 terms of trede relationships with the rest of the world. 0:15:53.680 --> 0:15:56.360 If it's terrifying more of its imports, then more the 0:15:56.400 --> 0:16:00.360 pressure is going to be overseas. So this thing comes 0:16:00.440 --> 0:16:03.000 up in the context of Wiznamy for the dollar, right, 0:16:03.280 --> 0:16:06.760 and the Trump campaigns talked about the desire to have 0:16:06.840 --> 0:16:09.000 a weaker dollar, but some of these policies we think 0:16:09.000 --> 0:16:11.640 at least initially would manifest, and the stronger dollar because 0:16:11.760 --> 0:16:13.520 it's putting more pressure on the rest of the world 0:16:14.200 --> 0:16:17.400 than the central bank dubblishness you'd see overseas without weigh what. 0:16:17.440 --> 0:16:18.360 It would do to the US. 0:16:18.720 --> 0:16:20.720 Most people talk about also in the contacts, of what 0:16:20.800 --> 0:16:22.800 it means for US consumers. If you look at the 0:16:22.800 --> 0:16:25.240 rest of the world, who would win in that scenario. 0:16:26.640 --> 0:16:28.960 Well, I think it's complicated to say that there are 0:16:29.040 --> 0:16:31.880 specific kind of winners and losers. I'd say is if 0:16:32.120 --> 0:16:34.760 over the long term, if the US is pursuing more 0:16:34.840 --> 0:16:37.640 protectionist policies and the aggregate, which it probably is regardless 0:16:37.640 --> 0:16:40.080 of who's present, it's just a matter of tactics. Republicans 0:16:40.120 --> 0:16:42.480 clearly want to lean more on tariffs. But what it 0:16:42.520 --> 0:16:45.400 does create this long term incentive towards nearshore and reshoring, 0:16:45.440 --> 0:16:48.240 et cetera. And the places that are best set up 0:16:48.280 --> 0:16:49.400 for that, I think are the ones that we know 0:16:49.600 --> 0:16:53.000 from the most part, right Mexico. If you go into 0:16:53.080 --> 0:16:57.720 Asia we're talking about Vietnam or maybe Turkey a Nina, 0:16:58.080 --> 0:16:59.680 because these are areas where you have to kind of 0:16:59.720 --> 0:17:03.640 re create the labor supply and the labor cost elements 0:17:03.640 --> 0:17:05.080 that you have in China. But you can't do it 0:17:05.119 --> 0:17:07.080 in one place. You have to if you're multinationally, you 0:17:07.119 --> 0:17:08.399 have to kind of do in the aggregate in the 0:17:08.720 --> 0:17:09.679 multiple different places. 0:17:09.840 --> 0:17:11.640 You have a hard job, especially at a time where 0:17:11.640 --> 0:17:13.720 people are saying it's basically a toss up and nobody 0:17:13.760 --> 0:17:15.400 really knows what's going to happen, and people are coming 0:17:15.440 --> 0:17:17.200 to you to explain what's going to happen, and you say, 0:17:17.240 --> 0:17:20.600 I have no clue, but I am curious about whether 0:17:20.640 --> 0:17:23.399 it's getting easier in this one sense that the two 0:17:23.480 --> 0:17:25.639 parties are kind of coming to the same place that 0:17:25.800 --> 0:17:28.200 increasingly it looks like the policies are very similar to 0:17:28.280 --> 0:17:29.840 one another. You just talked about how they are going 0:17:29.920 --> 0:17:32.080 to be protection as policies no matter what, is there 0:17:32.160 --> 0:17:35.200 a baseline of how much this gets accelerated, regardless of 0:17:35.240 --> 0:17:36.280 whether it's Harris or Trump. 0:17:36.600 --> 0:17:39.159 Yeah, I mean so, if we're talking about trade, the 0:17:39.280 --> 0:17:41.720 real difference is in the short term on whether or 0:17:41.720 --> 0:17:44.880 not you're using tariffs right, And if that's true, then 0:17:44.960 --> 0:17:47.520 what you're the real difference in twenty twenty five is 0:17:47.640 --> 0:17:50.879 are we pursuing trade protectionist policies that have terriffs or don't. 0:17:51.600 --> 0:17:53.840 The end state might be very much the same, but 0:17:54.000 --> 0:17:55.960 in the short term, the tactic of using tariffs just 0:17:56.000 --> 0:17:58.280 creates a lot more volatility, a lot more uncertainty of 0:17:58.280 --> 0:18:00.520 your own growth. And then to the that you've got 0:18:00.640 --> 0:18:03.560 a Republican pursuing those policies, maybe they're going to deliver 0:18:03.680 --> 0:18:05.720 something on the back end in twenty twenty six that's 0:18:05.960 --> 0:18:08.760 helpful to the economy in terms of greater fiscal expansion. 0:18:08.880 --> 0:18:12.239 But the sequencing here is important because you might very 0:18:12.280 --> 0:18:14.560 well go through the tougher and more risky stuff. 0:18:14.359 --> 0:18:16.840 Upfront, and then you want to talk about corporate taxes. 0:18:16.920 --> 0:18:18.840 Now we can have the tariff conversation. It's a bit 0:18:18.880 --> 0:18:20.440 easier because we don't have to talk about the makeup 0:18:20.440 --> 0:18:21.719 of Congress when it comes to taxes. 0:18:22.280 --> 0:18:22.480 We do. 0:18:23.000 --> 0:18:25.480 Let's talk about how workable things are. Harris is saying, 0:18:25.560 --> 0:18:28.080 take things from twenty one to twenty eight. Trump is 0:18:28.119 --> 0:18:30.200 saying take things from twenty one down to fifteen, but 0:18:30.280 --> 0:18:32.680 with a lot of conditions. I imagine you filtered a 0:18:32.760 --> 0:18:34.920