WEBVTT - Bloomberg Surveillance TV: May 28, 2024 0:00:00.120 --> 0:00:06.800 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 --> 0:00:37.640 Terminal and the Bloomberg Business App. Lori Calvicina of RBC 0:00:37.800 --> 0:00:40.360 saying this for a material move higher in the market 0:00:40.400 --> 0:00:42.519 by year end to be justified on the math, we 0:00:42.600 --> 0:00:45.199 think investors will need to start focusing on the outlook 0:00:45.240 --> 0:00:49.479 for twenty five, where visibility still seems a bit limited. 0:00:49.680 --> 0:00:51.440 Laurie's with us here in New York. Lori, good morning 0:00:51.479 --> 0:00:51.640 to you. 0:00:51.960 --> 0:00:54.080 Thanks for having let's talk about twenty twenty five. I 0:00:54.080 --> 0:00:56.160 think it's so difficult to do without really knowing what 0:00:56.160 --> 0:00:57.040 happens in November. 0:00:57.160 --> 0:00:58.560 How hard is it to answer that question? 0:00:58.600 --> 0:01:01.040 Well, I think that's a great point. The exact point 0:01:01.040 --> 0:01:03.720 of client I spoke with last week made And it's 0:01:03.760 --> 0:01:06.160 interesting because, on the one hand, I have equity investors 0:01:06.280 --> 0:01:08.399 US based ones at least saying, oh, you know, there's 0:01:08.400 --> 0:01:10.240 not a lot to do on the election. We're not 0:01:10.280 --> 0:01:13.280 putting on any trades, and it's like, well, but visibility 0:01:13.319 --> 0:01:16.000 is limited, and you know, what happens in November really matter? 0:01:16.080 --> 0:01:16.800 So which one is it? 0:01:17.640 --> 0:01:19.800 I think you sort of a lack of clarity about 0:01:19.840 --> 0:01:22.200 what to do is also contributing to the fog. 0:01:22.360 --> 0:01:24.800 You had a line that we repeated over and over 0:01:24.800 --> 0:01:26.840 again on this program for the last several months. You 0:01:26.880 --> 0:01:29.320 said that talking about the election with clients was like 0:01:29.440 --> 0:01:30.160 staring at the sun. 0:01:30.400 --> 0:01:31.800 Is it still like staring at the sun? 0:01:31.920 --> 0:01:34.119 It shifted a little bit, and you know, my joke's 0:01:34.120 --> 0:01:37.120 not funny anymore post eclipse. But the reality is now 0:01:37.120 --> 0:01:39.520 I'm using the line safety and numbers because what I'm 0:01:39.560 --> 0:01:42.360 sensying from the US again, the US based people, not 0:01:42.400 --> 0:01:44.440 the people based outside of the US, but the US 0:01:44.520 --> 0:01:47.160 based people. They still don't really want to talk about 0:01:47.160 --> 0:01:49.120 the election all that much. And again I've heard some 0:01:49.320 --> 0:01:52.800 very impassioned defenses of I traded this in twenty sixteen, 0:01:52.800 --> 0:01:54.760 I traded this in twenty twenty. I'm not trading this 0:01:54.840 --> 0:01:56.720 again kind of coming out of the hedge fund community. 0:01:56.720 --> 0:01:58.360 The long goalies are like, yeah, I'll believe it when 0:01:58.400 --> 0:02:00.400 I see it. But the long goal only is what 0:02:00.440 --> 0:02:02.840 I'm hearing from them is that they're getting questions from 0:02:02.880 --> 0:02:05.880 their clients primarily based in Europe and Canada and Asia 0:02:06.000 --> 0:02:08.359 and other places outside the US. They're having to come 0:02:08.440 --> 0:02:10.720 up with talking points and they're having to dust off 0:02:10.720 --> 0:02:13.880 the historical playbooks and come up with something to say. Frankly, 0:02:14.600 --> 0:02:16.720 I don't think there is a lot of conviction from 0:02:16.720 --> 0:02:19.320 investors and again US based ones on which way the 0:02:19.360 --> 0:02:21.240 outcome is going to be. But there is a general 0:02:21.280 --> 0:02:23.680 sense that Congress is going to be divided and that 0:02:23.680 --> 0:02:25.960 you're going to have a split government generally, so not 0:02:26.160 --> 0:02:27.920 much is going to get done down the road. But 0:02:27.960 --> 0:02:29.760 that's really where people are right now. So we joke 0:02:29.800 --> 0:02:31.960 safety in numbers, let's talk about the charts, let's talk 0:02:31.960 --> 0:02:33.720 about the data, and we'll keep you all out of fights. 0:02:33.840 --> 0:02:36.000 Well, isn't that conviction itself that there's going to be 0:02:36.040 --> 0:02:37.080 gridlock in Washington? 0:02:37.400 --> 0:02:39.720 I think so, And look that is my base case 0:02:39.760 --> 0:02:41.800 as well. But what I've told people is if you 0:02:42.080 --> 0:02:44.360 kind of again separate the two investor bases, And if 0:02:44.360 --> 0:02:46.840 you talk to non people who don't sit in the US, 0:02:46.880 --> 0:02:49.800 they've generally been leaning into the Republican sweep idea for 0:02:49.880 --> 0:02:53.320 quite some time. So you know, it's always a question, right, 0:02:53.360 --> 0:02:56.280 what are investors expecting? What's priced in? Different parts of 0:02:56.280 --> 0:02:58.520 the market are pricing in different things, I think, but 0:02:58.560 --> 0:03:01.440 I don't think anybody's seen in the Democratic sweep. And 0:03:01.440 --> 0:03:04.120 even though that's not high on my radar either, I 0:03:04.160 --> 0:03:06.120 have been telling people you got to think about it 0:03:06.160 --> 0:03:07.519 a little bit, just because no one. 0:03:07.440 --> 0:03:09.120 Is okay, So what if you do think about it 0:03:09.160 --> 0:03:11.320 and you do say to yourself, okay, this is how 0:03:11.320 --> 0:03:15.040 I would position for blue sweep versus red sweep. What's 0:03:15.080 --> 0:03:16.280 the number one trade for each? 0:03:16.720 --> 0:03:19.079 So I think, you know, I heard one comment from 0:03:19.080 --> 0:03:21.679 a non US investor, you know, when we were talking 0:03:21.720 --> 0:03:24.000 about this concept of divided government, and they said, oh, 0:03:24.040 --> 0:03:26.960 I guess no more fiscal stimulus. So I thought that 0:03:27.040 --> 0:03:28.600 was I thought that was interesting. It was a very 0:03:28.639 --> 0:03:31.720 you know, kind of kind innocent little comment. But I 0:03:31.960 --> 0:03:34.280 thought that was really, you know, just sort of interesting 0:03:34.320 --> 0:03:38.240 because there's been so much consternation about, you know, well, 0:03:38.280 --> 0:03:40.360 this market shouldn't be this high, you know, gush darn 0:03:40.400 --> 0:03:44.200 that fiscal stimulus, and you know, sort of taking that 0:03:44.320 --> 0:03:46.680 idea out from out from you know, kind of the 0:03:46.680 --> 0:03:49.920 market backdrop I think is puzzling, you know, to some investors. 0:03:50.480 --> 0:03:52.600 To be honest, though, A Marie, we did a survey, 0:03:52.720 --> 0:03:54.560 you know, back in kind of early to mid April, 0:03:54.560 --> 0:03:56.880 where we actually asked our investors what would you you know, 0:03:56.920 --> 0:03:58.280 what would you buy, what would you sell? What's your 0:03:58.320 --> 0:04:01.880 outlook for different industries under the different scenarios and the 0:04:01.920 --> 0:04:04.440 Democratic sweep scenario. I think we only had like seventeen 0:04:04.480 --> 0:04:07.200 percent of our analysts were bearish, Fewer than that were bullish. 0:04:07.240 --> 0:04:10.200 Most were in the neutral camp. Generally, it's the healthcare 0:04:10.280 --> 0:04:12.840 sectors and the energy sectors that come up as bullish 0:04:12.880 --> 0:04:16.120 or bearish under different outcomes. You talk to my healthcare analysts, 0:04:16.120 --> 0:04:18.040 they're going to downplay the impact and tell you they're 0:04:18.080 --> 0:04:20.840 not really expecting too much out of either candidate depending 0:04:20.839 --> 0:04:23.520 on who wins. And with energy, I do, frankly wonder 0:04:23.560 --> 0:04:25.440 if people are just looking back at twenty twenty and 0:04:25.440 --> 0:04:27.680 don't realize that Biden's running a very different campaign than 0:04:27.720 --> 0:04:28.400 he was back then. 0:04:28.520 --> 0:04:31.039 He said, it's a kind of innocent comment to think 0:04:31.040 --> 0:04:33.040 that there's going to be no fiscal stimulus with SAVIDI 0:04:33.080 --> 0:04:35.440 governmor are you basically saying there is going to be 0:04:35.480 --> 0:04:38.600 fiscal stimulus additional rounds regardless of who wags you know. 0:04:38.600 --> 0:04:40.440 I don't know, but I will tell you that when 0:04:40.480 --> 0:04:42.320 I look at Trump and Biden and I look at 0:04:42.360 --> 0:04:44.040 the different issues, and you know, we kind of went 0:04:44.080 --> 0:04:46.719 through the Trump campaign website pretty closely. I know there's 0:04:46.720 --> 0:04:48.680 a lot of other stuff out there, but you know, 0:04:48.760 --> 0:04:50.839 it's sort of a struggle in our seat, frankly to 0:04:50.839 --> 0:04:53.040 figure out what to focus on and what's noise and 0:04:53.080 --> 0:04:55.719 what's real. But when I kind of go through, you know, 0:04:55.800 --> 0:04:57.440 kind of cut through the rhetoric and go through the 0:04:57.440 --> 0:05:00.720 policy ideas of different of the two different camps, it 0:05:00.760 --> 0:05:02.839 seems like they're both you know, talking about wanting to 0:05:02.880 --> 0:05:05.279 keep jobs in the US. There's a big commitment to 0:05:05.360 --> 0:05:08.120 restoring and I talk to investors, they think both these 0:05:08.160 --> 0:05:11.280 candidates are inflationary in terms of their views on trade 0:05:11.320 --> 0:05:13.920 and immigration. So I will say I think also US 0:05:14.000 --> 0:05:17.120 based investors again are struggling to come up with assalient 0:05:17.160 --> 0:05:20.680 differences from an investment perspective between the two candidates. 0:05:20.160 --> 0:05:23.320 At this point, then why are you just neutral? Why 0:05:23.400 --> 0:05:25.520 are you feeling not that great about stocks given the 0:05:25.520 --> 0:05:28.200 fact that probably either candidate is going to try to 0:05:28.440 --> 0:05:31.560 stimulate the economy after they wig, regardless of which party. 0:05:31.640 --> 0:05:33.120 Well, again, we go back to our base case and 0:05:33.200 --> 0:05:36.560 politics one oh one, and you know my politics one 0:05:36.600 --> 0:05:38.680 o one class Larry Sabadela used to always tell us 0:05:38.680 --> 0:05:41.120 all politics is local. But he also reminded us how 0:05:41.160 --> 0:05:43.839 bills get created. And that's what I find I educate 0:05:43.839 --> 0:05:45.880 a lot of investors about. It doesn't matter what these 0:05:45.920 --> 0:05:48.640 two candidates say, right, You've actually got to have cooperation 0:05:49.040 --> 0:05:51.560 from both chambers of Congress to get anything done. And 0:05:51.600 --> 0:05:53.680 as you look at the landscape, do you really see, 0:05:53.760 --> 0:05:57.560 unless you have a United government, anybody cooperating with anybody 0:05:57.560 --> 0:06:00.520 in the next four years? Me, not so much. So 0:06:00.800 --> 0:06:03.000 you know that, frankly, I think informs our view and 0:06:03.040 --> 0:06:05.240 a lot of investors' views, Like, on the one hand, 0:06:05.279 --> 0:06:07.599 doesn't really matter, is anything actually going to be able 0:06:07.640 --> 0:06:08.080 to get done? 0:06:08.200 --> 0:06:10.640 We're looking out to November because there's very little happening 0:06:10.680 --> 0:06:13.039 over the next week or so. What we saw happen 0:06:13.120 --> 0:06:15.000 last week, and I think we should go over it 0:06:15.160 --> 0:06:16.400 we saw a lot of people put a lot of 0:06:16.440 --> 0:06:18.719 weight on what most people would consider to be second 0:06:18.720 --> 0:06:21.120 tier economic data, which is an S and P global 0:06:21.279 --> 0:06:22.479 PMI in America. 0:06:22.560 --> 0:06:24.640 Surprising to the upside. 0:06:24.200 --> 0:06:26.240 Ignoring in video and video was up on the week 0:06:26.279 --> 0:06:29.680 by fifteen percent S and P five hundred, dead flat. 0:06:29.760 --> 0:06:30.520 What was that about? 0:06:30.760 --> 0:06:33.000 So I don't know so much about that particular data point, 0:06:33.040 --> 0:06:34.720 But if I rewind a couple weeks ago, I was 0:06:34.760 --> 0:06:36.880 out on the road and people were freaking out about 0:06:36.920 --> 0:06:39.719 the employment cost Index and I didn't even really even 0:06:39.760 --> 0:06:42.599 remember that that was a thing. And then the next 0:06:42.640 --> 0:06:44.920 week investors were making fun of the people who were 0:06:45.000 --> 0:06:47.560 freaking out about that the prior week. Sure, so I 0:06:47.600 --> 0:06:49.680 think it all goes back to if you look at 0:06:49.680 --> 0:06:52.040 twenty twenty five again, and we want to be forward looking, 0:06:52.040 --> 0:06:53.800 there's a lot of fog out there. There's a lot 0:06:53.800 --> 0:06:57.840 of clouds, not necessarily storm clouds, but just lack of visibility, 0:06:58.160 --> 0:06:59.920 and we're all just stuck. 0:06:59.640 --> 0:07:00.880 Talking about the FED. 0:07:01.560 --> 0:07:03.760 I joked with a friend of mine recently that you know, 0:07:03.760 --> 0:07:06.360 in equity land, we've all had to become rate strategists 0:07:06.400 --> 0:07:08.400 and you know, kind of make friends with the economists 0:07:09.000 --> 0:07:12.800 and so any little breadcrumb of information that can shed 0:07:12.880 --> 0:07:15.280 light on the will they won't they? When they? You know, 0:07:15.280 --> 0:07:17.200 when are they going to go? That's all people seem 0:07:17.240 --> 0:07:19.720 to care about right now. And I think investing has 0:07:19.840 --> 0:07:22.800 changed over the years. We all get access to information, 0:07:22.840 --> 0:07:25.040 you know, whether it's the terminal or these other data sources. 0:07:25.320 --> 0:07:29.000 We can analyze things much much faster. That accelerated during COVID. 0:07:29.240 --> 0:07:32.440 So people are looking for any incremental piece of data 0:07:32.480 --> 0:07:34.600 that's not widely watched to get some sort of clue 0:07:34.600 --> 0:07:35.160 on this debate. 0:07:35.240 --> 0:07:37.600 Do you think we are just as sensitive to upside 0:07:37.600 --> 0:07:40.280 surprises as we are downside surprises? And with that in mind, 0:07:40.560 --> 0:07:42.960 what do you advocate for inequities at the moment? 0:07:43.360 --> 0:07:46.840 So in my mind, the rotation thesis still makes a 0:07:46.840 --> 0:07:48.720 lot of sense, and I actually can see that being 0:07:48.760 --> 0:07:52.080 consistent with a sideways market. If you think about the 0:07:52.160 --> 0:07:54.760 rate of upward revisions as a good gauge for earning sentiment, 0:07:54.840 --> 0:07:57.600 it's actually shifted back in favor of the top ten 0:07:57.680 --> 0:07:59.720 market cap names in the S and P five hundred, 0:07:59.840 --> 0:08:02.200 But throughout most of this reporting season, most of the 0:08:02.320 --> 0:08:04.840 upper revisions were coming for the other four hundred ninety 0:08:04.840 --> 0:08:08.000 stocks In the SMP, so I think, you know, we've 0:08:08.080 --> 0:08:10.160 seen a little bit of bumps in that, but generally 0:08:10.600 --> 0:08:13.880 that megacap growth trade is still quite expensive. It's still 0:08:13.920 --> 0:08:16.800 quite crowded, and it's got decelerating earnings growths and that 0:08:16.920 --> 0:08:21.160 always makes growth investors nervous. Now, the rotation thesis, I 0:08:21.160 --> 0:08:23.640 think it's not just about valuation, but it's also about 0:08:23.640 --> 0:08:25.720 the economic tailwinds that have been building. And if you 0:08:25.760 --> 0:08:27.920 look at twenty twenty four GDP, it's kind of stalled 0:08:27.920 --> 0:08:30.760 out around two point four percent. That's right at average. 0:08:30.760 --> 0:08:33.439 We haven't seen any movement to the twenty twenty five 0:08:33.520 --> 0:08:35.200 numbers yet, which are still sitting around. 0:08:35.000 --> 0:08:36.920 One to seven. That is weak GDP. 0:08:37.160 --> 0:08:39.400 And that's why I feel a little bit stuck right 0:08:39.440 --> 0:08:42.000 now because to really get excited on twenty twenty five, 0:08:42.600 --> 0:08:44.400 I need to see that number go up, and it's not. 0:08:44.559 --> 0:08:46.440 And it's not really going down either. It's not doing 0:08:46.480 --> 0:08:49.480 anything now the downside, I think your question is brilliant, 0:08:49.520 --> 0:08:51.679 you know, sort of the tail risks on both sides. 0:08:51.960 --> 0:08:54.360 What could drive us down? I think we're pretty fairly 0:08:54.440 --> 0:08:56.440 priced for a FED that you know, kind of maybe 0:08:56.480 --> 0:08:59.679 cuts once moderating inflation, maybe a little stickier than we 0:08:59.760 --> 0:09:02.720 end surely thought. But if we start to really see 0:09:03.000 --> 0:09:06.439 inflation expectations deteriorate, you know, in terms of moving up, 0:09:06.760 --> 0:09:09.319 if we start to see the Fed narrative fall apart, again, 0:09:09.360 --> 0:09:11.240 there's a little bit of downside risk to this market, 0:09:11.240 --> 0:09:12.559 and I think that's underappreciated. 0:09:12.640 --> 0:09:14.880 Flying blind into twenty five is becoming a little bit 0:09:14.920 --> 0:09:17.400 of a thing. Lori Cavsen and there F RPC. 0:09:27.520 --> 0:09:28.280 Joining us now. 0:09:28.280 --> 0:09:31.520 Prat s ReRAM Farcleys and Debor Cunning of Federated Hermes 0:09:31.559 --> 0:09:33.360 for a conversation about the Federal Reserve pleasure. 0:09:33.400 --> 0:09:34.080 I want to start with you. 0:09:34.080 --> 0:09:37.079 You've talked about the healthy skepticism you have about the 0:09:37.120 --> 0:09:40.680 degree of restrictiveness this Federal Reserve has with this policy rate, 0:09:40.960 --> 0:09:41.840 with this economy. 0:09:42.000 --> 0:09:42.880 Where'd you stand on that? 0:09:42.960 --> 0:09:43.160 Now? 0:09:45.040 --> 0:09:46.520 Hi, thanks for having me on the show. 0:09:47.280 --> 0:09:49.600 Yes, we've had our doubts. 0:09:49.280 --> 0:09:53.720 About if policy is restrictive enough, and I think you know, 0:09:53.840 --> 0:09:56.959 one thing that keeps fueling that doubt is just given 0:09:57.000 --> 0:10:02.080 how resilient the macroeconomic backdrob remain. You know, we've we 0:10:02.080 --> 0:10:06.679 we saw you know, pretty firm data on spending in 0:10:06.760 --> 0:10:09.840 Q one UH and honestly, our take on. 0:10:09.720 --> 0:10:10.480 The retail sales. 0:10:10.520 --> 0:10:13.800 The latest retail sales print is really that maybe demand 0:10:13.960 --> 0:10:17.640 just normalized after a very big March increased, and there's 0:10:17.840 --> 0:10:20.839 you know, the fundamentals for the US consumer still looks 0:10:20.840 --> 0:10:25.199 pretty firm. And I think, you know, we we echo 0:10:25.320 --> 0:10:27.400 what we learned from the minutes that there is some 0:10:27.600 --> 0:10:31.040 uncertainty regarding the restrictiveness of monitory pantacy. 0:10:31.600 --> 0:10:36.160 Debrah, how skeptically you you know, I'm probably not quite 0:10:36.200 --> 0:10:37.040 that skeptical. 0:10:37.120 --> 0:10:41.800 I do believe that even in an environment where inflation 0:10:42.000 --> 0:10:45.360 remains at three to four percent, five and a quarter 0:10:45.400 --> 0:10:48.959 to five and a half, with the YO curve fairly 0:10:49.080 --> 0:10:52.360 flat inverted to some degrees, you go further out of 0:10:52.400 --> 0:10:56.760 the curve where you know, expectations are different from a 0:10:56.800 --> 0:11:00.400 timeframe standpoint. But I do believe, given where we are 0:11:00.720 --> 0:11:04.600 from a standpoint of growth in the economy, where we 0:11:04.640 --> 0:11:08.800 are from inflationary levels having you know, come down as 0:11:08.800 --> 0:11:10.839 far as they are, but still with the ways to go, 0:11:11.520 --> 0:11:14.720 that the level that is currently being dictated in the 0:11:14.760 --> 0:11:18.680 market at five plus percent, you know, for the money markets, 0:11:18.720 --> 0:11:23.280 five minus percent small amounts for the bond markets, seems 0:11:23.320 --> 0:11:26.600 to be doing its job. And I feel like the 0:11:26.679 --> 0:11:30.120 FED rhetoric that we have been hearing for pretty much 0:11:31.160 --> 0:11:34.679 from from everyone since the last meeting has been that 0:11:34.800 --> 0:11:36.840 it's high enough, it doesn't need to go higher at 0:11:36.840 --> 0:11:39.040 this point. So I feel like we're going to don't 0:11:39.040 --> 0:11:41.160 fight the FED type of trade at this point. 0:11:41.400 --> 0:11:41.760 That's said. 0:11:41.760 --> 0:11:43.040 Dever, do you think it would be a mistake to 0:11:43.040 --> 0:11:44.960 cut race here, given the fact that so many people 0:11:45.000 --> 0:11:48.440 are seeing enough momentum in the economy to really risk 0:11:48.480 --> 0:11:50.400 the potential for reacceleration and fleetion. 0:11:52.000 --> 0:11:52.360 I do. 0:11:52.440 --> 0:11:54.320 I think we're not to the most We're not to 0:11:54.400 --> 0:11:57.040 the time period that we need to see in place 0:11:57.320 --> 0:11:59.720 or touch due to inflation. Yet at this point we 0:11:59.800 --> 0:12:02.160 have seen some you know, maybe cracks in some of 0:12:02.200 --> 0:12:05.920 the data, you know, barring some of the secondsier data 0:12:05.920 --> 0:12:07.800 that that Mike was talking about earlier and that you 0:12:07.840 --> 0:12:10.200 were all speaking about. I think, you know, when you 0:12:10.280 --> 0:12:13.000 look at some of the employment statistics, if you look 0:12:13.120 --> 0:12:16.360 at you know, the Jolts data, maybe some of the 0:12:16.360 --> 0:12:19.840 broader indices. From an inflationary perspective, it certainly is not 0:12:20.080 --> 0:12:22.640 what I would call a crack that turns into you know, 0:12:22.679 --> 0:12:25.040 a big fisher or canyon. It's just something that I 0:12:25.080 --> 0:12:28.679 think probably takes the growth side of the equation down 0:12:28.720 --> 0:12:32.000 a little bit, more dependent upon the consumer, more dependent 0:12:32.200 --> 0:12:36.280 upon services than goods, and all of that plays into, 0:12:36.520 --> 0:12:38.559 you know, sort of keeping rates where they are. I 0:12:38.559 --> 0:12:43.120 don't think the Fed is at this point in any need, 0:12:43.400 --> 0:12:46.560 nor are they being compelled to move rates in either direction. 0:12:46.800 --> 0:12:47.880 Pusha what's your take on this? 0:12:47.960 --> 0:12:48.760 Tubsesaurius A. 0:12:48.800 --> 0:12:50.800 Strateigis was on earlier and he was saying that it 0:12:50.840 --> 0:12:53.079 would be a policy error for the Fetcher reserve to 0:12:53.120 --> 0:12:55.120 cut this year, given the fact that there is so 0:12:55.200 --> 0:12:58.360 much momentum and a lot of in the pipeline inflationary 0:12:58.400 --> 0:13:00.480 pressure that's going to come through next year. 0:13:00.520 --> 0:13:01.439 Do you agree? 0:13:02.720 --> 0:13:02.800 So? 0:13:02.800 --> 0:13:05.160 I think it really depends on how the data evolved 0:13:05.200 --> 0:13:08.880 here on. You know, our own baseline expectation is that 0:13:08.960 --> 0:13:12.240 perhaps they will find an opportunity to initiate a rate 0:13:12.280 --> 0:13:16.520 cut this year, you know, most likely in September, equally 0:13:16.640 --> 0:13:20.319 likely in December, just depending on you know, how the data, 0:13:20.400 --> 0:13:24.880 particularly the inflation prints play out, and and if we indeed, 0:13:24.960 --> 0:13:27.280 you know, get a series of point two percent month 0:13:27.360 --> 0:13:30.280 or a month on core pyce and you know that 0:13:30.280 --> 0:13:33.439 that evidence accumulates, I think it will be very hard 0:13:33.559 --> 0:13:37.880 for there would be no reason why they remain on hold. 0:13:37.880 --> 0:13:39.920 I think they can, you know, get their foot in 0:13:40.080 --> 0:13:42.720 and at least get one rate cut for it. From 0:13:42.760 --> 0:13:45.840 a from a risk management perspective, you know, policy would 0:13:45.880 --> 0:13:49.760 still be relatively restrictive in that world, but you know 0:13:50.040 --> 0:13:51.800 that will be a nod to the fact that the 0:13:51.840 --> 0:13:54.080 disinflationary progress has started. 0:13:54.640 --> 0:13:56.600 I'm pretty sure. I think this is the struggle we 0:13:56.640 --> 0:13:58.839 always have. We all know it's about the economic data. 0:13:58.920 --> 0:14:03.000 But what economic data? Do you ignore the solid jobless claims? 0:14:03.280 --> 0:14:06.200 Do you maybe put some emphasis on the slow down 0:14:06.240 --> 0:14:08.360 and reas house salves, do you put some weight on the. 0:14:08.280 --> 0:14:09.840 PMI from last week? 0:14:09.840 --> 0:14:12.319 Of all things, where do you place the most emphasis 0:14:12.360 --> 0:14:14.199 right now and the incoming information? And what do you 0:14:14.280 --> 0:14:15.880 choose to discount to ignore? 0:14:17.280 --> 0:14:19.200 Well, I think at this point we can't choose to 0:14:19.240 --> 0:14:22.440 discount or ignore anything. We know that you know, the 0:14:23.080 --> 0:14:26.120 FED is highly data dependent and the data is really 0:14:26.160 --> 0:14:30.040 our only guide to give us a sense of, you know, 0:14:30.280 --> 0:14:33.920 how restrictive monetary policy is and where and how the 0:14:33.960 --> 0:14:39.080 conditions are to support the disinflation process. But you know, 0:14:39.200 --> 0:14:41.840 just in terms of what we're really looking at, you know, 0:14:41.960 --> 0:14:45.920 it's the inflation outcomes themselves, which I think are top, 0:14:46.000 --> 0:14:48.520 top of the line, very important at this point in time. 0:14:48.960 --> 0:14:51.680 And I think after that comes the labor market data 0:14:51.840 --> 0:14:55.640 and you know, prints related to consumer spending, so be 0:14:55.680 --> 0:14:59.320 it retail sales or the real personal spending estimates like 0:14:59.400 --> 0:15:02.280 we get this, I think those are the hard data 0:15:02.320 --> 0:15:05.280 that you know, we're really looking for keeping an eye out. 0:15:06.360 --> 0:15:09.240 And then again, you you know, it seems like every 0:15:09.240 --> 0:15:12.080 little data point is important, and as you rightly pointed out, 0:15:12.360 --> 0:15:14.040 you know, the market's reacted to the S and P 0:15:14.200 --> 0:15:17.800 global last week, So I think at this point in time, 0:15:17.880 --> 0:15:19.800 we can't afford to discount anything. 0:15:20.000 --> 0:15:22.080 Deborah, what's your take on this, given the fact that 0:15:22.120 --> 0:15:25.160 it seems like literally one comment in the page book 0:15:25.200 --> 0:15:27.600 potentially that we are not aware of, could move things 0:15:27.640 --> 0:15:31.160 if it is something that confirms a sneaking suspicion or 0:15:31.160 --> 0:15:31.880 fear in the market. 0:15:33.920 --> 0:15:35.560 You know, I agree that it's a mosaic. 0:15:35.640 --> 0:15:38.000 You can't it's hard to discount anything at this point, 0:15:38.040 --> 0:15:40.400 so taking in as much information as what you're being 0:15:40.440 --> 0:15:43.280 given and trying to digest it and put it into 0:15:43.320 --> 0:15:46.240 some you know, mosaic form that you can you know, 0:15:46.320 --> 0:15:50.160 theorize based on what your expectations are off of that 0:15:50.160 --> 0:15:54.320 that that collection of information and with the intention that 0:15:54.400 --> 0:15:56.760 hopefully that has something to do with you know, what 0:15:56.760 --> 0:15:59.440 what the FEDS intentions are. I think, you know, the 0:15:59.640 --> 0:16:05.880 the slow down in labor market quits, maybe the ratio 0:16:06.320 --> 0:16:11.360 of open positions to those available to be hired. Certainly 0:16:11.360 --> 0:16:13.960 the retail sales. I mean, the consumer really has been 0:16:14.040 --> 0:16:18.120 driving this economy. So really anything that has to do 0:16:18.400 --> 0:16:22.160 with the consumer in specific, but also from a broader 0:16:22.200 --> 0:16:26.720 mosaic standpoint, you can't ignore global you can't ignore you know, 0:16:27.000 --> 0:16:28.920 the non consumer. 0:16:28.480 --> 0:16:30.400 Aspect of the market either. 0:16:30.760 --> 0:16:33.160 It all forms you know, sort of the theory that 0:16:33.200 --> 0:16:36.560 you're trying to come up with, which is higher for longer. 0:16:36.600 --> 0:16:38.680 I still think too, when we're talking about rake cuts 0:16:38.720 --> 0:16:41.120 this year, we're only in main now. Granted we're at 0:16:41.120 --> 0:16:43.200 the end of May, we're almost at the beginning of summer, 0:16:43.760 --> 0:16:45.480 but there's a lot of this year to go, more 0:16:45.520 --> 0:16:48.000 than half of it. So I think many many things 0:16:48.000 --> 0:16:50.640 can happen. And what the FED is still trying to do, 0:16:50.720 --> 0:16:53.400 it's gain confidence, and I think that takes them somewhere 0:16:53.400 --> 0:16:55.720 in the neighborhood of probably two to five months, and 0:16:55.760 --> 0:16:59.200 that still puts US in twenty twenty four end of 0:16:59.240 --> 0:17:01.520 twenty twenty, but we're there end. 0:17:01.400 --> 0:17:05.159 Of twenty twenty four. But Deborah, to Lisa's point earlier, 0:17:05.200 --> 0:17:06.800 a lot of guests have come on this program and 0:17:06.960 --> 0:17:10.840 talking about all the inflation and pressures potentially in twenty 0:17:11.000 --> 0:17:14.399 twenty five, is the FED potentially how do they How 0:17:14.440 --> 0:17:16.439 do you think they think about twenty twenty five when 0:17:16.440 --> 0:17:18.880 they think about inflation, and when some people are saying 0:17:18.880 --> 0:17:21.240 that they mean to hike after they cut at the 0:17:21.320 --> 0:17:22.160 end of this year. 0:17:23.359 --> 0:17:25.520 I think that's overthinking it. At this point. 0:17:25.600 --> 0:17:29.359 I believe that, you know, their goal is to take 0:17:29.440 --> 0:17:32.480 what's available for them now. And yes, they do give 0:17:32.640 --> 0:17:36.240 one to three year types of forecasts in their series 0:17:36.280 --> 0:17:40.240 of economic projections, But in fact, I think they're really 0:17:40.280 --> 0:17:42.960 focused on what they do need to do now, and 0:17:43.040 --> 0:17:45.560 to the extent that that has some impact on the 0:17:45.600 --> 0:17:47.680 next year, the next two years, they'll deal with that 0:17:47.720 --> 0:17:52.360 at that particular point in time. So I really think 0:17:52.359 --> 0:17:54.800 they're focusing on what happens the rest of this year 0:17:55.000 --> 0:17:59.480 and then twenty twenty five. You know, maybe energy prices 0:17:59.520 --> 0:18:04.800 stop being the deflationary trend they've been, maybe housing stops 0:18:04.880 --> 0:18:07.520 being the inflationary trend that it's been. Maybe there are 0:18:07.720 --> 0:18:10.679 offsets that are different, but I think again that's something 0:18:10.760 --> 0:18:13.960 that they will address as that happens, not as it's 0:18:14.080 --> 0:18:17.080 you know, sort of forecast in the in the next year, 0:18:17.200 --> 0:18:19.439