Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along
Speaker 1: with Jonathan Ferrell and Lisa A. Brawnwitz Jaily. We bring
Speaker 1: you insight from the best and economics, finance, investment and
Speaker 1: international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg
Speaker 1: dot Com and of course on the Bloomberg terminal. It
Speaker 1: is a most wonderful time to speak to Terry Wiseman.
Speaker 1: He's global interest rate and Currency strategistic Macquarie, but with
Speaker 1: decades of experience and understanding that the FED is a
Speaker 1: central banker to the world, Dr Weisman, I what I
Speaker 1: want to do right now is take the really important
Speaker 1: comment in your recent research that the FED is far
Speaker 1: more important than Amicron and the Ukraine as well. If
Speaker 1: that's the case, what does E M want from the
Speaker 1: central banker to the world. I think emerging markets want
Speaker 1: what they always want, which is cheap liquidity flowing from
Speaker 1: the developed markets into the emerging markets to help sustain
Speaker 1: their asset prices and sustained sustain their growth in their
Speaker 1: financial system. Unfortunately, we're probably not going to get that
Speaker 1: that easily when the FED is retracting liquidity, and this
Speaker 1: is not really unusual when the Fed starts into its
Speaker 1: a tightening policy from an accommodated policy, as we saw
Speaker 1: in two thousand thirteen with the taper tantrum, as we
Speaker 1: saw it in two thousand fifteen in anticipation of the the
Speaker 1: first rate hike from the Fed. There's always a class
Speaker 1: of asset of assets does poorly. Two thousand thirteen during
Speaker 1: the Taper tamptrum is clearly emerging markets. But you had
Speaker 1: a rotation in two thousand fifteen into the into the
Speaker 1: asset classes, and most poorly being commodities. There's always an
Speaker 1: asset class that suffers. It may not be emerging markets
Speaker 1: this year, by the way, it may simply be that
Speaker 1: that class of assets that's done very well in the
Speaker 1: previous regime of easy monetary policy and the pandemic, which
Speaker 1: was large cap techy. We're seeing a money coming out
Speaker 1: of the NASDAC one hundred uh and and and the
Speaker 1: and the cryptocurrencies right now. The arch theory is it
Speaker 1: e M is stronger, better, more resilient than they were
Speaker 1: twenty or thirty years ago. Do you buy that? I
Speaker 1: would have bought it if you asked me that two
Speaker 1: years ago. The problem is that the pandemic has introduced
Speaker 1: certain structural weaknesses into the emerging markets, including high debt levels. Remember,
Speaker 1: the emerging markets were no less shot and developed markets,
Speaker 1: and it's trying to spend their way out of the
Speaker 1: problems of the pandemic that's left them with a high
Speaker 1: level of debt, a high debt burden, just as it
Speaker 1: has for the developed markets. So that thesis might it
Speaker 1: might have been valid two years ago, it's hardly valid
Speaker 1: these days. So Terry, why have we not seen more
Speaker 1: of what you expect from the Fed? Priced in? If
Speaker 1: we have one house after another coming out trying to
Speaker 1: up their forecast to the for the year to five
Speaker 1: rate hikes are possibly more well, if you mean for
Speaker 1: for the emerging markets, I think it's because they were
Speaker 1: never a beneficiary of of what happened over the last
Speaker 1: two years, certainly not from a from a structural or
Speaker 1: economic perspective. So there's a thinking out there that because
Speaker 1: there's so much more value relatively speaking, in the emerging
Speaker 1: markets versus developed markets, they should be rotated into as
Speaker 1: we as we move out of the old regime and
Speaker 1: into the new regime. That that might be valid, except
Speaker 1: for the fact that I mentioned that some of these
Speaker 1: emerging markets do have these structural issues now as a
Speaker 1: result of the pandemic. But let's face as some of
Speaker 1: the issues that are burning the world and the the
Speaker 1: sentiment of traders right now are stemming from the emerging markets.
Speaker 1: Russia is clearly an emerging market, China is as well,
Speaker 1: and there are geopolitical tensions there too with regard to
Speaker 1: Taiwan and of course Latin America. The other the other
Speaker 1: bulish bracket emerging market is um It's it's it's confronting
Speaker 1: a lot of political issues this year, including two major elections.
Speaker 1: So yes, if it weren't for the structural issues from
Speaker 1: the pandemic, if it weren't these real political concerns, yes, Uh,
Speaker 1: Latin American emerging markets generally would look cheap right now.
Speaker 1: I agree, But there's still a few headwinds. So give
Speaker 1: us a sense of the scope of dollar strengthening that
Speaker 1: you're expecting. So we're expecting a little bit more dollar
Speaker 1: strengthening over the next few weeks and months, I mean,
Speaker 1: until we get resolution from the Fed as to what
Speaker 1: it's going to do this week and especially in March.
Speaker 1: It feels very difficult to imagine traders jumping back into
Speaker 1: the foreign exchange and abandoning the dollar. So I think
Speaker 1: for the next few weeks and months, we're gonna continue
Speaker 1: to see that strong, sturdy dollar theme that we've been
Speaker 1: advancing and calling for since the middle of last year.
Speaker 1: I think when we get through a few hurdles, including
Speaker 1: the FEDS UH hike and the clarity over what their
Speaker 1: interest rate outlook is, we get through the French elections,
Speaker 1: maybe we get through the rush of Ukraine issues, then
Speaker 1: we can expect UH some dollar weakness, but it probably
Speaker 1: won't happen until well into the second quarter of this year.
Speaker 1: We need to get to all of those hurdles. Tell
Speaker 1: me of China in the state of it now, Terry Weisman,
Speaker 1: going into the Olympics days away, and then out of
Speaker 1: the Olympics, what happens when we go home? I don't know.
Speaker 1: Are they going to invade Taiwan? Are they going to
Speaker 1: continue to to um pump more more liquid into the system?
Speaker 1: Is their property development sector going to to crash as
Speaker 1: a result of the burden of death? Can this is
Speaker 1: really this is your wheelhouse, Terry, Let's go there. I
Speaker 1: don't mean to interrupt it. This is too important. Do
Speaker 1: you suggest that their government can bail out the real
Speaker 1: estate sector? Is then the way they've bailed out things
Speaker 1: over the many decades. There are very few financial sector
Speaker 1: problems that enough domestic liquidity created by the central bank
Speaker 1: cannot solve. Okay, let's be very clear here on top
Speaker 1: of that, China has certain advantage when dealing with these
Speaker 1: financial sector issues. They control the state banks, for example,
Speaker 1: they control a lot of the economy. Uh so, so
Speaker 1: I think they're the tools at their disposal, actually greater
Speaker 1: than the tools that might have been at the disposal
Speaker 1: of the US and great in the global financial crisis
Speaker 1: of two thousand nine. Uh so, so, yes, I think
Speaker 1: that there is I mean, if if you have to
Speaker 1: bet whether or not they're going to be able to
Speaker 1: solve all this, I would say yes. It may not
Speaker 1: be an a dropt solution, it might not be immediate,
Speaker 1: but over time, I don't think it's going to lead
Speaker 1: to the kind of concerns that we saw eleven or
Speaker 1: twelve years ago in the Western World crisis. And mcauie Terry,
Speaker 1: thank you, without question. This is our conversation of the
Speaker 1: day on what we see, what we observe, what we
Speaker 1: try to figure out forward in Ukraine. Chancellor A. Marco
Speaker 1: is retired. So you were to say who has the
Speaker 1: most expertise among Western diplomats on the fractious nature of
Speaker 1: Eastern Europe down to Ukraine and all the balance of NATO,
Speaker 1: and many would suggest that the assistance of Mr mccra
Speaker 1: of France is Philippe Eten, his French ambassador to the
Speaker 1: United States, but far more tours of duty in Belgrade
Speaker 1: and buch Arest, and of course with his knowledge of
Speaker 1: Eastern European languages of Romanian and Sir about Karad as well, Embassador,
Speaker 1: honored to have you with us this morning. What does
Speaker 1: the reporting, what does the zeitgeist right now in the
Speaker 1: West get wrong on Ukraine? Well for the moment. First,
Speaker 1: thank you for having me for the moment. Of course,
Speaker 1: we face a very very serious crisis. We are everybody
Speaker 1: is very much worried here about the risks of this
Speaker 1: major crisis in the heart of Europe, and we must
Speaker 1: combine firmness and obviously keep the channels opened. Uh. We
Speaker 1: are doing that as friends, friends, having the Presidency of
Speaker 1: the Council of the European Union right now with our
Speaker 1: foreign ministers meeting again of the twenty seven countries. We
Speaker 1: are indeed very very keen to keep a very close
Speaker 1: consultation with the United States and between all the formats
Speaker 1: engaged uh we see, but also you, as I said,
Speaker 1: and NATO and the United States. And also to continue
Speaker 1: our work together with Germany in the so called Nomine format,
Speaker 1: to work with Ukraine Andrews Russia, to continue our work
Speaker 1: to find a solution to the crisis in eastern Ukraine.
Speaker 1: You were experienced moving French citizens out of a crisis
Speaker 1: in Georgia. Georgia, of course part of the Soviet Union.
Speaker 1: You've had a tangible hand on experience. What should be
Speaker 1: the presentation to Mr Putin to have him find a
Speaker 1: stability instead of an invasion of Ukraine. What is the
Speaker 1: distinction that you believe will change Mr Putin's tone and
Speaker 1: rhetoric and action. First, we must deter him from an
Speaker 1: aggression by clearly indicating that any aggression would have as
Speaker 1: a consequence, very very serious consequences. And then, as I said,
Speaker 1: we must also, as the US as the Europeans are doing,
Speaker 1: keep the channel opened to discuss how we have the
Speaker 1: possibility using instruments of diplomacy to solve this crisis, also
Speaker 1: in view of a longer term basis, which is to
Speaker 1: rebuild the instruments of European security. So many treaties have
Speaker 1: been abandoned in the recent years. We have this to rebuild. Now.
Speaker 1: How much daylight is there between the French approach to
Speaker 1: dealing with diplomacy and the US approach right now? As
Speaker 1: I said, the French approach is not to deal with
Speaker 1: diplomacy only. It's also a clear indication on the Europeans
Speaker 1: side that we UH will take the measures to face
Speaker 1: and to answer inmigration. So it's it's this dual approach
Speaker 1: where I do not see differences between the Europeans and
Speaker 1: the Americans ambassador going forward. There is also a lot
Speaker 1: of tension though in the European Union because of the
Speaker 1: bifurcated economic recoveries after the pandemic. How much has this
Speaker 1: been a discussion As France has enjoyed a faster recovery
Speaker 1: than many other European regions. France indeed has a regained
Speaker 1: its position the position of its economy had been before
Speaker 1: the Pandemics are Economic and Finance Minister and just forecast
Speaker 1: four person growth next year and as an economistic economist,
Speaker 1: Paul Krugman wrote in a recent column, the labor market
Speaker 1: has not been disrupted because we have taken measures by
Speaker 1: the way, not on in France, i think, but in Europe,
Speaker 1: but in particular in France. As we have seen last
Speaker 1: Monday a week ago, economy remains very attractive. Twenty one
Speaker 1: important investors, including eleven American companies, have committed to invest
Speaker 1: four point five billion in in the French economy and
Speaker 1: to create ten thousand jobs, which means that's the attractiveness
Speaker 1: of our economy is indeed quite strong. What does the
Speaker 1: French image in Europe mean in terms of military hardware sales?
Speaker 1: Do Ukraine? Germany seems so reticent and not on a
Speaker 1: simplistic nature, but with airbus expertise and with jet engineering
Speaker 1: expertise that everyone understands is world class. Will avoid submarines
Speaker 1: with Ukraine with great respect, ambassador. But tell me what
Speaker 1: France can signal by selling by selling French engineering to
Speaker 1: the people of Ukraine. Uh. Well, it's not new that
Speaker 1: we have our strong economic relationship with Ukraine, so we
Speaker 1: we we intend to continue to to support Ukraine as
Speaker 1: we have been doing until now. Of course, I have
Speaker 1: to ask you one question and COVID there's been such
Speaker 1: a an uproar within the United Kingdom in America over
Speaker 1: mcroninal give Lisa Bramo. It's once an update on Paris
Speaker 1: in April. In terms of our macrone how are you doing?
Speaker 1: The micron variant had, like in the US, a very
Speaker 1: strong search recently, uh or and we we hope it
Speaker 1: is now having its speak. Of course, as a consequences
Speaker 1: in terms of health intensive care units was the consequences
Speaker 1: were not that as serious as before because people are
Speaker 1: vaccinated a lot, and the new vaccination pass is coming
Speaker 1: into force today. So there was a very very strong
Speaker 1: policy in France to have everybody being vaccinated, and I
Speaker 1: think it worked quite well because of time in the market. Sir,
Speaker 1: we must move on, Ambassador at Young. Thank you so much,
Speaker 1: Ambassador of France to the United States. Let's get to
Speaker 1: Victoria Fernandez. The chief market is strategic a cross mark
Speaker 1: global investments, and right on cue Victoria, I'll quote you.
Speaker 1: I know everybody is saying that the FED is way
Speaker 1: behind the curve, but I do believe that they were
Speaker 1: trying to follow the data, at least their interpretation of
Speaker 1: the data. What is that last bit mean, Victoria, Well,
Speaker 1: I think Jonathan and we look, everyone has a different
Speaker 1: opinion of what the data means, even just talking about
Speaker 1: the inflation components a moment ago or people more concerned
Speaker 1: about the inflation number or the response to inflation, and
Speaker 1: so I think that's what it means. What is the
Speaker 1: FEDS and reportation of what we're seeing? Do they still
Speaker 1: see a transitory component even though they took that word
Speaker 1: away because the market didn't like it. I think they do.
Speaker 1: They anticipate that the inflation never is going to come down,
Speaker 1: probably starting in the second quarter, and perhaps they want
Speaker 1: to buy themselves a little bit of time, so maybe
Speaker 1: we get one rate hike in March. I think originally
Speaker 1: they probably wanted to wait until June to do that,
Speaker 1: So maybe they'll give the market the first rate hike
Speaker 1: and then hold off until the middle of the year
Speaker 1: when inflation has come back down. So we need to
Speaker 1: see how them uh found interprets what's going on with inflation, Victoria.
Speaker 1: What's a sweat level out there? When you talked across
Speaker 1: mark clients, how afraid are people? Is there any sense
Speaker 1: of catharsis out there? And abrupt change and equity portfolios. Well. Obviously,
Speaker 1: when we've seen some of the volatility over the last
Speaker 1: couple of weeks, that's made clients nervous, right, But our
Speaker 1: conversation with them is, look, there is a lot going
Speaker 1: on right now for the market to digest. We have
Speaker 1: a decently strong economy. Hopefully earnings is going to continue
Speaker 1: to support at that, but you go along with it.
Speaker 1: We do have some high inflation numbers, we have monetary
Speaker 1: policy we're trying to get through, and we have rich
Speaker 1: valuations on some of these stocks out there, So the
Speaker 1: markets trying to digest that. It's not surprising then that
Speaker 1: we're in like the lowest death stile of stocks making
Speaker 1: twenty day highs. But I think what's important and what
Speaker 1: we tell our clients is look at this kind of
Speaker 1: oversold condition that we're in, in the longer term upward
Speaker 1: trend that the market is still in, and combine that
Speaker 1: with the fact that credit spreads Jonathan and I we
Speaker 1: talked about this, and I'm really yealed about a week ago.
Speaker 1: Credit spreads are so well behaved right now that that
Speaker 1: tells us there's still some support for the equity markets.
Speaker 1: There's just gonna be quite a bit of volatility. I
Speaker 1: love that you have. John has embedded a plug for
Speaker 1: his Real Yale Show into his guests that come on
Speaker 1: this property. Thank you for that. That is a fantastic show.
Speaker 1: I do recommend you watch it one pm on Friday's Victoria.
Speaker 1: How much going forward? Do you think that we have
Speaker 1: priced in some of the potential margin compression as we
Speaker 1: deal with the inflation that you talk about? Yeah, I
Speaker 1: mean this is what everyone's gonna be looking at in
Speaker 1: these earnings reports that come out. I mean this week
Speaker 1: is jam packed. You were naming some of the companies
Speaker 1: that we're gonna see. The biggest issue that we think
Speaker 1: is going to be UM margin pressure when it comes
Speaker 1: to UM wages and employment cost index. Look at the
Speaker 1: e c I and how high that number has run.
Speaker 1: I think the Fed is watching that very closely. JP
Speaker 1: Morgan is an excellent example talking about UM, the issues
Speaker 1: that they had in regards to wages going higher and
Speaker 1: what that did to their earnings. So I think that's
Speaker 1: gonna be key when we're looking UM at what the
Speaker 1: earnings report tell us and the guidance. Obviously there's gonna
Speaker 1: be some supply chain issues UM that will cause some
Speaker 1: margin compression as well. But I think it's gonna be
Speaker 1: the employment cost that really people are gonna be watching,
Speaker 1: and that could make a difference when we're looking at
Speaker 1: the volatility throughout the rest of earning season. So Victoria,
Speaker 1: given his whole backdrop, the fact that you said that
Speaker 1: you look or you're looking at an oversold condition, what asked,
Speaker 1: spects of the market right now are oversold and look
Speaker 1: attractive and given all of these risk factors that you're
Speaker 1: putting out there, yeah, you know, at least the look
Speaker 1: the average stock is down about fifteen percent right now
Speaker 1: from its fifty two week HUIHS tech names even more
Speaker 1: so around twenty, So we think people need to pull
Speaker 1: out their shopping list here. We like financials as a
Speaker 1: sector for the for two. We like JP Morgan, We
Speaker 1: like Bank of America. But I think look at some
Speaker 1: of the pullbacks that you've seen in other names, some
Speaker 1: of those more cyclical value names. Lows is down eleven
Speaker 1: percent over the last month. We just added to our
Speaker 1: Lows position on Friday. Regions Financial is another name. Tractor
Speaker 1: Supply I think was down about ten percent over the
Speaker 1: last month. So I think look for individual names that
Speaker 1: you can add to your portfolio that have had that
Speaker 1: pullback and start checking them off your shopping list. Victoria
Speaker 1: Fernandez a cross mark. Victoria, thank you for jointing us
Speaker 1: out of course for the plug as well. When in doubt,
Speaker 1: parachute in an optimist. There's a number of optimists are
Speaker 1: with us, and there's no other optimist is optimistic? Is
Speaker 1: Neil Datta And he's a been a pinata is a
Speaker 1: pessimists have gone after him through this entire pandemic. It's
Speaker 1: real simple. You need a theoretical construct to be in
Speaker 1: the market. And the way to be in the market
Speaker 1: to go up spent last year was to read Datta.
Speaker 1: He joins us this morning. His your optimism weakened, Neil No,
Speaker 1: I mean we have to focus back on the fundamentals,
Speaker 1: and ultimately healthy fundamentals can help turn the market. Um.
Speaker 1: You know, for all to talk about how this is
Speaker 1: a FED driven slowdown, I mean, where is the flight
Speaker 1: to safety in the dollar? Why is emerging markets out
Speaker 1: performing this year? I mean it's all it's it's a
Speaker 1: very sort of interesting period for the financial markets. But
Speaker 1: that you know, on this sort of idea that growth
Speaker 1: is decelerating. Um, you know, like so many things, I mean,
Speaker 1: potential sightings, like UFOLS, potential sighting is not actually confirmed.
Speaker 1: I mean you look, you think about housing, the housing
Speaker 1: markets accelerating. Um, there's a lot of construction activity in
Speaker 1: the pipeline. I would expect motor vehicle production to also
Speaker 1: be accelerating this year. Uh, that's substantially running below trend. Uh.
Speaker 1: And oh, by the way, we have um, you know,
Speaker 1: two of Asia's largest economies taking steps to support growth
Speaker 1: this year. So um, I think, and with the omicron
Speaker 1: very beginning to fade, I mean, that's going to provide
Speaker 1: a positive demand shock to the service sector, not only
Speaker 1: in the US. But Okay, this is really critical and
Speaker 1: goes to Krugman's essay this weekend, which I thought was
Speaker 1: brilliant partitioning the demand side dynamics with a supply side dynamics.
Speaker 1: And what you're suggesting, Neil is within the gloom, demand
Speaker 1: will remain resilient, I believe. So. I mean, take a
Speaker 1: look at mortgage purchase applications, Tom, I mean, even though
Speaker 1: interest rates have been backing up, purchase applications have actually
Speaker 1: been strengthening during that time, which tells you that maybe
Speaker 1: it's not only about interest race, but things like price expectations. Right,
Speaker 1: So the user costs for for housing, even though rates
Speaker 1: have gone up, remain low because price expectations also remained firm. Right,
Speaker 1: So people are going to be much more willing to
Speaker 1: finance an asset they think is going to go up
Speaker 1: in value. And that's underpinning demand in the housing market.
Speaker 1: I mean, you're out a situation now where the builders
Speaker 1: are actually throttling sales again. So, um, you know this
Speaker 1: isn't a demand issue. Um, so you know. Look, I
Speaker 1: mean this deceleration call, Yes, growth will decelerate. I mean
Speaker 1: that doesn't take a rocket scientist to figure out. I mean,
Speaker 1: we're growing very rapidly off the lows in the pandemic,
Speaker 1: and believe it or not, a deceleration is priced in.
Speaker 1: I'm looking at ECFC in Bloomberg right now. Quarterly growth
Speaker 1: expected to grow from six percent in the fourth quarter
Speaker 1: of this year down to two and a half uh
Speaker 1: in the fourth quarter of two. So it's about what's
Speaker 1: priced into the market and consensus expectations, and what's the
Speaker 1: likely outcome relative to those expectations. And my sense is
Speaker 1: the inflation sinary boom is largely continuing this year. Okay,
Speaker 1: so if the inflationary boom is largely continuing, then how
Speaker 1: about the risk that people were worried about maybe a
Speaker 1: week ago about the Fed hiking rates h too quickly.
Speaker 1: Do you think that that's an overreaction as well, since
Speaker 1: the Fed's going to act cautiously and move slowly so
Speaker 1: that they don't disrupt anything. Well, I think the I
Speaker 1: think the market is right to price and hikes this year.
Speaker 1: But I mean I think we're getting a little bit
Speaker 1: over our skis. I mean, it looks like your dollar
Speaker 1: futures markets basically priced for a coin flip for a
Speaker 1: fifty basis point move in March. I mean, if history
Speaker 1: is any guide recent history, so basically at during since
Speaker 1: from the nineties on, the Fed's more likely to end
Speaker 1: a tightening cycle of fifty basis points and start one.
Speaker 1: So um, I think the odds of them going fifty
Speaker 1: in March is basically zero. Um. But as I said,
Speaker 1: I mean four hikes and runoff this year, I think
Speaker 1: that's a reasonable baseline. Um. But I think where the
Speaker 1: markets getting a little bit over its skis here is
Speaker 1: you know, pricing in five hikes, maybe six sites potentially
Speaker 1: those hikes probably shift more into you, so the markets
Speaker 1: right to price in a little bit more of an
Speaker 1: aggressive FED. But you know, let's be let's be honest
Speaker 1: about this. Is the FED really hawkish? I mean, other
Speaker 1: central banks are already hiking lisa And maybe that's one
Speaker 1: of the reasons why even though the kitchen sink has
Speaker 1: been thrown at the foreign exchange market, the dollar has
Speaker 1: actually been flattening out over the last three months. The
Speaker 1: two concerns here right now, right there's the inflation side,
Speaker 1: which you actually endorse. You think that inflation is going
Speaker 1: to be stickier this year throughout the year, and how
Speaker 1: much does that crimp consumer demand, which you think it
Speaker 1: won't necessarily do. And then there's the idea of the
Speaker 1: FED responding to this but which will at least shake
Speaker 1: risk markets, which possibly is a reason why you've seen
Speaker 1: such a huge draw down, particularly in the NASDAC. On
Speaker 1: the first point, how much can you dismiss some of
Speaker 1: the retail sales data that we got out, some of
Speaker 1: the peripheral sentiment data that suggests that consumers really are
Speaker 1: pairing back on what they're buying because they're purchasing power
Speaker 1: has gone down so much so to me, if you
Speaker 1: look just at average generally earnings, that gives you an
Speaker 1: incomplete picture of just how strong the consumer is, because
Speaker 1: you have to look at aggregate wages and salaries. That's
Speaker 1: the some product of jobs, the work week, and hourly earnings,
Speaker 1: and that's running at a very healthy rate. In fact,
Speaker 1: is running double digits. That was true in December as well.
Speaker 1: It's running well above the pace of inflation. So the
Speaker 1: aggregate sort of real income pie is growing. At the
Speaker 1: same time, we haven't even actually had a household credit
Speaker 1: cycle yet. If you look at consumer credit revolving credit
Speaker 1: relative to things like disposable income or core consumer spending,
Speaker 1: it remains well below normal. So households haven't even taken
Speaker 1: on normal levels of credit appetites. So there's room for
Speaker 1: improvement there. But are you we really going to worry
Speaker 1: about um consumer spending when people are putting on down
Speaker 1: payments for homes. I mean, you're worried about whether they're
Speaker 1: gonna be buying cashmere sweaters during the winter when they're
Speaker 1: buying houses. Um, so I think you know and that
Speaker 1: and that and that's durable goods. Those are durable goods, right,
Speaker 1: So and that obviously has tentacle into other areas of
Speaker 1: consumer spending. You do you delay the FED rate rate
Speaker 1: moves into two thousand twenty three. Doug cash just published
Speaker 1: that he's buying at the sound of cannons, This off
Speaker 1: of Nathan Mayer Rothschild from years and years ago. You
Speaker 1: step up to the sound of cannons and start buying
Speaker 1: into the market. The underpinning of that is framing the
Speaker 1: FED call. Let's be clear here, how many rate rises
Speaker 1: do you see in two thousand and twenty two. Are
Speaker 1: you in the camp with Stephen Englander at Standard Charter
Speaker 1: that we're gonna see a lot less movement by the
Speaker 1: Fed than expected. Well, I think there's a decent amount
Speaker 1: of dispersion with the Fed. But you know, look when
Speaker 1: when when when governor uh sorry, when Minneapolis Fed President
Speaker 1: Neil cash Car's telling you that he's penciling in two
Speaker 1: rate hikes for this year. I think that's a reasonable
Speaker 1: baseline of how much the FED will do, at least
Speaker 1: at a bare minimum this year. And it's probably uh,
Speaker 1: you know something where they go in March and June
Speaker 1: at a minimum um, then they'll do runoff and then
Speaker 1: if inflation is sticky. I think you can pencil and
Speaker 1: hikes in September and December. The Wall Street Journal was
Speaker 1: out today talking about how the FED may go at
Speaker 1: every meeting. Again, it just tells you about how how
Speaker 1: how much focusing it has already priced into the markets,
Speaker 1: and how little the Fed actually has to do to
Speaker 1: surprise in a dovish direction. So I think that you'll
Speaker 1: probably see a bull stepending of the yolker going in
Speaker 1: or or or immediately following the meeting. That that's that's
Speaker 1: that's what we're telling our our clients. I think the
Speaker 1: front end has room to rally the front room, the
Speaker 1: front the front end has room to rallies. In other words,
Speaker 1: you're telling your clients to buy short dated bonds and
Speaker 1: buy the risk stories. Yeah, for a trade at least.
Speaker 1: I mean, you know, coin flip for for fifty basis
Speaker 1: points in March. The odds are zero, Okay, And who's
Speaker 1: worried about those cashmir sweatershean, No, that's for sure. No,
Speaker 1: we appreciate it's I think the point there was Mike
Speaker 1: and hits home. It's really really important. It's about probabilities.
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