WEBVTT - Surveillance: Dollar Weakness with Wizman 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa A. Brawnwitz Jaily. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment and 0:00:17.280 --> 0:00:23.280 international relations. Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:29.639 dot Com and of course on the Bloomberg terminal. It 0:00:29.880 --> 0:00:33.199 is a most wonderful time to speak to Terry Wiseman. 0:00:33.240 --> 0:00:36.600 He's global interest rate and Currency strategistic Macquarie, but with 0:00:36.680 --> 0:00:40.199 decades of experience and understanding that the FED is a 0:00:40.320 --> 0:00:43.519 central banker to the world, Dr Weisman, I what I 0:00:43.560 --> 0:00:47.480 want to do right now is take the really important 0:00:47.520 --> 0:00:50.880 comment in your recent research that the FED is far 0:00:50.960 --> 0:00:55.920 more important than Amicron and the Ukraine as well. If 0:00:55.960 --> 0:00:58.840 that's the case, what does E M want from the 0:00:58.880 --> 0:01:03.480 central banker to the world. I think emerging markets want 0:01:03.600 --> 0:01:07.080 what they always want, which is cheap liquidity flowing from 0:01:07.080 --> 0:01:10.000 the developed markets into the emerging markets to help sustain 0:01:10.040 --> 0:01:12.680 their asset prices and sustained sustain their growth in their 0:01:12.720 --> 0:01:16.360 financial system. Unfortunately, we're probably not going to get that 0:01:16.360 --> 0:01:19.480 that easily when the FED is retracting liquidity, and this 0:01:19.600 --> 0:01:24.320 is not really unusual when the Fed starts into its 0:01:24.760 --> 0:01:28.080 a tightening policy from an accommodated policy, as we saw 0:01:28.080 --> 0:01:30.840 in two thousand thirteen with the taper tantrum, as we 0:01:30.880 --> 0:01:33.160 saw it in two thousand fifteen in anticipation of the the 0:01:33.240 --> 0:01:36.319 first rate hike from the Fed. There's always a class 0:01:36.360 --> 0:01:40.680 of asset of assets does poorly. Two thousand thirteen during 0:01:40.720 --> 0:01:43.800 the Taper tamptrum is clearly emerging markets. But you had 0:01:43.840 --> 0:01:47.160 a rotation in two thousand fifteen into the into the 0:01:47.160 --> 0:01:49.960 asset classes, and most poorly being commodities. There's always an 0:01:49.960 --> 0:01:52.320 asset class that suffers. It may not be emerging markets 0:01:52.320 --> 0:01:54.640 this year, by the way, it may simply be that 0:01:54.640 --> 0:01:57.360 that class of assets that's done very well in the 0:01:57.480 --> 0:02:00.880 previous regime of easy monetary policy and the pandemic, which 0:02:00.880 --> 0:02:04.200 was large cap techy. We're seeing a money coming out 0:02:04.240 --> 0:02:08.280 of the NASDAC one hundred uh and and and the 0:02:08.680 --> 0:02:12.560 and the cryptocurrencies right now. The arch theory is it 0:02:12.680 --> 0:02:16.440 e M is stronger, better, more resilient than they were 0:02:16.480 --> 0:02:20.400 twenty or thirty years ago. Do you buy that? I 0:02:20.440 --> 0:02:22.200 would have bought it if you asked me that two 0:02:22.280 --> 0:02:26.000 years ago. The problem is that the pandemic has introduced 0:02:26.040 --> 0:02:31.040 certain structural weaknesses into the emerging markets, including high debt levels. Remember, 0:02:31.080 --> 0:02:33.720 the emerging markets were no less shot and developed markets, 0:02:33.760 --> 0:02:35.600 and it's trying to spend their way out of the 0:02:35.639 --> 0:02:38.280 problems of the pandemic that's left them with a high 0:02:38.360 --> 0:02:40.440 level of debt, a high debt burden, just as it 0:02:40.440 --> 0:02:43.440 has for the developed markets. So that thesis might it 0:02:43.520 --> 0:02:46.200 might have been valid two years ago, it's hardly valid 0:02:46.240 --> 0:02:49.400 these days. So Terry, why have we not seen more 0:02:49.560 --> 0:02:51.919 of what you expect from the Fed? Priced in? If 0:02:51.919 --> 0:02:54.359 we have one house after another coming out trying to 0:02:54.480 --> 0:02:56.760 up their forecast to the for the year to five 0:02:57.160 --> 0:03:01.639 rate hikes are possibly more well, if you mean for 0:03:01.639 --> 0:03:03.560 for the emerging markets, I think it's because they were 0:03:03.600 --> 0:03:06.880 never a beneficiary of of what happened over the last 0:03:06.919 --> 0:03:08.959 two years, certainly not from a from a structural or 0:03:08.960 --> 0:03:11.960 economic perspective. So there's a thinking out there that because 0:03:11.960 --> 0:03:15.320 there's so much more value relatively speaking, in the emerging 0:03:15.360 --> 0:03:19.480 markets versus developed markets, they should be rotated into as 0:03:19.520 --> 0:03:21.200 we as we move out of the old regime and 0:03:21.240 --> 0:03:23.919 into the new regime. That that might be valid, except 0:03:23.960 --> 0:03:25.440 for the fact that I mentioned that some of these 0:03:25.480 --> 0:03:27.600 emerging markets do have these structural issues now as a 0:03:27.600 --> 0:03:29.920 result of the pandemic. But let's face as some of 0:03:29.919 --> 0:03:32.480 the issues that are burning the world and the the 0:03:32.600 --> 0:03:36.000 sentiment of traders right now are stemming from the emerging markets. 0:03:36.320 --> 0:03:39.640 Russia is clearly an emerging market, China is as well, 0:03:39.720 --> 0:03:42.800 and there are geopolitical tensions there too with regard to 0:03:42.880 --> 0:03:46.600 Taiwan and of course Latin America. The other the other 0:03:46.680 --> 0:03:50.600 bulish bracket emerging market is um It's it's it's confronting 0:03:50.600 --> 0:03:53.960 a lot of political issues this year, including two major elections. 0:03:54.000 --> 0:03:57.360 So yes, if it weren't for the structural issues from 0:03:57.360 --> 0:04:00.520 the pandemic, if it weren't these real political concerns, yes, Uh, 0:04:00.800 --> 0:04:03.000 Latin American emerging markets generally would look cheap right now. 0:04:03.040 --> 0:04:05.520 I agree, But there's still a few headwinds. So give 0:04:05.560 --> 0:04:07.400 us a sense of the scope of dollar strengthening that 0:04:07.440 --> 0:04:10.800 you're expecting. So we're expecting a little bit more dollar 0:04:10.840 --> 0:04:13.120 strengthening over the next few weeks and months, I mean, 0:04:13.240 --> 0:04:15.160 until we get resolution from the Fed as to what 0:04:15.200 --> 0:04:18.400 it's going to do this week and especially in March. 0:04:18.720 --> 0:04:22.880 It feels very difficult to imagine traders jumping back into 0:04:23.000 --> 0:04:25.520 the foreign exchange and abandoning the dollar. So I think 0:04:25.520 --> 0:04:27.320 for the next few weeks and months, we're gonna continue 0:04:27.320 --> 0:04:29.600 to see that strong, sturdy dollar theme that we've been 0:04:29.600 --> 0:04:32.560 advancing and calling for since the middle of last year. 0:04:32.960 --> 0:04:35.000 I think when we get through a few hurdles, including 0:04:35.040 --> 0:04:38.200 the FEDS UH hike and the clarity over what their 0:04:38.279 --> 0:04:41.000 interest rate outlook is, we get through the French elections, 0:04:41.000 --> 0:04:43.520 maybe we get through the rush of Ukraine issues, then 0:04:43.560 --> 0:04:46.679 we can expect UH some dollar weakness, but it probably 0:04:46.680 --> 0:04:49.440 won't happen until well into the second quarter of this year. 0:04:49.480 --> 0:04:52.040 We need to get to all of those hurdles. Tell 0:04:52.080 --> 0:04:55.000 me of China in the state of it now, Terry Weisman, 0:04:55.640 --> 0:04:58.960 going into the Olympics days away, and then out of 0:04:59.000 --> 0:05:04.600 the Olympics, what happens when we go home? I don't know. 0:05:04.680 --> 0:05:07.159 Are they going to invade Taiwan? Are they going to 0:05:07.200 --> 0:05:11.440 continue to to um pump more more liquid into the system? 0:05:11.800 --> 0:05:15.120 Is their property development sector going to to crash as 0:05:15.120 --> 0:05:18.000 a result of the burden of death? Can this is 0:05:18.040 --> 0:05:19.920 really this is your wheelhouse, Terry, Let's go there. I 0:05:19.920 --> 0:05:22.159 don't mean to interrupt it. This is too important. Do 0:05:22.200 --> 0:05:24.719 you suggest that their government can bail out the real 0:05:24.839 --> 0:05:27.560 estate sector? Is then the way they've bailed out things 0:05:27.600 --> 0:05:31.160 over the many decades. There are very few financial sector 0:05:31.240 --> 0:05:34.960 problems that enough domestic liquidity created by the central bank 0:05:35.000 --> 0:05:38.599 cannot solve. Okay, let's be very clear here on top 0:05:38.640 --> 0:05:41.040 of that, China has certain advantage when dealing with these 0:05:41.080 --> 0:05:43.839 financial sector issues. They control the state banks, for example, 0:05:44.520 --> 0:05:47.200 they control a lot of the economy. Uh so, so 0:05:47.240 --> 0:05:49.440 I think they're the tools at their disposal, actually greater 0:05:49.480 --> 0:05:51.000 than the tools that might have been at the disposal 0:05:51.040 --> 0:05:53.640 of the US and great in the global financial crisis 0:05:53.640 --> 0:05:56.719 of two thousand nine. Uh so, so, yes, I think 0:05:56.720 --> 0:05:58.159 that there is I mean, if if you have to 0:05:58.320 --> 0:05:59.800 bet whether or not they're going to be able to 0:05:59.800 --> 0:06:01.919 solve all this, I would say yes. It may not 0:06:02.000 --> 0:06:04.560 be an a dropt solution, it might not be immediate, 0:06:04.760 --> 0:06:06.520 but over time, I don't think it's going to lead 0:06:06.520 --> 0:06:09.320 to the kind of concerns that we saw eleven or 0:06:09.360 --> 0:06:14.360 twelve years ago in the Western World crisis. And mcauie Terry, 0:06:14.400 --> 0:06:23.440 thank you, without question. This is our conversation of the 0:06:23.520 --> 0:06:26.719 day on what we see, what we observe, what we 0:06:26.839 --> 0:06:31.640 try to figure out forward in Ukraine. Chancellor A. Marco 0:06:32.080 --> 0:06:34.960 is retired. So you were to say who has the 0:06:35.000 --> 0:06:39.279 most expertise among Western diplomats on the fractious nature of 0:06:39.320 --> 0:06:43.160 Eastern Europe down to Ukraine and all the balance of NATO, 0:06:43.560 --> 0:06:46.520 and many would suggest that the assistance of Mr mccra 0:06:46.760 --> 0:06:50.640 of France is Philippe Eten, his French ambassador to the 0:06:50.720 --> 0:06:54.120 United States, but far more tours of duty in Belgrade 0:06:54.600 --> 0:06:56.800 and buch Arest, and of course with his knowledge of 0:06:56.839 --> 0:07:01.599 Eastern European languages of Romanian and Sir about Karad as well, Embassador, 0:07:01.839 --> 0:07:04.400 honored to have you with us this morning. What does 0:07:04.440 --> 0:07:06.880 the reporting, what does the zeitgeist right now in the 0:07:06.880 --> 0:07:12.720 West get wrong on Ukraine? Well for the moment. First, 0:07:12.960 --> 0:07:16.080 thank you for having me for the moment. Of course, 0:07:16.800 --> 0:07:20.640 we face a very very serious crisis. We are everybody 0:07:20.680 --> 0:07:23.960 is very much worried here about the risks of this 0:07:24.120 --> 0:07:28.440 major crisis in the heart of Europe, and we must 0:07:30.080 --> 0:07:38.720 combine firmness and obviously keep the channels opened. Uh. We 0:07:38.800 --> 0:07:42.800 are doing that as friends, friends, having the Presidency of 0:07:42.840 --> 0:07:45.800 the Council of the European Union right now with our 0:07:45.840 --> 0:07:51.680 foreign ministers meeting again of the twenty seven countries. We 0:07:51.880 --> 0:07:56.960 are indeed very very keen to keep a very close 0:07:57.040 --> 0:08:01.360 consultation with the United States and between all the formats 0:08:01.400 --> 0:08:05.480 engaged uh we see, but also you, as I said, 0:08:05.640 --> 0:08:10.600 and NATO and the United States. And also to continue 0:08:10.600 --> 0:08:13.920 our work together with Germany in the so called Nomine format, 0:08:14.480 --> 0:08:19.640 to work with Ukraine Andrews Russia, to continue our work 0:08:19.760 --> 0:08:25.000 to find a solution to the crisis in eastern Ukraine. 0:08:25.360 --> 0:08:29.960 You were experienced moving French citizens out of a crisis 0:08:30.120 --> 0:08:33.880 in Georgia. Georgia, of course part of the Soviet Union. 0:08:33.920 --> 0:08:37.839 You've had a tangible hand on experience. What should be 0:08:38.360 --> 0:08:42.480 the presentation to Mr Putin to have him find a 0:08:42.600 --> 0:08:46.800 stability instead of an invasion of Ukraine. What is the 0:08:46.920 --> 0:08:51.320 distinction that you believe will change Mr Putin's tone and 0:08:51.400 --> 0:08:57.640 rhetoric and action. First, we must deter him from an 0:08:57.720 --> 0:09:04.120 aggression by clearly indicating that any aggression would have as 0:09:04.160 --> 0:09:09.080 a consequence, very very serious consequences. And then, as I said, 0:09:09.320 --> 0:09:12.400 we must also, as the US as the Europeans are doing, 0:09:13.400 --> 0:09:19.400 keep the channel opened to discuss how we have the 0:09:19.440 --> 0:09:26.800 possibility using instruments of diplomacy to solve this crisis, also 0:09:28.200 --> 0:09:32.160 in view of a longer term basis, which is to 0:09:32.800 --> 0:09:37.840 rebuild the instruments of European security. So many treaties have 0:09:37.960 --> 0:09:41.680 been abandoned in the recent years. We have this to rebuild. Now. 0:09:42.480 --> 0:09:45.439 How much daylight is there between the French approach to 0:09:45.559 --> 0:09:49.520 dealing with diplomacy and the US approach right now? As 0:09:49.520 --> 0:09:52.920 I said, the French approach is not to deal with 0:09:53.000 --> 0:09:59.960 diplomacy only. It's also a clear indication on the Europeans 0:10:00.080 --> 0:10:04.960 side that we UH will take the measures to face 0:10:05.559 --> 0:10:10.080 and to answer inmigration. So it's it's this dual approach 0:10:10.120 --> 0:10:13.400 where I do not see differences between the Europeans and 0:10:13.440 --> 0:10:18.040 the Americans ambassador going forward. There is also a lot 0:10:18.040 --> 0:10:20.880 of tension though in the European Union because of the 0:10:21.040 --> 0:10:25.400 bifurcated economic recoveries after the pandemic. How much has this 0:10:25.520 --> 0:10:28.840 been a discussion As France has enjoyed a faster recovery 0:10:29.080 --> 0:10:36.079 than many other European regions. France indeed has a regained 0:10:36.160 --> 0:10:39.800 its position the position of its economy had been before 0:10:40.080 --> 0:10:45.040 the Pandemics are Economic and Finance Minister and just forecast 0:10:45.160 --> 0:10:49.640 four person growth next year and as an economistic economist, 0:10:49.679 --> 0:10:55.200 Paul Krugman wrote in a recent column, the labor market 0:10:56.480 --> 0:10:59.400 has not been disrupted because we have taken measures by 0:10:59.400 --> 0:11:01.600 the way, not on in France, i think, but in Europe, 0:11:01.880 --> 0:11:04.160 but in particular in France. As we have seen last 0:11:04.280 --> 0:11:09.480 Monday a week ago, economy remains very attractive. Twenty one 0:11:10.120 --> 0:11:15.360 important investors, including eleven American companies, have committed to invest 0:11:15.480 --> 0:11:19.440 four point five billion in in the French economy and 0:11:19.440 --> 0:11:22.760 to create ten thousand jobs, which means that's the attractiveness 0:11:22.800 --> 0:11:26.880 of our economy is indeed quite strong. What does the 0:11:27.040 --> 0:11:33.160 French image in Europe mean in terms of military hardware sales? 0:11:33.200 --> 0:11:37.560 Do Ukraine? Germany seems so reticent and not on a 0:11:37.600 --> 0:11:42.559 simplistic nature, but with airbus expertise and with jet engineering 0:11:42.640 --> 0:11:47.160 expertise that everyone understands is world class. Will avoid submarines 0:11:47.200 --> 0:11:51.200 with Ukraine with great respect, ambassador. But tell me what 0:11:51.280 --> 0:11:56.200 France can signal by selling by selling French engineering to 0:11:56.240 --> 0:12:02.559 the people of Ukraine. Uh. Well, it's not new that 0:12:02.600 --> 0:12:11.280 we have our strong economic relationship with Ukraine, so we 0:12:11.280 --> 0:12:14.800 we we intend to continue to to support Ukraine as 0:12:14.840 --> 0:12:17.880 we have been doing until now. Of course, I have 0:12:17.960 --> 0:12:20.320 to ask you one question and COVID there's been such 0:12:20.360 --> 0:12:24.040 a an uproar within the United Kingdom in America over 0:12:24.280 --> 0:12:28.319 mcroninal give Lisa Bramo. It's once an update on Paris 0:12:28.480 --> 0:12:31.520 in April. In terms of our macrone how are you doing? 0:12:34.120 --> 0:12:37.800 The micron variant had, like in the US, a very 0:12:37.840 --> 0:12:44.000 strong search recently, uh or and we we hope it 0:12:44.600 --> 0:12:50.080 is now having its speak. Of course, as a consequences 0:12:50.440 --> 0:12:56.440 in terms of health intensive care units was the consequences 0:12:56.440 --> 0:13:00.440 were not that as serious as before because people are 0:13:00.520 --> 0:13:05.040 vaccinated a lot, and the new vaccination pass is coming 0:13:05.040 --> 0:13:09.000 into force today. So there was a very very strong 0:13:09.240 --> 0:13:14.400 policy in France to have everybody being vaccinated, and I 0:13:14.440 --> 0:13:17.240 think it worked quite well because of time in the market. Sir, 0:13:17.360 --> 0:13:19.840 we must move on, Ambassador at Young. Thank you so much, 0:13:19.840 --> 0:13:29.280 Ambassador of France to the United States. Let's get to 0:13:29.360 --> 0:13:31.679 Victoria Fernandez. The chief market is strategic a cross mark 0:13:31.720 --> 0:13:34.920 global investments, and right on cue Victoria, I'll quote you. 0:13:35.280 --> 0:13:37.079 I know everybody is saying that the FED is way 0:13:37.120 --> 0:13:39.199 behind the curve, but I do believe that they were 0:13:39.200 --> 0:13:42.560 trying to follow the data, at least their interpretation of 0:13:42.600 --> 0:13:46.080 the data. What is that last bit mean, Victoria, Well, 0:13:46.120 --> 0:13:48.480 I think Jonathan and we look, everyone has a different 0:13:48.480 --> 0:13:51.120 opinion of what the data means, even just talking about 0:13:51.120 --> 0:13:53.800 the inflation components a moment ago or people more concerned 0:13:53.800 --> 0:13:57.360 about the inflation number or the response to inflation, and 0:13:57.400 --> 0:13:59.400 so I think that's what it means. What is the 0:13:59.440 --> 0:14:01.960 FEDS and reportation of what we're seeing? Do they still 0:14:02.000 --> 0:14:05.040 see a transitory component even though they took that word 0:14:05.080 --> 0:14:08.000 away because the market didn't like it. I think they do. 0:14:08.040 --> 0:14:10.959 They anticipate that the inflation never is going to come down, 0:14:11.280 --> 0:14:14.080 probably starting in the second quarter, and perhaps they want 0:14:14.080 --> 0:14:16.600 to buy themselves a little bit of time, so maybe 0:14:16.640 --> 0:14:19.400 we get one rate hike in March. I think originally 0:14:19.440 --> 0:14:21.760 they probably wanted to wait until June to do that, 0:14:21.960 --> 0:14:24.120 So maybe they'll give the market the first rate hike 0:14:24.360 --> 0:14:26.480 and then hold off until the middle of the year 0:14:26.480 --> 0:14:28.680 when inflation has come back down. So we need to 0:14:28.680 --> 0:14:32.800 see how them uh found interprets what's going on with inflation, Victoria. 0:14:32.880 --> 0:14:35.320 What's a sweat level out there? When you talked across 0:14:35.440 --> 0:14:39.920 mark clients, how afraid are people? Is there any sense 0:14:39.960 --> 0:14:46.440 of catharsis out there? And abrupt change and equity portfolios. Well. Obviously, 0:14:46.520 --> 0:14:48.680 when we've seen some of the volatility over the last 0:14:48.680 --> 0:14:51.000 couple of weeks, that's made clients nervous, right, But our 0:14:51.040 --> 0:14:53.560 conversation with them is, look, there is a lot going 0:14:53.600 --> 0:14:56.080 on right now for the market to digest. We have 0:14:56.200 --> 0:14:59.560 a decently strong economy. Hopefully earnings is going to continue 0:14:59.600 --> 0:15:01.800 to support at that, but you go along with it. 0:15:01.840 --> 0:15:04.520 We do have some high inflation numbers, we have monetary 0:15:04.560 --> 0:15:07.400 policy we're trying to get through, and we have rich 0:15:07.520 --> 0:15:10.360 valuations on some of these stocks out there, So the 0:15:10.400 --> 0:15:13.800 markets trying to digest that. It's not surprising then that 0:15:13.880 --> 0:15:16.760 we're in like the lowest death stile of stocks making 0:15:16.800 --> 0:15:18.960 twenty day highs. But I think what's important and what 0:15:19.000 --> 0:15:21.400 we tell our clients is look at this kind of 0:15:21.480 --> 0:15:25.360 oversold condition that we're in, in the longer term upward 0:15:25.440 --> 0:15:28.160 trend that the market is still in, and combine that 0:15:28.240 --> 0:15:31.040 with the fact that credit spreads Jonathan and I we 0:15:31.040 --> 0:15:32.960 talked about this, and I'm really yealed about a week ago. 0:15:33.000 --> 0:15:36.000 Credit spreads are so well behaved right now that that 0:15:36.160 --> 0:15:39.280 tells us there's still some support for the equity markets. 0:15:39.320 --> 0:15:41.360 There's just gonna be quite a bit of volatility. I 0:15:41.440 --> 0:15:44.400 love that you have. John has embedded a plug for 0:15:44.520 --> 0:15:47.680 his Real Yale Show into his guests that come on 0:15:48.040 --> 0:15:50.960 this property. Thank you for that. That is a fantastic show. 0:15:51.000 --> 0:15:54.320 I do recommend you watch it one pm on Friday's Victoria. 0:15:54.640 --> 0:15:56.960 How much going forward? Do you think that we have 0:15:57.000 --> 0:15:59.560 priced in some of the potential margin compression as we 0:15:59.640 --> 0:16:03.040 deal with the inflation that you talk about? Yeah, I 0:16:03.040 --> 0:16:04.880 mean this is what everyone's gonna be looking at in 0:16:04.880 --> 0:16:07.240 these earnings reports that come out. I mean this week 0:16:07.360 --> 0:16:09.320 is jam packed. You were naming some of the companies 0:16:09.360 --> 0:16:11.880 that we're gonna see. The biggest issue that we think 0:16:12.000 --> 0:16:15.200 is going to be UM margin pressure when it comes 0:16:15.240 --> 0:16:18.960 to UM wages and employment cost index. Look at the 0:16:19.000 --> 0:16:21.640 e c I and how high that number has run. 0:16:21.680 --> 0:16:24.560 I think the Fed is watching that very closely. JP 0:16:24.680 --> 0:16:29.240 Morgan is an excellent example talking about UM, the issues 0:16:29.280 --> 0:16:32.560 that they had in regards to wages going higher and 0:16:32.680 --> 0:16:34.920 what that did to their earnings. So I think that's 0:16:34.960 --> 0:16:37.720 gonna be key when we're looking UM at what the 0:16:37.720 --> 0:16:40.400 earnings report tell us and the guidance. Obviously there's gonna 0:16:40.440 --> 0:16:43.160 be some supply chain issues UM that will cause some 0:16:43.240 --> 0:16:45.240 margin compression as well. But I think it's gonna be 0:16:45.280 --> 0:16:48.480 the employment cost that really people are gonna be watching, 0:16:48.520 --> 0:16:51.000 and that could make a difference when we're looking at 0:16:51.000 --> 0:16:53.960 the volatility throughout the rest of earning season. So Victoria, 0:16:54.000 --> 0:16:56.480 given his whole backdrop, the fact that you said that 0:16:56.600 --> 0:16:59.960 you look or you're looking at an oversold condition, what asked, 0:17:00.000 --> 0:17:02.680 spects of the market right now are oversold and look 0:17:02.680 --> 0:17:05.280 attractive and given all of these risk factors that you're 0:17:05.280 --> 0:17:07.720 putting out there, yeah, you know, at least the look 0:17:07.760 --> 0:17:10.280 the average stock is down about fifteen percent right now 0:17:10.320 --> 0:17:12.840 from its fifty two week HUIHS tech names even more 0:17:12.880 --> 0:17:15.360 so around twenty, So we think people need to pull 0:17:15.359 --> 0:17:18.439 out their shopping list here. We like financials as a 0:17:18.560 --> 0:17:22.480 sector for the for two. We like JP Morgan, We 0:17:22.560 --> 0:17:24.719 like Bank of America. But I think look at some 0:17:24.760 --> 0:17:27.119 of the pullbacks that you've seen in other names, some 0:17:27.240 --> 0:17:30.760 of those more cyclical value names. Lows is down eleven 0:17:30.760 --> 0:17:32.879 percent over the last month. We just added to our 0:17:32.920 --> 0:17:37.040 Lows position on Friday. Regions Financial is another name. Tractor 0:17:37.119 --> 0:17:39.240 Supply I think was down about ten percent over the 0:17:39.320 --> 0:17:42.800 last month. So I think look for individual names that 0:17:42.920 --> 0:17:44.800 you can add to your portfolio that have had that 0:17:44.880 --> 0:17:47.679 pullback and start checking them off your shopping list. Victoria 0:17:47.720 --> 0:17:50.240 Fernandez a cross mark. Victoria, thank you for jointing us 0:17:50.280 --> 0:17:59.720 out of course for the plug as well. When in doubt, 0:18:00.040 --> 0:18:03.040 parachute in an optimist. There's a number of optimists are 0:18:03.080 --> 0:18:06.600 with us, and there's no other optimist is optimistic? Is 0:18:06.680 --> 0:18:09.560 Neil Datta And he's a been a pinata is a 0:18:09.560 --> 0:18:13.240 pessimists have gone after him through this entire pandemic. It's 0:18:13.240 --> 0:18:16.679 real simple. You need a theoretical construct to be in 0:18:16.720 --> 0:18:18.919 the market. And the way to be in the market 0:18:18.920 --> 0:18:23.480 to go up spent last year was to read Datta. 0:18:23.720 --> 0:18:30.159 He joins us this morning. His your optimism weakened, Neil No, 0:18:30.320 --> 0:18:32.560 I mean we have to focus back on the fundamentals, 0:18:32.560 --> 0:18:36.440 and ultimately healthy fundamentals can help turn the market. Um. 0:18:36.480 --> 0:18:38.040 You know, for all to talk about how this is 0:18:38.080 --> 0:18:40.720 a FED driven slowdown, I mean, where is the flight 0:18:40.800 --> 0:18:43.920 to safety in the dollar? Why is emerging markets out 0:18:43.920 --> 0:18:46.320 performing this year? I mean it's all it's it's a 0:18:46.400 --> 0:18:49.080 very sort of interesting period for the financial markets. But 0:18:49.200 --> 0:18:50.960 that you know, on this sort of idea that growth 0:18:51.000 --> 0:18:54.960 is decelerating. Um, you know, like so many things, I mean, 0:18:55.359 --> 0:18:59.240 potential sightings, like UFOLS, potential sighting is not actually confirmed. 0:18:59.320 --> 0:19:02.600 I mean you look, you think about housing, the housing 0:19:02.600 --> 0:19:06.280 markets accelerating. Um, there's a lot of construction activity in 0:19:06.280 --> 0:19:09.760 the pipeline. I would expect motor vehicle production to also 0:19:09.800 --> 0:19:14.720 be accelerating this year. Uh, that's substantially running below trend. Uh. 0:19:14.720 --> 0:19:17.600 And oh, by the way, we have um, you know, 0:19:17.680 --> 0:19:20.960 two of Asia's largest economies taking steps to support growth 0:19:21.000 --> 0:19:26.640 this year. So um, I think, and with the omicron 0:19:26.760 --> 0:19:28.679 very beginning to fade, I mean, that's going to provide 0:19:28.680 --> 0:19:31.640 a positive demand shock to the service sector, not only 0:19:31.680 --> 0:19:33.639 in the US. But Okay, this is really critical and 0:19:33.640 --> 0:19:36.080 goes to Krugman's essay this weekend, which I thought was 0:19:36.119 --> 0:19:42.240 brilliant partitioning the demand side dynamics with a supply side dynamics. 0:19:42.440 --> 0:19:46.400 And what you're suggesting, Neil is within the gloom, demand 0:19:46.440 --> 0:19:51.359 will remain resilient, I believe. So. I mean, take a 0:19:51.359 --> 0:19:54.200 look at mortgage purchase applications, Tom, I mean, even though 0:19:54.200 --> 0:19:57.560 interest rates have been backing up, purchase applications have actually 0:19:57.600 --> 0:20:00.760 been strengthening during that time, which tells you that maybe 0:20:01.200 --> 0:20:04.760 it's not only about interest race, but things like price expectations. Right, 0:20:04.760 --> 0:20:07.640 So the user costs for for housing, even though rates 0:20:07.640 --> 0:20:12.600 have gone up, remain low because price expectations also remained firm. Right, 0:20:12.640 --> 0:20:14.280 So people are going to be much more willing to 0:20:14.280 --> 0:20:16.520 finance an asset they think is going to go up 0:20:16.520 --> 0:20:18.879 in value. And that's underpinning demand in the housing market. 0:20:18.920 --> 0:20:21.080 I mean, you're out a situation now where the builders 0:20:21.080 --> 0:20:24.239 are actually throttling sales again. So, um, you know this 0:20:24.320 --> 0:20:27.320 isn't a demand issue. Um, so you know. Look, I 0:20:27.320 --> 0:20:31.520 mean this deceleration call, Yes, growth will decelerate. I mean 0:20:31.560 --> 0:20:33.760 that doesn't take a rocket scientist to figure out. I mean, 0:20:33.800 --> 0:20:37.080 we're growing very rapidly off the lows in the pandemic, 0:20:37.880 --> 0:20:40.560 and believe it or not, a deceleration is priced in. 0:20:40.640 --> 0:20:44.280 I'm looking at ECFC in Bloomberg right now. Quarterly growth 0:20:44.520 --> 0:20:47.040 expected to grow from six percent in the fourth quarter 0:20:47.040 --> 0:20:49.720 of this year down to two and a half uh 0:20:49.760 --> 0:20:52.800 in the fourth quarter of two. So it's about what's 0:20:52.840 --> 0:20:55.919 priced into the market and consensus expectations, and what's the 0:20:55.960 --> 0:20:59.520 likely outcome relative to those expectations. And my sense is 0:20:59.520 --> 0:21:02.639 the inflation sinary boom is largely continuing this year. Okay, 0:21:02.640 --> 0:21:05.440 so if the inflationary boom is largely continuing, then how 0:21:05.440 --> 0:21:08.199 about the risk that people were worried about maybe a 0:21:08.240 --> 0:21:11.400 week ago about the Fed hiking rates h too quickly. 0:21:11.520 --> 0:21:13.920 Do you think that that's an overreaction as well, since 0:21:13.960 --> 0:21:16.720 the Fed's going to act cautiously and move slowly so 0:21:16.760 --> 0:21:19.280 that they don't disrupt anything. Well, I think the I 0:21:19.280 --> 0:21:21.520 think the market is right to price and hikes this year. 0:21:21.600 --> 0:21:23.479 But I mean I think we're getting a little bit 0:21:23.480 --> 0:21:26.200 over our skis. I mean, it looks like your dollar 0:21:26.280 --> 0:21:29.000 futures markets basically priced for a coin flip for a 0:21:29.040 --> 0:21:32.439 fifty basis point move in March. I mean, if history 0:21:32.520 --> 0:21:35.280 is any guide recent history, so basically at during since 0:21:35.320 --> 0:21:37.800 from the nineties on, the Fed's more likely to end 0:21:37.800 --> 0:21:40.040 a tightening cycle of fifty basis points and start one. 0:21:40.840 --> 0:21:43.280 So um, I think the odds of them going fifty 0:21:43.280 --> 0:21:46.560 in March is basically zero. Um. But as I said, 0:21:46.600 --> 0:21:49.080 I mean four hikes and runoff this year, I think 0:21:49.160 --> 0:21:52.040 that's a reasonable baseline. Um. But I think where the 0:21:52.080 --> 0:21:55.080 markets getting a little bit over its skis here is 0:21:55.119 --> 0:21:58.000 you know, pricing in five hikes, maybe six sites potentially 0:21:58.160 --> 0:22:03.040 those hikes probably shift more into you, so the markets 0:22:03.119 --> 0:22:05.479 right to price in a little bit more of an 0:22:05.480 --> 0:22:08.120 aggressive FED. But you know, let's be let's be honest 0:22:08.160 --> 0:22:10.240 about this. Is the FED really hawkish? I mean, other 0:22:10.280 --> 0:22:14.800 central banks are already hiking lisa And maybe that's one 0:22:14.800 --> 0:22:17.080 of the reasons why even though the kitchen sink has 0:22:17.119 --> 0:22:19.239 been thrown at the foreign exchange market, the dollar has 0:22:19.240 --> 0:22:21.720 actually been flattening out over the last three months. The 0:22:21.840 --> 0:22:24.240 two concerns here right now, right there's the inflation side, 0:22:24.240 --> 0:22:27.160 which you actually endorse. You think that inflation is going 0:22:27.240 --> 0:22:30.399 to be stickier this year throughout the year, and how 0:22:30.480 --> 0:22:32.960 much does that crimp consumer demand, which you think it 0:22:33.000 --> 0:22:35.080 won't necessarily do. And then there's the idea of the 0:22:35.080 --> 0:22:37.200 FED responding to this but which will at least shake 0:22:37.840 --> 0:22:40.200 risk markets, which possibly is a reason why you've seen 0:22:40.200 --> 0:22:43.439 such a huge draw down, particularly in the NASDAC. On 0:22:43.520 --> 0:22:46.240 the first point, how much can you dismiss some of 0:22:46.240 --> 0:22:48.280 the retail sales data that we got out, some of 0:22:48.320 --> 0:22:52.040 the peripheral sentiment data that suggests that consumers really are 0:22:52.160 --> 0:22:55.280 pairing back on what they're buying because they're purchasing power 0:22:55.320 --> 0:22:58.720 has gone down so much so to me, if you 0:22:58.840 --> 0:23:01.720 look just at average generally earnings, that gives you an 0:23:01.800 --> 0:23:04.840