WEBVTT - Surveillance: Stimulus Bets With BofA's Meyer 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom keene Jailey. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.280 Bloomberg dot Com, and of course on the Bloomberg Right 0:00:27.320 --> 0:00:30.200 now to get the conversation started on radio on television. 0:00:30.520 --> 0:00:33.080 To help you prepare for that you aren't. In the 0:00:33.120 --> 0:00:36.680 equity market, Gregg Bottle joins US with BMP Perry, Head 0:00:36.680 --> 0:00:40.120 of Equity and Derivative Strategy, Greg what does the derivative 0:00:40.159 --> 0:00:43.720 markets say the Greek letters? What does it say about 0:00:43.760 --> 0:00:48.360 developing confidence towards two thousand twenty one. Well, I think 0:00:48.400 --> 0:00:51.280 it's an interesting story in the In the volatility market, 0:00:51.280 --> 0:00:55.760 we've seen the VIX come down considerably and twins, as 0:00:55.800 --> 0:00:57.160 you point out, has been a bit of a low 0:00:57.280 --> 0:00:59.480 for the last six months. All of you as though 0:00:59.520 --> 0:01:01.920 it's likely to go lower into the new year. We've 0:01:01.920 --> 0:01:03.640 seen a huge amount of money and be put to 0:01:03.640 --> 0:01:06.319 work in the equity market, but we haven't seen the 0:01:06.360 --> 0:01:09.760 same type of return to short volatility strategies that we 0:01:09.800 --> 0:01:11.600 saw pre COVID, So we think that could be a 0:01:11.600 --> 0:01:14.800 big story for Q one next year. We get some 0:01:14.840 --> 0:01:17.480 notes whenever a guest comes on the program, and the 0:01:17.520 --> 0:01:20.679 guest quite kindly sends over their thoughts. And I'm looking 0:01:20.680 --> 0:01:23.280 at these notes right now. Jonathan Farrow laughed at me 0:01:23.319 --> 0:01:25.240 the last time I was on for my quote, more 0:01:25.319 --> 0:01:28.360 virus and sellers are likely to drive the market. Since then, 0:01:28.400 --> 0:01:32.479 we have seen massive inflows into US equities. Wasn't doubting you, Greg, 0:01:32.600 --> 0:01:34.839 wasn't doubting you. Just thought the line was a bit cliche. 0:01:35.160 --> 0:01:38.680 You've expected more inflows, Greg, Well, we think the rate 0:01:38.720 --> 0:01:41.480 of piece of inflows is going to slow considerably now. 0:01:41.560 --> 0:01:44.280 So importantly, we don't think we're going to see outflows 0:01:44.280 --> 0:01:46.520 from the US equity markets, but we do think we've 0:01:46.560 --> 0:01:48.800 seen a huge amount of money be put to work. 0:01:49.080 --> 0:01:51.880 We've seen big inflows in the CFTC data for the future, 0:01:52.320 --> 0:01:55.360 We've seen multi year highs in terms of the inflows 0:01:55.440 --> 0:01:58.120 into the E t F universe, and importantly, some of 0:01:58.120 --> 0:02:01.160 the quantitative strategies that we tracked have really re levered. 0:02:01.440 --> 0:02:03.920 So we think that massive pace of inflows we've seen 0:02:03.960 --> 0:02:07.120 over the last six weeks is going to slow considerably, 0:02:07.280 --> 0:02:09.320 But we don't think we're going to move into an 0:02:09.400 --> 0:02:11.960 environment where we're seeing net outflows, so we think that 0:02:12.200 --> 0:02:15.000 could just be supportive of a slower pace of equity 0:02:15.040 --> 0:02:18.160 gains going forward. Greg, this is actually out of consensus 0:02:18.240 --> 0:02:20.960 a little bit in terms of people saying that the 0:02:21.040 --> 0:02:24.560 retail investor is now actually getting more confident to put 0:02:24.639 --> 0:02:27.119 cash into equities and that you hadn't seen that full 0:02:27.200 --> 0:02:31.000 rotation until very recently and that will gain steam. Is 0:02:31.040 --> 0:02:33.240 that your sense as well that other people kind of 0:02:33.280 --> 0:02:36.359 have too much faith in this cash coming off the sidelines. 0:02:36.400 --> 0:02:38.040 I put in quotes because I know that that's a 0:02:38.040 --> 0:02:42.480 contentious phrase. Yeah, I don't necessarily think so. I do 0:02:42.560 --> 0:02:45.080 think more money can potentially be put to work. I 0:02:45.120 --> 0:02:47.120 just don't really think it can continue in the pace 0:02:47.200 --> 0:02:49.760 that it has over the last six weeks. A lot 0:02:49.760 --> 0:02:52.919 of these indicators we see are really at the highs 0:02:53.000 --> 0:02:55.960 that we've seen over a multi year period, and normally 0:02:56.000 --> 0:02:58.519 these things mean revert So you know, as I mentioned, 0:02:58.520 --> 0:03:00.480 I don't think that means you necessarily see a reversal 0:03:00.520 --> 0:03:03.200 in those flows, but it's just much slower rate of pace. 0:03:03.440 --> 0:03:05.880 And the interesting thing it's almost every indicator we look 0:03:05.919 --> 0:03:10.400 at core positioning is extremely stretched. E t F flows 0:03:10.400 --> 0:03:13.359 are extremely stretched. Futures positioning is very stretched, quantity of 0:03:13.400 --> 0:03:15.839 strategies are very stretched. So really I think that there's 0:03:15.880 --> 0:03:17.519 not as much of a wall of money on the 0:03:17.560 --> 0:03:20.000 sidelines to step in as maybe there was six weeks ago. 0:03:20.919 --> 0:03:22.960 I got this really strange dynamic at the moment, though, 0:03:22.960 --> 0:03:25.440 Greg where By, typically in the future there's always something 0:03:25.520 --> 0:03:27.520 to worry about, but at the moment in the future, 0:03:27.800 --> 0:03:30.839 there's something to be hopeful about, and in the near 0:03:30.919 --> 0:03:33.400 term there's something to worry about. Brick walk me through 0:03:33.400 --> 0:03:35.280 how unusual that might be for you, and how the 0:03:35.360 --> 0:03:39.320 markets capturing that story. Yeah, I think equity strategists often 0:03:39.360 --> 0:03:41.880 talk about it in terms of climbing the wall of worry, 0:03:41.920 --> 0:03:43.880 and that you know, one of the reasons to be 0:03:43.920 --> 0:03:46.880 optimistic about equities is when everybody else is worried, and 0:03:46.920 --> 0:03:49.680 when you can get past those events, potentially that can 0:03:49.800 --> 0:03:52.800 drive a bullish catalyst for markets. I think when we 0:03:52.840 --> 0:03:54.600 look to next year, one of the things that we 0:03:54.640 --> 0:03:57.520 are probably a little bit concerned about is that argue 0:03:57.560 --> 0:04:00.000 that we're going to see a cyclical reopening in the economy, 0:04:00.040 --> 0:04:03.960 me the market will perform well. Value outperformed growth is 0:04:04.000 --> 0:04:06.960 probably something of a consensus call now, So that's probably 0:04:07.000 --> 0:04:09.560 one of the key risks. But I do think those 0:04:09.600 --> 0:04:11.920 drivers are very strong, and I do think that can 0:04:12.040 --> 0:04:16.600 that can play out next year. There's gamma, acceleration, convexity, 0:04:16.680 --> 0:04:18.480 whatever word you want to use for it. It's at 0:04:18.520 --> 0:04:23.440 acceleration folks within markets. The ambiguity of gamma Is it 0:04:23.560 --> 0:04:26.320 good for our viewers and listeners are not? If we 0:04:26.360 --> 0:04:29.839 get an acceleration of good news or a continued acceleration, 0:04:30.360 --> 0:04:34.719 is that good? Does it matter about gamma right now? Well? 0:04:34.760 --> 0:04:36.919 I think when we look at the options market, the 0:04:36.960 --> 0:04:38.839 thing that we see is that VIX is often used 0:04:38.880 --> 0:04:41.680 as a barometer of fit, and one of the things 0:04:41.720 --> 0:04:44.279 that we haven't seen is a return to the pre 0:04:45.120 --> 0:04:48.159 pre February, pre March levels of volatility. We think we 0:04:48.200 --> 0:04:51.760 could see a new volatility regime in Q one next year, 0:04:51.800 --> 0:04:54.600 whether VIX breaks through twenty doesn't go back to low 0:04:54.680 --> 0:04:57.400 teens levels, but does trade in the mid teens high 0:04:57.400 --> 0:04:59.919 teens levels, and that could see some of the short 0:05:00.040 --> 0:05:03.320 volatility strategies really start to put money to work again. 0:05:03.560 --> 0:05:06.919 What that typically does is have a self reinforcing impact 0:05:07.040 --> 0:05:10.479 of depressing volatility and equity markets, and that's generally a 0:05:10.480 --> 0:05:13.160 positive thing for risky assets. So Greg, just to sort 0:05:13.160 --> 0:05:15.839 of tie this all together, you see with consensus in 0:05:15.960 --> 0:05:19.200 terms of the positivity, but perhaps uh not with some 0:05:19.240 --> 0:05:22.880 of your colleagues who anticipate some pretty big gains next year. 0:05:23.120 --> 0:05:26.040 What are you looking for in terms of the potential 0:05:26.080 --> 0:05:29.800 returns on the SMP and where you expect the biggest gains. 0:05:30.720 --> 0:05:33.320 So we think that there could be single digit gains 0:05:33.320 --> 0:05:34.960 on the SMP. I think we're going to see really 0:05:34.960 --> 0:05:37.760 strong earnings growth that's going to be offset somewhat by 0:05:37.760 --> 0:05:41.120 some multiple compression. So I think we can get mid 0:05:41.160 --> 0:05:44.960 to high single digit gains from the broader equity market 0:05:45.240 --> 0:05:47.760 in terms of rotation. I already said that, you know, 0:05:48.160 --> 0:05:50.839 we like the value versus growth story, but we do 0:05:50.920 --> 0:05:53.479 think it's a somewhat kind of consensus view. Where we 0:05:53.520 --> 0:05:56.760 differentiate ourselves on that view is we think the value 0:05:56.800 --> 0:06:00.440 sectors that have led lead lead the value urgents in 0:06:00.440 --> 0:06:04.240 the last six weeks, energy and financials, we don't think 0:06:04.240 --> 0:06:05.600 are going to be the sectors that are going to 0:06:05.720 --> 0:06:08.480 drive the value resurgence next week. I think the banks 0:06:08.480 --> 0:06:10.920 in particular at risk of being a valued trap next 0:06:11.000 --> 0:06:13.880 year given the rate environment that we still find ourselves 0:06:13.920 --> 0:06:16.400 in greg great final thought to leave it on. Thanks 0:06:16.440 --> 0:06:19.400 for anathing this year. Enjoy the sparring great battle of 0:06:19.520 --> 0:06:26.760 being preparable. Thank you, sir, Thank you very much. Jeremy 0:06:26.800 --> 0:06:31.520 Stretch joining now with c IBC on this historic moment. Jeremy, 0:06:31.560 --> 0:06:35.960 there has always been a distinctive feel to Switzerland. There 0:06:35.960 --> 0:06:38.800 has always been the pressure of the gnomes of Zurich 0:06:38.960 --> 0:06:42.400 in their nation that they have to protect themselves from 0:06:42.400 --> 0:06:46.919 the wall of money coming in that would form outright deflation. 0:06:47.520 --> 0:06:51.720 Is this an unfair statement of manipulation to Zurich and 0:06:51.800 --> 0:06:57.920 the people of Switzerland. Well, of course, this particular issue 0:06:57.960 --> 0:06:59.919 has been brewing for some time, and coleardly the Swiss 0:07:00.000 --> 0:07:02.279 of very mindful of that, and indeed the SNB have 0:07:02.720 --> 0:07:07.400 increased their visibility visa VI their intervention in order to 0:07:07.400 --> 0:07:09.039 try and pocate the U s treasury. So in a 0:07:09.080 --> 0:07:12.120 sense they were kind of anticipating this risk would come, 0:07:12.160 --> 0:07:16.400 and unusually correctly say the Swiss are often recipients of 0:07:16.440 --> 0:07:18.840 a wall of money when there are periods in episodes 0:07:18.840 --> 0:07:22.000 of uncertainty. What the SMB have been attempting to achieve 0:07:22.160 --> 0:07:25.840 is to maintain currency competitiveness with their primary trading partner, 0:07:25.840 --> 0:07:28.480 and that is a FURS Germany, and also to limit 0:07:28.680 --> 0:07:33.680 disinflationary deflationary tendencies um. And it is very much the 0:07:33.680 --> 0:07:37.240 case that they've been utilizing the policy of the currency 0:07:37.240 --> 0:07:39.800 as a means or a mechanism to do that, other 0:07:39.840 --> 0:07:43.120 than perhaps following some of the other benchmarks we've seen 0:07:43.160 --> 0:07:46.640 from other global centiment in terms of asset purchases. So 0:07:46.680 --> 0:07:48.960 it's it's it's it's in a sense the SMB have 0:07:49.000 --> 0:07:51.680 been pursuing a very different policy which has ended up 0:07:51.720 --> 0:07:54.120 with them getting into the crossheads of the U. S. Treasury. 0:07:54.400 --> 0:07:57.680 I'm not sure necessarily it's you know, the treasury sort 0:07:57.680 --> 0:08:00.840 of doctrine is going to really sort of change the 0:08:00.920 --> 0:08:03.240 dynamic for the SMB. And of course it's very interesting 0:08:03.240 --> 0:08:05.800 that the reporters come out today when the SMB will 0:08:05.840 --> 0:08:09.480 been making their latest policy decision tomorrow. Is if one 0:08:09.480 --> 0:08:12.000 would expect them to continue to argue that was frank 0:08:12.000 --> 0:08:14.440 is still highly valued and they will continue to intervene. 0:08:14.520 --> 0:08:17.280 So it's it's very much the case of the two 0:08:17.280 --> 0:08:21.200 sides are I think highlighting the sort of differential positions, 0:08:21.200 --> 0:08:22.960 But I'm not sure necessari is going to change the 0:08:23.000 --> 0:08:27.920 game that much. The SMB says it doesn't engage in 0:08:27.960 --> 0:08:32.400 currency manipulation. They also say they're willing to intervene more 0:08:32.440 --> 0:08:37.000 strongly in the FX market. These two words are important, Jeremy, 0:08:37.240 --> 0:08:40.760 manipulation and intervention, and I want to sit on that 0:08:40.880 --> 0:08:42.880 just for a moment. I was lucky enough to spend 0:08:42.920 --> 0:08:44.840 a lot of time in Switzerland to visit the Swiss 0:08:44.880 --> 0:08:47.160 National Bank. I was in the meetings. I would sit 0:08:47.200 --> 0:08:50.200 there and talk to President Jordad after the meetings as well, 0:08:50.240 --> 0:08:53.640 and he would often talk about intervening in the EFFECTS market. 0:08:53.720 --> 0:08:56.840 He wasn't shy about it. But manipulation is a different word, Jeremy. 0:08:56.920 --> 0:09:01.800 Is that just the technicality or is that important? I 0:09:01.840 --> 0:09:04.280 think it is important because, of course, manipulation implies a 0:09:04.320 --> 0:09:07.800 degree of sort of almost malevolence. I trying to gain 0:09:07.840 --> 0:09:11.000 an implicit advantage at the expense of your competitor over 0:09:11.080 --> 0:09:14.520 your counterpart um, and that is always seen as a 0:09:14.600 --> 0:09:17.040 very retrograde step. But I think in the context of 0:09:17.080 --> 0:09:20.600 the SMB and other parties who are aiming to intervene 0:09:20.640 --> 0:09:24.559 to try and maintain economic stability or to maintain, as 0:09:24.559 --> 0:09:27.640 I say, a competitive degree of competitiveness. V. Two B 0:09:27.720 --> 0:09:31.040 trading partners, then there is a different interpretation. So I 0:09:31.080 --> 0:09:35.880 think there is a material difference between the intervention and manipulation, 0:09:35.920 --> 0:09:38.360 and I think the question is whether the U. S. 0:09:38.360 --> 0:09:41.400 Treasury are prepared to extep that differential when it comes 0:09:41.400 --> 0:09:44.800 to those negotiations going forward. But clearly the the SMB 0:09:45.160 --> 0:09:47.400 do meet the criteria as laid out by the U. S. 0:09:47.440 --> 0:09:50.640 Treasury in terms of being labeled a manipulator. But as 0:09:50.679 --> 0:09:54.080 I said, I think it's not a malevolent process that 0:09:54.200 --> 0:09:56.200 the Swiss are embarking upon. And I think about an 0:09:56.200 --> 0:09:59.120 important distinction, Jeremy, other than name calling, does this have 0:09:59.160 --> 0:10:05.280 any significance for actual trading action? I think probably not. 0:10:05.520 --> 0:10:08.000 I mean we, I mean this report is one that 0:10:08.080 --> 0:10:11.920 we've often wait off, wait for and get excited about, 0:10:11.920 --> 0:10:14.760 but then when it comes, we debated and discussed it 0:10:14.800 --> 0:10:16.280 for a few minutes, and then we move on to 0:10:16.400 --> 0:10:19.240 other issues. And I think of the context what you've 0:10:19.280 --> 0:10:21.199 been discussing in the course of the last half an hour, 0:10:21.240 --> 0:10:23.520 I think there are much bigger fish to fry in 0:10:23.600 --> 0:10:27.120 terms of the tortuous discussions regarding the stimulus process in 0:10:27.160 --> 0:10:30.880 the US and other broader dynamics. In terms of the 0:10:30.920 --> 0:10:34.920 COVID response mechanisms, So I'm not sure necessarily this report 0:10:34.960 --> 0:10:38.080 in itself really adds too much to the to the narrative. 0:10:38.120 --> 0:10:39.599 As I say, the timing is interesting in view of 0:10:39.600 --> 0:10:42.880 the SMB decisions tomorrow, but I think it's one which 0:10:43.440 --> 0:10:46.240 we will we will move on from relatively quickly. And 0:10:46.240 --> 0:10:48.240 of course, you know, the U. S. Treasury sectory is, 0:10:48.920 --> 0:10:51.559 you know, task with this negotiating with the counterparts. But 0:10:51.640 --> 0:10:54.480 of course that U. S. Treasury Secretary will be also 0:10:54.600 --> 0:10:56.880 changing relatively quickly. So I think the you know, the 0:10:57.240 --> 0:11:00.079 moon music or the you know, the the nate of 0:11:00.120 --> 0:11:02.559 the news cycle will move on very quickly. The other issue, 0:11:02.559 --> 0:11:04.320 of course, is that the Swiss just haven't been that 0:11:04.440 --> 0:11:08.400 successful at this since early addressing the FX market. Jeremy. 0:11:08.400 --> 0:11:10.680 Great to catch up, sir, Jeremy Stretch of C I 0:11:10.760 --> 0:11:17.880 B C patients this morning. Roshall Meyer, Bank of America, Michelle, 0:11:17.960 --> 0:11:21.480 thank you so much for waiting for this moment. Are 0:11:21.520 --> 0:11:24.360 we in recession? I look at the e CEO screen 0:11:24.360 --> 0:11:27.200 and McKee tells me to bring up negative revision and 0:11:27.240 --> 0:11:31.400 retail grim retail. Can you call any BR recess n 0:11:31.480 --> 0:11:35.280 B E R recession? Certainly not um I think what 0:11:35.280 --> 0:11:38.200 we're seeing is a bit of a payback after exceptionally 0:11:38.240 --> 0:11:42.040 strong growth in retail spend and in good spending in 0:11:42.080 --> 0:11:45.319 general the last several months. And remember also in November, 0:11:45.720 --> 0:11:47.439 this is going to get a little wonky. But the 0:11:47.559 --> 0:11:50.240 seasonal factors tend to be very large. When you're looking 0:11:50.280 --> 0:11:53.880 at month ever month changes um for retail sales on 0:11:53.920 --> 0:11:56.079 a seasonally adjusted basis, do you have to account for 0:11:56.120 --> 0:11:58.520 the fact that you typically have these really large seasonal 0:11:58.520 --> 0:12:01.040 adjustments in November in sto stem as a result of 0:12:01.080 --> 0:12:04.400 the holiday season, and there's this is not a normal environment, 0:12:04.800 --> 0:12:07.240 far from it. So the way people are spending, the 0:12:07.280 --> 0:12:10.520 timing of the spend has really shifted, which is probably 0:12:10.559 --> 0:12:14.120 making these these these kind of month over month comparisons 0:12:14.160 --> 0:12:16.680 that much more difficult right now, that much more difficult, 0:12:16.760 --> 0:12:19.920 meaning that perhaps it paints a worse picture than is 0:12:19.920 --> 0:12:23.960 actually the case. Is that what you're in saying here, Michelle, Well, potentially, 0:12:24.040 --> 0:12:26.400 I mean if you look at more high frequency data, 0:12:26.440 --> 0:12:28.240 so that gets spending on a daily basis from a 0:12:28.320 --> 0:12:30.520 variety of different sources, what you see is that you know, 0:12:30.559 --> 0:12:35.680 typically Black Friday, UM Cyber Monday, there's a big increase 0:12:35.679 --> 0:12:39.000 in spending really Thanksgiving and Black Friday with doorbuster sales, 0:12:39.040 --> 0:12:42.360 people go to stores and they buy. That didn't happen 0:12:42.440 --> 0:12:44.480 this year as a result of COVID, so you don't 0:12:44.520 --> 0:12:48.000 have that in person UM thrust of sales around a 0:12:48.000 --> 0:12:51.719 two to three day period UM, which historically when you 0:12:51.760 --> 0:12:54.439 seasonal adjust the data, you're looking for that type of increase, 0:12:54.640 --> 0:12:57.360 particularly things like clothing and department stores. Is Mike just 0:12:57.520 --> 0:13:00.800 mentioned um, So yes, I think it's eight that that 0:13:00.800 --> 0:13:04.719 that there was a weakening this month relative particularly to 0:13:04.760 --> 0:13:07.720 what you typically see in a holiday season. But again, 0:13:08.040 --> 0:13:10.400 part of that reflects these seasonal adjustments, and part of 0:13:10.440 --> 0:13:12.640 it reflects the fact that there was so much momentum 0:13:12.640 --> 0:13:16.079 heading into this period that some softening, you know, isn't 0:13:16.080 --> 0:13:19.520 that surprising. Are you ready to pencil in a negative 0:13:19.559 --> 0:13:23.680 print for pyrolls for December, Michelle, I don't think the 0:13:23.760 --> 0:13:26.440 data is quite pointing that yet. UM. We have to 0:13:26.440 --> 0:13:30.559 continue to monitor claims. I mean, the claim status looked weaker, 0:13:31.040 --> 0:13:33.760 realizing again the noise and the weekly data, but there 0:13:33.800 --> 0:13:37.200 has been some concerning signs for claims UM. Some of 0:13:37.240 --> 0:13:40.280 the other high frequency data points that we monitor, so 0:13:40.480 --> 0:13:43.920 survey data, UM, monitor data on small businesses from home 0:13:43.960 --> 0:13:46.760 base and the like. Um, it's so some softening, but 0:13:46.920 --> 0:13:49.600 certainly not a collapse. So I think it's it's very 0:13:49.679 --> 0:13:53.120 likely that relative to even the November weakening for jobs, 0:13:53.160 --> 0:13:55.600 we will see further softening in December. But it's not 0:13:55.640 --> 0:13:57.880 obvious yet that will be a negative current. We have 0:13:57.960 --> 0:13:59.040 to just wait and see what the rest of the 0:13:59.120 --> 0:14:01.880 data shows up. Well, let's think about lessons learned over 0:14:01.880 --> 0:14:03.520 the last couple of months the Michelle and trying to 0:14:03.559 --> 0:14:06.520 apply them to Q on Q two next year. The 0:14:06.520 --> 0:14:09.719 tail winds is obvious, the vaccinations have started. The head 0:14:09.720 --> 0:14:12.480 winds are obvious. New York could be locked down within weeks. 0:14:12.600 --> 0:14:14.720 We're seeing the same thing in California and elsewhere across 0:14:14.720 --> 0:14:16.959 the United States. It's kind of got a case study 0:14:16.960 --> 0:14:19.280 on how this economy responds going into lockdown and coming 0:14:19.320 --> 0:14:21.240 back out. Michelle, what have you learned about that and 0:14:21.240 --> 0:14:24.520 how are you applying that thinking to wordly next year? Sure, 0:14:24.720 --> 0:14:27.120 so it's a big deal. I mean we shunt over 0:14:27.160 --> 0:14:31.160 a look the near term challenges for the economies. Was again, 0:14:31.240 --> 0:14:34.440 the data is showing um and and and I think 0:14:34.440 --> 0:14:36.080 a lot of it does reflect the fact that the 0:14:36.200 --> 0:14:39.359 rising corby CAS has has been significant and the responses 0:14:39.400 --> 0:14:42.760 from governments have been significant in terms of the restrictions. 0:14:43.000 --> 0:14:45.680 And that's playing and it's making you know, an impact 0:14:45.680 --> 0:14:48.320 in the data. But it's very very different than in 0:14:48.360 --> 0:14:51.040 the spring. In the spring when we had lockdowns, there 0:14:51.120 --> 0:14:55.440 was an extreme collapse of economic activity. This time around, 0:14:55.440 --> 0:14:59.080 it there's a greater ability to navigate these restrictions. People 0:14:59.120 --> 0:15:02.040 can move back to more virtual workforce, they could shift 0:15:02.080 --> 0:15:06.200 back to buying more online. Um. There's a more dynamic economy, 0:15:06.240 --> 0:15:08.680 which I think is helping to buffer some of the pain. 0:15:09.040 --> 0:15:11.720 Doesn't stop it. There still is a softening and we're 0:15:11.760 --> 0:15:14.440 only looking for one percent GDP growth in Q one, 0:15:14.800 --> 0:15:18.680 so we're forecasting this moderation and growth. Um. But but 0:15:18.760 --> 0:15:20.960 it's very different this time around in terms of those 0:15:20.960 --> 0:15:23.040 restrictions than it was back in the spring, given how 0:15:23.080 --> 0:15:25.480 the economy has been able to navigate it. If you're 0:15:25.520 --> 0:15:28.760 just joining us on Bloomberg Radio, on Bloomberg Television Michelle 0:15:28.760 --> 0:15:31.160 Meyer of Bank of America Securities, Head of all of 0:15:31.320 --> 0:15:35.040 US Economics, you'll continue where this. We're following not three, 0:15:35.080 --> 0:15:37.560 but now four stories. Let me get to the quick 0:15:37.560 --> 0:15:43.320 one Bitcoin over twenty dollars extraordinary. It has been a moonshot. 0:15:43.560 --> 0:15:46.640 We'll have some more on that through the day as well. 0:15:46.720 --> 0:15:49.440 We have stimulus in Washington. We're gonna have that on 0:15:49.560 --> 0:15:52.600 in a moment. Here we're looking at retail sales with 0:15:52.720 --> 0:15:57.520 Michelle Myers, and of course currency manipulation by Vietnam and Switzerland. 0:15:57.560 --> 0:15:59.920 What you need to know is yields our set high 0:16:00.120 --> 0:16:02.840 or here uh this morning with futures up six down, 0:16:02.920 --> 0:16:07.720 futures up a fractional fourteen Michelle Meyer. The oddity here 0:16:07.720 --> 0:16:11.880 are these huge swings of March, the huge recovery bounce, 0:16:11.920 --> 0:16:14.000 and some of the vectors here right now are a 0:16:14.000 --> 0:16:19.440 little bit uncertain. How does stimulus presumed affect your world? 0:16:19.840 --> 0:16:24.600 How does stimulus affect retail sales? Well, it has a 0:16:24.800 --> 0:16:29.120 strictly direct leak through the consumer um. When you think 0:16:29.160 --> 0:16:32.560 about the ability and the willingness of the consumers spend 0:16:32.840 --> 0:16:35.640 the extent that they're getting more money in through stimulus, 0:16:35.680 --> 0:16:38.760 they have a greater ability to spend. Now, of course, 0:16:39.080 --> 0:16:41.880 with restrictions, with lockdowns, that limits how much they can 0:16:41.880 --> 0:16:44.040 engage in the economy, how much they can spend. You 0:16:44.080 --> 0:16:45.480 can't go to stores as much, they can't go to 0:16:45.520 --> 0:16:47.760 restaurants as much they can buy a lot online. Um, 0:16:47.800 --> 0:16:50.520 So it changes the composition of spent. But if stimulus 0:16:50.520 --> 0:16:52.240 is coming in, if funds are coming in, as of 0:16:52.280 --> 0:16:55.400 course the purchasing power of the consumer. And that was 0:16:55.480 --> 0:16:59.160 extremely clear back in the middle of April, when stimulus 0:16:59.240 --> 0:17:02.840 funds first start to be distributed, even with the economy 0:17:02.920 --> 0:17:06.879 still largely in lockdown, we saw consumer spending turnaround as 0:17:06.960 --> 0:17:09.399 people went out and started to spend those stimulus funds. 0:17:09.400 --> 0:17:12.760 And then once the economy reopened, it unleashed quite a 0:17:12.760 --> 0:17:16.000 lot of spending, so so so the it was much 0:17:16.040 --> 0:17:18.480 more extreme turns back in the spring, from you know, 0:17:18.520 --> 0:17:21.560 economy that was essentially shut down to one that was 0:17:22.119 --> 0:17:23.800 you know, brought back to life very very quickly and 0:17:23.880 --> 0:17:26.440 very very abruptly in some ways because of that stimulus 0:17:26.440 --> 0:17:29.120 and because of the reopening. UM, the turnaround this time 0:17:29.160 --> 0:17:32.080 is gonna be much much more more modest, despite restrictions 0:17:32.119 --> 0:17:35.400 being put in place as a result of the COVID rise. UM. 0:17:35.440 --> 0:17:37.760 It's the economy has been able to really kind of 0:17:38.119 --> 0:17:40.360 work around that in a way that is much much 0:17:40.359 --> 0:17:42.320 different than the spring. So you're not going to see 0:17:42.359 --> 0:17:45.000 those big swings this time around. And our review Michelle, 0:17:45.000 --> 0:17:47.640 there is this question though, especially if this nine billion 0:17:47.680 --> 0:17:50.760 dollar plan as reported by political goes through that would 0:17:50.840 --> 0:17:55.280 include direct payments to individuals that's considered by some to 0:17:55.359 --> 0:17:59.280 be more inflationary. How much could that increase your inflation 0:17:59.359 --> 0:18:02.840 expectation for next year? Should it be a past as 0:18:03.240 --> 0:18:07.199 we seem to be seeing the parameters? Sure? So, I 0:18:07.200 --> 0:18:10.520 mean if you think about just looking at cash held 0:18:10.560 --> 0:18:13.200 on hand in banks or you know, just money suply 0:18:13.359 --> 0:18:17.240 measures or the savings rate, there's a lot of cash 0:18:17.320 --> 0:18:21.520 floating out there already um and with the stimulus likely 0:18:21.560 --> 0:18:26.080 to be enacted and potentially with direct payments to consumers, 0:18:26.359 --> 0:18:29.320 that's going to just add to those cash piles um 0:18:29.359 --> 0:18:32.920 over time it's spent that creates a nice, healthy response 0:18:32.960 --> 0:18:36.600 through the real economy, and if that really builds on 0:18:36.640 --> 0:18:39.840 itself and gains a lot momentum, than sure it is inflationary. 0:18:39.920 --> 0:18:42.639 But it really important link is that the real economy 0:18:42.640 --> 0:18:44.520 has to pick up. People have to use that money 0:18:44.920 --> 0:18:47.359 and push it into the economy. It's not just inflationary 0:18:47.400 --> 0:18:50.160 because it's been created and and this is so important 0:18:50.240 --> 0:18:53.280 John Farroll. In terms of the inflation dynamics, we see 0:18:53.280 --> 0:18:57.840 Switzerland battling deflation, their arch fear for folks pushing five 0:18:57.920 --> 0:19:01.080 years with their currency. Interview mentioned that we have seen 0:19:01.480 --> 0:19:04.920 and johnet goes to the disinflation worry and the heritage 0:19:04.920 --> 0:19:08.960 of United Kingdom real wage declines that were seen across 0:19:09.080 --> 0:19:12.600 much of the twentieth century. John Ferroll, what's the inflation 0:19:12.640 --> 0:19:15.920 wins in the United Kingdom? Given what Ms Meyers says 0:19:16.240 --> 0:19:20.000 about inflation dynamics in the US? What a lot of 0:19:20.000 --> 0:19:21.800 what we've seen over the last several years has been 0:19:21.800 --> 0:19:24.040 currency driven. I think in the near term now we're 0:19:24.080 --> 0:19:25.480 just trying to work out what on earth is going 0:19:25.520 --> 0:19:27.919 on in this labor market, which is basically levitating at 0:19:27.920 --> 0:19:31.520 the moment, suspended from the forces of gravity. Lastly, because 0:19:31.840 --> 0:19:33.919 of what has been going on the fiscal side, Michelle 0:19:33.960 --> 0:19:35.560 has been really difficult to get a read on these 0:19:35.640 --> 0:19:39.040 labor markets because they've been so well supported by fiscal policy. 0:19:39.359 --> 0:19:43.040 How's that going to change through twenty one? So I 0:19:43.080 --> 0:19:45.640 think for the you know, the labor market hasn't received 0:19:45.640 --> 0:19:48.320 the same degree of support as the consumer. For example, 0:19:48.440 --> 0:19:50.159 right when you think about how the stingles was designed 0:19:50.160 --> 0:19:52.600 in the US, there is much more around direct payments 0:19:52.720 --> 0:19:55.199 to make sure that consumers have money to spend and 0:19:55.200 --> 0:19:58.439 that they can help to lubricate the economy. But in 0:19:58.520 --> 0:20:02.440 terms of the labor markets, there were extreme losses. You know, um, 0:20:02.760 --> 0:20:06.080 over twenty million people lost their jobs. Were more than 0:20:06.119 --> 0:20:09.000 halfway back in terms of recovery UM. And a lot 0:20:09.000 --> 0:20:12.159 of sectors are fully recovered, but there's a lot that aren't. 0:20:12.160 --> 0:20:15.959 A lot of the services leave your hospitality workers that 0:20:16.000 --> 0:20:18.560 were employee prior to COVID are still out of work 0:20:18.600 --> 0:20:21.040 going on almost a year um that they will have 0:20:21.160 --> 0:20:24.119 not had employment. So um. You know, there's still a 0:20:24.200 --> 0:20:25.800 lot of healing that has to be done from the 0:20:25.840 --> 0:20:28.240 labor market. And I think where stimulus plays a role 0:20:28.320 --> 0:20:30.880 is actually it creates a bit of a gap between 0:20:31.119 --> 0:20:35.600 income which is elevated and job creation which is still 0:20:35.640 --> 0:20:39.240 at levels that are pretty low and pretty recessionary UM. 0:20:39.320 --> 0:20:41.920 So the stimulus is really bridging that gap and hoping 0:20:42.560 --> 0:20:44.960 that it can help generate and buy enough time for 0:20:45.040 --> 0:20:46.960 the labor market to fully heal itself and then you 0:20:46.960 --> 0:20:49.879 get income creation naturally through the labor market. But that 0:20:49.920 --> 0:20:52.919 hasn't fully happened yet. Michelle always fantastic to catch up 0:20:52.960 --> 0:20:59.120