WEBVTT - Turnhill: never saw a sustained volatility so low before

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<v Speaker 1>Broadcasting live to New York Bloomberg eleventh yold to Washington

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<v Speaker 1>d C Bloomberg to Boston Bloomberg twelve hundreds, to San

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<v Speaker 1>Francisco Bloomberg nine sixty to the Country series XM Channel

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<v Speaker 1>one ninety and around the globe the Bloomberg Radio Plus

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<v Speaker 1>Appen Bloomberg dot com. This is Hoomwork Surveillance. Good morning,

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<v Speaker 1>I'm Karen Moscow along with Tom Keenan, Barry Ridholtz and

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<v Speaker 1>the Opening Vale Brought to you by s c I

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<v Speaker 1>imagine when investment operations predicularly respond to regulatory change. C

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<v Speaker 1>I S has global operating platform can be your canalysts

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<v Speaker 1>for business transformation at sc i C dot com. Slash

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<v Speaker 1>imagine Stocks higher at the open SNP five up four

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<v Speaker 1>tenths per cent or seven points at sixty two down

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<v Speaker 1>Jones Industrial average of three ten percent or sixty five

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<v Speaker 1>points to seventeen thousand, six nine eight Nasdacs up six

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<v Speaker 1>tenths per cent or twenty seven points to forty eight

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<v Speaker 1>seventy four ten year Treasury down nine thirty seconds. The

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<v Speaker 1>yield one eight three percent yield on the two year

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<v Speaker 1>point seven nine percent nine x Scrude oil up two

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<v Speaker 1>point seven per cent or a dollar six four a barrel.

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<v Speaker 1>Comics gold is down to ten percent or two dollars

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<v Speaker 1>ten cents tow the euro a dollar thirteen thirteen, the

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<v Speaker 1>ends one twelve point six six And that's a Bloomberg

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<v Speaker 1>business flash, Tom and Barry Turner, thanks so much. Richard

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<v Speaker 1>Turnell is with black Rock. He's got a fancy title,

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<v Speaker 1>Global Chief Investment Strategist out of Cambridge and with a

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<v Speaker 1>tour duty at the Bank of England, which means he

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<v Speaker 1>learned he was trained. He lunch is as bad as

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<v Speaker 1>lunch yesterday at the Economic Club of New York. The

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<v Speaker 1>Rubbert Chicken was off the chart and Mr Turner, the

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<v Speaker 1>conversation was not like the lunch. It was blinding to

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<v Speaker 1>hear chair yelling inner dovishness. Was she ripping out a

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<v Speaker 1>page from Governor Carney of central banks that are boxed in, Sorry,

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<v Speaker 1>Fir's little good morning. Look. I think what you're seeing

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<v Speaker 1>is definitely a change in tone coming out at the FED,

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<v Speaker 1>and that really following a change in tern we've seen

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<v Speaker 1>from not just Governor Carney, but actually I think across

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<v Speaker 1>the world d CB and the Bank Japan alll signaling

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<v Speaker 1>easier policy going forward. I think we're just an environment

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<v Speaker 1>where there's such uncertainty out there that the FED prepared

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<v Speaker 1>to tolerate the risk of higher inflation, at least in

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<v Speaker 1>the short run, given the potential risk of the down

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<v Speaker 1>side of the economy. So I think we're just gonna

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<v Speaker 1>be an environment now A policy is going to be

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<v Speaker 1>looser globally for some time that we all thought just

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<v Speaker 1>a few weeks ago. And then you brilliantly highlight your

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<v Speaker 1>note what everyone's noticed. Do we think Dean Cronin for

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<v Speaker 1>his view this morning, it's too quiet out there? T

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<v Speaker 1>o O quiet? How do we respond to the too quiet?

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<v Speaker 1>So it's too quite, particularly in equity markets, and you know,

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<v Speaker 1>the VIX has collapsed right back down below fourteen again

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<v Speaker 1>this morning. It's at a level we haven't seen since

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<v Speaker 1>last summer. Now, we still think that equity is the

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<v Speaker 1>right place to be for most clients, but volatility is

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<v Speaker 1>very unlikely to stay at these levels for a long

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<v Speaker 1>period of time, partly because it's just so unusually low,

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<v Speaker 1>and also you're not seen the same confirmation signals from

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<v Speaker 1>fixed income or currency where volatility is actually is actually

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<v Speaker 1>much higher. So our recommendation to clients would be you

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<v Speaker 1>should be taking advantage of these very low levels of

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<v Speaker 1>volatility to put some hedges in your port failure. Again,

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<v Speaker 1>we think, we think this is a good time to

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<v Speaker 1>be in risk assets, but there are definitely risks out there.

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<v Speaker 1>There are risks around China, risks around politics both in

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<v Speaker 1>the US and here in Europe, and increasingly is we

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<v Speaker 1>just touched on risks around inflation where the said is

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<v Speaker 1>prepared to lease tolerate higher inflation in the short run.

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<v Speaker 1>So now it's a good time to be taking advantage

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<v Speaker 1>of the very low levels evolved, very low levels of

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<v Speaker 1>VIX and and put a bit of insurance in your

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<v Speaker 1>port failio. Let me push back on the idea that

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<v Speaker 1>this is such an unusual situation. Didn't we have the

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<v Speaker 1>VIX in in the low team means for years and

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<v Speaker 1>years and years in the nineteen nineties, in a period

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<v Speaker 1>where markets clearly a different environment and than today. But

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<v Speaker 1>it's hard to say that we've never really experienced anything

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<v Speaker 1>like this, isn't it. Well, you've never seen before was

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<v Speaker 1>such a prolonged period of low vall. So so we

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<v Speaker 1>saw three consecutive years of of the VIX not just

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<v Speaker 1>in the low teens and the low low teens from

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<v Speaker 1>two thousand and twelve through the two thousand and fourteen.

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<v Speaker 1>But we've looked back at our data over all history,

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<v Speaker 1>and never in history have we seen a sustained period

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<v Speaker 1>of volatility in this low before. So you're right, there

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<v Speaker 1>have been certainly periods of low volatility in the past,

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<v Speaker 1>often associated with easier monetary policy, that we have never

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<v Speaker 1>seen a prolonged period of very low vall like the

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<v Speaker 1>one we saw through two thousand and twelve to two

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<v Speaker 1>thousand and fourteen. So yeah, I think it's it's very

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<v Speaker 1>dangerous assume that's the norm and that's what we're going

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<v Speaker 1>back to. Our analysis suggests that actually it was quantitative easy,

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<v Speaker 1>which would the grove volatility to those extraordinary low levels.

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<v Speaker 1>With the feed now having exited QEWE, I think it's

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<v Speaker 1>much more likely you're going to see these periodic spikes

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<v Speaker 1>involved going forward. And actually, you know what we've seen

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<v Speaker 1>in the last few months, I suspect it's going to

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<v Speaker 1>become a much more commonplace experience. We get these short

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<v Speaker 1>term writers involved, followed by eating back. So I think

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<v Speaker 1>I think it's been a very unusual environment. So let

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<v Speaker 1>me let me channel the message of the market and

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<v Speaker 1>and create the counter narrative, which is the fall in

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<v Speaker 1>volatility is saying, hey, the ft is right. There is

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<v Speaker 1>no real threat from inflation, at least not anytime soon.

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<v Speaker 1>And while everybody's all upset about the sturm and drunk

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<v Speaker 1>about the politics, even if Bernie Sanders or Donald Trump

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<v Speaker 1>takes the White House, what are they going to be

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<v Speaker 1>able to accomplish through through Congress? Can we read the

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<v Speaker 1>low valence saying hey, maybe things aren't as terrible as

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<v Speaker 1>everybody thinks. Yeah, I'd actually point to some other things

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<v Speaker 1>as well as those of driving that that volatility decline.

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<v Speaker 1>If you go back to January, people were very worried

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<v Speaker 1>about oil and what that meant for the economy. That

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<v Speaker 1>you know, those those concerns have dissipated. That they were

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<v Speaker 1>very worried about further China's de evaluation after moving the

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<v Speaker 1>currency early in January. Those those concerns have dissipated. And

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<v Speaker 1>there was even concerned about another European banking crisis, particularly

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<v Speaker 1>after the Deutsche Bank news. And again those those concerns

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<v Speaker 1>have dissipated because actually European banks are still able to

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<v Speaker 1>access credit, so You've had a lot of kind of

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<v Speaker 1>fancy things just not happening. I would say, so part

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<v Speaker 1>of the news is like a lot of concerns out

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<v Speaker 1>there which have just not played out, and that's alloy

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<v Speaker 1>of volatility to fall. But when I look forward, it's

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<v Speaker 1>not hard to come up with a list of potential

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<v Speaker 1>things to worry about. And again just go back to

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<v Speaker 1>how how unusual this level of volatility is. I think

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<v Speaker 1>is yeah, with that windfall is low, this is the

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<v Speaker 1>time to think about buying that potentior. Who's the horse

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<v Speaker 1>and who's a card? I'm going to say, vole in

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<v Speaker 1>the markets are out front of the economics, which just

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<v Speaker 1>damp and global GDP, which folds right into the revenue

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<v Speaker 1>stream of all the corporations we talked about in the

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<v Speaker 1>bottom line is the damp and vows getting out front

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<v Speaker 1>of a new terminal value for revenue growth. I mean,

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<v Speaker 1>what is your model for revenue growth? So we're thinking

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<v Speaker 1>a very low growth environment for some time, and actually

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<v Speaker 1>you know that that that low growth environment should be

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<v Speaker 1>one actually in which risk assets can do reasonably well.

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<v Speaker 1>When this sweet spot right now, where that takes us

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<v Speaker 1>back to what we saw something that in the nineties.

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<v Speaker 1>You talked about in the nineties earlier in terms of

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<v Speaker 1>low bow, in this sweet spot that it was called goldilocks,

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<v Speaker 1>where growth is looking sufficiently strong that people are less

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<v Speaker 1>worried about deflation. But it's not but it's not so

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<v Speaker 1>strong as to put the fedback in play, with the

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<v Speaker 1>Ellen's comments in the last few days reinforcing that. So

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<v Speaker 1>you're in this you're in this sweet spot that's helping

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<v Speaker 1>facilitate this low bowl. But there are real risks on

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<v Speaker 1>both sides. There's risks that you know that we have

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<v Speaker 1>an external shock which drives us into a week or

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<v Speaker 1>growth environment, and we can talk about some of the

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<v Speaker 1>risks particularly around you know, Europe and China devaluation. The

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<v Speaker 1>risk on the other side which actually start to see

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<v Speaker 1>inflation pick up, that that's a risk people really what

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<v Speaker 1>even considering just a few months ago, but actually some

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<v Speaker 1>of the day to think in the US is coming

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<v Speaker 1>coming through suggesting that. So again I think it's just

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<v Speaker 1>dangerous assume that ball just stayed at these levels for

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<v Speaker 1>a long time. Richard, Thank you so much. Richard Turner

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<v Speaker 1>with Black Rocket London, look forward to speaking to particularly

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<v Speaker 1>as we migrate over to London. Uh in the coming

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<v Speaker 1>weeks again. A Richard turn On, global chief investment strategist

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<v Speaker 1>black Rock, the market up a hundred two. I don't

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<v Speaker 1>know if I'm bar Barry. Where's the record now? Is

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<v Speaker 1>like eighteen thousand three years. We're still uoints away. We're

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<v Speaker 1>about four or three point seven percent away from all

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<v Speaker 1>time highs. Okay, so we're not on the high watch yet.

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<v Speaker 1>We're not on the record watch, but we're getting there

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<v Speaker 1>at some point. The VIX thirteen point six one, Richard

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<v Speaker 1>turn Ill talking about a VIX under fourteen is being

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<v Speaker 1>remarkable to yield two year yield points seven nine, maket

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<v Speaker 1>point eight zero percent in the tenure one point eight four.

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<v Speaker 1>There's a thirty year bond two point six four. These

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<v Speaker 1>are wow yields. After Janet Yellen speaks in this hour

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<v Speaker 1>of Bloomberg surveillance, roch By bonsa White Plains visit Mazda

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<v Speaker 1>White Plains dot com with our news Michael Barr, Tom Berry,

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<v Speaker 1>thank you very much. Brussels Mainly report will remain closed

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<v Speaker 1>today as temporary repair work continues. Last week of suicide

0:09:32.040 --> 0:09:35.480
<v Speaker 1>bomber destroyed the check in area. The temporary system when

0:09:35.480 --> 0:09:38.640
<v Speaker 1>it begins we'll be able to process eight hundred passengers

0:09:38.640 --> 0:09:41.640
<v Speaker 1>an hour. The normal is five thousand per hour. It

0:09:41.679 --> 0:09:45.320
<v Speaker 1>looks like a Republican pledge is falling apart. The three

0:09:45.360 --> 0:09:49.240
<v Speaker 1>Republican presidential candidates have pulled back on supporting whoever the

0:09:49.240 --> 0:09:52.760
<v Speaker 1>party chooses as its nominee. At a town hall meeting

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<v Speaker 1>last night, front runner Donald Trump said he's resending his

0:09:56.640 --> 0:09:59.920
<v Speaker 1>promise to support the nominee because he's been treated badly.

0:10:00.520 --> 0:10:04.080
<v Speaker 1>Ted Cruz says having a Trump nomination would be a

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<v Speaker 1>train wreck. Trump later spoke to ABC this morning, I'll

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<v Speaker 1>make a decision if if I don't get it, which

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<v Speaker 1>I think I will, And as far as his support

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<v Speaker 1>of me, I don't care if he supports me. John

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<v Speaker 1>Kasy says he wants to see how this all folds

0:10:18.880 --> 0:10:22.720
<v Speaker 1>out before the nomination. Mourners will pay their final respects today.

0:10:22.800 --> 0:10:26.360
<v Speaker 1>Jo extra Ronto mayor Rob Ford for It died last week.

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<v Speaker 1>At Age Global News twenty four hours a day, powered

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<v Speaker 1>from around the world, not Michael Barr, Barry, Tom and Michael,

0:10:36.840 --> 0:10:40.600
<v Speaker 1>thanks so much. Coming up, we're gonna consider the ultimate

0:10:40.760 --> 0:10:45.760
<v Speaker 1>all in one mass Era Matt Lipstick. I mean, I'm

0:10:45.800 --> 0:10:48.000
<v Speaker 1>all over that. I mean, you know you gotta look

0:10:48.000 --> 0:10:53.160
<v Speaker 1>for your your new Revlon Matt Bomb, Matt Bomb. I

0:10:53.440 --> 0:10:57.000
<v Speaker 1>don't know what that costs. Next run Perlman and his

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