Speaker 1: Broadcasting live to New York Bloomberg eleventh yold to Washington
Speaker 1: d C Bloomberg to Boston Bloomberg twelve hundreds, to San
Speaker 1: Francisco Bloomberg nine sixty to the Country series XM Channel
Speaker 1: one ninety and around the globe the Bloomberg Radio Plus
Speaker 1: Appen Bloomberg dot com. This is Hoomwork Surveillance. Good morning,
Speaker 1: I'm Karen Moscow along with Tom Keenan, Barry Ridholtz and
Speaker 1: the Opening Vale Brought to you by s c I
Speaker 1: imagine when investment operations predicularly respond to regulatory change. C
Speaker 1: I S has global operating platform can be your canalysts
Speaker 1: for business transformation at sc i C dot com. Slash
Speaker 1: imagine Stocks higher at the open SNP five up four
Speaker 1: tenths per cent or seven points at sixty two down
Speaker 1: Jones Industrial average of three ten percent or sixty five
Speaker 1: points to seventeen thousand, six nine eight Nasdacs up six
Speaker 1: tenths per cent or twenty seven points to forty eight
Speaker 1: seventy four ten year Treasury down nine thirty seconds. The
Speaker 1: yield one eight three percent yield on the two year
Speaker 1: point seven nine percent nine x Scrude oil up two
Speaker 1: point seven per cent or a dollar six four a barrel.
Speaker 1: Comics gold is down to ten percent or two dollars
Speaker 1: ten cents tow the euro a dollar thirteen thirteen, the
Speaker 1: ends one twelve point six six And that's a Bloomberg
Speaker 1: business flash, Tom and Barry Turner, thanks so much. Richard
Speaker 1: Turnell is with black Rock. He's got a fancy title,
Speaker 1: Global Chief Investment Strategist out of Cambridge and with a
Speaker 1: tour duty at the Bank of England, which means he
Speaker 1: learned he was trained. He lunch is as bad as
Speaker 1: lunch yesterday at the Economic Club of New York. The
Speaker 1: Rubbert Chicken was off the chart and Mr Turner, the
Speaker 1: conversation was not like the lunch. It was blinding to
Speaker 1: hear chair yelling inner dovishness. Was she ripping out a
Speaker 1: page from Governor Carney of central banks that are boxed in, Sorry,
Speaker 1: Fir's little good morning. Look. I think what you're seeing
Speaker 1: is definitely a change in tone coming out at the FED,
Speaker 1: and that really following a change in tern we've seen
Speaker 1: from not just Governor Carney, but actually I think across
Speaker 1: the world d CB and the Bank Japan alll signaling
Speaker 1: easier policy going forward. I think we're just an environment
Speaker 1: where there's such uncertainty out there that the FED prepared
Speaker 1: to tolerate the risk of higher inflation, at least in
Speaker 1: the short run, given the potential risk of the down
Speaker 1: side of the economy. So I think we're just gonna
Speaker 1: be an environment now A policy is going to be
Speaker 1: looser globally for some time that we all thought just
Speaker 1: a few weeks ago. And then you brilliantly highlight your
Speaker 1: note what everyone's noticed. Do we think Dean Cronin for
Speaker 1: his view this morning, it's too quiet out there? T
Speaker 1: o O quiet? How do we respond to the too quiet?
Speaker 1: So it's too quite, particularly in equity markets, and you know,
Speaker 1: the VIX has collapsed right back down below fourteen again
Speaker 1: this morning. It's at a level we haven't seen since
Speaker 1: last summer. Now, we still think that equity is the
Speaker 1: right place to be for most clients, but volatility is
Speaker 1: very unlikely to stay at these levels for a long
Speaker 1: period of time, partly because it's just so unusually low,
Speaker 1: and also you're not seen the same confirmation signals from
Speaker 1: fixed income or currency where volatility is actually is actually
Speaker 1: much higher. So our recommendation to clients would be you
Speaker 1: should be taking advantage of these very low levels of
Speaker 1: volatility to put some hedges in your port failure. Again,
Speaker 1: we think, we think this is a good time to
Speaker 1: be in risk assets, but there are definitely risks out there.
Speaker 1: There are risks around China, risks around politics both in
Speaker 1: the US and here in Europe, and increasingly is we
Speaker 1: just touched on risks around inflation where the said is
Speaker 1: prepared to lease tolerate higher inflation in the short run.
Speaker 1: So now it's a good time to be taking advantage
Speaker 1: of the very low levels evolved, very low levels of
Speaker 1: VIX and and put a bit of insurance in your
Speaker 1: port failio. Let me push back on the idea that
Speaker 1: this is such an unusual situation. Didn't we have the
Speaker 1: VIX in in the low team means for years and
Speaker 1: years and years in the nineteen nineties, in a period
Speaker 1: where markets clearly a different environment and than today. But
Speaker 1: it's hard to say that we've never really experienced anything
Speaker 1: like this, isn't it. Well, you've never seen before was
Speaker 1: such a prolonged period of low vall. So so we
Speaker 1: saw three consecutive years of of the VIX not just
Speaker 1: in the low teens and the low low teens from
Speaker 1: two thousand and twelve through the two thousand and fourteen.
Speaker 1: But we've looked back at our data over all history,
Speaker 1: and never in history have we seen a sustained period
Speaker 1: of volatility in this low before. So you're right, there
Speaker 1: have been certainly periods of low volatility in the past,
Speaker 1: often associated with easier monetary policy, that we have never
Speaker 1: seen a prolonged period of very low vall like the
Speaker 1: one we saw through two thousand and twelve to two
Speaker 1: thousand and fourteen. So yeah, I think it's it's very
Speaker 1: dangerous assume that's the norm and that's what we're going
Speaker 1: back to. Our analysis suggests that actually it was quantitative easy,
Speaker 1: which would the grove volatility to those extraordinary low levels.
Speaker 1: With the feed now having exited QEWE, I think it's
Speaker 1: much more likely you're going to see these periodic spikes
Speaker 1: involved going forward. And actually, you know what we've seen
Speaker 1: in the last few months, I suspect it's going to
Speaker 1: become a much more commonplace experience. We get these short
Speaker 1: term writers involved, followed by eating back. So I think
Speaker 1: I think it's been a very unusual environment. So let
Speaker 1: me let me channel the message of the market and
Speaker 1: and create the counter narrative, which is the fall in
Speaker 1: volatility is saying, hey, the ft is right. There is
Speaker 1: no real threat from inflation, at least not anytime soon.
Speaker 1: And while everybody's all upset about the sturm and drunk
Speaker 1: about the politics, even if Bernie Sanders or Donald Trump
Speaker 1: takes the White House, what are they going to be
Speaker 1: able to accomplish through through Congress? Can we read the
Speaker 1: low valence saying hey, maybe things aren't as terrible as
Speaker 1: everybody thinks. Yeah, I'd actually point to some other things
Speaker 1: as well as those of driving that that volatility decline.
Speaker 1: If you go back to January, people were very worried
Speaker 1: about oil and what that meant for the economy. That
Speaker 1: you know, those those concerns have dissipated. That they were
Speaker 1: very worried about further China's de evaluation after moving the
Speaker 1: currency early in January. Those those concerns have dissipated. And
Speaker 1: there was even concerned about another European banking crisis, particularly
Speaker 1: after the Deutsche Bank news. And again those those concerns
Speaker 1: have dissipated because actually European banks are still able to
Speaker 1: access credit, so You've had a lot of kind of
Speaker 1: fancy things just not happening. I would say, so part
Speaker 1: of the news is like a lot of concerns out
Speaker 1: there which have just not played out, and that's alloy
Speaker 1: of volatility to fall. But when I look forward, it's
Speaker 1: not hard to come up with a list of potential
Speaker 1: things to worry about. And again just go back to
Speaker 1: how how unusual this level of volatility is. I think
Speaker 1: is yeah, with that windfall is low, this is the
Speaker 1: time to think about buying that potentior. Who's the horse
Speaker 1: and who's a card? I'm going to say, vole in
Speaker 1: the markets are out front of the economics, which just
Speaker 1: damp and global GDP, which folds right into the revenue
Speaker 1: stream of all the corporations we talked about in the
Speaker 1: bottom line is the damp and vows getting out front
Speaker 1: of a new terminal value for revenue growth. I mean,
Speaker 1: what is your model for revenue growth? So we're thinking
Speaker 1: a very low growth environment for some time, and actually
Speaker 1: you know that that that low growth environment should be
Speaker 1: one actually in which risk assets can do reasonably well.
Speaker 1: When this sweet spot right now, where that takes us
Speaker 1: back to what we saw something that in the nineties.
Speaker 1: You talked about in the nineties earlier in terms of
Speaker 1: low bow, in this sweet spot that it was called goldilocks,
Speaker 1: where growth is looking sufficiently strong that people are less
Speaker 1: worried about deflation. But it's not but it's not so
Speaker 1: strong as to put the fedback in play, with the
Speaker 1: Ellen's comments in the last few days reinforcing that. So
Speaker 1: you're in this you're in this sweet spot that's helping
Speaker 1: facilitate this low bowl. But there are real risks on
Speaker 1: both sides. There's risks that you know that we have
Speaker 1: an external shock which drives us into a week or
Speaker 1: growth environment, and we can talk about some of the
Speaker 1: risks particularly around you know, Europe and China devaluation. The
Speaker 1: risk on the other side which actually start to see
Speaker 1: inflation pick up, that that's a risk people really what
Speaker 1: even considering just a few months ago, but actually some
Speaker 1: of the day to think in the US is coming
Speaker 1: coming through suggesting that. So again I think it's just
Speaker 1: dangerous assume that ball just stayed at these levels for
Speaker 1: a long time. Richard, Thank you so much. Richard Turner
Speaker 1: with Black Rocket London, look forward to speaking to particularly
Speaker 1: as we migrate over to London. Uh in the coming
Speaker 1: weeks again. A Richard turn On, global chief investment strategist
Speaker 1: black Rock, the market up a hundred two. I don't
Speaker 1: know if I'm bar Barry. Where's the record now? Is
Speaker 1: like eighteen thousand three years. We're still uoints away. We're
Speaker 1: about four or three point seven percent away from all
Speaker 1: time highs. Okay, so we're not on the high watch yet.
Speaker 1: We're not on the record watch, but we're getting there
Speaker 1: at some point. The VIX thirteen point six one, Richard
Speaker 1: turn Ill talking about a VIX under fourteen is being
Speaker 1: remarkable to yield two year yield points seven nine, maket
Speaker 1: point eight zero percent in the tenure one point eight four.
Speaker 1: There's a thirty year bond two point six four. These
Speaker 1: are wow yields. After Janet Yellen speaks in this hour
Speaker 1: of Bloomberg surveillance, roch By bonsa White Plains visit Mazda
Speaker 1: White Plains dot com with our news Michael Barr, Tom Berry,
Speaker 1: thank you very much. Brussels Mainly report will remain closed
Speaker 1: today as temporary repair work continues. Last week of suicide
Speaker 1: bomber destroyed the check in area. The temporary system when
Speaker 1: it begins we'll be able to process eight hundred passengers
Speaker 1: an hour. The normal is five thousand per hour. It
Speaker 1: looks like a Republican pledge is falling apart. The three
Speaker 1: Republican presidential candidates have pulled back on supporting whoever the
Speaker 1: party chooses as its nominee. At a town hall meeting
Speaker 1: last night, front runner Donald Trump said he's resending his
Speaker 1: promise to support the nominee because he's been treated badly.
Speaker 1: Ted Cruz says having a Trump nomination would be a
Speaker 1: train wreck. Trump later spoke to ABC this morning, I'll
Speaker 1: make a decision if if I don't get it, which
Speaker 1: I think I will, And as far as his support
Speaker 1: of me, I don't care if he supports me. John
Speaker 1: Kasy says he wants to see how this all folds
Speaker 1: out before the nomination. Mourners will pay their final respects today.
Speaker 1: Jo extra Ronto mayor Rob Ford for It died last week.
Speaker 1: At Age Global News twenty four hours a day, powered
Speaker 1: by our journalists more than a hundred fifty news bureaus
Speaker 1: from around the world, not Michael Barr, Barry, Tom and Michael,
Speaker 1: thanks so much. Coming up, we're gonna consider the ultimate
Speaker 1: all in one mass Era Matt Lipstick. I mean, I'm
Speaker 1: all over that. I mean, you know you gotta look
Speaker 1: for your your new Revlon Matt Bomb, Matt Bomb. I
Speaker 1: don't know what that costs. Next run Perlman and his
Speaker 1: Revlon Bloomberg Surveillance. Savanov's brought to you by c I
Speaker 1: T from transportation to healthcare to manufacturing. ST offers commercial lending, leasing,
Speaker 1: treasury management services for small at middle market businesses. Learn
Speaker 1: more at st dot com to put knowledge to work