WEBVTT - June Inflation Data Reaction; CPI and Jobless Claims 0:00:02.440 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio News. 0:00:12.000 --> 0:00:15.600 This is the Bloomberg Surveillance Podcast. I'm Tom Keene along 0:00:15.600 --> 0:00:19.000 with Paul Sweeney. Join us each day for insight from 0:00:19.000 --> 0:00:23.159 the best in economics, finance, investment, and international relations. You 0:00:23.200 --> 0:00:25.840 can also watch the show live on YouTube. 0:00:26.160 --> 0:00:27.640 Visit the Bloomberg. 0:00:27.200 --> 0:00:31.760 Podcast channel on YouTube to see the show weekday mornings 0:00:31.760 --> 0:00:35.040 from seven to ten am Eastern from our global headquarters 0:00:35.159 --> 0:00:39.040 in New York City. Subscribe to the podcast on Apple, Spotify, 0:00:39.400 --> 0:00:42.920 or anywhere else you listen and always I'm Bloomberg Radio, 0:00:43.120 --> 0:00:47.080 the Bloomberg Terminal, and the Bloomberg Business App. And what 0:00:47.120 --> 0:00:50.600 we see now with so much of inflation as it 0:00:50.680 --> 0:00:55.480 comes in decidedly in a disinflationary mode, You're going to 0:00:55.520 --> 0:00:57.840 see a huge move I would predict in the market 0:00:57.840 --> 0:01:01.200 equities lift. Here, I'm looking at the ten year real 0:01:01.280 --> 0:01:03.680 yield Claudia. Some would want me to do it. It 0:01:03.760 --> 0:01:07.399 plunges out of the recent range and moves from one 0:01:07.400 --> 0:01:10.800 point nine to nine down to a stunning one point 0:01:10.880 --> 0:01:14.880 nine zero, a full time basis point move. Paul, go 0:01:15.000 --> 0:01:17.560 through the list of the inflation You do it better. 0:01:17.360 --> 0:01:20.119 Than me, CPI Tom just right off the headline is 0:01:20.280 --> 0:01:22.640 there's a negative symbol. There's a negative symb let's call 0:01:22.640 --> 0:01:24.960 that out zero point one percent. Tom. The consensus was 0:01:25.000 --> 0:01:28.720 a positive zero point one percent, So it's lower than 0:01:28.760 --> 0:01:30.959 the consensus. It's lower than the last month. That gets 0:01:30.959 --> 0:01:34.560 your attention. X Food and Energy zero point one percent 0:01:34.880 --> 0:01:37.399 versus the consensus of zero point two percent. So you 0:01:37.440 --> 0:01:40.480 put that all in for the annualized number, Tom, CPI 0:01:40.720 --> 0:01:43.160 X Food and Energy year on year came into three 0:01:43.200 --> 0:01:45.680 point three percent to consensus was three point four percent, 0:01:45.720 --> 0:01:47.800 and that was what it was last month. So a 0:01:48.160 --> 0:01:50.559 slower inflationary environment is what we're seeing here, Tom. 0:01:50.680 --> 0:01:54.080 Average wages pretty much level as well, maybe a little 0:01:54.120 --> 0:01:56.080 bit of an improvement in weekly earnings. 0:01:56.280 --> 0:01:59.000 And I would finally state the claims. 0:01:58.840 --> 0:02:03.320 Reversed from the recent trend to a this is this 0:02:03.360 --> 0:02:06.960 is Claudia is going to be really impressive, worser claims. 0:02:07.240 --> 0:02:07.880 How about that. 0:02:08.040 --> 0:02:10.919 It's a better claims statistic, But it's just one data 0:02:10.960 --> 0:02:15.760 point on this market moving CPI report futures up eight 0:02:15.960 --> 0:02:18.919 NASTAC up two tenths of a percent, a ten year 0:02:19.160 --> 0:02:22.760 real yield craters from a one ninety nine to one 0:02:22.800 --> 0:02:24.000 point nine one percent. 0:02:24.560 --> 0:02:26.799 We went with claudia, some claudia. 0:02:26.840 --> 0:02:30.760 There's a negative sign on CPI month over month, what 0:02:30.800 --> 0:02:31.680 does that signal? 0:02:31.840 --> 0:02:32.280 It's good? 0:02:33.000 --> 0:02:36.040 I mean, this is the what's so important about getting 0:02:36.360 --> 0:02:39.600 these kind of numbers at this point is it goes back. 0:02:39.680 --> 0:02:41.640 It tells us what we saw the second half of 0:02:41.720 --> 0:02:45.160 last year, what wasn't supposed to happen, the disinflation without 0:02:45.160 --> 0:02:48.680 the pain that was real. And it also tells us 0:02:48.840 --> 0:02:51.200 a lot of that where we got stuck up at 0:02:51.200 --> 0:02:55.400 the beginning of this year, that was that was not 0:02:55.560 --> 0:02:58.040 the right signal. Right, So this is you know, we 0:02:58.120 --> 0:03:00.000 get one more month of data, but it actually helped 0:03:00.120 --> 0:03:02.760 to sort out the different conflicting stories that we've had 0:03:02.800 --> 0:03:06.320 before that you know, we we are on this disinflation 0:03:06.440 --> 0:03:08.560 path and we have been, and this is this is 0:03:08.720 --> 0:03:10.720 very good news. It is one data point and you 0:03:10.800 --> 0:03:13.079 don't you know, it's nice to see a negative ahead 0:03:13.080 --> 0:03:15.760 of that number. We shouldn't get to, you. 0:03:15.720 --> 0:03:16.760 Know, wound up about it. 0:03:16.760 --> 0:03:19.600 But this is the disinflation story. It's here and it 0:03:19.639 --> 0:03:21.880 has been here. We've just it's been under the hood 0:03:22.120 --> 0:03:22.799 and been hidden. 0:03:23.200 --> 0:03:25.160 So how do you think the FED is going to 0:03:25.160 --> 0:03:27.760 interpret interpret this data? Claudy, Are they going to look 0:03:27.760 --> 0:03:30.120 at it on a month basis or kind of a 0:03:30.320 --> 0:03:32.720 maybe three months six month trailing basis. How do they 0:03:32.760 --> 0:03:34.560 look at some of this CPI data. 0:03:35.200 --> 0:03:39.000 We we now have three months that are good months, 0:03:39.320 --> 0:03:42.280 right and frankly, this is is another very good month 0:03:42.480 --> 0:03:44.160 as with last month. So again they're not going to 0:03:44.200 --> 0:03:47.320 want to, you know, overreact to one month, but we're 0:03:47.320 --> 0:03:49.880 getting in their three month moving average range. Of these 0:03:49.920 --> 0:03:52.360 are good numbers. We need to keep them going. We 0:03:52.400 --> 0:03:55.960 had a full string of disinflation the second half of 0:03:56.080 --> 0:03:59.360 last year. The composition we're all talking about top line 0:03:59.400 --> 0:04:03.400 numbers going on under the food is important and you know, 0:04:04.040 --> 0:04:06.600 good news is good news here and it is a story. 0:04:07.320 --> 0:04:10.880 It re enforces the dissemplation story, which is what we 0:04:11.000 --> 0:04:12.240 need to get back to normal. 0:04:12.400 --> 0:04:15.720 The market moves, Futures explode up sixteen down, futures up 0:04:15.760 --> 0:04:19.000 seventy eight, nasdack up three tens an percent, small caps 0:04:19.080 --> 0:04:22.840 almost up two percent, the vics a much more attractive 0:04:22.920 --> 0:04:26.560 number twelve point three three. Bloomberg surveillance across the nation 0:04:26.680 --> 0:04:29.680 with a stunning inflation report, and we are strong with 0:04:29.720 --> 0:04:33.560 claudiasm of course of Michigan for years and affiliated with 0:04:33.600 --> 0:04:36.960 the University of Chicago Boos School. The former governor of 0:04:37.000 --> 0:04:40.880 the Federal Reserve System, Randall Krasner, joins us now the 0:04:40.920 --> 0:04:45.280 market economist Randy Krausner. Neil Dudda of Renaissance Macro puts 0:04:45.320 --> 0:04:49.880 out a blistering single sentence, The doves have what they need, 0:04:50.320 --> 0:04:53.600 It is time to cut. What will the PhDs that 0:04:53.720 --> 0:04:57.520 the ECCOS building advise Chairman Powell? 0:04:58.080 --> 0:05:01.000 I will say that we have the foundation for a cut, 0:05:01.040 --> 0:05:02.919 but they're not going to be ready to go yet. 0:05:03.720 --> 0:05:07.240 So I think they're As Jay has said over and 0:05:07.279 --> 0:05:10.479 over again, he needs more data to feel confident that 0:05:10.680 --> 0:05:13.680 inflation is coming down in a sustained and sustainable way. 0:05:14.200 --> 0:05:17.360 This is certainly consistent with that, and you could see 0:05:17.360 --> 0:05:19.599 from the testimony that he gave over the last couple 0:05:19.600 --> 0:05:24.000 of days he was talking more about the risks to 0:05:24.080 --> 0:05:27.760 the downside, that is that the FED those rates too 0:05:27.839 --> 0:05:31.960 long and the economy, in particularly the labor markets lows 0:05:32.000 --> 0:05:34.359 too much. This is not enough to get them to 0:05:34.400 --> 0:05:36.320 move at the end of this month. I don't really 0:05:36.360 --> 0:05:39.600 think that's going to happen, but I do think it 0:05:39.680 --> 0:05:41.640 sets the foundation for a move in September. 0:05:42.320 --> 0:05:45.320 Tough question Randy, I'm going to ask it with your brilliance, 0:05:45.360 --> 0:05:49.720 and particularly in financial economics, people will say the elites 0:05:49.800 --> 0:05:54.760 are benefited by our FED policy because they are asset heavy. 0:05:55.279 --> 0:05:59.400 Price up, yield down assets do better when you're around 0:05:59.480 --> 0:06:03.360 the table the Echos building July thirty one or into September, 0:06:04.040 --> 0:06:07.760 is there any discussion of the partition of America where 0:06:07.880 --> 0:06:11.400 so many Americans need that rate cut now? 0:06:11.640 --> 0:06:15.080 Well, certainly, the FED has been very much focused on 0:06:15.360 --> 0:06:17.280 the labor market. I mean think back to a few 0:06:17.360 --> 0:06:19.840 years ago when Jay Powell and the rest of the 0:06:19.880 --> 0:06:23.080 FED launched the average inflation targeting where they said, well, 0:06:23.120 --> 0:06:25.160 we could run the economy too hot for a little 0:06:25.160 --> 0:06:28.599 while and that would be okay. So they are very 0:06:28.640 --> 0:06:31.039 sensitive to that. That is I think why Jay is 0:06:31.040 --> 0:06:34.280 starting to speak so much more about that. The unemployment 0:06:34.400 --> 0:06:37.880 rate has been four percent or below for a very 0:06:37.920 --> 0:06:41.240 long time. Now, that's a very strong labor market, and 0:06:41.240 --> 0:06:43.440 there has been a lot of generation of jobs, not 0:06:43.480 --> 0:06:45.480 just at the high end, but really throughout the entirety 0:06:45.560 --> 0:06:51.360 of the income income distribution. But they're sensitive to that, 0:06:51.480 --> 0:06:54.600 and I think that will lead them to cut by September, 0:06:54.760 --> 0:06:55.760 but not this month. 0:06:56.000 --> 0:06:59.240 So Randy whinn the FED does begin to cut rates. 0:07:00.080 --> 0:07:01.920 Do they do it? Did they do it, you know, 0:07:02.320 --> 0:07:05.360 four or five six meetings in a row? Did they alternate? 0:07:05.360 --> 0:07:06.040 How does that work? 0:07:06.080 --> 0:07:09.400 And Paul, your question is the absolute heart of the matter. 0:07:09.600 --> 0:07:11.920 Sure, for sure, And so I don't think they know 0:07:12.120 --> 0:07:13.600 yet how they want to do it. 0:07:13.640 --> 0:07:15.400 I don't think they remember. 0:07:15.400 --> 0:07:18.400 There's that old phrase that the Island green Span had 0:07:18.400 --> 0:07:20.720 that you moved a pace that was likely to be measured, 0:07:20.960 --> 0:07:23.680 so twenty five basis points every meeting for like two years. 0:07:24.080 --> 0:07:25.680 I don't think they want to do something like that. 0:07:25.840 --> 0:07:28.760 See, Randy, you're busting my chop. So as Paul asked 0:07:28.800 --> 0:07:33.040 the money questionnaire. But Randy, we are wedded to a green. 0:07:32.880 --> 0:07:35.560 Spanny in mathematics on this. 0:07:36.160 --> 0:07:38.480 Are we wrong to do that? I mean, should we 0:07:38.520 --> 0:07:41.720 be more creative about it? Back to McChesney, Martin or 0:07:41.840 --> 0:07:45.320 Arthur Burns. Should we have a new formula forward beside 0:07:45.640 --> 0:07:46.840 a measured green span. 0:07:47.160 --> 0:07:49.000 Yeah. I don't think they're going to do the measured pace. 0:07:49.160 --> 0:07:52.840 I think there was pretty clear consensus even when I 0:07:52.400 --> 0:07:56.640 was there, which is now a while ago, that measured 0:07:56.680 --> 0:07:59.560 pace was not the best way to do things. 0:07:59.680 --> 0:08:01.280 And so I think that they will move. 0:08:01.760 --> 0:08:03.920 And you can see when they moved inflation interest rates 0:08:04.000 --> 0:08:05.760 up that was not at a measured pace, that was 0:08:05.800 --> 0:08:06.480 pretty rapid. 0:08:07.240 --> 0:08:09.720 So I think they're gonna they'll bring interest rates down. 0:08:09.800 --> 0:08:10.920 I think they'll bring. 0:08:10.760 --> 0:08:13.040 Them down somewhat gradually at first, but if they see 0:08:13.040 --> 0:08:16.360 the libor market really weakening, they'll start to move quickly. 0:08:16.760 --> 0:08:20.160 That'll be too late to prevent the labor market from 0:08:20.240 --> 0:08:24.680 softening substantially. But they have to weigh the risks of 0:08:25.080 --> 0:08:28.720 calling all clear too early, getting back into what happened 0:08:28.760 --> 0:08:31.440 in the late seventies early eighties, where they did that 0:08:31.520 --> 0:08:34.320 and then inflation reignited and they had to raise rates 0:08:34.440 --> 0:08:38.160 really high at a really bad recession. They'd rather wait 0:08:38.200 --> 0:08:40.360 a little bit, you know, perhaps a little bit too long, 0:08:40.400 --> 0:08:44.920 to buy some insurance against that upside inflation scenario. But 0:08:44.960 --> 0:08:48.040 then they can cut and just have a slow down, 0:08:48.200 --> 0:08:50.720 maybe a mild recession, but something that'll be much less 0:08:50.760 --> 0:08:54.640 worse than what they had in the early eighties. 0:08:54.880 --> 0:08:58.200 All right, Rannie, So today's inflation, David, you know, certainly 0:08:58.520 --> 0:09:01.360 showing some slowing inflation. We heard from FED Chairman J 0:09:01.440 --> 0:09:03.400 Powell over the last two days speaking in front of 0:09:03.400 --> 0:09:06.920 Congress focusing. I think a lot of investors said, boy, 0:09:06.920 --> 0:09:09.000 he's really kind of focused on the labor market, the 0:09:09.040 --> 0:09:11.880 employment market, and citing some slow downs, there are just 0:09:11.920 --> 0:09:14.839 some softness there. How do you think about the labor market. 0:09:14.840 --> 0:09:16.319 How do you think that Federal Reserve thinks about the 0:09:16.360 --> 0:09:16.880 labor market. 0:09:17.160 --> 0:09:19.000 So I think they see that, I think is really 0:09:19.080 --> 0:09:22.800 the key on both the demand side as well as 0:09:22.840 --> 0:09:25.400 on the supply side. So on the supply side, they 0:09:25.440 --> 0:09:28.079 look a lot of wage growth, and wage growth has 0:09:28.120 --> 0:09:31.880 been coming down a bit. It's still now three point 0:09:31.960 --> 0:09:34.920 nine percent rather than four point one percent, substantially above 0:09:35.080 --> 0:09:39.080 their inflation target. And given how important wages are in 0:09:39.080 --> 0:09:42.240 the cost structure of both both certainly services firms, but 0:09:42.280 --> 0:09:47.240 even manufacturing firms, unless productivity really spikes up, that's going 0:09:47.280 --> 0:09:49.840 to have to come down a little bit, a little 0:09:49.880 --> 0:09:54.120 bit more. On the demand side, obviously, when there's good 0:09:54.120 --> 0:09:56.679 real wage growth as there has been, that is that 0:09:56.920 --> 0:09:59.280 wages have been growing fast and nominal wages have been 0:09:59.280 --> 0:10:02.920 growing faster than inflation. That's a that's a big plug 0:10:03.160 --> 0:10:06.280 or households continuing demand, and they want to keep that 0:10:06.360 --> 0:10:07.200 balance just right. 0:10:07.520 --> 0:10:10.640 Professor Krausser, stay with us, don't go away at the 0:10:10.640 --> 0:10:13.960 Blue School Chicago, with his great work at opening BOS 0:10:14.040 --> 0:10:16.560 School in London. Here a number of years ago, Randall Krasser, 0:10:16.640 --> 0:10:18.000 the former governor of. 0:10:17.960 --> 0:10:20.600 The FED, Randy, we're learning so much. 0:10:20.800 --> 0:10:23.640 And what I learned was from David Rosenberg at Marylynch 0:10:23.720 --> 0:10:27.840 a million years ago that the financial media focuses on 0:10:27.840 --> 0:10:31.559 one statistic, or maybe we get sophisticated and we look 0:10:31.600 --> 0:10:35.160 at three statistics. Pros like you and Kate Moore for 0:10:35.240 --> 0:10:41.000 that matter, look at forty seven or fifty five inflation statistics, 0:10:41.360 --> 0:10:44.200 which is the one you're looking at right now. What 0:10:44.400 --> 0:10:48.839 is the subset of data that matters to Randall Krasner. 0:10:48.480 --> 0:10:53.240 And it's not really the CPI, it's the Personal Assumption 0:10:53.280 --> 0:10:58.240 Expensure Index the PCE that comes out with the with 0:10:58.320 --> 0:10:59.440 the GDP report. 0:10:59.640 --> 0:11:01.880 That's what the FED has said that they really focused on. 0:11:02.520 --> 0:11:05.080 I think that's reasonable because if you look at the 0:11:05.120 --> 0:11:09.240 waitings in the CPI, a very large fraction of it 0:11:09.280 --> 0:11:12.640 is around rents, and so you know some of the 0:11:12.679 --> 0:11:15.600 oddities that we get with rents, whether it's you know, 0:11:16.080 --> 0:11:18.120 last month, there's a big spike up in New York 0:11:18.160 --> 0:11:21.800 City rents, there's a big lag in the way that 0:11:21.880 --> 0:11:25.720 rents are come into, right, its owner occupied housing, but 0:11:25.720 --> 0:11:29.040 it's really rental numbers that come in that sort of 0:11:29.160 --> 0:11:32.199 lag things because as you know, people sent you usually 0:11:32.240 --> 0:11:34.880 signed one year contracts for rents, and so we're finding 0:11:34.920 --> 0:11:36.760 out a lot about what happened last year rather than 0:11:36.760 --> 0:11:40.199 what's happening happening currently. Less of a weight on that 0:11:40.360 --> 0:11:44.560 in the in the PCE index, and so the FED 0:11:44.640 --> 0:11:47.080 really focuses more on that, and I think that's reasonable 0:11:47.080 --> 0:11:47.320 to do. 0:11:47.520 --> 0:11:50.200 Okay, Randy, this is really important, And I mean, you know, 0:11:50.440 --> 0:11:55.439 Brown University economics pop. It's a little different than Harvard 0:11:55.520 --> 0:12:00.280 Undergraduate economics. The gentleman at Harvard Jason firm, and I 0:12:00.280 --> 0:12:02.400 think you know who he is, Randall Cross. Oh, yes, 0:12:02.760 --> 0:12:06.200 Jason Ferman of X ten Fame launches a tweet out 0:12:06.320 --> 0:12:12.280 moments ago amazing inflation data for June. What's exclamation points? 0:12:12.400 --> 0:12:16.200 They do that at Harvard Brown University? Poole said, no 0:12:16.320 --> 0:12:20.560 exclamation points ever. Come on, Randy, the Fed's got to 0:12:20.760 --> 0:12:26.160 adjust to this report. Explain how they adjusts. They staggered 0:12:26.160 --> 0:12:27.760 to July thirty first. 0:12:27.679 --> 0:12:29.360 So certainly they will take this on board. 0:12:29.640 --> 0:12:32.280 And I think, as you can see from the minutes, 0:12:33.800 --> 0:12:37.119 that I think are reflected in some of Jay's recent testimony. 0:12:37.440 --> 0:12:41.880 There's a lot more concerned about the potential downsides and 0:12:42.240 --> 0:12:45.440 the risks of keeping interest rates high for too long. 0:12:46.160 --> 0:12:48.600 They will take that on board, and I think what 0:12:48.679 --> 0:12:50.560 they will do is I don't think they're going to move, 0:12:51.160 --> 0:12:53.000 but I think what they're going to do lay the 0:12:53.040 --> 0:12:56.520 foundation for move in September, because in some sense Jay 0:12:56.960 --> 0:13:00.880 laid the foundation for changing the wording and changing the 0:13:01.960 --> 0:13:07.120 changing the press conference UH feeling in July, and because 0:13:07.160 --> 0:13:10.400 the move the FED in its communication moves at a 0:13:10.400 --> 0:13:14.040 pace that is likely to be gradual, and so they 0:13:14.320 --> 0:13:17.920 lay the foundation for changing the wording in July to 0:13:17.960 --> 0:13:20.120 be able to lay the foundation for actually making a 0:13:20.200 --> 0:13:21.119 change in September. 0:13:21.360 --> 0:13:23.480 So I think that's what your most likely to hear. 0:13:24.080 --> 0:13:25.200 Randy, thank you so much. 0:13:25.240 --> 0:13:28.040 And just for the record, Professor Krausner, I would kill 0:13:28.160 --> 0:13:31.800 to get Professor Krasner and Professor fermanon. 0:13:31.679 --> 0:13:32.679 At the same time. 0:13:33.120 --> 0:13:36.679 That's a giant in financial economics, in a giant in 0:13:36.760 --> 0:13:37.959 policy economics. 0:13:38.320 --> 0:13:39.640 Randy Krasner, the Moose. 0:13:39.480 --> 0:13:52.480 School, Kate Moore, She's had a thematic strategy and global 0:13:52.520 --> 0:13:55.720 allocation at a little firm called black rock. So, Kate, 0:13:55.920 --> 0:13:58.480 I'd love to get your thoughts here on this inflation 0:13:58.520 --> 0:14:00.440 print we Saul this morning. What is mean for you? 0:14:00.679 --> 0:14:02.720 Look, I think this is the latest and a string 0:14:02.760 --> 0:14:05.280 of good news for the equity market. You know, one 0:14:05.280 --> 0:14:08.120 of the things I was really considering as we finished 0:14:08.120 --> 0:14:10.840 off the second quarter was that, you know, most people 0:14:11.000 --> 0:14:14.200 were skeptical about the sustainability of the equity market going 0:14:14.200 --> 0:14:16.199 into the second half of the year. There are a 0:14:16.240 --> 0:14:21.440 little anxious that we can't repeat returns. I think this message. 0:14:21.040 --> 0:14:22.760 That we're getting now that the FED is going to 0:14:22.760 --> 0:14:23.000 be in. 0:14:22.920 --> 0:14:24.960 A place where they can continue to or they can 0:14:25.000 --> 0:14:27.120 start to ease policy and continue to guide us, and 0:14:27.240 --> 0:14:29.800 that is the path into the beginning of twenty twenty 0:14:29.800 --> 0:14:32.960 five is going to be quite supportive for equity markets. 0:14:33.080 --> 0:14:35.760 But it's not the whole story, right, I Mean, lower 0:14:35.840 --> 0:14:39.760 rates are certainly a support, but that's not what's really 0:14:39.880 --> 0:14:43.240 driving the equity markets in twenty twenty four. It's really 0:14:43.240 --> 0:14:45.360 been in earnings and a fundamental story. 0:14:45.720 --> 0:14:47.440 So now us equity. 0:14:47.160 --> 0:14:49.880 Investors, we have to turn our attention to earnings, which 0:14:49.920 --> 0:14:51.280 are kicking off any moment. 0:14:52.800 --> 0:14:54.280 So what do you expect to see here? We had 0:14:54.320 --> 0:14:57.600 some of the numbers today. Delta a little bit weaker 0:14:57.640 --> 0:15:01.320 than expected on some costs, PEPSI, a little bit weaker 0:15:01.360 --> 0:15:03.960 on some top line there. What are your expectations here 0:15:04.000 --> 0:15:04.840 for earnings cycle? 0:15:06.280 --> 0:15:07.960 Yeah, so okay, let's get out this. 0:15:08.400 --> 0:15:10.840 To begin with, the baseline consensus is looking for a 0:15:10.920 --> 0:15:12.920 seven and a half to eight percent EPs growth for 0:15:13.000 --> 0:15:13.680 the second quarter. 0:15:13.920 --> 0:15:16.400 That's obviously a little bit of an acceleration from the 0:15:16.480 --> 0:15:17.160 first quarter. 0:15:17.480 --> 0:15:19.560 So this is what I'm talking about, between the price 0:15:19.640 --> 0:15:23.840 moves and where consensus is from bottom up basis. You know, 0:15:23.880 --> 0:15:27.080 we're kind of at a hot place. But I will 0:15:27.120 --> 0:15:30.520 say as much as people are anxious about a pullback 0:15:30.720 --> 0:15:34.000 and you know, get worried that multiples have expanded, there 0:15:34.000 --> 0:15:36.040 are a couple of reasons I think this earning season 0:15:36.080 --> 0:15:39.400 could meet these high expectations. So first, I'm going to 0:15:39.480 --> 0:15:42.400 make this point around pre announcements, because I watched this 0:15:42.520 --> 0:15:45.440 really closely. When you're going into earning season, people may 0:15:45.680 --> 0:15:48.200 put out all the bad news if they need to early, 0:15:48.920 --> 0:15:51.680 and there have been very few negative pre announcements this quarter, 0:15:51.840 --> 0:15:53.880 especially relative to what we got in the first quarter 0:15:53.880 --> 0:15:55.160 of twenty four, which was. 0:15:55.160 --> 0:15:57.120 Still a good earnings quarter. 0:15:57.520 --> 0:16:01.280 So no one is coming out trying to front run 0:16:01.440 --> 0:16:04.480 the market here and get the bad news out before earnings, 0:16:04.600 --> 0:16:07.000 which I think is actually a very positive signal. 0:16:07.520 --> 0:16:07.680 Kay. 0:16:07.760 --> 0:16:10.480 And then the second thing, Oh, please go on, don't continue, Kate, 0:16:10.600 --> 0:16:13.680 Kate Moore, you deserve a second thing, Give us a 0:16:13.720 --> 0:16:14.320 second thing. 0:16:15.320 --> 0:16:16.800 The second thing I was going to say is that 0:16:16.880 --> 0:16:20.840 earnings revision ratios. This is like the ratio of upgrades 0:16:20.840 --> 0:16:24.760 to downgrades from the bottom up analysts. And over the 0:16:24.800 --> 0:16:27.800 last one month, the earnings revision ratios for the US 0:16:28.000 --> 0:16:30.520 and particularly for the biggest parts that matter, like tech, 0:16:31.000 --> 0:16:34.560 have been very positive or have in Tech, we've had 0:16:34.600 --> 0:16:37.640 more than two upgrades for every one down grade. And 0:16:37.680 --> 0:16:40.560 you know that's not a sign going into earning season 0:16:40.920 --> 0:16:43.720 that people aren't seeing any signs of weakness. 0:16:43.960 --> 0:16:45.640 Ira Jersey is going to be with us in a bit. 0:16:45.720 --> 0:16:48.280 We're still with Kate Moore, Blackrock and mister Jersey and 0:16:48.320 --> 0:16:50.440 his team. I mean, Kate, it's not like you or 0:16:50.480 --> 0:16:53.440 you're you know, you're alone and you're understaffed. Jersey's got 0:16:53.480 --> 0:16:57.200 like seven people right now writing and working on the moment, 0:16:57.640 --> 0:17:00.680 and Iris of course talking about key rain just here 0:17:01.120 --> 0:17:04.480 in the fixed income market, I want you to bring 0:17:04.520 --> 0:17:07.600 that over to the equity market. Irad Jersey says, four 0:17:07.640 --> 0:17:10.920 point one eight percent on a ten year yield is 0:17:10.960 --> 0:17:14.160 a big deal. Right now, the tenure yield is four 0:17:14.200 --> 0:17:19.760 point two zero percent. How do equities react if yields 0:17:19.800 --> 0:17:24.080 go price up, yield down outside the recent range. 0:17:24.320 --> 0:17:26.800 Price up, yield down, I think would be really supportive 0:17:26.880 --> 0:17:29.080 for big parts of the market. You may actually see 0:17:29.400 --> 0:17:32.600 a little bit of action in the small and mid caps, 0:17:32.600 --> 0:17:34.440 which have been, as we know, huge laggards. 0:17:34.560 --> 0:17:36.120 Up one point eight percent right now. 0:17:37.000 --> 0:17:38.640 Yeah, and here's what I'll say. 0:17:38.760 --> 0:17:42.040 Fundamentally, that segment of the market is not as strong 0:17:42.080 --> 0:17:44.639 as what we see in the large cap indices and 0:17:44.680 --> 0:17:48.119 the megacap company that said this is the news that 0:17:48.160 --> 0:17:52.440 we need for smaller segments of the of the business 0:17:52.440 --> 0:17:55.120 community that rates are on the path down. 0:17:54.960 --> 0:17:57.440 Because they know that has been a headwind for operations. 0:17:57.560 --> 0:17:59.399 I got one more question, Kate Moore, when then we 0:17:59.400 --> 0:18:01.159 got to go over to Jersey to tell us what 0:18:01.280 --> 0:18:06.320 to do? You you don't remember the analogs that we remember. 0:18:06.400 --> 0:18:09.680 The nifty sixty I was, you know, nifty fifty rather 0:18:09.720 --> 0:18:12.880 in the sixties and all that, even ninety nine, two 0:18:12.920 --> 0:18:17.200 thousand does Kate More have an equity market analog you're 0:18:17.240 --> 0:18:20.040 working off of or is this a whole new world 0:18:20.080 --> 0:18:21.680 after all? 0:18:21.800 --> 0:18:25.480 Yeah, Tom, I do remember ninety nineteen thousand. Don't worry. 0:18:25.560 --> 0:18:26.400 I'm not that young. 0:18:26.840 --> 0:18:30.080 But what I will say is I don't see a 0:18:30.080 --> 0:18:33.280 perfect analog right here. And I know everyone wants to 0:18:33.320 --> 0:18:35.159 pick a period in history and say it looks just 0:18:35.280 --> 0:18:38.439 like this, and it's a comfort, you know, people like 0:18:38.520 --> 0:18:41.760 that comfort. But we are in the midst of, I 0:18:41.760 --> 0:18:45.560 think a massive technological change here with the advent of AI, 0:18:45.880 --> 0:18:48.359 and as companies try and figure out how to adopt 0:18:48.440 --> 0:18:51.320 AI and figure out the use cases and what the 0:18:51.320 --> 0:18:54.200 best way to work with this technology is, and I 0:18:54.240 --> 0:18:56.960 think that's going to lead to the incredible, you know, 0:18:57.480 --> 0:19:00.760 bifurcation in the market. Companies that have access to the 0:19:00.800 --> 0:19:04.040 technology have access to amazing data sets and are using 0:19:04.080 --> 0:19:06.840 it appropriately and those that don't. You're starting to see 0:19:06.840 --> 0:19:09.720 that separation in earnings already. And I just don't know 0:19:09.800 --> 0:19:12.000 that we, or at least in the lifetime I've been 0:19:12.040 --> 0:19:17.320 in almost five decades, that we've seen this significant of 0:19:17.440 --> 0:19:19.160 a technological change. 0:19:19.400 --> 0:19:22.280 Kate Moore, thank you so much, Blackrock. She's got to 0:19:22.320 --> 0:19:26.040 talk to her steam. Colleagues at Blackrock right now greatly 0:19:26.119 --> 0:19:27.159 greatly appreciate that. 0:19:36.160 --> 0:19:37.520 Ira Jersey joins us. 0:19:37.400 --> 0:19:42.040 Now with Bloomberg Intelligence, and he is a surveillance soccer expert. 0:19:42.440 --> 0:19:44.440 Paul, why don't you get us on the straight. 0:19:44.160 --> 0:19:47.160 And narrow exactly? All right, Ira, we had this inflation print, 0:19:47.200 --> 0:19:51.080 came in a little bit softer than expected. What's your market? 0:19:51.119 --> 0:19:53.120 What's the treasury market telling you about what we saw 0:19:53.119 --> 0:19:54.000 in the inflation print? 0:19:54.640 --> 0:19:58.000 Yeah, so the treasury market liked it, and the treasury 0:19:58.000 --> 0:19:59.240 market has rallied. 0:19:59.280 --> 0:20:01.160 We've seen some we call bull steepening. 0:20:01.240 --> 0:20:03.639 So you have the front end yield, so yields on 0:20:03.680 --> 0:20:07.159 the two year note are are lower more than yields 0:20:07.200 --> 0:20:09.680 on the long end of the yield curve. So that's 0:20:09.960 --> 0:20:12.480 what we call bull steepening of the curve. And that's 0:20:12.480 --> 0:20:15.600 not a huge surprise because you know what this data does. 0:20:15.640 --> 0:20:18.400 It gives more confidence to the market that not only 0:20:18.480 --> 0:20:22.320 might the Fed cut in September, but once they do 0:20:22.359 --> 0:20:25.520 start to cut, assuming that we continue to have reasonably 0:20:25.600 --> 0:20:29.920